Goodbye Middle America

[Sparlin]

I think there are some truths in this article as well as some political finger pointing. The fact remains, if the ship is sinking, what are you doing to survive. I'm seeing first hand some "middle class" families struggling like they haven't before. There is a problem; how are you part of the solution?

The Middle Class in America Is Radically Shrinking. Here Are the Stats to Prove it

Posted Jul 15, 2010 02:25pm EDT by Michael Snyder in Recession

From The Business INSIDERS

Editor's note: Michael Snyder is editor of theeconomiccollapseblog.com

The 22 statistics detailed here prove beyond a shadow of a doubt that the middle class is being systematically wiped out of existence in America.

The rich are getting richer and the poor are getting poorer at a staggering rate. Once upon a time, the United States had the largest and most prosperous middle class in the history of the world, but now that is changing at a blinding pace.

So why are we witnessing such fundamental changes? Well, the globalism and "free trade" that our politicians and business leaders insisted would be so good for us have had some rather nasty side effects. It turns out that they didn't tell us that the "global economy" would mean that middle class American workers would eventually have to directly compete for jobs with people on the other side of the world where there is no minimum wage and very few regulations. The big global corporations have greatly benefited by exploiting third world labor pools over the last several decades, but middle class American workers have increasingly found things to be very tough.

Here are the statistics to prove it:

• 83 percent of all U.S. stocks are in the hands of 1 percent of the people.
• 61 percent of Americans "always or usually" live paycheck to paycheck, which was up from 49 percent in 2008 and 43 percent in 2007.
• 66 percent of the income growth between 2001 and 2007 went to the top 1% of all Americans.
• 36 percent of Americans say that they don't contribute anything to retirement savings.
• A staggering 43 percent of Americans have less than $10,000 saved up for retirement.
• 24 percent of American workers say that they have postponed their planned retirement age in the past year.
• Over 1.4 million Americans filed for personal bankruptcy in 2009, which represented a 32 percent increase over 2008.
• Only the top 5 percent of U.S. households have earned enough additional income to match the rise in housing costs since 1975.
• For the first time in U.S. history, banks own a greater share of residential housing net worth in the United States than all individual Americans put together.
• In 1950, the ratio of the average executive's paycheck to the average worker's paycheck was about 30 to 1. Since the year 2000, that ratio has exploded to between 300 to 500 to one.
• As of 2007, the bottom 80 percent of American households held about 7% of the liquid financial assets.
• The bottom 50 percent of income earners in the United States now collectively own less than 1 percent of the nation’s wealth.
• Average Wall Street bonuses for 2009 were up 17 percent when compared with 2008.
• In the United States, the average federal worker now earns 60% MORE than the average worker in the private sector.
• The top 1 percent of U.S. households own nearly twice as much of America's corporate wealth as they did just 15 years ago.
• In America today, the average time needed to find a job has risen to a record 35.2 weeks.
• More than 40 percent of Americans who actually are employed are now working in service jobs, which are often very low paying.
• or the first time in U.S. history, more than 40 million Americans are on food stamps, and the U.S. Department of Agriculture projects that number will go up to 43 million Americans in 2011.
• This is what American workers now must compete against: in China a garment worker makes approximately 86 cents an hour and in Cambodia a garment worker makes approximately 22 cents an hour.
• Approximately 21 percent of all children in the United States are living below the poverty line in 2010 - the highest rate in 20 years.
• Despite the financial crisis, the number of millionaires in the United States rose a whopping 16 percent to 7.8 million in 2009.
• The top 10 percent of Americans now earn around 50 percent of our national income.

Giant Sucking Sound

The reality is that no matter how smart, how strong, how educated or how hard working American workers are, they just cannot compete with people who are desperate to put in 10 to 12 hour days at less than a dollar an hour on the other side of the world. After all, what corporation in their right mind is going to pay an American worker 10 times more (plus benefits) to do the same job? The world is fundamentally changing. Wealth and power are rapidly becoming concentrated at the top and the big global corporations are making massive amounts of money. Meanwhile, the American middle class is being systematically wiped out of existence as U.S. workers are slowly being merged into the new "global" labor pool.

What do most Americans have to offer in the marketplace other than their labor? Not much. The truth is that most Americans are absolutely dependent on someone else giving them a job. But today, U.S. workers are "less attractive" than ever. Compared to the rest of the world, American workers are extremely expensive, and the government keeps passing more rules and regulations seemingly on a monthly basis that makes it even more difficult to conduct business in the United States.

So corporations are moving operations out of the U.S. at breathtaking speed. Since the U.S. government does not penalize them for doing so, there really is no incentive for them to stay.

What has developed is a situation where the people at the top are doing quite well, while most Americans are finding it increasingly difficult to make it. There are now about six unemployed Americans for every new job opening in the United States, and the number of "chronically unemployed" is absolutely soaring. There simply are not nearly enough jobs for everyone.

Many of those who are able to get jobs are finding that they are making less money than they used to. In fact, an increasingly large percentage of Americans are working at low wage retail and service jobs.

But you can't raise a family on what you make flipping burgers at McDonald's or on what you bring in from greeting customers down at the local Wal-Mart.

The truth is that the middle class in America is dying -- and once it is gone it will be incredibly difficult to rebuild.

http://finance.yahoo.com/tech-ticke...-out-here's-the-stats-to-prove-it-520657.html

 

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[Russ H]

Gee, it's easy to point fingers.

I'm intentionally NOT going to get political here, but it's going to be hard to keep this thread open.

Please, everyone, let's try to keep the politics out.

Things that are causing this:

1. Economies of scale. It is now cheaper to design something here, even get the raw materials for it here, ship those materials overseas, have someone else build it, then ship it back to the US. CHEAPER-- and similar quality (much of the assembly is done by robots overseas). Why is this?

2. We are in the midst of the biggest Recession in our lifetimes-- even our parent's lifetimes. Same thing happened the last time (in the 1930s): Rich got richer, poor got poorer.

3. We are not coming close to other countries in education. This is due, in part, to the anti-tax lobbies in the states. In our state (California), for instance, we've gone from having one of the best public education systems on the planet, to one of the worst in the US-- all in a generation. Lack of funding-- and most important-- lack of giving a sh*t by many of the residents.

I can see how *we* (my family) can flourish, but I can't for the life of me see how we, as a country, will get out of this without some major mind shifts and commitments to things like education and learning how to reduce our cost of living in the US relative to other countries (or changing the exchange rate of the dollar relative to other places).

I'll stop. I can't go further without making a political reference.

Hoping that all other posters will show similar restraint.

-Russ H.

 

[Sparlin]

LOL Russ,

I found your button.

I will say that both parties are guilty, but more importantly its the citizens that don't care, don't educate themselves, and don't plan ahead that have allowed this national crisis.

Improved work ethic, loss of entitlement mentality, patriotism over profit, and educating oneself are good values for an individual.

Now back on track, if the economy is so shaky, what can we do to prepare?
This is meant to be a motivation to learn how to swim, or better yet, build a better ship.

 

[Entrepreneur]

I found this article to be really interesting. My family and I came to the USA with the idea of achieving the "american dream" in our minds 24/7. Now, I am a college student, still lower middle class, and the world seems to have changed so quickly, or maybe it's just that I have started to mature and pay attention to all of these global shifts and domestic changes.

I am at a point where I am wondering if I should even live in the USA to achieve a comfortable, wealthy life quicker after college. I feel it is easier to achieve this kind of life and the "non-american dream" in a country like India or China where there is a growing middle class and domestic consumption is increasing. Many needs have yet to be met in these countries, and I think those who will provide the right services/ products with smart thinking and strategies will achieve millionaire or billionaire status within a few years there.

It's kind of confusing, but I am seriously considering the pros and cons of such a shift to India and China.

Anyone else considering a move like this? Any thoughts?

 

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[Russ H]

Now, I am a college student, still lower middle class, and the world seems to have changed so quickly, or maybe it's just that I have started to mature and pay attention to all of these global shifts and domestic changes.

Bingo. Same thing happened to me. Welcome to the world-- it's always been here, I just never noticed it until I was in college (thought I had, but wow, I was just seeing the shadows)

I am at a point where I am wondering if I should even live in the USA to achieve a comfortable, wealthy life quicker after college. In a country like India or China where there is a growing middle class and domestic consumption is increasing. Many needs have yet to be met in these countries, and I think those who will provide the right services/ products with smart thinking and strategies will achieve millionaire or billionaire status within a few years there.

Once had a friend who said "Cater to the classes, eat with the masses. But cater to the masses, and you eat with the classes.".

In other words, as MJ suggests in one of his excellent posts (where is it?)-- find something that *millions* of people want, and you can get rich.

Serve just a few hundred folks, and your upside is limited.

I went through a similar shift myself, albeit on a smaller scale. My previous life catered to the rich and famous-- I did very high end projects for very wealthy people.

It was a blast.

But I was always limited in how much I could make, since my craft depended on ME (it was not scalable). That's what made it so appealing to the classes-- very high end, personalized attention to detail. I had, on average, 5 cleints or less per year, who paid me $50,000-$200,000 for the work I did for them.

So now we're B&B innkeepers, and we sell thousands of rooms each year for $99-399 each. We have WAY more overhead, and a staff of 15, and lots more other responsibilities.

But we'll gross over a million this year, and (if the RE markets come back and/or lenders start lending again), we're sitting on a pretty nice nest egg in real estate.

You can serve millions anywhere-- depends on what your product is. It's true there are many, many more millions in China and India. But unless you have some cultural/language skills for either of those markets, it's not as easy as you might think to crack into them.

-Russ H.

 

[Entrepreneur]

Thanks Russ, that's a great lesson- actually several great lessons. I speak hindi, and am interested in hotels and possibly opening my own one day and hoping it grows beyond just that one.

I speak hindi and so I think India makes more sense than China in terms of culture/ language skills as you mentioned. From what I've been hearing India's hospitality industry is growing extremely fast, which is not surprising.

Bingo. Same thing happened to me. Welcome to the world-- it's always been here, I just never noticed it until I was in college (thought I had, but wow, I was just seeing the shadows)
Serve just a few hundred folks, and your upside is limited.

So now we're B&B innkeepers, and we sell thousands of rooms each year for $99-399 each. We have WAY more overhead, and a staff of 15, and lots more other responsibilities.

But we'll gross over a million this year, and (if the RE markets come back and/or lenders start lending again), we're sitting on a pretty nice nest egg in real estate.

You can serve millions anywhere-- depends on what your product is. It's true there are many, many more millions in China and India. But unless you have some cultural/language skills for either of those markets, it's not as easy as you might think to crack into them.

-Russ H.

 

[Pinnacle]

I'd like to introduce a completely unique dimension to the discussion if I may.

There should be no class system in the first place. There should be no middle class, rich, or poor classes. There are two reasons that a class system exists in this so-called "free" country of ours, one of which spawned the next:

1. Misappropriated financial education. Financial education has always been with us, but since America's founding it was kept as privileged education reserved for certain people. Those who were not the "certain people" were made to believe that financial education should not be a priority...that is if they were even conscious of what financial education was.
2. The economy, built by private sector citizens, was turned over to the public sector government, which would not exist without being created by the former. Now, we have money managers in the form of statesmen: the most expensive broker in the history of personal finance.

I personally avoid the debate about how we can help the middle class because it is both moot and counterintuitive: in order to help the middle class, we should eliminate the class system completely and allow free individuals to personally define what "being rich" is to them. You don't have to be a billionaire or millionaire. You don't have to want to be those things. You can be a hundred-aire, or a thousand-aire, so to speak. Just do yourself a favor and make sure you have enough money coming into your life that working can be a choice rather than a necessity...especially in this day in age.

Just my 2 cents. Very sorry to preach. :smx3:

 

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[Cat Man Du]

I have tried to remove the politics from this...so see what you think ??


Submitted by Jim Quinn of the Burning Platform


I’m sorry to be the bearer of bad news. There are no easy solutions. There are only painful, more painful, and really really painful solutions.


The ONLY way to save the country from financial collapse is to take on the largest expenditures. They are:

· $895 billion for Military spending
· $730 billion for Social Security
· $491 billion for Medicare
· $297 billion for Medicaid

These 4 areas total $2.4 trillion per year out of $3.8 trillion. This is 63% of all Federal spending. A real leader would tackle these areas. A 3rd party candidate with gonads would propose the following ideas:
· Iin 2000 the annual Defense (funny name) Budget was $380 billion. Since that date CPI has increased 25%. On an inflation adjusted basis, the Defense Budget should be $475 billion today. Essentially we are paying an additional $420 billion PER YEAR to fight the phantom WAR ON TERROR. This is nothing but a fraud perpetrated by the neo-cons and now the neo-liberals. My plan is to declare victory in the War on Terror. No one knows what victory means anyway. Withdraw ALL the troops from the Middle East, Germany, Japan and Korea. Let them blow themselves up if they want. Not our problem. Germany, Korea and Japan can pay for their own defense. Tell the Pentagon they have $475 billion to allocate and not a dime more for the next 10 years. SAVINGS = $420 billion

· A fantastic idea regarding Social Security. This idea would benefit the working class and stick it to the rich. ”Drop the rate substantially, but include all income – wage and non-wage. Three-quarters of Americans pay more in payroll taxes than in income taxes. By reducing the wedge between the hourly amount earned by employees and the hourly cost paid by employers, this strategy would create immediate incentives for employment. Moreover, it would raise more revenue because at present, even Warren Buffett only pays Social Security taxes on the first $106,800 of income.” This idea would be an immediate boost to the economy as the average worker would take home more pay. Revenue from Social Security would increase by $200 billion.

· On the cost side of Social Security, life expectancy, amount of wealth, and market incentives would need to be introduced. Anyone over 55 years old would get just what they were promised. Workers from 30 years old to 55 years old would see the age they were entitled to collect SS rise from 67 to 76 depending on their current age. Anyone whose net worth is in the top 5% of all Americans would not receive SS when they retire. Workers just entering the workforce would be given the option of a significantly scaled down benefit or a private account to be managed by themselves. These steps would make the system viable forever. It would not cut costs in the near term.

· For those under 55—as they become Medicare-eligible—it creates a Medicare payment, initially averaging $11,000, to be used to purchase a Medicare certified plan. The payment is adjusted to reflect medical inflation, and pegged to income, with low-income individuals receiving greater support. The plan also provides risk adjustment, so those with greater medical needs receive a higher payment. The proposal also fully funds Medical Savings Accounts (MSAs) for low-income beneficiaries, while continuing to allow all beneficiaries, regardless of income, to set up tax-free MSAs. Enacted together, these reforms will help keep Medicare solvent for generations to come. This proposal, along with eliminating the fraud within this system would save at least $200 billion per year.

· This healthcare plan would reduce costs, keep the high quality, and keep it out of the government’s clutches: It provides a refundable tax credit—$2,300 for individuals and $5,700 for families—to purchase coverage (from another state if they so choose) and keep it with them if they move or change jobs. It establishes transparency in health-care price and quality data, so this critical information is readily available before someone needs health services. State-based high risk pools will make affordable care available to those with pre-existing conditions. In addition to the tax credit, Medicaid will provide supplemental payments to low-income recipients so they too can obtain the health coverage of their choice and no longer be consigned to the stigmatized, sclerotic care that Medicaid has come to represent. This plan would save $200 billion per year.

· There are two options to simplify the tax system. Americans spend $11 trillion per year. They pay $1.1 trillion in income taxes per year. The tax code is 17,000 pages long. By scrapping the entire income tax and replacing it with a 10% VAT, the country would get the same revenue with individuals being freed from the tax code. The other option is essentially a modified flat tax as proposed by Paul Ryan: This highly simplified code fits on a postcard. It has just two rates: 10% on income up to $100,000 for joint filers and $50,000 for single filers, and 25% on taxable income above these amounts. It also includes a generous standard deduction and personal exemption (totaling $39,000 for a family of four), and no tax loopholes, deductions, credits or exclusions (except the health-care tax credit). The proposal eliminates the alternative minimum tax. It promotes saving by eliminating taxes on interest, capital gains, and dividends. It eliminates the death tax. It replaces the corporate income tax—currently the second highest in the industrialized world—with a business consumption tax of 8.5%. This new rate is roughly half the average in the industrialized world and will put American companies and workers in a stronger position to compete in a global economy.

· The Deptartment of Education and the Department of Energy were both created in 1979. Since this time student test scores have plummeted, the cost per student has skyrocketed, and we graduate more morons into society than ever. Since this time, our dependence on foreign oil has doubled, no nuclear power plants have been built, no refineries have been built and peak oil has been completely ignored. For this outstanding performance, we spend $78 billion per year for the Dept of Education and $36 billion per year for the Dept of Energy. If we survived from 1789 until 1979 without these departments, we can make do without them again. They are miserable failures and must be scrapped. Annual Savings = $114 billion.
· Every department and every program and every government worker would be required to take a 10% reduction across the board. Annual savings = $100 billion.
· Legalize marijuana for adults and then tax the shit out of it like tobacco and alcohol. Unknown revenue increase. Reduction in prison costs for minor drug offenses.

By my estimation we’d be pretty damn close to a balanced budget. It would entail pain and sacrifice to achieve a balanced budget. The pain and sacrifice today would ensure that our children and grandchildren have a tomorrow.

 

[Anon3587x]

In regards to taxes, if you sit 20 or so people in a room. 5 days a week, 4 weeks a month, 12 months a year. They will find ways to over complicate all these laws way more then needed. Instead of wasting my life reading a ever changing tax code that is 17,000 pages long. I'd rather be out and about enjoying life.

 

[throttleforward]

Cat-
Of course these are excellent suggestions. However, one must remember that a politician's sole reason for existing is either to become reelected, or to quit and make money outside of government. You don't meet too many former congressmen who are flipping burgers or who "dabbled" in federal politics - the either get rich off of their connections, or the stay in because they havn't gotten the requisite connections to be rich when the leave (or they are power-hungry).

Either way, my point is that a legislator's ultimate show of power is to offer a tax break or direct appropriation for a special interest group. That's why our tax code is so confusing - it is the culmination of decades of politicians flexing their political muscle and trying to encourage purchases or programs that will help their district.

Sometimes I wish we had a benevolent dictator in the US. Perhaps there should be an amendment to the Constitution which allows a constitutional convention to dissolve Congress and force new congressional elections. Those who were members of Congress when it was dissolved are precluded from ever holding federal elected office.

 

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[Anon3587x]

This quote is political but I feel it needs to be said.

"The ideal form of government is democracy tempered with assassination. "
-Voltaire