Middle-class Americans are struggling to make ends meet: prices are going up at the grocery store, wages have been stagnant and the United States dollar’s purchasing power doesn’t buy as much as it used to. Are middle-class Americans being left behind in the collapse of the U.S. economy?
Despite the federal government spending hundreds of billions of dollars in an attempt to restart the economy, most Americans aren’t seeing any improvements and studies have suggested that they aren’t very optimistic about the future of the country.
Can anyone blame them, though? The unemployment rate remains relatively the same, most of the workers’ mid-wage occupations that were held prior to the Great Recession have been transitioned in to low-wage employment opportunities and more Americans are working part-time rather than full-time. Even debt remains an issue as a significant percentage of Americans rely on their credit cards to stay afloat – 44 percent of U.S. households are one financial emergency away from ruin.
For those who have been able to garner a raise at their job, it has become superfluous because this year led to the expiration of the two percent payroll tax cut (4.2 percent back up to 6.2 percent). Therefore, a worker earning $50,000 this year will take home $1,000 less.
Not only do Americans have to deal with less money, the cost of living continues to soar: grocery prices are projected to jump four percent this year, healthcare premiums are increasing by an average of 6.3 percent across the country, shipping costs are seeing hikes of at least 4.5 percent and the rates of tuition are spiking by 4.8 percent.
Even if Federal Reserve Chairman Ben Bernanke likes to insist that inflation and the effects are inflation have been rather tepid, the old Chico Marx joke would suffice in this case, “Who are you going to believe? Me or your own eyes?”
The Fed’s money-printing policies have hurt the middle- and lower-classes since the financial collapse of 2007/2008. The freshly created money benefits the wealthy, but as the money gets transferred throughout the economy the dollar gets debased and purchases less. Moreover, low interest rates have hurt savers and investors, even distorting the marketplace.
Although the Fed is damaging savings accounts, Americans aren’t even saving enough for a rainy day or their retirement. The savings rate – calculated by the percentage of disposable income put away for a rainy day – dropped to 2.4 percent in January, down from six-plus percent prior to the financial downturn. One of the factors of this dramatic decline is that median family wealth hit a 43-year low at the end of last year.
The median net worth in the U.S. (measured in 2010 dollars) is $57,000.
It may not even improve for the middle class anytime soon. President Barack Obama’s Affordable Care Act has led to many companies to decrease full-time employment or to just reduce their staffing levels. For instance, John Schnatter, Papa John’s CEO, made news when he said Obamacare will cost the company between $5 million and $8 million each year and this will lead to the company increasing the price of pizza and cut workers’ hours.
Robert Murray, chief executive of Murray Energy Co. in Pepper Pike, Ohio, laid off 150 employees. He also cited Obamacare as a reason.
One of the biggest issues when discussing the middle class is household debt levels. Total consumer debt in the U.S. is $11.34 trillion, mostly from credit cards, student loans, automobile loans, mortgages and other forms of debt. The median household debt in the U.S. is $75,600 – Forbes noted that the average household U.S. debt is 136 percent of household income, compared to 17 percent for the Chinese.
Can there be any respite for the American middle-class? Not unless the government downsizes, gets out of the way and permits people to live their lives the way they want to without endless taxes, bureaucratic red tape, inflationary practices at the Fed, senseless laws being imposed each day and regulations that hinder businesses.
Perhaps ZeroHedge summed the entire situation up in an article published in December:
“Crony capitalism for the wealthiest, scrappy socialism for the poorest, and everyone else (that soon to be extinct creature known as the middle class) left to fend for themselves.”
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