In the interest of full disclosure: I am not an economist. I live on the Planet Earth and buy when I can afford it.
It’s no secret to those who think about it: Most of the American economic engine is powered by the middle class. The lower - what is it? – 15%? 20%- 25% - who subsist from one government or charity check to the next don’t really throw a large amount of dollars into the boiling kettle of American commerce. Likewise that well-off top 15%, let alone the incredibly, frighteningly 1% or so that has seen its wealth just about double because G W Bush and the rest of the Republican politicians want to become even more obscenely wealthy than they already are. No, it’s that middle 40% or so – the Billy Joe Sixpack blue collar worker and the James Whiteshirt office drone who spend their time stoking the fires of America’s commercial furnaces. The mega-wealthy? Just how many people do you support when you buy yacht? Or a $75,000 gold Rolex? These people keep some lawyers, accountants, and bond brokers fed, that’s all.
These families are high school graduates, upper-grade high school dropouts with a valuable trade job, and quite a few College graduates with Bachelor’s degrees. They’ve got a wife, 2.4 kinds, two 10 year old cars, a house they co-own with a bank or mortgage company, and dreams. Dreams of the good life; dreams of climbing up the ladder of society. Dreams of those 2.4 kids as doctors, dentists, lawyers, corporate accountants, proctologists. (Well, only the male kids, I guess.)
Some of them are just old enough to have watched “Leave It To Beaver” and noted that Ward worked hard all day long at the office, and June wore a nice dress, pearl set and frilly apron, while Wally had nicely pressed chinos, penny loafers, and button down prep shirts. Now, the Beav, he was a bit of a rapscallion, of course, and wore dirty jeans, and frequently torn shirt and Keds. But he did have a Cub Scout uniform, and was trying real hard to make it into the Wolf patrol. Did the Cleavers have a car? I don’t remember; probably was a station wagon.
It’s not like that now. Billy Joe Sixpack and Joe Whiteshirt come home after 9 or 10 hours of work just in time to take over supervising the kids eating a microwaved frozen meal as Mom rushes out the door to the part-time job she works 6 nights a week at the convenience store because wages haven’t kept pace with inflation.
Lately we’ve seen a few discouraging signs: Personal disposable income dropped – precipitously
That’s REAL income by the way: what that dollar in your pocket buys. Personal income has slid, too. Inflation just always seems to outdistance wages for the middle class, doesn’t it? Hey! Not everyone can make $7 million a year. Wait till they see what a gallon of heating oil is going to cost this winter, or a unit of natural gas.
Prices paid for commodities have doubled since Mr Bush took possession of our Oval Office.
These graphs don’t figure in health care, education, or what’s euphemistically termed “other services”. Things like fire departments, garbage collection, water treatment plants, ambulance services. (In many localities, that’s funded separately from the fire department.)
Oh yes, and then there’s debt service – in a big part that’s about credit card payments. I don’t know about you, but I get three card offers a week, from banks I never heard of, and probably never heard of me. I’ve been saving all of them; firewood’s going to be damned expensive this winter, too. The Wall Street Journal reported that for the second quarter 4.81% of credit card accounts were past due, up from 4.76% in the first quarter. Both of those rates were record-setters. The American Bankers Association reported that "Delinquency rates rose for nearly all of the eight types of consumer loans the ABA tracks." (The exceptions were Property improvement and Mobile home loans).
Spending’s down too. Dropped off 0.5% this month. That’s the biggest drop since November 2001.
The Fed keeps raising rates; mortgage money is going to dry up; people who’ve been depending on the alleged housing boom of the last year to re-fatten their wallets are going to be stuck with second houses they can’t get afford, can’t get rid of, and can’t pay for. Mortgage lenders are going to have a LOT of firewood to keep them warm this winter.
And what happens to all these business that the middle class supports by their all-weekend-long shopping mall binges? When Joe Sixpack and James Whiteshirt and their families finally wake up to find their credit card accounts closed, or when they have to decide whether to spend the last $20 they have until payday on has to go to work or meat for the family? Think those stores are going to stay open in the malls with no customers? Think those mega-corporations are going to pay those incredible rents, just to feed their employees, with no customers?
The fabulous legendary Bush economy and all the propaganda have been ephemera. Just words on a piece of paper, or a TV screen, continuing the unending marketing to the middle class.
Comments
Excellent piece...and far more disturbing than anyone might realize. It's long been known that one of the key underpinnings of the birth of modern civilization in Europe was the creation and growth of a middle class. The growing middle class in turn spawned the Renaissance
Here's a decent reference:
Google Answers
I have long feared the reduction of the middle class in America. A strong middle class has helped us reach the point we are today in the world and we can ill-afford to see the middle class squeezed further in the U.S.
When some rich dude buys spends $75,000 on a watch, yacht, Cadillac, etc.he does in fact support all the people that built it, designed it, supplied the raw materials for it etc. This is not to mention the sales tax paid on it that goes to supporting the US Military, education, social programs that help the lower and middle class, etc.
I make $80K/year, but still drive 10 year old vehicles, drink Wal-Mart pop and don't have HBO, Showtime etc. My family uses coupons, looks for sale items and spends our money as wisely as possible.
I am not jealous of people who are rich, and certainly don't categorize them all as crooks or those to be despised.
How convenient to simply wrap up every challenge we have today in life, and blame it on George Bush. I could pick and choose a host of indices that would paint Bill Clinton equally bad, but I don't blame him or any other individual for any difficulties I have had in my financial life.
I don't expect the government to fix my problems, but to limit their involvement in my life. Let ME be the one to make an honest living for a hard day of work on my own.
Overall on first look, I like this blog. I'll likely be checking in regularly. Bulldog pointed me in this direction.
Well, uhmm.... No, actually. There are no Federal taxes on gold rolex watches, or yachts, nor Cadillacs either for that matter. It's true. You could look it up. Here. http://moneycentral.msn.com/content/P65067.asp
Now, it's true there's a lot of people who makes that stuff. Lots of South African gold miners who still work for tuppence ha'worth per diem, 16oo feet underground. But the Rolexes are all assembled overseas. No Americans gain, other than the importers and jewelers. Yacht-building in the US is a lost industry. I think there's only three shipyards builting luxury yachts in the US - about 35 employees, total. And, I think GM builds their Cadillacs in Canada......
But truth to tell, all the gazillionaires I know would only be caught in a Cadillac when they're being chauffeured, face up, head first. And that's a one way ride, anyhow.
Thanks for reading us, Nick. Sorry about you not getting HBO. I hear Deadwood is pretty damned good.
Re: Nick...
I re-read Lurch's post and quite frankly I don't see how you can state that he's advocating government "fix" all our problems or that he's advocating government increase its involvement in our lives.
The point I see is the following:
1) Bush and company came into office claiming that they would improve everyone's economic status.
2) Bush and company have pushed numerous tax cuts, corporate incentive laws, etc, etc, etc, all under the guise of improving the economy and bettering our standard of living.
3) Instead of having a positive effect for the most important section of society, the middle class, they have only benefited a small percentage of the populace and corporations.
4) To the contrary, his policies have increased the burden on the middle class even more, and arguably, this most crucial segment of our society is shrinking to the eventual detriment of American civilization.
5) In spite of evidence to the contrary, Bush and company continue to make claims that "jobs are being created, people are making more money than ever, and our economy is growing stronger every day." I can't count how many times I have heard this yet the only thing the numbers show us is that corporations are making more money and the rich are getting richer. The middle class is indeed making more money...but inflation is rising faster than that.
We have supposedly come out of a recession yet why do we hear the phrase "jobless recovery" repeated over and over? When I hear "jobless recovery", I know exactly what that means: corporations are making more money while the average joe is not doing any better. When I hear productivity is increasing, all that means is that workers are putting in more time for the same amount of pay.
On a personal level, my salary has been relatively stagnant over the past 4 years yet my tax burden has gone *up* over that same time span. Normally, I would be in trouble, but I have been avoiding new debts like the plague and shaving off long-term debt as quickly as I can. But I know I'm fortunate...and my situation is rare.
When I heard about tax cuts from the Republicans to spur economic growth, etc, the only thing that comes to mind now is that old, familiar, and yet forgotten phrase: "Voodoo Economics" said by none other than George Bush, Sr.
It's not about a handout. But it is about government involvement in our lives. You say you want government to limit their involvment in your life. However, they are already involving themselves...and only in a negative way. The economic polices of the government should help the middle class not hurt it...
Hey Lurch, Damn Good Job. Bravo Zulu! I am one of those that lives on the "Eagle Shit" for a whole month, and scrimp and save to get to the next months ration. Being a retired Chief, and also having been lucky enough to be a Tech Rep and live as an officer on 2 Tin Cans and a LHA, I recognize a lot of you in here as part of the same fraternity that I have belonged to for the past 50 years... I knew a Lurch a long time ago, he was a hulking RM1 who went to several crypto schools with me back in the 60's. Yep, I am a black shoe twidget! Who thinks all sailors are all the same, in fact all who served honorably, wether it was for a career or just for the one time in any branch of the military are my mates.
Nice new office you have here, I hope to come around every now and then and help take out the trash, or just be a Chief... Hang in shipmates, we'll get these feather merchants rode out on a rail... Bunny Pants, the cowardly, deserting son of a bitch perhaps will end up in front of a Tribunal in the Hague along with the rest of his henchmen.. I sure hope so, I got an old manure covered line hanging in the barn I will donate to that august group to use on the chicken hawk group.
Fair Winds and Following Seas..
Oh, Lt. Joe Fish.... Ya got a damn good crew here, I would have loved to have served with you.
I know LCDR Jeff, he and I hang out in Preemptive Karma a bit...
Now, all I gotta find is the Goat Locker!
Thanks, Chief. I kinda sorta half-recognized your email handle through the fog of early morning war with my aches and pains, and thanks to Mr Giggle I'd like to say you've got a nice little bunker over there at smirking chimp.
That Lurch you knew isn't me, although, like all Lurch's I'm sure he was a helluva guy. For myself, I'm not smart enough for crypto school.
Great post,
For the last 35 years my wife and I have been making and selling arts and crafts to make a living. We didn't like the BS involved in the high-end arts scene so we hitched our wagon to the middle class. WE make and sell pottery at fairs, Saturday market and wholesale to shops.
Sales have fallen off steadily since Bush came into office. We see just as many people who tell us how beautiful our stuff is but they don't buy or they buy less. This is the almost universal story of people who make their living like us,sales off 40% to 50%. The middle class is disappearing and FAST!
Many good points and counterpoints made here. To Soul Catcher: Bush, Gore and Kerry all made promises to improve the economy. Matter of fact that is all SOP for a presidential candidate. If one actually said, things suck and it ain't getting better, only their mother would vote for them. I'm all for term limits and prosecuting any corrupt politician, regardless of his party affiliation.
As for the economy.....manufacturing is the key to any nation's wealth. Manufacturing means that we must build something, increase its value then preferably sell it overseas. As long as there is a trade defecit, we are effectively taking money out of the US and sending it elsewhere. If we continue to buy outside the country then we will eventually be out of money. All the illegal aliens in this country are making money (not paying tax on it either) then sending a good portion of the profits back home (overseas/Mexico)which further takes away from the overall wealth of America. More and more manufacturing jobs are moving overseas. I worked in the Philippines for two years and could see that there are tens of thousands of people who are willing to work for $5/day. Every time you buy goods at WalMart or Home Depot, you are supporting the manufacturing of another country. Why spend $80 for a US made ladder when you can get nearly the same thing for half the price? It is difficult to compete with a business model that has such low labor costs. After WWII, the US was the only place on earth where the manufacturing base wasn't in ruins. The US was up and running at high capacity. Slowly, the rest of the world has been catching up. It will take years for the labor costs to equalize with what we are used to being paid here in the US. As wages overseas go up, they will continue to be driven down here. It is a tough road that we will continue to travel. These kinds of problems are not going to change with a new Executive Administration. I believe we need a focus on MANUFACTURING in the US, with HUGE tax breaks to companies AND employees so that companies can make a viable business decision to leave manufacturing here in the US. At the same time, employees will need to make wage concessions as well as be willing to dump many BS union rules and really focus on costs and quality. MANUFACTURING is the key to truly rebuilding this economy.
Instead of just boxing up the blame and putting at someone's doorstep, we should be thinking and looking long term at how we will regain manufacturing superiority.
I make $80K/year, but still drive 10 year old vehicles, drink Wal-Mart pop and don't have HBO, Showtime etc. My family uses coupons, looks for sale items and spends our money as wisely as possible.
Well kiss your nearest NeoCon and pass the ketchup cause honey you are making twice as much as the average wage earner in the USA and you are not exactly in the investor class now are you?
I AM an economist, and I would like to allay the worries posted here re BushCo economics, ie. Voodoo part II. The financial collapse is in the works, it cannot be reversed or even slowed at this point and we owe it ALL to Mr. Bush personally, he is in fact to blame for it, he took a fiscally responsible US government (after years of trying they finally got it right) and he looted it for his rich friends, and all those tax cuts? Wrong, there have been NO tax cuts since every dollar spent is a dollar taxed even if you do not get the bill for it today. The part that I believe will destroy America is that the bills will come due when the country will least be able to repay. Alas for the wealthy when that day comes the highest tax bracket might just go to 95%.
By the way, did you see the Forbes 400 list last week? The richest 400 people in wealth in the country now control over $1,300,000,000,000. The value of the 0.0075% of most expensive homes is now over one trillion dollars, and you wondered why you cannot afford a house? My VA disability (100%) is a whopping $2,300 per month, and goes up next year by $52. That will not even cover the rise in gasoline no less the $100 per month rise in the rent. Thank god for the Bonneville Power Authority and cheap electricity or I would be living in my car. Now the NeoCons want to strip veterans of their benefits and give Paris Hilton a HUGE tax break and the sheeple just lap it up.
Ah well, there will always be Buenos Aires.
Many good points and counterpoints made here.
Yes this has been a good discussion.
Bush, Gore and Kerry all made promises to improve the economy. Matter of fact that is all SOP for a presidential candidate.
Very true, but Gore and Kerry never had the chance to be proven right or wrong. Suppositions are nice but Bush is President and we have what we have out of Bush...and it's not working or else you and I both would not be pointing out flaws in our current economic situation such as the trade deficit you mentioned.
As for the economy.....manufacturing is the key to any nation's wealth. Manufacturing means that we must build something, increase its value then preferably sell it overseas. As long as there is a trade defecit, we are effectively taking money out of the US and sending it elsewhere. If we continue to buy outside the country then we will eventually be out of money.
Oh definitely I agree about the trade deficit. I have long wondered why we allow this to happen but it's been that way for many years now. What makes it worse with regards to your good point about US manufacturing suffering is that Bush's policies have focused on devaluing the US dollar but instead of helping reduce the trade deficit by making our exports cheaper to foreign countries, it's not helped. Some claim that the real reason we devalue the dollar is to allow foreign countries to buy more government bonds which allows us to run our deficit up more.
All the illegal aliens in this country are making money (not paying tax on it either) then sending a good portion of the profits back home (overseas/Mexico)which further takes away from the overall wealth of America.
I have a real pet peeve with the illegal alien issue. I have *NO* problems with people immigrating to this country so long as they follow the laws. One of our strengths has always been how we have handled immigration in a good way. However, illegal immigrants destroy the hard work that LEGAL immigrants perform by following the correct procedures. I work with a number of foreigners including one Indian who is working towards his green card. He's following the rules and doing his part. Heck, he just bought a house. Yet I can drive around and find some illegal immigrants working and their actions are not fair to HIM.
I believe we need a focus on MANUFACTURING in the US, with HUGE tax breaks to companies AND employees so that companies can make a viable business decision to leave manufacturing here in the US. At the same time, employees will need to make wage concessions as well as be willing to dump many BS union rules and really focus on costs and quality. MANUFACTURING is the key to truly rebuilding this economy.
I assume that when you are refering to tax breaks you are refering to incentives for maufacturing and not the current corporate welfare we have seen under the Bush administration. I can certainly agree with maufacturing incentives like that but there is already a huge amount of corporate tax breaks and they certainly have not helped. As to the unions, it's a mixed bag. In some cases, they hurt and in some cases they help. I live in Memphis, TN, home of Northwest Airlines and I got to see firsthand very recently how unions can unfairly receive a bad rap. I'm recalling some of this off the top of my head so the details may not be exact. The airplane mechanics' union was approached by NWA and asked to take their SECOND paycut in the past 5 or so years. Now this was screwed for two reasons:
1) the first time this happened, NWA assured the mechanics that this first cut was all they needed
2) the mechanics' accepted but the upper-level management TOOK NO PAYCUT
3) then as NWA had more financial issues, they approached the mechanics AGAIN earlier this year with the same bull story asking for another cut
4) the union said no this time and said that mgmt. was backing out.
5) so they voted to strike and NWA basically replaced them all with other cheaper and fewer mechanics.
6) then of course as we all know, NWA went ahead and filed for bankruptcy
Was the union right? I think so...Not only did management back out on their word but they did not take a paycut themselves.
On the other hand I have read about how automobile unions have screwed themselves with their exorbitant demands as well.
Instead of just boxing up the blame and putting at someone's doorstep, we should be thinking and looking long term at how we will regain manufacturing superiority.
There's a flaw in this thinking though. This link really hammers it home:
"THE BUCK STOPS HERE" DESK SIGN
The sign "The Buck Stops Here" that was on President Truman's desk in his White House office was made in the Federal Reformatory at El Reno, Oklahoma.
...
In his farewell address to the American people given in January 1953, President Truman referred to this concept very specifically in asserting that, "The President--whoever he is--has to decide. He can't pass the buck to anybody. No one else can do the deciding for him. That's his job.
Like it or not, Bush is the President and he's shown a large tendency to pass the buck or ignore real problems of the middle class. He's ultimately responsible and if he's not doing things right, the burden is on his shoulders. So to claim that it's a question of blame is incorrect. It's really a question of Bush taking responsibility to ALL the people of the country, regardless of their political position, their background or station in life and providing good clear policies for everyone and executing successfully. Rven JFK took responsilbity for the Bay of Pigs fiasco and acted. It's very difficult to find Bush doing the same.
One final point...my comment about the President representing ALL Americans also applies to all our representatives. After all they are OUR representatives...and what are they supposed to do? Represent US, ALL of us...not themselves, corporations, or special interests.
have a nice evening!
Former FC1(SW)(E-6) here and a third year Economics student at Bard college in New York.
Real wages have been in decline cylicly for a long time.
If you, or anyone else reading this is concerned with this current problem, I highly recomend you read "Progress and Poverty" by Henry George.
His book sets out to answer the question "Why in spite of increase in productive powers, do wages tend to a minimum which will give but a bare living?"
Nick: I sincerely believe you are sincerely WRONG. I see two major flaws with your postulation that manufacturing is the key.
1st, and perhaps correctable, is the fact that so many U.S. concerns incorporate offshore for the specific purpose of avoiding their (arugably fair)tax share. At the very least, they should receive no tax breaks (retroactive).
The 2nd flaw I see, I see no way to correct or avoid. It is technology. To maintain the price points we have come to expect, m any manufacturers have relocated their manufacturing operations in other nations where people are willing to work for $0.50 an hour or so. We cannot compete with that and, I really don't want to. We have to acknowledge that our economy has evolved and information is now the item we barter to keep the family fed. In short, Joe Sixpack will soon no longer have the leisure to be ignorant. Ignorance will keep going up in price until he simply can't afford it and will have to go to school to learn something that will allow him to make a living. Neither I nor the Idiot-n-Thief owe Joe the right/ability to maintain his ignorance. I refuse to defend it.
Now let's discuss that technology. Let's say that fuel prices spike so high that shipping costs remove any financial benefit to manufacturing overseas. (In truth, a number of things can/will cause that benefit to disappear but, this post has to end sometime today.) If the company decides to bring the manufacturing back to the good ole USA, what will they do? They will build a brand spanking new, state-of-the-art, highly automated plant. Didja notice the phrase "highly automated"? Good cause that is important. A "highly automated" facility will require/hire fewer workers and those that they do hire will be skilled workers who maintain the robots, computers, conveyor lines and such. A resume` will be required to get such a job and it is unlikely that having "high school dropout" in the education section will be considered a good thing.
The truth is that these automated facilities are coming regardless of fuel prices. Those folk in other countries who are working for them now will face what we already have. If they have not used their income for education, they will be in the same situation as Joe Sixpack. Manufacturing is dead as an employment base. Arguing with me will not revive it but feel free to do so anyway.
There is an old bumper sticker that reads: If you think education is expensive, try ignorance! There is wisdom to be gained there.
CAFKIA
Soul Catcher,
Excellent points and good post. I can also find common ground with you that the entire government system is NOT working for our benefit. Not just the Executive branch, but many others simply want more and more money, without regard to efficient spending of that money. Throw them ALL out and let's start over!
CAFKIA,
You are partly right about education and technology. But education and technology are the CATALYSTS for making manufacturing viable in the US. If a nation is not CREATING WEALTH through manufacturing then the only other way to obtain is is through selling of natural resources or stealing it.
As to your POINT#1 about companies moving off shore. Kerry himself called this legal avoidance of taxes a "tax break" for corporations. Whatever you call it, then if you get rid of this specific tax on a corporation in the US then that would negate the reason for them to move manufacturing off shore. I know you don't like it, but if another nation is willing to host manufacturing with low to zero taxes, then what can we do about it other than match it? This is a basic business decision.
As to point #2 which you claim technology is the second driver to a nation's wealth. Again let me explain why this is a CATALYST and not the root cause. Labor cost is only the main factor for manufacturing when you are building cheap products. Semicoductors for example, are manufactured using extremely expensive equipement. The main cost driver is the COST OF THE EQUIPMENT and NOT the COST OF LABOR. Whether this equipment is set up in the US or in China depreciation of the equipment per hour, day, month, etc. will cost the same. Any country has access to most of this high end manufacturing equipment. If Americans were willing to truly focus on quality and productivity, then in many cases the cost differential of labor can be made up in productivity. It does not take an economist to build a math model to understand this is true.
Yes, we should focus on education in an effort to improve our technology. This all should be done in an effort to regain manufacturing superiority. When everyone is working, they are paying federal income tax. They are buying more goods because they have money to spend, and this is the natural progression when manufacturing further developed in a nation.
I prefer a bunch of educated people working over a bunch of smart people sitting on their asses.
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