1/18/2013 8:45 PM ET|
A 2nd term to save the middle class
Obama steps into his second inaugural with a vow to turn around the decline of America's middle. But that promise is already in peril.
President Barack Obama, who said his "one mandate" in a second term was to help middle class families, takes the oath of office with many barriers to raising most Americans' living standards.
Most Americans started this year with a cut in take-home pay as Congress let a temporary 2-percentage-point reduction in payroll taxes expire. Workers' leverage to gain wage increases will be limited for years by competition from the swollen ranks of jobless Americans as forecasters expect the unemployment rate to remain at or above 7% through 2014.
Even with bright spots such as signs of strength in housing and an energy boom that's lowering fuel costs for manufacturers, forecasters predict a slower expansion as federal tax increases and spending cuts crimp growth and demand for exports drops with a weakening global economy. While the U.S. economy advanced at a 3.1% rate in the third quarter, growth of just 2% is seen this year, according to the median estimate of economists surveyed by Bloomberg.
At the same time, Obama faces united Republican opposition to his agenda and pressure to slash federal spending.
"The president is still fundamentally on the defensive," said Damon Silvers, policy director for the AFL-CIO labor federation. "His fundamental task is to avoid being forced into austerity measures that will hurt the economic recovery or the capacity of our government to serve the people."
Obama was confronted in his first term with an inherited recession that drove down most Americans' incomes. His second term starts with a fight to merely hold the line against the Republican House majority's push to cut benefits in entitlement programs such as Medicare and Social Security that many Americans rely on.
Looming battles over the budget, the legal debt limit and a round of automatic spending cuts scheduled for the end of February restrict Obama's leeway for other priorities, such as boosting infrastructure spending to stimulate economic growth.
The pieces of his economic agenda most likely to raise middle class living standards in the near term are "the parts that look like they're not going anywhere," said Larry Katz, a labor economics professor at Harvard University. These include plans for an infrastructure bank and tax breaks for new hires.
"Left by itself," Katz said, the economic recovery is likely to continue generating "tepid, small improvements" in middle-income workers' living standards "but not enough to really offset the poor performance since the late 1990s."
Middle class U.S. workers -- defined by one measure as households with annual incomes within 50% of the national median, or between about $25,700 and $77,000 -- have faced a four-decade-long erosion of living standards. It was interrupted by a rare period of rising earning power during the fast-growing economy of President Bill Clinton's second term, Katz said.
Real median household income soared to $54,932 in 1999 from $50,661 in 1996 based on constant 2011 dollars, an all-time high since the U.S. Census began reporting the data in 1967.
By contrast, median household income in November 2012 was $51,310 -- $3,850 lower than when Obama took office in January 2009, according to an analysis of census data by Sentier Research, an economic-consulting firm in Annapolis, Md.
In Clinton's second term, gross domestic product grew at an average 4.3% rate and the unemployment rate averaged 4.4%. That created a tight labor market, which provided workers leverage to press for higher wages.
Clinton also won congressional passage of a two-step increase in the minimum wage, which took effect in 1996 and 1997, creating additional upward pressure on pay; the federal minimum wage hasn't gone up since 2009, when the final step of a wage increase signed by President George W. Bush took effect.
The gains of the late-1990s are eclipsed by decades of downward pressure on pay.
Median wages for men between 25 and 64 dropped 19% - - to $34,000 a year -- from 1971 to 2011, after accounting for inflation, according to an analysis by Michael Greenstone, a Massachusetts Institute of Technology economics professor and director of the Hamilton Project, a Washington research group affiliated with the Brookings Institution.
The impact of the decades-long slide in wages was initially cushioned in many families by the increasing number of women who went to work, and later by the home equity that families borrowed against during the run-up in housing prices before the real estate bubble burst.
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The problem with your argument, max, is that the baby boomers were in their peak spending years during the Clinton era, which is why any president would have experienced economic growth during that time. Also, the tech stocks were soaring sky high back then and only fell apart toward the tail end of Clinton's second term.
Unfortunately the boomers started getting older and stopped spending so much money. Then the housing bubble burst, fueled in part by the Clinton-Greenspan-Graham repeal of Glass Steagal but mostly because the federal government backed subprime mortgage loans allowing the banks operate risk-free.
True, Bush was asleep at the switch as was everyone else including Senator Obama. TARP gave the banks their bailout and left the American taxpayer holding the debt. Its scope was far too expansive and should have allowed for more free market consequences for the banks with enough stimulus to keep the system from crashing.
As of now we are still hooked on stimulus spending, including the stock market, with no end in sight. What goes up must come down and we will never get back to where we were before the housing crisis until we let it happen.
If we do instill some fiscal sanity in the next election cycle, we will experience another economic boom when the boomers' kids start to enter their peak spending years. Our government and its people should be prepared for these cycles because they are going to happen regardless of which party is in power at the time.
If granting 'legitimacy' to all the illegals in this country and further driving down wages is his idea of 'saving' the middle class I wouldn't want to see what he might do if he chose to destroy it!
Well let's see in 2008 I was making 40,000$ a year but got laid off. then I took a job making 22,000$ after being unemployed for a year. Then I found a job making 30,000$, now in 2013 I am unemployed again, I really can't even meet my basic expenses on the 300$ a week I get for unemployment, I am thinking I am going to have to stop paying the car insurance and just drive uninsured because I have got to find some cash from somewhere. There just really aren't much in the way of decent paying jobs anymore. That is kind of what the future looks like. Low paying jobs not being able to pay the bills thats going to be reality for a lot of americans moving forward.
My share of the national debt went from $19,000 the day Bush left office to $52,000 today. This is FACT. Check it out for yourself. Who is going to pay it off? The 50 million on welfare? The rich? No me-the middle class. Already taxed to death and I need to pay "just a little more" .When the Obamacare fiasco began my health care premimum went up by one third and my co-pay doubled.Can't afford to even go to the doctor now. Savior my a$$.
Middle Class.... are you kidding that left the country a long time ago... Thank you Mr. Obama!
Yes, Mr. Obama under your reign my status has plummeted, there is no "disposable income" every single thing in our lives cost more yet our income has declined a total of 16%, our home is worth less than 40% of the mortgage amount and that doesn't even account for the $50,000 down payment, we pay more for all insurances, more for gas, more for groceries, more for prescriptions, more for doctor visits and the list goes on! Our kids if they can go to college at all will come out with huge debt that will prevent them from buying homes, cars or even being able to live.
Yes, Mr. Obama, I am deeply indebted to you for all you have done for this county and the once Middle Class! Can't wait to see what more damage you have in store for us. Perhaps if your constituents' understood more you would not be there today!
Let’s see twelve thousand dollars for a plate of food, at one of his gatherings I’d say yes he’s watching out for the middle class!
Savior of the middle class?
Are you serious?
He has been waging class warfare since he was sworn in for the first term.
This has been the most uneven recession I can remember in my life time.
The middle class has suffered the most.
Oh yea, I’m rolling in the dough! I bet he wants it! And the republicans are thinking I’m getting paid to much!
In 2001 Americans had the highest standard of living in the world, by 2009 we had fallen to 7th.
So what happened, Republicans had control of all the governmental branches and they implemented there magic formula,
They cut tax rates that had given us 4 straight balanced budgets
They ended the 8 year trend of smaller government by adding more agencies and entitlements, TSA, Home Land Security and Medicare D the largest entitlement expansion ever, hundreds of billions in added annual expenditures.
They increase our annual military expenditures from about $300 billion to $700 billion, another $400 billion per year with no way to pay for it.
They turned a $237 billion dollar surplus in 2001 into a $1.3 trillion dollar deficit by 2009
The national debt doubled going from $5 trillion to over $10 trillion
The GDP growth rate fell from 3.88% under Clinton to just 2.09% under Republicans
Job growth fell from 22.7 million under Clinton to just over 1 million under Republicans
Government went from spending 18% of the GDP to 25% of the GDP
Revenues fell from 20% of the GDP to just 14%
And like a cherry on the cake, Republican sponsored deregulation of the Banks and Wall Street lead directly to the housing bubble and ultimate financial collapse.
I've had enough of the Republicans Magic Formula, how about you.
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