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 $34,000 a year -- from 1971 to 2011, after accounting for inflation, according to an analysis by Michael Greenstone, a Massachusetts Institute of Technology economics professor and director of the Hamilton Project, a Washington research group affiliated with the Brookings Institution.
The impact of the decades-long slide in wages was initially cushioned in many families by the increasing number of women who went to work, and later by the home equity that families borrowed against during the run-up in housing prices before the real estate bubble burst.
More from Bloomberg:
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Boy! I don't know where to begin. 1st, there was no income tax breaks and whoever wrote this nonsense knows it. It was a FICA tax "holiday" that shouldn't have been allowed. President Obama could care less about the Middle Class. If he really cared he'd be doing something about our incredible debt. I'm stunned that MSNBC would even try to sell us this nonsense.
You are a prime example of an UNeducated, worthless American who should not be allowed to vote.
How is it that you have to take a drivers test to get a license, yet any moron like johnq can help shape this country and vote?
You should be made to take a test in order to vote.
I suggest that anybody who thinks Barry is there to help should be permitted toward the front of the line and provided two spoonfuls of the s$hit that he's serving.
I am in the MIDDLE CLASS and so is my wife,
BOTH OF OUR TAXES WENT UP!
Everyone of you who voted for hussein can eat ****. I hope that you idiots who voted for him get hit hard by the tax increases and suffer as a result.
Obama is the absolute worst enemy the middle class has from his very 1st speech until some how we survive 4 more years or more likely some of these otherwise smart dems realize how slimy and corrupt he is and when he bleeds the rioch dry whose next. i work for a company who employs about 4000 and i have sdeen something i never would have believed. Most people at work know my position on OBUUUUUMA and over the last few weeks some of my black and brown brothers have made a point of coming over to my table at lunch and really ranting about him and his policies and then others try to tell them how wrong they are and i just have to laugh.
As an economist at heart, I can cite at least 8-9 historical instances where "leaders" claimed they were going to turn the world around......and failed.
Obama's administration is going to go down in history as THE most egregious, most moral lacking administration in US history. Lies/theft/murder/abandonment/moral misses: the list continues to add up......
Wow and here I thought Dubya Bush, the too big to fail, the banks and the Republican party were the 'saviors' of the middle class? Lets see what these Fascists did for the middle class:
1)De-regulated the banking industry and caused the Republican Recession. The Repugs had to bial out their wealthy banker buddies with middle class tax money. The Repugs then call for cutting SS and medicare, medicaid and un-employment insurance to pay for the bonuses their banker masters received.
2) Held middle class un-employment insurance hostage until Obamer gave their masters ( the wealthy) the tax cut they demanded.
3) The Repugs have introduced a bill to totally eliminate the restrictions on H1B visas, so that now companies no longer have to off-shore their work, they can fire their middle class American workers and replace them with imported H1B cheap labor. Now that was worth a bonus or two for the Paris Hiltons of the world.
4) The Republicans are about as pro-middle class as Colonel Sanders is pro-chicken.
1."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".
- This is not a 'payroll tax' cut, it was a political ploy by our dishonest President to choose not to collect Social Security taxes and create the false illusion of giving people a tax break. It created a 140 billion dollar a year hole in the SS Trust fund, that fund has now reached the critical point of paying out more than it is taking in, a full six years sooner than expected because of this junk political move by Obama. He robbed the middle-classes future to pretend to help them.
2. "forecasters predict a slower expansion as federal tax increases and spending cuts crimp growth". There are no real spending cuts. The government has been financed by continuing resolution since 2009 as dishonest Senate leader Harry Reid has refused to actually produce a budget. Spending is drastically higher now (24% of GDP than it was during the prior 30 years (19% of GDP). To claim spending cuts is a blatant lie.
3. "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.".
-There is no Republican plan to cut Medicare or Social Security. This is a liberal talking point lie stated as a fact.
4." 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."
- Obama has engaged in years of massive stimulus spending on infrastructure. The CBO has already stated the drag on the economy created by the debt being incurred exceeds any stimulus effect.
5. The rest of the article is fanciful simplistic explanation of wages that fails to include the effect of massive levels of immigration of unskilled people which pull down wage averages, and also ignores the important point that overtime, individuals increase their incomes, so the same 20 year old fellow in 1990 who was in the bottom range is now gone, replaced by someone else. It's not the same people stuck as this article would have the simpleton liberal dupe believe.
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