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:
VIDEO ON MSN MONEY
The vast fortunes made by the world’s richest 100 billionaires is driving up inequality and hindering the world’s ability to tackle poverty.
The charity said the accumulation of wealth and income on an unprecedented scale, often at the expense of secure jobs and decent wages for the poorest.
Ban that Fraud Street Ponzi Scheme.
How dare business owners use other peoples money to expand their companies. Since they are so smart and independent and don't need anyones help to prosper and grow their business(s), why is it that they are always seeking everyone elses money? HYPOCRITES!
If you are all so smart, independent and proficient,.... DO IT ON YOUR OWN! Expand your business(s) with your OWN money and stop BEGGING for everyone elses money. GREEDY AND FRAUDULENT SCUMBAGS!
Please watch the movie Obama 2016 and then do some research into his grandparents and his mother's belief systems as well as the background information of all the People he went to College with and hung out with and appointed to his cabinet the first time and you will know just who he is and where he wants to take this Nation. He stated that he was going to raise the taxes on the rich and not the middle class. Currently with the changes he has brought before Congress the Middle class will pay more taxes this year than last year. The current amount figured for this next year is 4000.00 per household. Don't take anyone's word but do the research yourself. Here this will start you on your information hunt.
Yet, a cursory look at the people Obama has placed in his administration reveals a philosophy very different from his words. Obama has:
John Holdren as his Science Czar. Holdren believes in forced abortions and mass sterilizations.
Cass Sunstein as his Regulatory Czar. Sunstein believes in allowing animals to be represented in court, while banning all hunting.
Kevin Jennings, a homosexual and organizer of a group called Gay, Lesbian, Straight, Education Network as the Safe School Czar.
Mark Lloyd as Diversity Czar. Lloyd believes in curtailing free speech and is a supporter of Venezuelan dictator, Hugo Chavez.
Valerie Jarrett, an avowed Socialist, as his Senior White House Advisor.
Anita Dunn as former White House Communications Director, until she told some kids that Mao Tse Tung was her favorite philosopher and the person she turned to most for inspiration.
Carol Browner, a well-known socialist, as the Global Warming Czar working on Cap and Trade.
Van Jones, an ex-con and avowed Communist, as Green Energy Czar before a Jeremiah Wright-like video of Jones speaking about his plans surfaced.
Sold-out American allies Poland and the Czech Republic by cancelling a deal to build interceptor sites and radar that would protect them from ballistic missiles.
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Asian markets ended the Thursday session on a mixed note after the release of several economic data points. Japan's Corporate Services Price Index rose 0.7% year-over-year (expected 0.8%, previous 0.7%), while the Foreign Bonds Buying report indicated net sales in the amount of JPY463.90 billion (previous purchases of JPY114.60 ... More
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