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
Why do you hate good wages?
Will senior citizens vote for Republicans that want to END their Social Security and Medicare.
Tea Party Republicans = Senior Citizens Against Their Social Security Checks
Stand with Republicans desire to END Social Security and Medicare by declining your Social Security and MC.
SS/MC are social safety net programs that a conservative like you despises, unless you benefit from it, then social welfare programs are A-OK, when it's you using them.
Since Repubs want to end SS/MC, decline your SS/MC benefits. Let's see how well you fare.
It is his plan to destroy the middle class . Break our backs by taxing us to death , destroy property values . Have the employers reduce hours & wages to save the company and there employees from financial ruin and jack the cost of living to the moon.
Now we have to get back to work ! Millions on welfare depend on us !
Tomorrow is a triple header day for the Jerry Springer worshipers of the world !
God save us .....
I need not say anymore.
Save it?? What the hell does that mean?? He spent his first 4 years destroying it. Is this just in case it does survive and he can take the credit? And the Sheeple have so much koolaid in their systems that has short-circuted their memories that they will fall for it like a bunch of lemmings off a cliff.
Elderly Republican VOTERS can show their support for the GOP's desire to end SS/MC by REFUSING/DECLINING their Social security and Medicare.
Show solidarity with ALL elected Rethugs by declining your SS/MC.
Why do Republicans want to keep our good paying jobs over in China? Are they more loyal to China than America? yes.
End job outsourcing + a $15 an hour minimum wage = a roaring American economy and balanced budgets.
Low wages, anything below $15 an hour in today's dollars.
Republicanism foisting Mussolini's economic system of pro-corporate Fascism
Anti-unionism and union-busting which is a wage killer
Corporate personhood and corporations.
Unaffordable for-profit health care(mostly corporate) and prescription meds. (HC is the #1 reason for bankruptcy in the U.S.)
For-profit gasoline.(Hugo Chavez's state gasoline in Venezuela costs 25 cents per gallon at the pump in U.S. dollars)
High rents and mortgages
Placing the burden of taxation on the middle class and poor so that wealthy can enjoy near tax-free living.
For-profit energy, heat, utilities.
For-profit banking and charging interest on things like home loans.
Change it, or our future is a very dead future. Low birth rates are killing us.
Republicans blame Obama for his work on a weak economy which they started. The GOP hasn't lifted one finger (besides giving us the high sign) to help the economy. If this type of obstruction doesn't stop then the middle class might be doomed. I'm confident we will survive , the problem is it's going to take some time.
Any more saving of the middle class and we will be tax to our death, Please no more saving.
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