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
What is wrong with you people? Why do you keep believing his cr..p? He has never had to create a job nor come up with the money to make a payroll. He absolutely knows nothing about how a business is run. Yet once again we voted in someone VERY ignorant in what it takes to have a business and keep people employed so they can remain in the middle class. He doesn't have a clue....when will you get that through your heads? HE IS A FAILURE and now we have to deal with four more years of it!
Just look at his face in this picture...it says it all. He is even tired of trying to keep the lies and half truths in the air...time for another golf vacation.
Clueless as his administration and the Congress.
I couldn't WAIT to see to low-Iinformation redneck/ haters go ballistic!
OK, I;ll go along: Obummer is a radical christian/closet Muslim who is ruining our economy on purpose and taking our guns away so he can impose Sharia law and send his brothers in Kenya here to screw our women afer he forces everyone to gay marry!
You guys crack me up.
MSN AND THE REST OF THE LIBERAL MEDIA ARE SO BIAS NOT REPORTING HIS LIES! HERE'S A FEW: NO CUTS OR DEATH
PANEL IN OBAMACARE! YOU CAN KEEP YOUR DOCTOR! IT WILL CUT COST! NO MIDDLE CLASS TAXES! ECONOMY IS ON THE
RIGHT TRACK AND GROWING! UNEMPLOYMENT IS GOOD FOR THE ECONOMY! FAST N FURIOUS HAD NOTHING TO DO WITH
GUN CONTROL! BENGHAZI WAS CAUSE OF A VIDEO! CLASH FOR CLUNKERS WORKED! ALGAE IS THE NEW ENERGY! THE US
IS DRILLING MORE NOW CAUSE OF HIS AGENDA! HE WILL HAVE THE MOST TRANSPARENT GOVT EVER! ROMNEY LIED?
oblamo has a funny way of saving the middle class by RAISING their Taxes...?
Only person oblamo wants to help is himself.....
I have lost all trust with the government with him in control..Beware Americans...!
Obama does not want to "save" the middle class. He wants to create a whole new class of dependents who will in turn continue to vote for the democratic party which is slowly turning into a socialist regime. And this is exactly how socialists operate to gain and remain in power. Economically enslave people who will then have no choice but to not bite the hand that feeds them.
People should really try educating themselves about Obama's past, how he was brought up and what he really believes. The only thing he has succeeded in is dividing America along both racial and socio-economic lines, creating another unsustainable entitlement program (Obamacare), increasing our debt to over $16 trillion, presiding over the first U.S. national credit downgrade in history, increasing racial tensions, perpetuating welfare, food stamps, unemployment and expanding dependency on government.
Do these sound like the actions of a competent man who is "looking out for the middle class"? No, he wants to collapse capitalism by overloading the system by creating so much dependency on the government that the people won't allow spending cuts for fear of losing their only means of support, and eventually we'll declare bankruptcy which will clear the way for a new socialist/fascist economic system, which the socialist democratic party will preside over after convincing gullible Americans that they care for the "average guy" while Republicans only care about rich people.......all while the very democrats who espouse this lie are padding their already filthy rich bank accounts with the money they're stealing from the half of American's who pay taxes and also redistributing it to the dependent masses who keep them in power. It's a brilliant political strategy that anyone with common sense and an I.Q. over 100 should be able to see. It's just too bad they don't have the same brilliance when it comes to economics.
This article is inconsistent and just about as far from the truth as you can get. Obviously written by a non-middle class journalist who hasn't had to fill up his own gas tank or worry about paying for groceries, nor does he have any children who may end up paying for those American's now who want to avoid austerity measures at all cost. Hello! Middle class working Americans are not on social security and medicare! We are the ones paying into it. As I recall, at the beginning of the year, I took a pay cut so the coffers at Social Security could be refilled, all the while at 30 years old, I seriously doubt the program will be solvent by the time I reach retirement age.
There is so much wrong with this garbage heap of an editorial it's hard to even know where to start.
It's no wonder google was my home page, not MSN, so I don't have to read this tripe.
Obama has no intention of 'saving' the middle class. He's too busy completing that 'change' he promised in his first campaign. And that 'change' is the polar opposite of saving the middle class or this country.
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[BRIEFING.COM] The headlines generally favored Tuesday being another good day for the stock market. Instead, it was just a mixed day with modest point changes on either side of the unchanged mark for the major indices.
For the most part, the stock market was a sideshow. The main trading events were seen in the commodity and Treasury markets, both of which saw some decent-sized losses within their respective complex.
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