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
Save the middle class? That's right you think by taking away certain right's you are taking care of us. Well do us a favor. If you really want to help us, Leave.
You have got to be kidding a SAVOR of the middle class!!!!!!!!!!!!!!!!! That bastard wants to destroy the middle class. For some jacka.s reason, he want the United States to fail. If I am wrong then damn it, PROVE IT. Everything that this bastard has done is to bring these United states down............................................................................
Superman O to the rescue!
If you were honest you could have described the Republican goals as Balancing the budget and Less Government control of our lives, not wanting to take away expensive government benefits
I don`t know what you guys are smoking.I moved from middle class to upper middle class
during the last 4 years due to my limo service expanding and the stock market up 67%
during these years.I bet 99% of these Obama haters are jeolous white people who didn`t
put their money in the market on Jan.20th 2009 when the Dow was at 8156.Call yourself
stupid for missing the boat.If I can start and run a succesful business, most people
Restore birth rates by ending Republican job outsourcing and the Republican's war against good wages.
Low birth rates threaten EVERYONE'S future, including YOU.
You know, the pre-union wage before unions came along and created the middle class.
That's why Republicans hate unions and the middle class. that's why Repubs hate a fair wage for a fair days work.
A repeal of outsourcing and a FEDERAL minimum wage of $15 an hour would cause the American economy to soar. Republicans will fight a repeal and will fight against any wage increases.
Republicans have long declared war on the middle class and are winning by sending our jobs to China, union-busting, and wage-busting.
Copyright © 2014 Microsoft. All rights reserved.
Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.
[BRIEFING.COM] The stock market ended the holiday-shortened week on a mixed note as the Dow Jones Industrial Average shed 0.1%, while the S&P 500 added 0.1% with seven sectors posting gains.
Equity indices faced an uphill climb from the opening bell after disappointing quarterly results from Google (GOOG 536.10, -20.44) and IBM (IBM 190.04, -6.36) weighed on the early sentiment. Google reported earnings $0.15 below the Capital IQ consensus estimate on revenue of $15.42 ... More
More Market News
|There’s a problem getting this information right now. Please try again later.|
MUST-SEE ON MSN
- Video: Easy DIY smoked meats at home
A charcuterie master shares his process for cold-smoking meat at home.
- Jetpacks about to go mainstream
- Weird things covered by home insurance
- Bing: 70 percent of adults report 'digital eye strain'