6/13/2012 5:57 PM ET|
Washington vs. the middle class
Wage-earners are about to take it on the chin, again. And our choices in November are a president who has done too little to help the economy and a challenger who wants to do still less.
There's nothing like an election to bring out the worst in our politics. Especially one in the midst of a terrible balance-sheet morass. People are desperate. They're angry. And they're realizing the politicos in Washington just don't get it.
Witness the recent backlash and Republican foaming at the mouth over President Barack Obama's comment on Friday that the private sector, which has created 4.3 million jobs over the past 27 months, was "doing fine" (compared with the public sector, which has lost more than 1 million jobs).
Behind the perceived insensitivity, Obama had a valid point. Government workers are being purged, adding to the unemployment rolls. Yet it seems this is what people want.
You can feel the tide turning as those stung by the globalized economy (manufacturing workers, for example) turn on their brothers and sisters in the tax-fueled economy that is the government payroll. Voters are saying, "How dare they get raises and a good retirement!" instead of asking why the rest of us don't.
Wisconsin's union-busting governor, Scott Walker, made headlines last week by winning his closely watched recall election. Voters supported his actions to cut public worker benefits and collective-bargaining rights. Similar efforts are under way in California; both San Diego and San Jose voted to tighten pay and benefits for public workers.
But this is a scorched-earth approach, focusing on what we can take away from others instead of how to make things better for everyone. We're talking reallocation of resources, not fresh growth or new jobs. Republican presidential hopeful Mitt Romney illustrated this view with his own gaffe, complaining that Obama wants "more firemen, more policemen and more teachers."
In other words, we're inviting our political leaders to rain fire on yet another sector of the already bloodied middle class. The war has already begun, and the middle class is losing. It's about to get much worse as Washington pushes us off a fiscal cliff.
Down, and nearly out
First, consider our current predicament. Here's a list of middle-class miseries that comes courtesy of Gluskin Sheff economist David Rosenberg, who compiled most of it. I added a few items:
- Forty-five million Americans (one in seven) are on food stamps.
- One in seven is unemployed or underemployed.
- The percentage of those out of work defined as long-term unemployed is the highest (42%) since the Great Depression.
- Fifty-four percent of college graduates younger than 25 are unemployed or underemployed.
- Forty-seven percent of Americans receive some form of government assistance.
- Employment-to-population ratio for 25- to 54-year-olds is now 75.7%, lower than when the recession "ended" in June 2009.
- There are 7.7 million fewer full-time workers now than before the recession, and 3.3 million more part-time workers.
- Eight million people have left the labor force since the recession "ended" -- adding those back in would put the unemployment rate at 12% instead of 8.2%.
- The number of unemployed looking for work for at least 27 weeks jumped 310,000 in May, the sharpest increase in a year.
- Just 14% of high-school graduates believe they will have a more successful financial future than their parents.
- The male unemployment rate for ages 16 to 19 is 27%; for ages 20 to 24, it is 13%.
- Because of structural problems such as negative home equity (which keeps people from moving for work) and skills erosion (from long-term unemployment), UBS economists estimate that the economy's natural unemployment rate has increased from 5.7% before the recession to 8.6% now. This acts as a speed limit on potential economic growth.
- Between 2007 and 2010, median family net worth fell nearly 40%, while median inflation-adjusted incomes before taxes fell nearly 8%.
Ugly stuff. And it's about to get a lot worse.
Voting for recession
I wrote in this April column that the country is facing a looming fiscal cliff, and you've certainly heard the phrase since.
Approaching is a collection of tax increases and spending cuts worth, according to Bank of America Merrill Lynch, $720 billion, or roughly 4.6% of the U.S. gross domestic product, if you include things like tax increases to fund the new health-care bill. They include the expiration of the Bush tax cuts, automatic spending cuts agreed to in the last budget deal, and more.
The math is simple: If these things happen, they will slash nearly 5% off the growth rate of an economy expanding at a pitiful 1.9%. And they're all set to happen as the calendar flips to 2013 -- unless Washington does something.
Also in the mix is a debt-ceiling increase, which is needed to avoid a government shutdown unless -- again -- Washington acts. I'm not holding my breath.
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Like Obama, FDR was a Democrat. The only thing that saved this country from the Dem's back then was World War II. What do we have to save us from them Dem's now? A Nuclear War in the Middle East? I really don't think anyone will be worrying about their finances if the US goes up against Russia and China over the Syrian revolt.
Chemical weapons against Israeli nukes....American versus Russian and Chinese nukes.
Thank you, Obama for the change you promised. As a future post-apocalyptic citizen, I hope you survive to suffer with the rest of the survivors.
I really think nothing can save the middle class. I feel terrible.
But understand if you tax millionaires, (1/4 millionaires like me at 250K) I will not hire as much.
Obama care has already caused me to change my hiring behavior. Us small businesses do 65% of the hiring.
The Government has caused this problem. Stop the Liberals, lawsuits, and make common sense regulations or we will not hire. I am not working harder for less. Period!
The wealthy aren't going to give up what they have for the good of the nation. Corporations will make more job cuts not jobs. When we cut spending it will be the middle class that will suffer. Maybe the USA should try to do something for the homeless. Maybe the FED should consider the damage they are doing to savers with their zero interest being paid policy. I suspect the government will do nothing. The savers can just run out of money like the lady across the street from me and become homeless. There goes the neighborhood, another house for sale that probably won't sell easily. She moved in with her brother who was already crowded.
Hey I know how to fix all of this debt ,,Bush did it let him pay for it,,that way people can retirer at 65 an the companys can have there tax breaks an pay people 7.25 an hour an they can go bye new homes ,,oo thats right you cant buy a home on 7.25 an hour,,but thats ok Mitt Romney will save us, he will give the rich a big tax break an they will give us jobs,,,damn I forgot we have been giving the rich tax breaks for 10 years now an no jobs,hell thats not going to work ,,,hey Mitt thats not work what else you got
Judging by your comment about our chcoices I take it you are a Obozo fan.
My mind is made up and I am sick and tired of media and talking heads like you putting a good spin on Obozo. Obozo has done nothing good. If Mitt does anything good he will be one up on Obozo.
I won't be reading you any more.
Soon the "get into office so that you have access to public funds to buy more votes" plans are going to have to be refigured!
First off the wealthy aren't going to give up what they have for the good of the nation, nor should they. Corporations aren't going to do anything to jeopardize their bottom line either, in fact they will make more cuts not jobs. As far as the government employees only the fat should be cut and nothing more. The main problem is the FAT is at the top and they make the decisions. We need to CUT Spending and quit bailing out other counties. Cut special interests and tax breaks for corporations. And maybe the countries leaders should take a pay cut instead of a recess with pay. Then maybe they will once again be in touch with the rest of us.
You watch that Dimon testimony the other day ? Still in doubt about the direction of the country ?
Still in doubt who the bosses are and who takes the orders ? How can you be so stupid ?
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