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."

Image: Anthony Mirhaydari

Anthony Mirhaydari

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.

Stocks and funds mentioned on the next page: SPDR Gold Shares (GLD), Market Vectors Gold Miners (GDX), Great Basin Gold (GBG) and Agnico-Eagle Mines (AEM).