Economic Squeeze Plaguing Middle-Class Families (NY Slimes Outrights Deceives - AGAIN)

NY Times ^ | 8/28/04 | Timothy Egan

[NYC Republican]

EWTON, Iowa - Sure, she is upset that she cannot afford health care, and it hurts that higher tuition costs at the community college where she carries a full load have put her deeper in debt. But at the end of this month, Molly Illingworth will suffer the worst blow yet: she is getting laid off by her mother.

"I hate to close the shop," says Pam DeBruyn, Molly's mother, who owns a small party and office supply store here, and also works full time as a graphic designer. She needs the designer job for the health insurance, so she will close the store, and with it will go her daughter's employment.

In this Iowa family, one generation is trying to step through the gateway to the middle class; the other is struggling to stay in it. And it is the middle-class squeeze - rising college tuition and soaring health care premiums at a time when wages are stagnant and job creation is sluggish - that may be the sleeper economic issue of the presidential campaign.

"I feel the squeeze from both ends," said Beth Steenhoek, a mother of two who owns a small insurance agency in Newton. Fewer people are buying insurance, she said, because of a hefty increase in premiums, and her own family insurance costs have gone up as well.

Ms. Steenhoek has refinanced her home mortgage loan, and remembers getting "about $400 a kid" in the Bush tax cut, but she said it still feels like the family budget is shrinking. And she has not even thought of taking a few days off.

"A vacation? No, I can't leave the office."

For Ms. Steenhoek, the economy is the No. 1 issue in the presidential campaign. She is that rare species this election year: the undecided voter. But even solid partisans are troubled by the tremors at the edge of middle-class life.

"I'm a pretty staunch Bush Republican and I have a great job at I.B.M.," said Todd Canny, who was sharing ice cream with his three children and wife in a new mall. "But we're paying a lot more for health care co-pays and premiums, which is through my wife's job as a teacher. And trying to save for college for these three little ones has gotten a lot harder."

Senator John Kerry says the middle class has shrunk since President Bush took office, and when judged by the percentage of Americans who made $25,000 to $75,000 in 2003 - 45 percent of households - he is right, according to factcheck.org, a project of the Annenberg Public Policy Center that monitors campaign claims. Mr. Bush cites record home ownership and a rising investor class. He points to indicators of coming economic growth, and says his tax policies have put money directly back in people's pockets.

But despite low inflation, record home ownership and productivity, many middle-class households are close to a tipping point - a bill or two away from losing economic control, surveys and interviews show. Even with the creation of a million new jobs over the last year, the percentage of people who say the economy is in good shape has fallen as Election Day approaches.

[The number of Americans without health insurance rose to 45 million last year, up a million from the previous year, and median household income continued a three-year decline, the Census Bureau reported on Thursday. People in the middle-income brackets had the biggest declines in coverage.]

Last year, 1.6 million American households filed for personal bankruptcy, up 33 percent from 2000, according to figures kept by federal bankruptcy courts.

And if current trends hold, nearly one in seven families with children will declare bankruptcy by the end of the decade, said Dr. Elizabeth Warren, a Harvard Law School professor who is the co-author of "The Two-Income Trap: Why Middle Class Mothers and Fathers Are Going Broke" (Basic).

"These people aren't poor," Ms. Warren said. "But this is the first generation where college-educated people with a good job cannot find financial security."

But Ms. Warren said the squeeze goes beyond short-term economic swings, and is worse than it has been at any time since the creation of the post-World War II middle class. The reason is that the price of things that people cannot control, but need to get ahead of or stay ahead of, are rising much faster than inflation or wage increases.

With wages flat, college tuition is up an average of $1,207 for four-year institutions since 2000, and yearly health care premiums up $2,360 over the same period. Mr. Bush's advisers say the tax cuts have made up for stagnant wages. Real disposable income, money left over after taxes, is up slightly this year over last, and that is mostly because of tax cuts.

Another variable is gas prices. They have fallen some from recent highs, but record oil prices portend a winter when home heating fuel costs could break some family budgets. Already, higher gas prices have cost the average family about $500 a year.

So even though people received additional money out of their houses, through low-interest rate refinancing, or in their pockets, through the federal tax cuts, the stimuli seem to have worn off. Nearly two-thirds of people in recent polls say they have trouble paying bills and feel pinched by the rising costs of middle-class essentials.

It is one thing to feel the squeeze in Newton, a Maytag company town east of Des Moines where layoffs and outsourcing have had a ripple effect on businesses big and small. But it is quite another to hear people talk about the squeeze inside the polished marble shopping palace of the new Jordan Creek Town Center, Iowa's biggest mall. It had its grand opening this month in the booming suburbs west of Des Moines.

The Cannys live near the mall, in the fastest growing part of Iowa, where big houses and new office parks have sprouted in former corn fields.

Mr. Canny said the Bush tax cut did not help his personal finances as much as the rising health care costs and the higher price tag for filling his S.U.V. tank hurt them. Mr. Canny has yet to give Senator Kerry, who used the term "middle class'' eight times in his Democratic Party acceptance speech, a second look.

"But if things continue to get worse, it may start to affect my vote," Mr. Canny said.

Iowa's seven electoral votes went to former Vice President Al Gore by a slim margin in 2000 and the state is up for grabs this year, according to polls. It is not only a swing state, but also emblematic of all the trends that have pressed middle-class Americans.

Ms. DeBruyn and Ms. Steenhoek, here in Newton, own their businesses. Both women have a spouse who also works. But both women feel they have lost ground because of costs they cannot control, costs of things that keep them among the overwhelming majority of Americans who say they are middle class.

When Mr. Kerry said in his acceptance speech that "People are working weekends, two jobs, three jobs, and they're still not getting ahead," it went directly to the middle-class squeeze issue, and hit its mark in some households in Iowa.

"I like some of what Kerry has to say on the economy," Ms. Steenhoek said.

But both women also like President Bush's emphasis on trying to give tax money back to middle-class families. In Iowa a few months ago, Mr. Bush said the election "is a choice between keeping the tax relief that is working, or putting the burden of higher taxes back on the working people."

Here in the troubled prairie town of Newton, the only way Ms. DeBruyn says she can keep her dream of owning a small business alive is by firing her daughter, whom she has been paying $6.50 an hour. Then she plans to move the business into her home and open it at night, while holding onto her full-time day job as well.

"I'd like to retire in this town," said Ms. DeBruyn, who has lived in Newton all her life. "But it seems like we're holding onto less and less of what we make."

[spectre]

Missing from this NYT doom and gloom piece is one sentence regarding what their GREAT savior kerry would do about this.

We all know the reason.

[NYC Republican]

Excellent point... Also, what about all of the positives that have occurred during the past year (i.e.- booming economy/GDP growth, over a million jobs, higher stock market, tax cuts, etc)

[Southack]

"Thanks bud... Would love to see the % below and above middle class for '80 and '03 if anyone has it."

That median household chart in Post #27 comes close to giving you what you want. In 1980 (using inflation adjusted 2003 Dollars), half of all households made more than $37,000...and the other 50% made less.

Again using those same inflation adjusted Dollars, by 2003 50% of all households were earning more than $43,300 per year.

The Middle Class is that group in and around the Median. Clearly, the Median household income *increased* from 1980 to 2003, so the Middle Class at large is wealthier today than in decades past.

So if the Middle-Class is defined in such a way as to show shrinkage, then it is the Upper Class that will have to have grown in order for the Median to have increased.

In other words, your hunch that the NY Times is deceptively writing a story in a way so as to make it appear that we are more poor because of Middle Class shrinkage...is a good hunch.

The U.S. got richer from 1980 to 2003. More households were earning more money, even after adjusting everything for inflation.

The NY Times wants us to infer that we got poorer. That's incorrect.

5 Legislative Days Left Until The AWB Expires

[ninenot]

Cute stuff. GKC was always right. Try www.gilbertmagazine.com. There's a bunch of free wisdom there--

[ninenot]

Here's another from GKC: "It is terrible to see how few politicians are hanged."

[ninenot]

higher stock market

Dow's down on the year, fella.

ECRI Weekly Leading Index has been pointing downward for the last 6 months.

And of course, the trade deficit is an all-time all-time high.

[Qwinn2]

"Dow's down on the year, fella."

And up almost 50% since mid 2002.

Qwinn

[grey_whiskers]

You wrote:
"What's really interesting about that graph is that 'median income' peaked BEFORE, and was actually in decline BEFORE the 'recession' shaded area. "

I had a post earlier--couldn't find it.
Went approximately as follows:

Clinton's term:
Global Crossing
Tyco
Dot-Coms

Then Gore rescinds his concession and tries to SUE
his way into the White House
(while interest rates yanked UP by Greenspan)
Dot-bomb collapse begins

Then
9-11
Malvo sniper case
Anthrax
Afghan war
Run-up to Iraq
Iraq war
Oil to $50 / barrel

(while Bush cuts taxes)

How many job losses before BUSH TAX CUTS
How many job losses after BUSH TAX CUTS

I know I sure felt squeezed by that $800 check
returning MY MONEY. :-)

[grey_whiskers]

Or as PJ O'Rourke said once:

Term limits are not enough. We need JAIL.

;-)

[driftless]

There will always be a percentage of the population who for various reasons will fail. And some people do have bad luck. But that's been true for every society in the world throughout history. Does anyone think that that there weren't failures during the Clinton years? Of course people only have it tough whenever a Republican is in office. The instant a Republican is sworn in as prez, suddenly millions of well-off Americans lose their jobs and are thrust into dire poverty...or so the lib rags would have us believe.

The truth is that the economy is growing and there are great opportunities for people who who have the desire and who make smart choices. Everywhere I've gone in the Midwest this year, I've seen expanding businesses and nice, new homes. I've yet to see starving families on the streetcorners with tin cups in their hands.

[ninenot]

The tech-analy guys are in accord: Dow's in a secular bear mode. Most predict around 7,000 about 5-8 years out. That's not too bad.

It's been hanging in an 8% bandwidth for quite a while. That's usually a prelude to a move of some sort; the guess is down.

Greenspan's in a fix: he has to raise rates to make USTreasuries attractive, or the dollar gets hammered. But if he raises rates, the ARM crowd gets hurt, bad.

Hammering the dollar is good for exports, but will be a crucifixion if you use petroleum, or natural gas--regardless of source, they tend to move in lockstep.

OTOH, if the dollar gets hammered, UST's effective rates go up because the bonds sell at discount instead of face.

Besides all that, Greenie's made nasty noises about the upcoming SocSec and Medi-whats shortfalls--about $44 trillion--and at the same time, PBGC's going to add a boatload of liabilities.

Hell, things are just great!

[ninenot]

I dunno. I like PJO'R--but hanging lasts longer than jail.

[GSlob]

The definition of what constitutes upper, middle, and lower classes should, IMHO, account for lifestyles (actual or potential) in addition to price tags: 75K/yr in a pricey place simply does not go that far, and 25K/yr there does not go far at all.
I would like to suggest the following definitions, and would request others' input:
Upper class person does not HAVE TO work for a living, and can afford not to, while maintaining comfortable (independent) or luxurious (rich) living standard. All the price tags are somewhat subjective, of course.
Middle class person HAS TO work for a living, and cannot afford not to, so as to maintain comfortable (or better) living standard. Better-off retirees/pensioners with middle-class living standards can find themselves in the lower reaches of upper class.
Lower class person HAS TO work for a living, and cannot afford not to, so as to maintain lower than comfortable living standard.
Underclass person DOES NOT WANT TO work for a living, is not a pensioner, is frequently accompanied by social pathologies, and exists under lower than comfortable living standard.

Using their threshold numbers (25 and 75K) the upper class in this definition would be ca. 10million (4% of population, composed of 1.5M+ net worthers and better-off retirees); underclass would be 10-20mil (4-8%), and almost everyone with white-collar or skilled blue collar job would comprise the middle class (90 mil out of 140 mil workforce - some 65+% of the population, if families are included.)

[valkyrieanne]

Clearly, the Median household income *increased* from 1980 to 2003, so the Middle Class at large is wealthier today than in decades past.

So is this median adjusted for inflation? Even if it is, keep in mind that it reflects far more two-income households than in the 1960s. Even in the recession of the early 1960s, far more families were able to live on the income of a single breadwinner. The vast influx of women into the work force is *not* economic progress.

Similarly, this chart shows income increases - but it does not show the *exponential* increases in costs such as medical & dental care, tuition, insurance, costs of home maintenance & repair, and state and local taxes.

[Southack]

Yes, after factoring in *everything*, which includes inflation, tuition, medical care, etc... household incomes and wealth have increased 30% since 1967.

5 Legislative Days Left Until The AWB Expires

[jackbill]

From factcheck.org:

If the "middle class" is defined as those households with income between $25,000 and $75,000 (in dollars adjusted for inflation to 2002 levels) then that group did indeed shrink slightly during those two years. That shouldn't be surprising. There was an eight-month economic recession that started in March, 2001, and the unemployment rate climbed from 3.9% at the end of 2000 to 6.0% at the end of 2002.

During those two years, the share of households with less than $25,000 in income rose by 1.4 percentage points, while those in the middle declined by just under one percent. The middle did shrink. It's also true that the share of households in the top group also shrank. Those with income over $75,000 a year declined by 0.4%.

But Kerry naturally said nothing about the "declining upper class."

[Toskrin]

Here's the report from the US Census. The relevant data is in Appendix A.

US Census 2003 Household Income Data

1980
<25,000 33.1%
25K-75K 51.9%
>75,000 14.9%

2003
<25,000 29.0%
25K-75K 44.9%
>75,000 26.1%

Pretty clear that households are moving up rather than down.

[NYC Republican]

Thanks. There you go - the over 75k group went up by 11%, even more than the 7% change in middle class...

[hedgetrimmer]

FYI news stories



Ricardo Cavillo, 33, left-top, his wife Patricia, 41, right-top, along with their children Kimberly, 11, left, Angie, 8, center, and Pablo, 10, pose for a photograph in their two-bedroom apartment Thursday, Aug. 19, 2004, in Fullerton, Calif. The bank said the Cavillos only qualify for a $200,000 mortgage, but the median home price far exceeds $500,000 in Orange County, where Ricardo works a $38,000-a-year manufacturing job.


Ford Motor Co. is close to a final decision on where to locate a flexible manufacturing plant and Oakville, Ontario, would be 'a good place to do it,' its chief executive said on Tuesday. But with several jurisdictions eagerly lobbying for the project, Ford Chairman and Chief Executive Bill Ford Jr. refused to be drawn on the Oakville minivan plant's chances of winning the investment. In this June 24, 2004 file photo, Ford Motor Chairman and CEO Bill Ford Jr. (L), great-grandson of Ford founder Henry Ford, poses next to a Ford vehicle at Ford's Vietnam assembly plant during his one-day visit to Vietnam in Hai Duong province, 50 km (30 miles) east of Hanoi. Photo by Kham


President George W. Bush (news - web sites) holds up a pecan pie during a stop at a diner in Sidney, Ohio, August 28, 2004. Bush acknowledged U.S. manufacturing workers have seen a 'time of change' in the economy but said his private sector-based policies were the way to boost growth. (Kevin Lamarque/Reuters)

[raybbr]

Ever notice how the free-traders are always throwing that "Look how cheap things really are when adjusted for inflation from 1980" and yet they never post increases in median income levels that might have occurred if wages had been slightly ahead of inflation for that whole time?

I don't know how to find that information. Maybe you do? I am sure the levels indicated in the graph would show a markedly different median income.