Thursday, January 22, 2009

Singing the Middle Class Blues

In yesterday's post on Gerald Celente's FSN interview, I called attention to Celente's views on the struggling middle class and the ongoing trend towards "squeezing the little guy" via inflation and increased taxation.

This made me think back to a report Pew Research report released last year called, "Inside the Middle Class: Bad Times Hit the Good Life".

In their survey report, Pew found many Americans rather downbeat over their economic progress made in the previous five years. At the same time, a majority of those surveyed felt their standard of living was greater than their parents enjoyed at the same age.

Most survey participants also expressed optimism over the coming five year period, and "most expect their children to do better in life than they themselves have done".

Despite their optimism for the future, 79 percent of the survey respondents felt that it was more difficult for middle class people to maintain their standard of living at the present time, compared with five years earlier. But why?

According to the full Pew report, there is no consensus among respondents on the reasons for the recent decline in middle class living standards:

"There is nothing approaching a consensus about who or what is responsible for the middle class squeeze.

Nearly everyone agrees that it's become harder to maintain a middle class lifestyle, but there's no consensus about who or what is mostly to blame. Among middle class respondents, about a quarter (26%) blame the government, 15% blame the price of oil, 11% blame the people themselves, 8% blame foreign competition, 5% blame private corporations and the rest cite other factors or do not have an answer.

Within the middle class, big differences on this question occur along partisan lines. Democrats are most likely to point the finger at government (35% do so) while Republicans divide blame among the people (17%), the government (16%) and the price of oil (16%).There are also class divisions on this question, with the lower class nearly twice as likely as the upper class to blame the government (39% versus 21%)."

Given that Pew's latest economic report finds that the economy and jobs are the highest priority for President Obama's administration, it seems we can safely assume that these middle class blues are on the table for the coming year or two, at least.

So what accounts for these trends and the squeezing of the middle class? Inflation, excessive taxation, job losses, or years of people living beyond their means through too much personal debt and consumption? Maybe it's some combination of all of the above.

What have your observations and experiences told you?

2 comments:

Anonymous said...

I blame inflation. When new money is created out of thin air, it is not distributed equally to the entire population. The first in line to receive the new money gain purchasing power, and the rest of the population loses an equal and opposite amount of purchasing power.

Mild deflation would increase the purchasing power of the general consumer over time, as better technology increased productivity. As things are now, inflation transfers the entire productivity improvement to the first in line to receive new money.

Note that before inflation kicked into high gear (circa 1960), one income could easily support a family. Today, it takes 2 incomes plus overtime to support a family. Fixed income retirees lose the most.

David said...

Thanks Anon,

Agree completely. Inflation has taken a huge toll on savings (maybe that's why noone bothers to save here anymore?) and on the average American's standard of living.

I'm hearing some similar comments from readers via email, who say that (in their experience) inflation has been a drag on real economic progress for families. Future inflation also seems to be a concern...