This recession ain’t like the others. The current middle class has been struggling to keep up with their parent’s generation, and failing.
Here’s what happened . . .
From around 1820 to 1970, we saw a steady improvement in opportunity, lifestyle and wealth for the working man. I say ‘man’ because families were easily able to live off the ever-increasing salary of the single salary household.
But around 1970, moms starting working as well. We can debate why this happened.
Did ‘Women’s Lib’ send ladies into the workplace, taking the pressure off employers to increase their husband’s salaries? Or, did women go into the workplace because the cost of living simply made a one-income family untenable?
Perhaps both reasons contributed to the ‘working mom’.
Anyway, with 2 incomes, families could continue the upward mobility American’s came to expect. Certainly there was a price to pay with latch-key children and all the trouble that brings.
But by 1980, even 2 incomes failed to satisfy the American feeling of financial entitlement – 2 nice cars, a big house, 5 TV sets, college for the kids. So we simply borrowed our way to the American Dream. I’m talking about serious borrowing – 1st mortgages, 2nd mortgages, car loans and credit cards.
So we sent mom to work, and then we started paying on credit.
American debt during the Great Depression was 30%. By 2005 it was 125%. That means that our middle class has been living ‘under water’ continuously as a lifestyle choice.
With cheap mortgages, and banks happy to sign you up for multiple credit cards, the middle class dream stayed alive – barely.
Then came the housing collapse of 2007/08 followed by an old fashioned ‘run on the banks’ in 2008, leading to expensive bailouts. Then unemployment hit 10%. Finally, we’re seeing an increase in defaults on credit obligations by tens of thousands of Americans every day.
The middle class has been holding on to their upward mobility dream for the past 40 years. They worked longer hours, they sent mom to work, they’ve taken out loans and charged everything on their Visa Cards.
What’s left for them to do? . . . Work even more hours? . . . Send the children to work? Make grandma get a job? We seem to have run out of options.
And remember, with globalization, employers can easily hire dirt-cheap workers overseas to replace our great American dreamers. The middle class doesn’t have the clout, the unions, or much say in anything anymore. The top 2% of our society is making 80% of the money while the middle class is in a serious downward spiral.
We know that unbridled capitalism eventually creates a 2 class system – rich & poor. It’s happened over and over again. It’s the nature of the system. So 100 years ago we outlawed the 60 hour work-week, child labor, we allowed workers to bargain with their bosses and imposed taxes on the wealthy.
It’s so sad to see middle class ‘Tea Partiers’ dancing to the tune of conservative Republicans. “Go back to the Founding Fathers and free markets! Eliminate business regulations and lower everyone’s taxes, especially the rich!
The poor ‘tea party’ people have no idea that the jokes on them. They’re calling for the end of regulations so that the bankers can screw them yet again. Screw them harder this time – right into poverty.
Is this the end of the middle class? We can stabilize our system and stop this never-ending roller coaster ride of ‘boom and bust’. We need strong rules, carefully managed taxes and dare I say – term limits for our politicians. If they know they can’t get re-elected maybe they’ll be willing to make some tough economic decisions.
I’ll offer some concrete solutions in a future blog. It’s complicated for sure, but there is a solution. The American middle class has been the wealthiest and most industrious group in world history. It can endure, but we can’t be afraid to tweak the system.
We have no choice. After 200 years, the American middle class has run out of options.
