Sunday, August 26, 2012

"Saving" the Middle Class ... Facts, Freedom, Government, Security and Opportunity

Almost everybody belongs to the middle class, or at least wants to, or has middle class values, or so it seems.

And all the politicians are trying to win votes by proving their credentials with respect to helping "save" the middle class. Of course, that's where they'll find the most voters.

In other words, we're a nation based on middle class aspirations and values.

So what's the evidence say about the results of all this effort being focused on aiding the middle class? In other words, how has the middle class been doing these past few years and decades?

Pretty well, thank you, if we're measuring in decades. But not so well if the standard of measurement is what's happened the past few years.

Negative $4,019 is subtitled 'The Obama years have been brutal on middle-class incomes.'

Here's part of what the article has to say:

"The Presidential race is boiling down to one dominant issue: which party's policies will do more to help the financially stressed American middle class. President Obama's campaign theme is that Mitt Romney and the Republicans cater to the rich, while Mr. Obama cares about struggling families.

He may care, but he sure hasn't done much for them. New income data . . . reveal that the three-and-a-half years of the Obama Presidency have done enormous harm to middle-class households.

In January 2009, the month President Obama entered the Oval Office and shortly before he signed his stimulus spending bill, median household income was $54,983. By June 2012, it had tumbled to $50,964, adjusted for inflation. That's $4,019 in lost real income, a little less than a month's income every year.

Unfair, you say, because Mr. Obama inherited a recession? Well, even if you start the analysis when the recession ended in June 2009, the numbers are dismal. Three years after the economy hit its trough, median household income is down $2,544, or nearly 5%.

Add the authors: "The overall decline since June 2009 was larger than the 2.6 percent decline that occurred" during the recession from December 2007 to June 2009. For household income, in other words, the Obama recovery has been worse than the Bush recession.

It's true that the Bush years overall were also not great for household incomes. . . . real median household income is down about 8% from $55,470 in 2000 before the dot-com bubble burst. Some of this decline is due to the continuation of a trend of smaller family size, lower fertility rates and more Americans living alone. But some was also due to the subpar economic growth across the 2000s.

That slow growth trend has become worse since the latest recession, and this is where Mr. Obama is implicated. The President portrays the financial decline of American families on his watch as part of a decades-long trend. He's wrong. Real income for middle-income households rose by roughly 30% from 1983 to 2005, according to the Congressional Budget Office. . . .

So what does explain falling real incomes? Slow growth, yes, but another culprit has been rising prices—especially for food, gasoline, medical procedures and college tuition—that have eroded worker purchasing power. . . .

The big pay freeze is also the bitter fruit of public schools that have failed to teach the basic skills and knowledge needed to succeed in a competitive global economy. Rising health-care costs have also forced employers to take money that used to go into higher wages to pay higher premiums. . . .

Mr. Obama also likes to say that government workers like teachers are hurting and the private economy is doing "just fine." But the data indicate that over the past three years households with government workers saw their incomes decline less than households with private workers. The public-private pay gap is now wider than ever ($77,998 government versus $63,800).

Every age group has seen a decline in income—except the elderly. Those between the ages of 65 and 75 saw an average 6.5% gain in income, though most are not working and collect Medicare and Social Security.

The last time incomes fell this fast was during the late 1970s under Jimmy Carter, and it's no coincidence that economic policies then and now are so similar. "

Summing Up

Although middle class income has fallen the past few years, I really wonder if that's going to make much of a difference in how people vote this fall.

My own belief is that it's the big government protective "security" umbrella versus the individual self reliance vote that may matter most in the end.

A recent survey found that given a choice between future lower Social Security benefits and paying higher taxes, most people would choose to have taxes raised.

This puzzled me because at first I couldn't think of any good reason why people would prefer government to (mis)handle their MOM instead of the individuals keeping it and investing it for themselves.

But then I remembered what the French economist and philosopher Frederic Bastiat said about government more than 170 years ago, "The state is the great fiction by which everybody seeks to live at the expense of everybody else."

Then I better understood the problem with why so many of our fellow Americans choose to rely on government. Too many of us have been "trained well" these past several decades and have grown accustomed to look to government to solve our problems and protect us from ourselves. Even though that's both a sham and a shame.

So what path will we choose to take in the future? Will we pick the individual freedom to make our own way or the false "security" of government promises which we incorrectly believe will provide us with lots of OPM to spend?

So let's answer the question directly of whether bigger and more intrusive government can save the middle class? NO, it can't. Only We the People can do that.

And why is that? Well, to quote General Douglas MacArthur, "There is no security on this earth. Only opportunity."

No matter what vote seeking politicians may tell us or what We the People may choose to believe.

In the end, facts, hard work and accepting individual responsibility for our actions will win out over empty platitudes. They always do.

Thanks. Bob.

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