The year in review for the American middle class

By David Rohde
December 22, 2011

By almost every measure, 2011 was a lost year for the American middle class. Who is to blame depends on your political view. What follows is an attempt to sum up the major developments and missed opportunities of the year gone by. For me, the following areas represent the most serious perils facing middle class Americans.

– Jobs: Economists generally agree that the single most effective way to revive the American middle class is to create more high-paying, stable private sector jobs. The unexpected emergence of 140,000 new private sector jobs in November helped drop the unemployment rate to a two-and-a-half-year low 8.6 percent, but the rosier figure was aided by 315,000 people who gave up and stopped looking for work last month. The most important factor of all — the quality of the new jobs — was unclear. Governments, meanwhile, slashed 20,000 public sector jobs across the country and deadlock in Washington blocked both Obama’s $447 billion jobs plan and Republican job creation proposals.

– Fiscal order: Economists also generally agree that a bipartisan plan to seriously address the $1.7 trillion federal deficit could increase business and consumer confidence, strengthen the economy and potentially create jobs. The year began with hopes that the bipartisan Simpson-Bowles plan might gain traction in Washington. Yet President Obama and Republican leaders both failed to embrace it. Months of disastrous partisanship followed, from the summer default brinksmanship, to the fall failure of the Congressional super-committee to the prolonged deadlock over how to fund payroll tax cut and unemployment insurance extensions.

– Housing: Home values are at an eight-year low and more than 10 million American families are underwater, or owe more than their homes are worth. The state of the housing market is yet another drag on the middle class. In October, The White House announced a change in executive branch rules designed to help families refinance at historically low interest rates, but the effort is too small to have a serious impact. Like so many other issues, legislation that might achieve more is frozen in a deadlocked Congress.

– Higher Education: Technological advances have created a global economy where members of the American middle class must adapt or fall behind. Low-skilled manufacturing jobs have left the United States and will never return. Learning high-end manufacturing skills, getting a practical college degree or looking for business in China, India and other emerging markets are all ways Americans can potentially compete in the global economy. After carrying out impressive K-12 education reforms, the White House outlined some promising reforms to reduce tuition and increase innovation in higher education at a December meeting with college presidents. Yet again, convincing an ideologically divided Congress to act will be difficult.

– Health care: A September survey found that health insurance companies raised the average annual premiums for family coverage by 9 percent in 2011, the highest increase in nearly a decade. The average annual cost of a family insurance premium was $15,073 in 2011, roughly twice the amount it was in 2001, burdening middle-class earners and the companies that employ them. Democrats blamed insurance companies. Republicans blamed Obamacare. The Supreme Court’s November decision to hear legal challenges to the administration’s health care reform law is a step forward. Whether Obamacare stands or is struck down in 2012, a Supreme court ruling will create clarity for consumers, the health care industry and voters.

– Europe: Like it or not, the American middle class now lives in an interconnected world economy. A Euro Zone debt crisis could have a devastating impact on a fragile U.S. recovery. After a glacial initial response, European leaders showed some leadership as 2011 came to a close. With any luck, it will continue in 2012.

– Occupy Wall Street: The movement that emerged this fall placed rising income inequality at the center of American debate. Over time, the disparate group seemed to lose focus and experienced a drop in public opinion polls. December efforts to seize foreclosed homes show signs of promise, but the Occupy movement needs to unite with labor unions to become a serious political force.

– The Tea Party: In its second year of existence, the movement also views itself as a defender of the middle class. Its calls for serious deficit reduction and a change in the way government operates are legitimate. But Republican presidential candidates’ absurdly simplistic pandering to the group in 2011 was counter-productive. The middle class deserves a serious debate about how to reinvent our economy, government and education system. Not false promises that government — and government alone — is responsible for every evil in America.

Advice for 2012: These are landmark elections for the American middle class. Vote for pragmatists, not partisans.

PHOTO: A placard hangs on the sign of a tent inside the Occupy DC encampment at Freedom Plaza in Washington, December 5, 2011. REUTERS/Stelios Varias

20 comments

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Although I made very little money this year compared to previous years, it certainly wasn’t a lost year for me. Learned a whole lot of new things, never been in better shape and even had a little fun.

Posted by Nicostrata | Report as abusive

If people had put their money where their mouth was and it was pinned all around that placard, it would mean something.

Oh, you mean that’s just the demand of people without those things that they want OTHERS to provide them without charge? No thanks.

At the end of the day, even the unions can’t stand these OWC people!

Show me the economy that can and will do everything on that placard for three or more generations, or that ever has, and I’ll listen. Until then…blowing smoke…

Posted by OneOfTheSheep | Report as abusive

Little serious political work can take place in the USA without addressing the runaway financial system that is creating a plutocracy.

Globalization has not caused the problem. All that the term means is that jobs and industry are being exported from the USA, mostly by Americans, using a grossly over-valued dollar to make operations in other countries profitable. It is an effect, not a cause. The overvalued dollar is the cause. And, behind that one, the cause of the over-valued dollar is a political system that is corrupt and systematically advocates a strong dollar and a poor country.

Posted by txgadfly | Report as abusive

Actually, “who is to blame depends on your political view” is not in question at all, since it took the unified effort of the entire US government to achieve this incredible disaster.

Well done guys/girls, you’ve had a banner year that is going to be hard to be beat going forward!

If we have a “going forward” that is.

Posted by Gordon2352 | Report as abusive

There are a lot of jobs out there going unfilled. However they require that you have skills that schools no longer teach — manual skills that you learn in shop class. Ever since college became the holy grail, we have given up working with our hands. When I left the construction business a few years back, nearly all the labor force was Hispanic. America is still the most welcome place for entrepreneurs. But (you knew that was coming), we have to quit whining and start looking for what we can do, not what we want to do. Put your kids in schools that will teach them skills like welding and machining.

Posted by thirddan | Report as abusive

Sorry, it’s not that complicated. No taxes for the wealthy means they gamble the money that should go to the government of all the people, or they send it overseas for more profits than they can make at home by providing jobs. The wealthy are no help, only an impediment to society.
2. An unregulated financial industry is like giving a kid ten pounds of chocolate – he will get sick and cause his parents a lot of heartache.

Posted by myownexperience | Report as abusive

546 People run this country:
1 President
1 Vice president
100 Senators
435 Representatives
5 Delegates
1 Resident Commissioner
9 supreme court members

Term Limits for congress and the supreme court
Campaign finance reform or nothing will ever change.

Posted by tmc | Report as abusive

I say tmc makes a point. There is too much power in too few hands.

Posted by M.C.McBride | Report as abusive

When this country was founded, power was in even fewer hands. That worked out pretty well, actually.

What hasn’t worked out well is the number of lawyers now wielding this power and their “legal’ mindset. In their profession they are consistently dealing with things gone wrong; and thus are ill equipped to keep things from going wrong or visualize an appropriate “fix” when they do.

They also, being human, tend to “feather” the legal nest to the disadvantage of everyone else.

Posted by OneOfTheSheep | Report as abusive

I hear lots of blame. We are a country without a rudder as we have failed to let God lead our country. We give him lip service, but do our own thing. Even at Christmas we cannot put down our lust for politics and our lust for money. Unless we let God lead us we can expect more of the same failures.

Posted by fred5407 | Report as abusive

Agree with Fred5407 we need to let God lead our country again as it was in the good old days.

Also we need to look for ways to bring back the industries that have left the country. May be we need to encourage again the “Buy American” even if this mean a tempory increased in costs for the short term however at the end it will pay through stronger local businesses, and more job creation. The current scenario of being a serice country will not provide us the standard of living and the indepenency that we are looking for.

Posted by Shanshoun | Report as abusive

This editorial is a littany of economic drivel, beginning with “Economists generally agree that the single most effective way to revive the American middle class is to create more high-paying, stable private sector jobs.” No kidding? Wow, that’s really profound. So where do the jobs come from, geniuses?

Economics is all about meeting wants and needs. When the work of meeting those wants and needs is outsourced, the jobs are gone and no amount of gimmicking the economy – through fiscal stimulus or quantitative easing – will magically create new ones. The only solution is to bring those jobs back. The only way to bring them back is by abandoning the World Trade Organization and reclaiming the right to manage trade in our own best self-interest, including the smart use of tariffs to assure a balance of trade.

Pete Murphy
Author, “Five Short Blasts”

Posted by Pete_Murphy | Report as abusive

Oh yes! Thanks to those people who make it clear that the majority of Americans have much more virulent and hostile enemies here at home than with Al Qaeda.

For those who do not want to be part of America, get out while the getting is good. There are many uses for idle hands and you will not like any of them. We need to cleanse this country. The inactive will have plenty to do when the tyrannical no longer own anything.

Posted by txgadfly | Report as abusive

The middle class will get nowhere while the country is run as a plutocracy… we all need to vote to slce Amerca superwealthy down to democratic size.. and it doesn’t matter which party does it..

In Eisenhower’s America income over $400,000–the equivalent of less than $3 million today–faced a top marginal tax rate of 91 percent. Our current top rate: 35 percent. In 2004, after exploiting loopholes, taxpayers who took home more than $5 million paid an average 21.9 percent of their incomes in federal tax. In 1954 the federal tax bite on taxpayers with comparable incomes averaged 54.5 percent.

How much revenue could be raised by a significant tax hike on America’s highest incomes? If the top rate was raised to 50 percent on all income between $5 million and $10 million and 70 percent on income above $10 million, federal revenues would jump $105 billion–and the nation’s richest 0.1 percent would still be paying less in taxes than they did under Ike.

Posted by maitai | Report as abusive

Congress gets an F-minus. The Republican House gets an Expulsion.

Posted by KyuuAL | Report as abusive

I was about to disagree as usual with the posts on this subject but TMC and Pete Murphy hit the nail correctly on the head. PROVE them wrong with facts if you can.

Posted by WiseOne2 | Report as abusive

“Five Short Blasts” for Pete_Murphy’s comment! They should be aimed directly at the current U. S. President and Congress.

Posted by Wassup | Report as abusive

Why do editorials about the fall of the US middle class fail to mention the regressive tax policies the US has followed since the 1980s. Payroll tax (only hitting those making under $100K) rate has tripled in the past 25 years. Sales tax rates in many US states have more than doubled in the past 20 years. Yet corporate tax rates, capital gains and derivative tax rates dropped over 50% in the same time period.

Job creation, steady economic growth and general prosperity cannot happen in the US until the tax rates on speculative trading, private equity, hedge funds, derivatives and other financial engineering wonders of the 21 century are double to triple the middle class income tax rates. The whole US financial markets are caught up in a speculative fever reaching funded by unreasonable leverage which clearly are destroying the middle class.

But as long as Congress and the President can be bought by our financial wunderkinds, there is scant hope there will be any change in the plight of the middle class. Our elected officials simply don’t care.

Posted by Acetracy | Report as abusive

I don’t understand how falling housing prices are bad for the middle class as a whole. Many don’t even own a home! Lower prices mean cheaper rent or a chance to finally buy that home. It’s bad for the segment of the middle class that used their house like some kind of slush fund but that is the minority of the middle class.

Posted by anarcurt | Report as abusive

Where the blame falls is not determined by a political view, but rather, political views are a large part of the blame. The major problem is an unwillingness by those with power to bring the country into the present so that we can move into the future.

Politically, the extreme partisanship of Congress caused by the two-party system; Republicans, as usual, fearful of a tiny extreme right, are willing to destroy the economy to ensure President Obama is a one-term president; the right is also determined to destroy the Middle Class, creating an under-class that will be content to have any kind of job; Democrats just willing to play the political game to score points with the Working Class, but making no serious effort to improve our situation.

The private sector is the primary culprit, however. Government has absolutely no business creating jobs. It is not nimble enough, nor does it have the capital. Government can only put out seed money in those areas it hopes business will follow suit. (It was the height of folly for the Obama Administration to gut the Space Program while advocating technology and moving to the future.) The Fortune 500 sits on over $1 trillion and cash, with access to even more cheap money. It is in its own self interests to invest in the future by creating more high paying jobs.

However, the problem is these companies are run by gutless managers whose sole concern is the size of their bonus. None of them have vision beyond quarterly earnings.(Which, by the way, is the heaviest anchor holding back all companies.)

By committing to job creation and changing practices to the reality of a global economy would cause a decrease in the increase of quarterly profits for an extended period of time. That, in turn, would hurt senior executive bonuses. Even though high un-underemployment is an even bigger drag, none are willing to risk their bonus to do the right thing for company and country.

Finally, unless the US political process is opened up to allow Independent voters full access, nothing will ever change. Until political power is returned to the grass roots via major political reform, the two-party system will only become more severe and less able to make change. It threatens to wreck the nation. A scenario the right has already said it will accept.)

Until the wealthy, corporations and government stop looking into the past for solutions — or to keep the country where it is — then disaster awaits.

Posted by KJeroH | Report as abusive