The year in review for the American middle class
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