The Continued Erosion of the American Dream
Just in case you weren’t yet a part of the growing chorus of people who think the dream of upward mobility is dead or dying, some recently released data should dampen any kind of hope for the future you might be stockpiling in the musty attic of your medium-sized American heart.
A new report from the Pew Research Center shows in stark detail what the economic and political contractions of the past several decades has wrought for the American middle class, who now represent a statistical minority compared to an aggregate of both wealthy and impoverished Americans:
The ranks of the poorest and richest are swelling, particularly among the very wealthy-the share of upper-income households grew by nearly twice what it was in the 1970s. One of the reasons for this shift identified by the Pew study has been the continued stagnation of middle class incomes:
Although middle class individuals and families earn more than they did in decades past, the gains have failed to keep pace with those at the upper end of the scale. Median incomes of wealthy households have grown 47 percent since 1970, compared to a modest 34 percent gain for middle-income households and a paltry 28 percent for the poorest American families. To make matters worse, the recessions of 2001 and 2008 hit middle- and lower-income households harder than those at the gilded tiers, with lower- and middle-income households losing 9 and 4 percent respectively, compared to a 3 percent dip for the wealthiest individuals.
These downward trends have had a similar impact on wealth generation for the lower and middle classes. With less money coming in, and greater political resistance to social services, more households are turning to debt as a safety net, while the most monied households are free to invest in assets without resorting to credit. The Great Recession of 2008 essentially wiped out any wealth gains the middle and lower class made since the 1980s, while wealthy families more than doubled their share:
Further impacting this downward trend is the fact that it is very expensive to be poor in America, thanks in no small part to the financial services industry:
Mr Martin at least has a bank account. Some 8% of American households—and nearly one in three whose income is less than $15,000 a year—do not. More than half of this group say banking is too expensive for them. Many cannot maintain the minimum balance necessary to avoid monthly fees; for others, the risk of being walloped with unexpected fees looms too large.
Doing without banks makes life costlier, but in a routine way. Cashing a pay cheque at a credit union or similar outlet typically costs 2-5% of the cheque’s value. The unbanked often end up paying two sets of fees—one to turn their pay cheque into cash, another to turn their cash into a money order—says Joe Valenti of the Centre for American Progress, a left-leaning think-tank. In 2008 the Brookings Institution, another think-tank, estimated that such fees can accumulate to $40,000 over the career of a full-time worker.
Between check cashing operations and predatory payday lenders who allow poorer households to borrow against tax refunds, the financial sector puts the vulture in vulture capitalism, picking the meat off of the weakest members of society in an attempt to satiate its overwhelming hunger for profit.
The current election climate, affected by the public fears of wealth inequality and big government, only now allows for frontrunning political candidates to publicly acknowledge and voice their concerns about the breadth of factors affecting upward mobility amongst the poor and middle class. Similarly late to the party, the reality of persistently depressed American incomes has finally attracted the attention of some of the more progressive voices in the financial sector-or at least those with the greatest vested self-interest in maintaining a healthy economy. Jeremy Grantham, co-founder and chief investment strategist of Grantham Mayo van Otterloo (GMO), with over 100 billion dollars in assets under management, published a recent newsletter excoriating the propensity of those in the financial services industry for plugging their ears in the midst of bearish bad news:
Mr. Grantham goes on to make pointed criticism of the notion that low unemployment numbers released by the Bureau of Labor Statistics translate into a happy-go-lucky, cheerful windfall for the American economy, correctly acknowledging the lower numbers are better accounted for by decreased participation in the labor market-people have simply given up hope of finding good paying work:
And those pesky taxes the Republicans have been bitching about for the past 50 years as roadblocks to American job creators? They’re nothing compared to those levied by other developed nations:
So, what can we conclude from the data?
The rich get richer, the poor stay poor, and the folks in the middle slowly sink into the vat of quicksand that is perpetual indebtedness, wage stagnation, and despair. Reversing this trend will take a massive grassroots effort on the part of justifiably angry Americans. We must demand tax hikes on the richest among us in order to reinvest in our social safety net and reinvigorate our economy with new government-funded public works programs. We must overhaul the tax code to make it more progressive and less skewed towards the interests of big businesses who engage in tax inversion strategies, relocating to tax havens while retaining major operations within the United States. We must throw our support behind organized labor in order to claw back some semblance of control over the restrictive policies of our employers.
Most importantly, we must channel our anger and despair, making it crystal clear to the aristocratic and oligarchical classes that economic oppression cannot and will not be tolerated.