Middle class feels squeeze
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| Mon, 07-12-2004 - 4:31pm |
Cynthia Tucker - Universal Press Syndicate
07.12.04 - By now, Karl Rove and his minions had expected that improved jobs reports would have boosted the president's election prospects immeasurably. After all, the stock market is doing just fine and corporate profits are going gangbusters. How come so many workers are still worried?
Well, most workers don't get to share the bounty of those corporate profits. Even with the popularity of 401(k)s, which are replacing traditional pensions, only about half of all Americans own stock. The average American is still feeling what John Kerry and his running mate, John Edwards, call the "middle-class squeeze."
Already, jobs growth, which picked up in March, has begun to slow considerably. The report from the month of June showed a disappointing 112,000 new jobs, fewer than necessary to keep pace with population growth. Even more telling is this: When Bush came into office, 64.4 percent of all American adults were working. That figure has now dropped to 62.3.
For those who are working, hourly wages have declined slightly over the last year after adjusting for inflation. And many of the manufacturing jobs that boosted generations of Americans into the middle class are probably gone forever -- lost to computers and Chinese workers.
Add to that soaring health-care costs. Workers are having to pay more of their insurance costs, reducing their take-home pay. Or they are stuck with jobs that provide no health insurance.
As if that were not enough, Alan Greenspan recently raised interest rates and is expected to keep raising them for the next several months. As he does, many average Americans will find it harder to pay off their monthly credit cards bills or get a mortgage. During the recession, they had used those credit cards to keep up their standard of living (and buy the nation out of that recession). Many families now have substantial credit card debt.
Bush is not responsible for the global tidal wave that has swamped U.S. manufacturing or the credit card debt that threatens to bankrupt many families. The president didn't create an out-of-control health-care system or push down hourly wages. But his natural affinity for the wealthy and well-connected has produced policies that are much more in tune with their interests than with those of average working folk.
According to the U.S. Census, yearly median family income is $51,407. In terms of income distribution, the largest group of American families -- nearly 21 percent -- earn between $50,000 and $75,000 a year. Nearly 16 percent of American families live off incomes between $35,000 and $50,000 annually. That paints a picture of a substantial midsection -- nearly 37 percent of families -- with incomes between $35,000 and $75,000 a year.
Now take a look at the distribution of the Bush tax cuts. The American families earning between $43,000 and $76,000 have received only a 17 percent share of the tax cuts, according to an analysis by the Urban-Brookings Tax Policy Center. By contrast, the top 1 percent of income-earners has received a 24.2 percent share.
I know, I know. Those wealthy Americans paid more of the taxes, so they deserve more of the tax cut, right? Actually, they got more than they deserved, even by that measure. And they haven't used their tax cuts to produce substantial numbers of good-paying jobs for Americans. Wealthy investors are concerned only about increasing their profits. If replacing factory workers with robotic arms does that, they gladly install the robotic arms.
Much of the economy is beyond the control of any president. But shoring up the general welfare is not. Bush had a responsibility to expand the social safety net -- extend unemployment benefits, create access to health care -- for those Americans who are falling further behind, despite their best efforts.
Instead, the president has coddled the wealthy.

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This is the way it was in the beginning. However as the industrial revolution progressed the individuals, local communities and churches did help. Americans suffered. Do you think government involvement occurred because there was a necessity.
I don't consider your belief that local communities should take care is a sign of compassion it is a way of letting people fall through the cracks and you don't have to be reminded. If individuals, local communities and churches could take care of the problem they would be doing it and the government would't be needed.
Tell you what....leave out the sarcasm about my intelligence. I know what a flat tax is.
Getting personal will only make you look petty.
That everyone will want one. Ok, not everyone, but a significant percentage, and they will be battling the 'marrieds' who don't think think civil partnerships should come with all the acutrements of marriage,
Renee ~~~
How do you suppose the administation will react to these numbers? Is it important?
Inflation-adjusted wages fall again in June
Down six of the last seven months
With today’s release of inflation data for June, EPI analysis reveals that real hourly and weekly earnings have fallen for six out of the last seven months (see the figures below).
The average hourly wage of blue-collar (production) workers in manufacturing and non-managers in services was $15.65 last month (these workers represent about 80% of the private-sector workforce). When the recovery began in November 2001, their real wage was $15.69, slightly higher than the real value in June 2004 (see Figure 1). For weekly earnings, the relevant values are $530.17 in November 2001 and $525.84 last month, as shown in Figure 2 (the larger decline for weekly earnings is due to a loss in hours worked per week). In other words, after adjusting for inflation, both hourly and weekly earnings are below where they were when the current recovery got underway.
There are three factors contributing to the decline of real wages in the current labor market. The first and most important factor is the lingering effect of the formerly jobless recovery. Though employment is growing again, considerable slack remains in the labor market. The unemployment rate, for example, at 5.6% in June 2004, is at the very same rate as in November 2001 when the current recovery began. Under these labor market conditions, with an oversupply of workers relative to employers’ demands, there is little pressure to bid wages up.
Second, the quality of the net new jobs appears to be putting downward pressure on wage growth. Specifically, industries and occupations that are adding jobs most quickly pay less than those growing more slowly. There is considerable confusion on this point. For example, analysis published by factcheck.org reported that more job growth has occurred in sectors paying above the median wage than below that wage level.1 But this is not what drives wage growth. Instead, the average wage is driven up when high-wage sectors grow faster than average and vice versa. Over the past year, industries and occupations growing faster than average pay 7% less than those that are growing more slowly.
Finally, faster inflation in recent months has meant that nominal wages need to grow faster to beat price growth. Yet, because of the factors noted above, nominal wage growth has slowed sharply, from an annual average of 2.9% in the second quarter of last year to 2.1% in the same quarter this year. Inflation over this same period has accelerated from 2.2% to 2.8%. Thus, even if inflation were back to its level of a year ago, wages would still be stagnant at best, with real wage growth far behind the growth rate of productivity.
Although employment has thankfully begun to rebound, the persistent effects of the longest jobless recovery on record continue to take a toll on wage growth, meaning working families have to work more hours to lift their real incomes.
http://www.epinet.org/content.cfm/webfeatures_snapshots_07162004
I still think the way to help out is to do something with the FICA tax.
I would propose reducing this tax from 7.65% to 4% but at the same time do away with the cap at which you stop paying. To me, this is fair as the average and lower income people get an additional tax relief, as well as most companies, but the larger income people will then pay more into the Social Security pool, (which they will not have to rely on for their retirement).
Edited 7/16/2004 3:27 pm ET ET by debateguy
I would think it a fair item to see the federal tax level raised 1.5% to 2.0% on those individuals, especially if the government would implement the FICA tax reduction that I think is both fair and would most likely give the Government more money for Social Security.
I think the federal tax rate for the top tier at 50% or more is too much.
I'm not speaking of gay marriage; I'm speaking of civil partnership.
I'm not conflating civil partnership and the flat tax. I'm predicting a causal relationship. I agree with your point about special interests impeding the flat tax because
Renee
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