"Why America’s middle class is lost" Washpost

"They’ve waited more than a decade in Downey. They’ve tried all the usual tricks to bring good-paying jobs back to the 77-acre plot of dirt where once stood a factory that made moon landers and, later, space shuttles. Nothing brought back the good jobs. 

Those jobs aren’t coming back. Not at the old North American Rockwell plant, and not in thousands of similarly socked towns.

Yes, the stock market is soaring, the unemployment rate is finally retreating after the Great Recession and the economy added 321,000 jobs last month. But all that growth has done nothing to boost pay for the typical American worker. Average wages haven’t risen over the last year, after adjusting for inflation. Real household median income is still lower than it was when the recession ended.

Make no mistake: The American middle class is in trouble.

That trouble started decades ago, well before the 2008 financial crisis, and it is rooted in shifts far more complicated than the simple tax-and-spend debates that dominate economic policymaking in Washington."  Washpost

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IMO we Americans wrecked our own Middle Class (whatever that really may be)  We did things like this:

- By embracing Free Trade as an unequivocal good we shipped a lot of our manufacturing base abroad.  I agree with Adam Smith that Free Trade is a good thing if it benefits the polity of which one is a member.  There is a principal in economcs called "competitive advantage."   In a Free Trade situation China has a great competitive advantage over the US in terms of labor costs and a lack of quality regulation in manufacturing.   Embrace of NAFTA and similar arrangements has produced what Ross Perot predicted would be a "great sucking sound" as jobs left the USA for parts abroad where competitive advantage would result in wonderful profits for people like me who are invested in the equity markets.  

- The US government has wasted vast amounts of money, often borrowed, on wars abroad that were completely unncesessary. The enemies we fought were real enemies and they needed to be fought, but they could have been fought with counter-terrorism methodologies; commandos, police, intelligence, diplomacy.  It was not necessary to invade and occupy Iraq and Afghanistan and then try to transform the countries.  The money drained off into such wars was lost to the general American econmy and siphoned into private hands both overseas and in the US.  This kind of loss of circulating capital is generally detrimental to the level of enterprise and taxes paid in a country.  A loss of revenue in government leads to reductions in discretionary expenditures in things like the space program.  Think Downey.

-The cost of higher education has been allowed to escalate to levels at which people who were in the Middle Class or had a chance to be in the Middle Class face choices between beggaring themselves in an attempt to educate their children  or seeing their children carry burdens of crippling debt for much of their lives.  None of that promotes prosperity.

"We have met the enemy and it is us."  pl  

http://www.washingtonpost.com/wp-srv/special/business/peak-income/?hpid=z6

http://www.washingtonpost.com/sf/business/2014/12/12/why-americas-middle-class-is-lost/?hpid=z7 

 

 

 

Comments

[BabelFish]

The buzzwords used to be "computer programmers". I was at a Tom Peters conference as he spoke about the last broom making factory in the US going out of business. Sure enough, his answer was we didn't want those jobs. We wanted good paying jobs like computer programming. That's us, a nation of 350 million programmers.

I asked him what all the non-programers were supposed to do for a living in this new simplified economy of his. He had the grace to say he didn't know. Apparently no one else has figured that out either.

Last words. Colleges have simply become predatory, saddling the young with useless degrees and many thousands of dollars in student loan debt.

[harry]

Cui bono? Do I have to say?

[Charles Dekle]

Col Lang,

Thank you. My family was not wealthy and probably would be considered lower middle class even back in the 50s and 60s when I grew up. I was able to get a fine liberal arts education and even an extended education in Electrical Engineering by enrolling in state supported universities where tuition rates were reasonable and I was able to work while I studied. When I matriculated it was with only a very small debt load.

That opportunity allowed my wife, also a state university graduate, and me to eventually move into to an income bracket where we able to save enough money to provide a comfortable income for our retirement. We are grateful for that opportunity and don't mind giving back by paying our fair share of taxes.

As you pointed out, we would never accomplish that if we were starting out in today's economic climate. I am so sad that others who are beginning their lives now in similar circumstances will not have the same opportunity as we did. As you point out this does not bode well for the future of our Republic.

Kind regards,

[Stan Henning]

I'm afraid it appears that we completely overlooked the direction we were heading. I still look with horror at the younger Bush ill conceived Iraq action and the meaningless Afghanistan fiasco. I'm afraid we are still in the process of doing ourselves in and may not recover without seriously focussing on what we have done to ourselves and what it will take to reverse our heading toward Armageddon.

[AEL]

I blame the destruction and demonization of unions. They provided organized political resistance against the interested of the Oligarchs and pressured in favor of the median.

[Peter C]

So true. I want to add another term called "Absolute Advantage". The ability to move monies to any location globally to manufacture at the cheapest rates. Don't like the workers demanding a few cents more per hour. Take your cash and move to where the workers are cheaper and compliant.

There are very few blockages to moving money around the planet electronically. There are some so called regulations to control ill gotten gains. HSB bank recently paid a paltry sum in fines to settle the charges on laundering or assisting in laundering 300 Billion in illicit drug transactions. If so called legitimate international banks will knowingly assist in black market transactions, there is absolutely no will to help skirt any requirements when dealing in legitimate trade goods. There is a huge boom in Chinese money flooding the real estate market in California. The question is with very stringent rules on exporting money out of China, how do all cash Chinese buyers come with millions at a time to make multiple buys of both residential and commercial property without help of International Banks assisting?

I have witnessed from the peak of prosperity to the decline in my life time.

[turcopolier]

babelfish

Marguerite and I have been looking at Sanford, Maine. The place is much reduced from the rather vibrant industrial town of our childhoods. pl

[Bobo]

Try Naples, Me a little further north but I know Brandy Pond would suit you well. Great hunting, fishing, antiquing, serenity etc etc. there is nothing better than jumping in the skiff early in the morning to go fetch the paper and the items on the list the wife gave you while stopping on the way back to catch some fish for breakfast. There are a few spots where the Bream will actually jump in the skiff if your not up to tossing a line.
Any place on the water in Maine is God's Gift to humanity. Good Luck.

[Tyler]

Sir,

Id add the complete gutting of any immogration enforcement to that list. Carpentry used to pay excellent money, among other professions. STEM jobs are another source of immigration fraud as the Zuckerbergs and Cooks of the world cry about how unfair it is to have to hire Americans instead of asian slave labor.

[BabelFish]

It truly is, Pat. At one time, it was touted as "The Town That Refused To Die". It was a shock to go through it last year.

[ex-PFC Chuck]

If the negotiations of the Trans-Pacific Partnership(TPP), Trans-Atlantic Trade and Investment Partnership(TTIP) and the Trade in Services Agreement(TISA) are successful and ratified, the Deluge-Up (vis-a-vis Trickle Down) economy will officially be on steroids. These so-called "trade agreements" are not really about trade at all. They are about ceding the sovereignty of nation states, including most definitely the US of A, to multinational corporations, their senior executives and their parasitical rent-collecting hangers-on. The negotiations are being conducted in utmost secrecy and what little is known about them (thanks to the leaks of a handful of true patriots of several of the afore-mentioned nation states) is truly scary. The promoters of these "trade agreements" will be pushing for fast-track status while maintaining the secrecy of the agreed-upon treaty texts. Thus if said status is granted the Congress will be voting up or down on each entire package which almost no American citizens will have seen except for a few business community people who are strong supporters. Open discussion of these negotiations has been limited mainly to economics blogs, such as Naked Capitalism. The mainstream media has been almost entirely missing in action. The link below, although over a year old, is still a good overview of what this controversy is all about.

http://www.nakedcapitalism.com/2013/08/how-the-pending-trans-pacific-partnership-and-eu-us-trade-deals-will-gut-national-regulations-hurt-budgets-and-undermine-sovereignity.html

Naked Capitalism has a good search tool if you're interested in pursuing the issue further. The promoters of these so-called "trade agreements" who have sworn oaths of office to protect and defend the Constitution should be impeached, or perhaps prosecuted for treason. Sadly that list includes the current president as well as almost all members of the Republican caucuses in Congress and probably a majority of their Democratic colleagues.

[turcopolier]

Babelfish

I am impressed with the contributions of the Goodall family to the welfare of their workers. pl

[turcopolier]

Bobo

Perhaps the state should be declared a reservation for the "summer people." pl

[Walrus]

Some observations:

1. Free Trade - properly introduced and practised, is beneficial to everyone. It creates low skilled jobs for low skilled people and provides them with a pathway to a better existence. Go to China and see the difference between a a protected, planned economy and free markets. The increases in jobs, investment and growth from Free Trade are simply not arguable.

For example. Boeing just raised its Chinese sales growth forecasts.

http://www.wsj.com/articles/boeing-predicts-sales-of-6-000-passenger-planes-to-china-over-next-20-years-1409814755

The issue is introduction. When a developed country starts giving up low skilled jobs it needs to retrain and upskill those workers to start producing the elaborately transformed high value added stuff that you still produce - and which you will sell to those developing economies free trade stimulated.

The difficulty, and where an intelligent government is needed, is mediating the process that takes away jobs from (say) black workers in a Southern textile mill and adds jobs for skilled mechanics at Boeing.

It is this mediation where America is a complete, abject and total failure because greed is good and money is power. Workers, whole towns, have been thrown on the scrap heap by industry and government because you have all been conditioned to regard any sort of helping hand program as "socialism".

As for that helping hand, I spent Two years in Government service doing just that with considerable good results. It is possible to do this without damage, but that takes planning and investment by Government and industry.

As for industry "protection" that stinks. I lived in a protected economy for my first Twenty years in Australia and it was rotten for the consumer but highly profitable for those "protected" from the need to invest, innovate and thus compete. I could go on.

To Col. Langs list of evils I would add, like Tyler, uncontrolled immigration of skilled and unskilled workers driven in part by greedy business owners.

Then there is the little fact that organising America into Fifty little states with Fifty sets of laws, accounting practices and tax systems is just plain economic and social lunacy today. My favourite example being one State demanding sales tax on an aircraft when it visited its owners summer home:

http://www.aopa.org/News-and-Video/All-News/2008/January/31/26-000-tax-bill-Maines-state-of-confusion

But hey, lets be optimistic here; there is great potential in the United States if it could just stop confusing greed, stupidity, dishonesty and hypocrisy with civic virtue - as was demonstrated by making Milt Romney a Presidential candidate.

[Fred]

AEL,

Wage and benefits are not the only things unions were engaged in politically.

[turcopolier]

walrus "little states?" We have quite a few that have larger populations than Australia. You think we should take the communist tyranny in China as an example of how to run our affairs? Australia's small population is spread across a continent. It would make little sense for this small country to have actual federalism. Most of us do not want to live in a country with a consolidated government in which people like Holder, Yoo and Cheney would have even more power over our lives. pl

[confusedponderer]

Another problem with the 50 states:

How many places do you have to get a chorporate charter in Australia, UK, Germany, Japan, France - one - i.e. there is one sort of limited and that's it.

How many do you have in the US? 50?! Fifty different regulations, fifty different sorts of taxation, fifty different limitations of liability. It's a joke.

US state politicos enact laws on corporate charters that underbid each other, and then tell their electorates that that is a competitice advantage.

It isn't, beyond the state level, since it doesn't create a level playing field which for an economy is a necessity i.e. for the nation it is detrimental.

As a result, US states have enact corporate charters with less and less requirements and oblications and low corporate taxes. Witness the regulatory race to the bottom.

If you're think your state is being low on taxes (read: state revenues), wait for some ALEC funded nut next state who taxes even less.

Teddy Roosevelt tried to stop that and create federal corporate charters and he failed.

It was not politicaly possible at the time, and it's just as politically impossible to change today.

[Babak Makkinejad]

Walrus said...

Free trade has destroyed manufacturing in Australia - while Japan and Korea have prospered behind their protectionist walls; as did the United States for much of the 19-th century.

Australians sold their manufacturing jobs abroad, electing to live off natural resources - like some oil-based economy - creating a hand-out culture and laziness.

Free trade was supposed to be replaced by Finance Capital - like the City in London - but it failed to deliver the goods after 2008 in the United States.

[Babak Makkinejad]

Immigration is irrelevant in my opinion; IBM, for example, has more employees in India than is US - has been so since 2006 - and many others like it.

[Babak Makkinejad]

Not every one can become a programmer; it requires a certain mathematical aptitude that many people lack.

You need to create small jobs/shops in which people can eke out an existence.

[turcopolier]

All

This post was about the decline in the manufacturing sector resulting in the decline of the American middle class. IMO that decline has resulted from the kind of thing that I cited. IMO that decline has nothing whatever to do with American federalism. The American economy did just fine under that system of federalism until we began to export jobs to every rat hole in the world under the banner of Free Trade. the Australians and the Germans may wish to live in unitary states that exist under the image but not the reality of federalism but most of us do not. pl

[Fred]

Babak,

Absolutely correct. Their automotive sector, small though it was, is going to disappear in about 18 moths. The manufacturing employees in Australia are about to get royally screwed. Those lost wages have a significant multiplier effect, in this case negative. Allot of other Australians are going to be poorer shortly.

[Fred]

confusedponderer,

Not every company operating in America operates in more than one state.

" it doesn't create a level playing field which for an economy is a necessity i.e. for the nation it is detrimental."
Tell that to Greece, Spain and your fellow EU member states when they are getting bankrupted by German banks and the ECB.

[Fred]

Babak,

We should not need to create any career path were Americans have to "eke out an existence." That line we hear often in the press about jobs "nobody wants" is all about eking out a living for about ten million immigrants who are neither here legally nor Americans and is all about low, low wages. If they weren't here their employers would be raising wages (and working conditions) and those jobs would quite quickly be wanted.

[Tyler]

Babak,

If you think immigration is irrelevant you are a fool, but then again you don't have to worry about the 3rd World flooding into Iran, so not surprising.