What's hurting the middle class?

[Engineer]

Click me!

Quite eye opening after reading the statistics. Maybe overspending isn't the "OGRE" that many, including myself, has made it out to be. Well worth the read even if long...

The over-consumption story gets a big boost from current economic data. First, families have more money to spend. The typical two-income family today earns nearly 75 percent more than their one-income parents earned a generation ago.

Whether families are spending more than they should according to some moral notion?consuming too much of the world?s resources or buying things they could easily live without?is not the issue at hand. These data give us no clue about the right amount of spending. But they give us powerful evidence that excessive consumption is not why families are going broke. There is no evidence of any ?epidemic? of overspending?certainly nothing that could explain a 255 percent increase in the foreclosure rate, a 430 percent increase in the bankruptcy rolls, and a 570 percent increase in credit-card debt. A growing number of families are in terrible financial trouble, but despite the accusations, their frivolity is not to blame.

One last inescapable expense is taxes. With two people in the work force and a higher income, today?s median-earning family pays more in taxes. Indeed, here?s where the adjusted-for-inflation comparison of families across generations paints a misleading picture. Families making less back in the early 1970s were paying less in taxes; today, inflation has also pushed them into a higher income bracket, and they are paying more in sales taxes, property taxes, Medicare, and a host of other taxes.The total tax burden for today?s two-income family is about 38 percent larger than that of their one-income counterparts of a generation ago.

But the new family budget is notable for another reason: it is far more deeply leveraged. A generation ago, the one-income family committed about 54 percent of its pay to the basics?housing, health insurance, transportation, and taxes. That is, the one-income family spent about half its income to make the ?nut??the basic expenses that must be paid even if someone gets sick or loses a job. Today, these basic expenses, including child care so that both parents can work, consume 75 percent of the family?s combined income. With 75 percent of income earmarked for fixed expenses, today?s family has no margin for error.

Lots more to read. Worth a look.

 

[bozack]

thanks for the great read, I always enjoy others input on society, consumerism, luxury items and the effect on the middle and upper middle class...

it is really refreshing to read articles like this which clearly point out that spending on nice items really isn't the problem rather there are other factors at work such as cost of living and low wages....

I always find it funny that the finger is pointed at the middle class and their desire for a nicer life as if that is something wrong, whereas it is the media and companies which target this demographic for their products...as if people should go without dishwashers and microwaves....the money I would save on avoiding such purcahses is a pittance compared to what I pay every year in state and local taxes that get me next to nothing in services not to mention the high cost of housing and or child care....not to mention the high cost of college and tuition debt required to land even a marginally acceptable job...

If they don't want middle class consumers overspending and they feel banktruptcy is truly a problem maybe they should petition the media to stop glamorizing luxury lifestyles and or products for which the majority of society "cannot" afford...however according to articles like this, to which I agree fully people are in a much better position to afford such goods...

I also enjoyed the fact that there were a few things brought to light that I would have never thought of...such as carseats and safety requirements for large families and how modern economy and standard cars just cannot transport children today if properly restrained, that and the cost of clothing due to the lessening of the requirements for formal affiars and also cheaper production/distribution with outlet and or discount stores...something my wife and I leverage heavily...that as well as food and the lesser cost overall...

Also I know for my wife and myself schooling will be a huge factor in a home purchase and really limits where we can buy..either it is a relatively bad town and private school or a nice town and a really small house comparatively...someone here suggested that our problem is that we picked the wrong state to live, however that mentality suggests that states should be reserved for the rich something to which I wouldn't want to agree with, especially since the jobs tend to be in the states which are the most difficult to afford...at least for pharma/biotech the industry in which both my wife and I work...

 

[dmcowen674]

Originally posted by: Engineer
Click me!

One in every three families with an income above $35,000 reports owing medical bills they cannot pay.

This financial distress hits the middle class hard. It is middle-class homeowners who lose their houses to foreclosure?people who once saved enough money for a down payment, who showed that they had steady enough incomes to make monthly payments, and who survived the most rigorous credit screen imposed in consumer financial markets. It is the people in the middle?not the richest or the poorest?who accumulate the most debt on their credit cards. It is these same people who seek relief in the bankruptcy courts.

These data compose a deeply disturbing picture. Tens of millions of American families?middle-class people with decent educations and respectable occupations?are living on the edge of a financial cliff. Some will hang on, and others will plunge over.

Whether families are spending more than they should according to some moral notion?consuming too much of the world?s resources or buying things they could easily live without?is not the issue at hand.

These data give us no clue about the right amount of spending. But they give us powerful evidence that excessive consumption is not why families are going broke.

There is no evidence of any ?epidemic? of overspending?certainly nothing that could explain a 255 percent increase in the foreclosure rate, a 430 percent increase in the bankruptcy rolls, and a 570 percent increase in credit-card debt.

A growing number of families are in terrible financial trouble, but despite the accusations, their frivolity is not to blame.

But but but that can't be. Zentroll and the rest of the resident rich Republicans swear the middle class is overspending and it's their own fault and responsibility. It's their fault they can no longer live in the area they have ever known anjd they should move to the slums where maybe they can survive.

Better yet they should be on the street and die according to the resident Republicans.

Looks like they will get their wish.

 

[bozack]

Originally posted by: dmcowen674
But but but that can't be. Zentroll and the rest of the resident rich Republicans swear the middle class is overspending and it's their own fault and responsibility. It's their fault they can no longer live in the area they have ever known anjd they should move to the slums where maybe they can survive.

Better yet they should be on the street and die according to the resident Republicans.

Looks like they will get their wish.

I used to be of the same mindset, that it was people succumbing to media and materialism that was the bane of society and or personal savings...however with time and experience I now realize that there is alot more to it than what is being pushed. One can only hope as this article suggests more people come to the same realization and demand change...

I agree that expanded education in terms of years covered would be great and is necessary, it will also put more teachers in the workforce...also mortgage/credit companies should be held accountable for selling products that put people in higher risk than they should be...heck we hold every other company accountable which puts out products detrimental to the public why should they get a pass...and state and local govts should do alot more to encourage affordable new housing that is convenient rather than making large and expensive homes or cramped condos or townhouses peoples only options...

 

[dmcowen674]

Originally posted by: Engineer
Click me!
The wealthy may be living in spacious new digs, but middle-class families are not.

Even as middle-class living conditions have improved only modestly, the burden of paying for a home has increased dramatically.

The proportion of families who are ?house-poor??that is, who spend more than 35 percent of their incomes on housing?has quadrupled in a single generation. Today it often takes two working people to support a mortgage. A police officer or elementary-school teacher earning an average salary could not afford to pay the mortgage of a median-priced home in two thirds of the nation?s metropolitan areas.

Why such a staggering increase in the cost of housing?

The rising cost of health care has also taken a bite out of the family budget, even for healthy families. In one generation, the average out-of-pocket cost of employer-subsidized health insurance has jumped by about 90 percent. And a growing number of families are offered no employer-subsidized health insurance at all; they must either buy health insurance on the open market or forgo it altogether. In recent years, the number of middle-class families with no health insurance has grown precipitously.

One last inescapable expense is taxes. With two people in the work force and a higher income, today?s median-earning family pays more in taxes. Indeed, here?s where the adjusted-for-inflation comparison of families across generations paints a misleading picture. Families making less back in the early 1970s were paying less in taxes; today, inflation has also pushed them into a higher income bracket, and they are paying more in sales taxes, property taxes, Medicare, and a host of other taxes.The total tax burden for today?s two-income family is about 38 percent larger than that of their one-income counterparts of a generation ago.

This year another million and a half families will file for bankruptcy, and mortgage foreclosures are already hitting record numbers across the country.

When George W. Bush signed the bankruptcy bill into law earlier this year, he made clear his vision that whatever troubles face American families, it is their own fault, and his plan is to punish them.

Zentroll and the rest of the resident Republicans will continue to be thrilled.

 

[DrPizza]

Whoa! I usually stay away from P&N (but came here out of boredom).

It seems I actually agree with Dave's sarcasm? Is this a bad thing? I've heard rumors it is.

About 3 weeks ago, I had stated something similar to some of the points made in that article in a business course (that I'm being forced to take because it was a pre-requisite for a grad course I already took.) The accuracy and conclusions of the article aren't perfect, but they're pretty good.

 

[dmcowen674]

Originally posted by: bozack

Originally posted by: dmcowen674
But but but that can't be. Zentroll and the rest of the resident rich Republicans swear the middle class is overspending and it's their own fault and responsibility. It's their fault they can no longer live in the area they have ever known anjd they should move to the slums where maybe they can survive.

Better yet they should be on the street and die according to the resident Republicans.

Looks like they will get their wish.

I used to be of the same mindset, that it was people succumbing to media and materialism that was the bane of society and or personal savings...however with time and experience I now realize that there is alot more to it than what is being pushed. One can only hope as this article suggests more people come to the same realization and demand change...

I agree that expanded education in terms of years covered would be great and is necessary, it will also put more teachers in the workforce...also mortgage/credit companies should be held accountable for selling products that put people in higher risk than they should be...heck we hold every other company accountable which puts out products detrimental to the public why should they get a pass...and state and local govts should do alot more to encourage affordable new housing that is convenient rather than making large and expensive homes or cramped condos or townhouses peoples only options...

Does anyone know if there any ceiling limit on the interest rate Credit Card Companies can charge???

When the new bankruptcy law went into effect last October and the new double minimum May 1st many of the cards went from 19 to 22% interest to 24.88% interest.

Seems like legal loan sharking to me.

 

[DrPizza]

Originally posted by: dmcowen674

Does anyone know if there any ceiling limit on the interest rate Credit Card Companies can charge???

When the new bankruptcy law went into effect last October and the new double minimum May 1st many of the cards went from 19 to 22% interest to 24.88% interest.

Seems like legal loan sharking to me.

Again, I agree. And, consider the person near their limit who pays their bill 1 day late.
Not only do they have to pay a 24.88% interest rate, but they're nailed with a $35 late fee. Then, once the late fee and interest are applied, it puts them over their limit, so another $35 fee is applied. At that point, the payment is applied, and the person holding the credit card has to pay off all those fees before the next credit card payment is due (along with the next month's payment) or the process is repeated.. Interest + late fees. Anyone struggling to just make the minimum payment (regardless of the reason) will immediately have their debt spiral out of control once this happens.

 

[Engineer]

I've seen interest rates on recent Chase offerings as high as 31.99% if you miss a payment. Does seem kinda steep. FYI.

 

[6000SUX]

People may be devoting a higher portion of their earnings to the "nut", but that doesn't mean that they are not overspending on the basics. Nobody needs credit cards to survive. If the average two-income family makes 75% more than the one-income family of yesterday, they should be able to make ends meet just fine. My two-income family does, living in a fairly expensive part of the country.

Statements like this really point out how statistics can be manipulated to sway the minds of the weak:

"The total tax burden for today?s two-income family is about 38 percent larger than that of their one-income counterparts of a generation ago."

So we're making 75% more, and paying 38% more in taxes, if I read that right? This is enough to make me avoid reading the article. It sounds sorta like tripe.

 

[ericlp]

Yup... Does this mean that the real estate "bubble" is finally going to burst? With all these foreclosures do you think there is "enough" rich people to keep snapping up houses? Can we let the last remaining best investment slide down into the crapper?

I think if bush had a few braincells left he would lower the interest rates since........ That WAS keeping the market afloat for some time. I just sold a few lots I had for investments. I feel that the high prices of real estate is coming to an end. I think if the market does collapse it won't be just middle class but a bunch of rich calls will be getting burned with this one. Next Year will be really interesting!

 

[Wheezer]

sorry, it can't be both ways.

Either the "middle class" (and I use that term loosely, because I have yet to see a definition of the "middle class") is doing better, or they are suppressed by the rich as proposed by many.

The first quote from the OP is:

First, families have more money to spend. The typical two-income family today earns nearly 75 percent more than their one-income parents earned a generation ago.

So if the middle class is doing better then how are they being held back? And if they have more then how are they getting themselves into so much trouble?

SO let's move on.

Whether families are spending more than they should according to some moral notion?consuming too much of the world?s resources or buying things they could easily live without?is not the issue at hand. These data give us no clue about the right amount of spending. But they give us powerful evidence that excessive consumption is not why families are going broke. There is no evidence of any ?epidemic? of overspending?certainly nothing that could explain a 255 percent increase in the foreclosure rate, a 430 percent increase in the bankruptcy rolls, and a 570 percent increase in credit-card debt. A growing number of families are in terrible financial trouble, but despite the accusations, their frivolity is not to blame.

That is complete bull. ANYONE with common sense understands that if you overspend, you go broke. (You all are so ready to point out this fact with our gov't) Yes everyone wants to and should try to strive to be better, but the rule of living within your means applies. The problem is people are going out and getting the luxury items they want and doing a vast majority of it on credit. They don't care about the consequences of tomorrow as long as they will have that nice new plasma TV today, and of couse once they get that, they have to have the digital cable or dish to go with it, and a new entertainment center, and a new surround sound system.

The probelm is people put thier WANTS before the NEEDS. Pay your bills first THEN if there is anything left put a littel aside until you can afford it. What good is a new TV if you have no house to put it in? Petty spending on one item is one thing, but many people let it snowball out of control and then when they get in trouble they are looking someone else to bail them out.

 

[dmcowen674]

Originally posted by: Engineer
I've seen interest rates on recent Chase offerings as high as 31.99% if you miss a payment. Does seem kinda steep. FYI.

Should ask Eaglekeeper to chime in.

So they are allowed to keep the rate at 31.99% forever since they missed a payment?

 

[techs]

Whats hurting the middle class?
1) Outsourcing which is keeping down wages.
2) Illegal immigrant workers keeping down wages.
3) The tax cut which 50 percent went to the wealthiest 2 percent. Increasing the distribution of wealth away from the middle class to the wealthiest.
3) Massive borrowing and spending at time the age distribution (Americans are disproportionately at their highest wage earning ages) in America should be generating massive surpluses to pay for massive expenditures in the near future.
4) Trade policies that encourage theft of intellectual property of American companies.
5) Foreign policies that have made America unwelcome in many areas of the world.
6) Huge defense spending that is draining money away that could have been used for industrial growth in the manufacturing sector and bleeding away our best and brightest to the defense contractors.
7) Health care policies that are encouraging huge increases in health care while delivering less care.
8) Energy policies that have kept America wasteful of oil and draining our money away to foreign lands.
9) Political divide that has half the middle class supporting anti-middle class economic policies in exchange for support for social issues. The middle class has been split and therefore can't effectively influence our lawmakers to pass laws favoring the middle class.

 

[bozack]

Originally posted by: 6000SUX
People may be devoting a higher portion of their earnings to the "nut", but that doesn't mean that they are not overspending on the basics. Nobody needs credit cards to survive. If the average two-income family makes 75% more than the one-income family of yesterday, they should be able to make ends meet just fine. My two-income family does, living in a fairly expensive part of the country.

Statements like this really point out how statistics can be manipulated to sway the minds of the weak:

"The total tax burden for today?s two-income family is about 38 percent larger than that of their one-income counterparts of a generation ago."

So we're making 75% more, and paying 38% more in taxes, if I read that right? This is enough to make me avoid reading the article. It sounds sorta like tripe.

Do you have children? have any of them entered into college, what is your salary? are you middle or upper middle class, what do you consider an expensive part of the country....

there are many many factors which you really don't consider, I also think the statatement you made about credit to be rather naive...fact is that even with steady income and without overspending on needless luxuries there are more than a few families who just cannot make ends meet. Might want to try reading strapped, pretty simplified but some rather interesting info.

 

[bozack]

Originally posted by: Wheezer


The probelm is people put thier WANTS before the NEEDS. Pay your bills first THEN if there is anything left put a littel aside until you can afford it. What good is a new TV if you have no house to put it in? Petty spending on one item is one thing, but many people let it snowball out of control and then when they get in trouble they are looking someone else to bail them out.

A perfect example of someone who responds without having read the content of the article presented...

If you had bothered to actually read the piece you would see they addressed all of your unfounded conclusions point for point and disproved exactly what you are saying.

 

[bozack]

Originally posted by: techs
.
7) Health care policies that are encouraging huge increases in health care while delivering less care.

Here in MA this will be the biggest bane on the middle class IMHO now that insurance is mandatory for those whom the state deems can afford it..basically everyone that makes more than minimum wage...I know that if this law was in effect when I was contracting I would have had to heavily leverage credit and at the time I didn't live anything even close to an extravagent life.

add that with the astronomical cost of living if you want anything of a reasonable commute, and the skyrocketing cost of child care due to other associated costs (cost of living, commuting costs, state taxes and regulations)...and then the cost of schooling if you want your child to be able to read at a normal time or avoid being stabbed and you are already in debt...not to mention any medical costs as well as home repair and or auto problems...

 

[techs]

Originally posted by: bozack

Originally posted by: Wheezer


The probelm is people put thier WANTS before the NEEDS. Pay your bills first THEN if there is anything left put a littel aside until you can afford it. What good is a new TV if you have no house to put it in? Petty spending on one item is one thing, but many people let it snowball out of control and then when they get in trouble they are looking someone else to bail them out.

A perfect example of someone who responds without having read the content of the article presented...

If you had bothered to actually read the piece you would see they addressed all of your unfounded conclusions point for point and disproved exactly what you are saying.

A perfect example of someone who knows nothing or never bothers to question a politically motivated article (possible nominee to the Supreme Court?)
OVER HALF OF AMERICAN BANKRUPTCIES ARE THE RESULT OF MEDICAL BILLS.
That completely shoots down the WHOLE article and its conclusions.
I claim p*wnage.

 

[dmcowen674]

Originally posted by: bozack

Originally posted by: 6000SUX
People may be devoting a higher portion of their earnings to the "nut", but that doesn't mean that they are not overspending on the basics. Nobody needs credit cards to survive. If the average two-income family makes 75% more than the one-income family of yesterday, they should be able to make ends meet just fine. My two-income family does, living in a fairly expensive part of the country.

Statements like this really point out how statistics can be manipulated to sway the minds of the weak:

"The total tax burden for today?s two-income family is about 38 percent larger than that of their one-income counterparts of a generation ago."

So we're making 75% more, and paying 38% more in taxes, if I read that right? This is enough to make me avoid reading the article. It sounds sorta like tripe.

Do you have children? have any of them entered into college, what is your salary? are you middle or upper middle class, what do you consider an expensive part of the country....

there are many many factors which you really don't consider, I also think the statatement you made about credit to be rather naive...fact is that even with steady income and without overspending on needless luxuries there are more than a few families who just cannot make ends meet. Might want to try reading strapped, pretty simplified but some rather interesting info.

Don't bother with him. He is from ATOT and thinks it is perfectly OK to slam on your brakes to get the guy behind you to wreck both vehicles and pick up the money.

He doesn't have an honest bone in his body and hates America.

 

[Engineer]

Originally posted by: 6000SUX
So we're making 75% more, and paying 38% more in taxes, if I read that right? This is enough to make me avoid reading the article. It sounds sorta like tripe.

Possibly more tax breaks? Childcare credit? Self funding retirement (401k)? Medical insurance credit? Possible that lots of money going into those things that weren't there before?

How about the article stating that housing costs rising. Rising housing costs = more mortgage deduction.

Not sure how you can get "tripe" from that without considering the obvious points that the article even pointed out.

You didn't read it all and if you did, you were dismissing it without weighing it. Maybe you noticed that the statistics were pulled from good ole USA government stats? I guess the government is wrong.

Also, I guess we should believe you automatically because you have more credentials than a Harvard Law professor? With a name from "Robocop", I wonder how many would agree?

 

[techs]

Originally posted by: techs

Originally posted by: bozack

Originally posted by: Wheezer


The probelm is people put thier WANTS before the NEEDS. Pay your bills first THEN if there is anything left put a littel aside until you can afford it. What good is a new TV if you have no house to put it in? Petty spending on one item is one thing, but many people let it snowball out of control and then when they get in trouble they are looking someone else to bail them out.

A perfect example of someone who responds without having read the content of the article presented...

If you had bothered to actually read the piece you would see they addressed all of your unfounded conclusions point for point and disproved exactly what you are saying.

A perfect example of someone who knows nothing or never bothers to question a politically motivated article (possible nominee to the Supreme Court?)
OVER HALF OF AMERICAN BANKRUPTCIES ARE THE RESULT OF MEDICAL BILLS.
That completely shoots down the WHOLE article and its conclusions.
I claim p*wnage.

Your post has already been proved false.
Why continue?
p*wned.

 

[1prophet]

Oh really,

Autoworkers who used to thrive on overtime now find it tough to keep up their lifestyles.

The United Auto Workers' legal department has handled the bankruptcies of nearly 10,000 of its members, retirees and their families in Michigan since 2002, according to Detroit News research of court records. UAW lawyers estimate that Chapter 7 and Chapter 13 filings in Michigan have been growing at a 10 percent annual clip in recent years.

The bankruptcies show that many Michigan autoworkers are failing to scale back their lifestyles in the face of massive changes slamming the state's bread-and-butter industry.


I know too many people outside the UAW who live on credit in order to one up the Jones's with something bigger and better while living on the edge of financial ruin.

So I ask who's fault is this all? And you say congress and the president they are overspending and overtaxing us, and I ask who elected them the trees or was it the dogs running down the street, no it was us because we love the lies that they tell us since the truth is not what we want to hear, and then you say what truth is that?

Would you vote for someone that tells you are greedy, wretched, miserable always looking out for number one at the expense of your fellow man or do you vote for a politician that tells you the other side is the cause of all this and are taking away your American dream, and by electing me I will tax the rich and make sure you get yours since you are Americans and it is your right to be entitled to all of this.


In this country the foundation is the people and it seems the people have become apathetic, self serving, greedy, self rightous, and the congress and the president is the reflection we hate to see when we look in the mirror because that reflection is us.

 

[Engineer]

Originally posted by: 1prophet
Oh really,

Autoworkers who used to thrive on overtime now find it tough to keep up their lifestyles.

The United Auto Workers' legal department has handled the bankruptcies of nearly 10,000 of its members, retirees and their families in Michigan since 2002, according to Detroit News research of court records. UAW lawyers estimate that Chapter 7 and Chapter 13 filings in Michigan have been growing at a 10 percent annual clip in recent years.

The bankruptcies show that many Michigan autoworkers are failing to scale back their lifestyles in the face of massive changes slamming the state's bread-and-butter industry.


I know too many people outside the UAW who live on credit in order to one up the Jones's with something bigger and better while living on the edge of financial ruin.

So I ask who's fault is this all? And you say congress and the president they are overspending and overtaxing us, and I ask who elected them the trees or was it the dogs running down the street, no it was us because we love the lies that they tell us since the truth is not what we want to hear, and then you say what truth is that?

Would you vote for someone that tells you are greedy, wretched, miserable always looking out for number one at the expense of your fellow man or do you vote for a politician that tells you the other side is the cause of all this and are taking away your American dream, and by electing me I will tax the rich and make sure you get yours since you are Americans and it is your right to be entitled to all of this.


In this country the foundation is the people and it seems the people have become apathetic, self serving, greedy, self rightous, and the congress and the president is the reflection we hate to see when we look in the mirror because that reflection is us.

I'm not sure that you can pick one group that has the UNION attitude to make the point for the entire article. The stats are there for the reading. Interesting that the average CC debt in the US is over $8,000 while the MEDIAN CC debt is $1,900. Those that run up the debt kick it's ass...the rest live within means (or so it seems).

Truth about credit card debt.

 

[da loser]

Rosenthal argue that support for the bankruptcy bill among Republicans was largely a matter of ideology. Among Democrats, they conclude that there was a significant correlation between votes and campaign contributions

ideology or corruption? you decide

 

[Slew Foot]

Im convinced that the root of many people's financial troubles lies in high housing costs. High housing costs makes you require two incomes, live farther from work, work mulitple jobs, less time with family, etc.. Hopefully with the impending bubble burst (and it's going to be BAD, trust me), things will revert to normal, but many people in the RE/construction industry are going to get slammed.