Wednesday, February 05, 2014

The Middle Class is Dying - And Corporate America Knows

The Republican’s don’t want to admit it, but the middle class is dying.  It is dying the way most things do any more, slowly running down until they just cease to function.

The irony is that the corporate/investor world, a cornerstone of the Republican political base, knows this is happening. They are, in fact, telling the world with their investment dollars that the middle class’s future health is a dim prospect.

According to this New York Times article:

“…new research by the economists Steven Fazzari, of Washington University in St. Louis, and Barry Cynamon, of the Federal Reserve Bank of St. Louis, backs up what is already apparent in the marketplace.

In 2012, the top 5 percent of earners were responsible for 38 percent of domestic consumption, up from 28 percent in 1995, the researchers found.

Even more striking, the current recovery has been driven almost entirely by the upper crust… Since 2009, the year the recession ended, inflation-adjusted spending by this top echelon has risen 17 percent, compared with just 1 percent among the bottom 95 percent.

More broadly, about 90 percent of the overall increase in inflation-adjusted consumption between 2009 and 2012 was generated by the top 20 percent of households in terms of income, according to the study, which was sponsored by the Institute for New Economic Thinking, a research group in New York.”
Investment money flows toward profit.  Why would it not? And the richest among us are buying things, eating at higher end restaurants, they are spending and the rest of us are not so those businesses are expanding while those that target the middle class are shutting their doors. 

In the end, what does this mean?  According to a Facebook post by former Labor Secretary Robert Reich:
“As a result: (1) the sinking middle class no longer has enough purchasing power to keep the economy growing and creating sufficient jobs; (2) the shrinking middle isn’t generating enough tax revenue for adequate education, training, safety nets, and family services; while (3) the rich are accumulating more and more political power to reduce their own taxes and get corporate welfare (subsidies, bailouts, tax cuts) for their businesses.”
I think another risk in this inequality of income and wealth is the devastating effect a stock market slide could have on the economy.

Consumers are a primary driver of the economy.  The rich are the only consumers who are expanding their spending.  When the casino that is the stock market turns bearish, and it will, they will reduce their spending and suddenly we are staring at another  recession.

A strong middle class is an imperative for our economy. They produce, they consume, and they mitigate the effects of economic negatives like rising oil prices and housing downturns.  Investing in a strong middle class is a kind of economic insurance against things like the Great Recession.

It is time that the conservatives learn that.  And it is time for the Democrats to walk the walk and start playing hard ball on investing in our county’s future - a vibrant, employed  middle class.

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