Middle class decline looms over final years of Obama presidency … Barack Obama enters the final two years of his presidency with a blemish on his legacy that looks impossible to erase: the decline of the middle class he has promised to rescue. – Reuters
Dominant Social Theme: Barack must try harder.
Free-Market Analysis: The West's economic system, we know now, regularly strips people of wealth. Monopoly central banks debase the currency via money printing and large corporations make entrepreneurialism difficult.
If Obama wanted to revive the middle class in the US, he would have to change fundamental parts of the system. But he hasn't, and thus the decline of the US middle class has continued.
The revival of middle-class jobs has been one of Obama's mantras since he took office in 2009 fighting the worst economic crisis in generations … Obama's administration can take credit for stabilizing the U.S. economy, which is growing again and last year added jobs at the fastest clip since 1999.
But for the middle class the scars of the recession still run deep. Federal Reserve survey data show families in the middle fifth of the income scale now earn less and their net worth is lower than when Obama took office.
In the six years through 2013, over the recession and recovery that have spanned Obama's tenure, jobs have been added at the top and bottom of the wage scale, a Reuters analysis of labor statistics shows. In the middle, the economy has shed positions – whether in traditional trades like machining or electrical work, white-collar jobs in human resources, or technical ones like computer operators.
The trend is in plain sight in Dalton, Georgia, a manufacturing hub 90 miles (145 km)north of Atlanta. Massive factories that made it "the carpet capital of the world," were slammed by the collapse of the housing bubble. During the recession, with machines idle, they began investing heavily in new technology and are now laying plans to restore some lost jobs.
But the new positions are more skewed to the high and low end, and there will be fewer of them per dollar of output than before the recession, said Brian Anderson, president of the Greater Dalton Chamber of Commerce.
"We can produce a whole lot of new carpet with not a lot more people," Anderson said. Companies have spent between $1.5 and $2 billion on retooling and innovation, reducing demand for labor, while higher than average regional unemployment continued to hold down wages, he said.
We can see from the above that reasons for Obama's failure may have to do with structural changes in the US economy. The idea, apparently, is that technology is disenfranchising middle-rank workers, though employment for high-end and low-end workers may expand.
We have a good deal of difficulty believing this, however. As pointed out above, the economic difficulties in the US are structural and have little to do with advancing technology and everything to do with regulatory and monetary measures that are endlessly distortive and dis-incentivize workers and entrepreneurs alike.
The idea of blaming unemployment on advancing technology is an old one and is intended, from what we can tell, to shift the blame from the public sector to the private sector. Given Obama's abysmal jobs record, the meme of technology-as-job-killer is being rolled out once again. This ensures the real culprits are not blamed.
The article therefore provides us with a kind of revisionist history of Obama's efforts to revive the economy. It points out that the Fed's Janet Yellen, "has put money in almost all Americans' pockets with near zero interest rates that have held down mortgage payments, allowed companies to reinvest, and boosted job creation."
In fact, rock-bottom interest rates didn't much benefit the middle class because that class was struggling to survive. Rates matter if someone intends to consume something. But the US middle class in aggregate was far from considering consumer purchases during the Great Recession.
The Fed's Survey of Consumer Finances shows how uneven the distribution of that stimulus has been. Between 2010 and 2013, as recovery took hold and stock markets soared, the average net worth of families in the top 40 percent of income earners grew. For all others average net worth shrank, declining 19 percent for the middle fifth.
This is the expected result if one understands that "pushing on a string" is improbable during asset deflations. People are just trying to hang on. They're not interested in spending, even if they are being enticed with credit.
Over the six years through 2013, the middle fifth's average annual family earnings fell to $47,243 from $53,008 while their average net worth dropped to $170,066 from $236,525.
Obama "had a good start in ending the recession and a good start to recovery and then we were knocked off that trajectory," said Josh Bivens, an economist with the Economic Policy Institute, a left-leaning think tank that advocates higher minimum wages and other policies to boost incomes.
Bivens blamed the end of stimulus programs and a standoff in Congress over the federal debt ceiling that curbed government spending for the loss of initial momentum.
To a degree the administration has also been a captive of broad technological and global trends. Automation and the offshoring of manufacturing and service jobs continue to transform industries and communities such as Dalton.
From our perspective, the above is beside the point. It certainly wasn't a lack of government spending that kept the economy wobbly. Nor was it technological innovation.
The sickness of the West is a monetary one and a corporate one. So long as corporations and central banks have powers enforced by the state itself, there is little chance that the larger marketplace can rebound in a truly healthy way.
In tonight's State of the Union Speech, Obama will call for higher taxes that would fund new programs for working classes. But such programs and tax fiddling does not address the real issue which is one of constant asset-inflation leading to tremendous credit collapses.
Monetary and corporate issues must be addressed first and foremost. Tax and regulatory issues are important, too, but the main issue is the ongoing implosion of prosperity generated by an increasingly destructive business cycle.
Obama has not done on a bad job with the economy because of entrenched economic difficulties that are very difficult to root out. He has done a bad job with the economy because he has failed to reveal the truth of its sickness. At least that would have been a start.