The Bush Admin's Middle Class Squeeze

[Taymelo]

Despite Strong Growth, Middle-Class Squeeze Continues Amid Higher Prices

by Christian E. Weller, Senior Economist, Center for American Progress

June 30, 2006

In the first quarter of 2006, the economy grew by 5.6 percent — the highest growth rate in two-and-a-half years. America’s middle class families, however, are not benefiting from this strong economic expansion. They continue to devote an increasing share of their income to typical middle-class items, such as housing, transportation, health care, and their kids’ college education.

A period of strong economic growth should provide much-needed relief. More jobs and higher wages should help middle-class families who feel the squeeze of stagnant wages and rising prices. Yet, as the numbers from the first quarter of 2006 indicate, this squeeze continues to tighten. Wages failed to keep pace with prices and the share of income dedicated to transportation grew.

The costs of typical middle-class items continue to rise faster than prices. Cases in point: from the start of this business cycle in March 2001to March 2006 college tuition grew by 45.0 percent; gasoline prices — a critical part of transportation costs — rose by 67.5 percent; and prices in general grew by 13.5 percent. In the first quarter of 2006, prices in general rose on an annualized basis by 4.2 percent from December 2005 to March 2006, while tuition costs increased by 6.5 percent and gasoline prices grew by 36.3 percent.

At the same time, middle-class families’ incomes have been flat or declining in inflation- adjusted terms. Inflation-adjusted weekly wages in March 2006 were actually below those recorded at the start of the most recent economic recession in March 2001. And the average inflation adjusted weekly wage in the first quarter of 2006 was below that of the fourth quarter of 2005.

As a result, middle class families in the first quarter of this year had to work longer hours to maintain a middle-class lifestyle than at the end of 2005 — a trend that started in the second half of 2001amid the last recession. In the first quarter of 2006, a typical two-earner, middle-class couple had to work 31.2 weeks to pay for housing, medical care, and transportation and to save for their kids’ college education (See figure 1). That’s an annualized increase in the middle-class squeeze by 1.3 percent in just one quarter. Today’s growing economy should ease this tightening, not slowly tighten it further.

A two-earner couple had $19,853 (in 2005 dollars) in disposable income in early 2006 after paying for the basics, such as health care, transportation, housing and college. Thus, they had less than at the end of 2005, as well as less than in 2000, the last year before the most recent recession (See figure 2). On an annualized basis, a two-earner couple lost $107 dollars (in 2005 dollars), or an annualized 2.1percent, in terms of funds left for discretionary spending over the course of the first three months of 2006. This decline in inflation adjusted discretionary funds comes at a time when most expenditures stabilized.

The primary driver of the middle class squeeze in early 2006 was an increase in oil prices. Higher prices lowered inflation-adjusted wages in the first quarter of 2006 below the level of the last quarter of 2006. And transportation spending grew by $41dollars (in 2005 dollars), or an annualized 2.8 percent, faster than spending for other items. The fact that transportation costs outgrew wages is also reflected in the fact that a two-earner, middle-class couple had to work 6.0 weeks to pay for transportation, up from 5.9 weeks at the end of 2005 and from 5.8 weeks at the end of 2000 (table 1).

In the face of rising oil prices, middle class families now must struggle alongside low income families, who spend a disproportionate share of their incomes on gasoline and transportation, and, if recent trends in gasoline prices are any indication, the middle-class squeeze may be tightening further in 2006. Wages have so far not kept pace with prices and transportation costs continue to rise at a rapid rate.

Sound familiar to anyone? I know I feel it.

[Anthony]

All in favor of giving Taymelo his own political forum:


I

[Uncle Mxy]

Taymelo's pointing out an (IMHO) real problem... the ever-growing squeezing of the middle class. Some of the forces leading to this squeeze are generated by Bush-led agendas. The article he quotes doesn't actually mention Bush, but it's willful ignorance if one can't trace the persisting rise in oil prices back to his initiatives. Many other forces leading to the squeeze on the middle class have pretty much -nothing- to do with Bush, though, and have been going on for decades. The average lifespan of an American has gone up under Bush and fueled the rise in health care costs. The world just keeps getting smaller and cheaper to reach under Bush, leading to outsourcing. I doubt it'd be any different under Gore, Kerry, Nader, etc. Framing this in terms of Bush leads us down a rat's nest, excessively politicizing a problem that isn't especially political, steering us clear of any real solutions and down the realm of polemic and bluster. <sigh>

[Taymelo]

Taymelo's pointing out an (IMHO) real problem... the ever-growing squeezing of the middle class. Some of the forces leading to this squeeze are generated by Bush-led agendas. The article he quotes doesn't actually mention Bush, but it's willful ignorance if one can't trace the persisting rise in oil prices back to his initiatives. Many other forces leading to the squeeze on the middle class have pretty much -nothing- to do with Bush, though, and have been going on for decades. The average lifespan of an American has gone up under Bush and fueled the rise in health care costs. The world just keeps getting smaller and cheaper to reach under Bush, leading to outsourcing. I doubt it'd be any different under Gore, Kerry, Nader, etc. Framing this in terms of Bush leads us down a rat's nest, excessively politicizing a problem that isn't especially political, steering us clear of any real solutions and down the realm of polemic and bluster. <sigh>

???

Did he just agree with me, and then disagree with both of us?

Did he just start off on a partisan level, and then catch himself, brush himself off, and point at me and yell "partisan"?

Did he just start tipping his hand to his political leanings, get nervous, and decide to jump back on the middle of the fence?

WTF was that?

Come on, Mxy. Its ok to take sides.

I agree that globalization is not a Bush invention. On the contrary, jobs are going to be lost overseas no matter who is running the country.

However, it is my opinion that your response was a bit pie in the sky and lets all get along, when you know that Bush is, indeed, more culpable than many other presidential candidates would have been, for the state of the middle class.

The republican agenda is based upon supporting its political donors, to the detriment of the american people. Its political donors are corporations that donate money to them specifically in order to buy muscle to help them beat the middle class down, down, down to a much lower and cheaper to class to employ.

The other agenda of their REAL constituents is to keep the public blind to the perils they are causing to the american public by running their companies so dangerously on the cheap.

The republican agenda is to "earn" their taxpayer supplied paychecks (and their corporate donations) spending 9-5, M-F, fighting to permit companies to pour autism causing chemicals into our waters, in order for those companies to turn higher profits, so they can donate even more money to get the republicans re-elected.

The republican agenda is then to spend another taxpayer subsidized week 9-5, M-F, fighting to enact federal legislation banning the states from putting language on food labels telling you that eating the fish in the waters the companies dumped chemicals in can cause autism because... well... see above. This is, of course, yet another example of how funny it is when republicans always SCREAM about state's rights - - - but when the states want to exercise those rights by labeling fish, to let you know what the corporations that donate to republicans did that will harm your unborn children - - - they suddenly want to RESTRICT state's rights, and enact legislation that will SPECIFICALLY BAN states from telling mothers of unborn babies that their children could be born autistic if they eat the fish.)

The republican agenda is to reward drug companies for their huge donations by forcing us to choose between food and ridiculously overpriced medicine.

Does that not affect the middle class?

[Uncle Mxy]

I have many moderate and nuanced opinions which don't fly too well in the face of the pathetic cariacatures we see in politics.

Did he just agree with me, and then disagree with both of us?

Did he just start off on a partisan level, and then catch himself, brush himself off, and point at me and yell "partisan"?

Did he just start tipping his hand to his political leanings, get nervous, and decide to jump back on the middle of the fence?

WTF was that?

It's called "I agree with you, but only a little". Bush is a minor player in the decades-long middle class squeeze. Tipping my hand? You mean, you still haven't gotten a read on me yet? Lemme spell it out in ALL CAPS:

Come on, Mxy. Its ok to take sides.

I CAN'T STAND BUSH!
But, there's plenty enough doofus things he's handled badly without having to blame him for every problem.

I agree that globalization is not a Bush invention. On the contrary, jobs are going to be lost overseas no matter who is running the country.

However, it is my opinion that your response was a bit pie in the sky and lets all get along, when you know that Bush is, indeed, more culpable than many other presidential candidates would have been, for the state of the middle class.

I see Bush as adjusting the deck chairs on the middle class Titanic here. No one's ever really proposed plans for how to deal with the onslaught of needy retiring Baby Boomers other than "stick it to the young and single". Hell, for all I know, Bush's efforts to inspire new generations of terrorists lead to new biological warfare tactics disproportionately killing off old folks in the U.S. and promoting sterlity, thus achieving a cost-benefit balance for health care and social programs that makes sense.

The republican agenda is based upon supporting its political donors, to the detriment of the american people. Its political donors are corporations that donate money to them specifically in order to buy muscle to help them beat the middle class down, down, down to a much lower and cheaper to class to employ.

The other agenda of their REAL constituents is to keep the public blind to the perils they are causing to the american public by running their companies so dangerously on the cheap.

The Democratic agenda isn't terribly different. Keep in mind that the blue states are much wealthier than the red ones. There's lots of arguments as why that is and what it means, but it's definitely not as simple as income. IIRC, in blue states, high vs. low income doesn't have nearly as much to do with party preference, but not for red states.

The republican agenda is to "earn" their taxpayer supplied paychecks (and their corporate donations) spending 9-5, M-F, fighting to permit companies to pour autism causing chemicals into our waters, in order for those companies to turn higher profits, so they can donate even more money to get the republicans re-elected.

The republican agenda is then to spend another taxpayer subsidized week 9-5, M-F, fighting to enact federal legislation banning the states from putting language on food labels telling you that eating the fish in the waters the companies dumped chemicals in can cause autism because... well... see above. This is, of course, yet another example of how funny it is when republicans always SCREAM about state's rights - - - but when the states want to exercise those rights by labeling fish, to let you know what the corporations that donate to republicans did that will harm your unborn children - - - they suddenly want to RESTRICT state's rights, and enact legislation that will SPECIFICALLY BAN states from telling mothers of unborn babies that their children could be born autistic if they eat the fish.)

The republican agenda is to reward drug companies for their huge donations by forcing us to choose between food and ridiculously overpriced medicine.

Does that not affect the middle class?

This is a fishy argument if ever I heard one. The fish in question wouldn't be a red herring, would it?

[Taymelo]

The republican agenda is to "earn" their taxpayer supplied paychecks (and their corporate donations) spending 9-5, M-F, fighting to permit companies to pour autism causing chemicals into our waters, in order for those companies to turn higher profits, so they can donate even more money to get the republicans re-elected.

The republican agenda is then to spend another taxpayer subsidized week 9-5, M-F, fighting to enact federal legislation banning the states from putting language on food labels telling you that eating the fish in the waters the companies dumped chemicals in can cause autism because... well... see above. This is, of course, yet another example of how funny it is when republicans always SCREAM about state's rights - - - but when the states want to exercise those rights by labeling fish, to let you know what the corporations that donate to republicans did that will harm your unborn children - - - they suddenly want to RESTRICT state's rights, and enact legislation that will SPECIFICALLY BAN states from telling mothers of unborn babies that their children could be born autistic if they eat the fish.)

The republican agenda is to reward drug companies for their huge donations by forcing us to choose between food and ridiculously overpriced medicine.

Does that not affect the middle class?

This is a fishy argument if ever I heard one. The fish in question wouldn't be a red herring, would it?

No.

No, it wouldn't.

HaHAAAAAAA! Suck on THAT, Mxy.

I win again.

That was too easy.

Who's next?

(j/k)

[Taymelo]

No, but seriously... what I posted about republicans supporting dumping, contaminating fish, and then fighting to prevent states from enacting laws to notify citizens of the potential dangers of the contaminated fish is all true. Google it if you like.

If, however, you are suggesting that the fish issue doesn't focus specifically on the middle class, and I'm lumping it in there to take a shot at republicans... then fine.

It WAS a red herring. HA!

So, what?

My dad used to like herring. Not red herring, though. More whitish/grey.

Ah, the memories of him eating that disgusting shit during Sunday brunch. Yummy.

Anyway, where was I? Oh, yes. Going to lunch.

[Uncle Mxy]

If, however, you are suggesting that the fish issue doesn't focus specifically on the middle class, and I'm lumping it in there to take a shot at republicans... then fine.

It WAS a red herring. HA!

Not every bit of humor calls for a smiley face.

So, what?

If you want to go fish, do so in another topic.

[b-diddy]

how bout this: the president of the US has to give all his assetts to the people of america, and in return gets paid a pension of exactly the avg american income for the rest of his life-- and he's barred from giving speaches for a million or writing books and making ten million. he only gets to live off the american avg, all other money he makes goes to the public.

think then the middle class would have a voice in politics? i know, i know, we'd never get benevolent aristocrats like bush in office again, but i think america would survive.

[Unibomber]

Uh...well, yeah.

The middle class is where the "money" is at.