Today's economy as a middle class citizen
Back in the 90's the economy was considered heaven to middle class Americans. They were spending as if the credit would never end; banks were offering anyone with a credit score over 500 mortgages to refinance homes up to 125% of its worth and the value was over-stated by appraisers who work closely with banking institutions. Now in 2008, middle class citizens feel a recession for many months with lost jobs, home foreclosures, and the cost of goods sky rocking. Since our Congress has yet to create an economic stimulus, real middle class incomes will continue to erode.
The middle class economy continues to feel the most effect from our failing housing market, unemployment, lending capabilities and government assistance. With so many sky rocking costs in fuel, food and shelter how are families surviving? Our government may tell us the stimulus check we received back in February through April was the answer. They believe this check was going to increase or stimulate people to spend that check on items that would make the economy stable. The government never intended for American's, especially the middle class to hold onto those funds to use when it could make a mortgage payment due to the loss of work.
To relate to the 2008 Economic Stimulus Act, this graph shows between April and May a large increase of income and between May and June that income took a tumble into the negative to over 5%. Most Americans accepted those checks with open arms but instead of increasing our spending which is why the government allowed this act to pass, Americans held onto them to help pay household bills. (Figure 1). I wonder how our Congress feels knowing that the last stimulus checks truly made no difference to spending in our country. On February 15, 2008, Peter R. Orszag, the director for Congressional budget office of the U.S. Congress in Washington, DC produced revisions to the forecast published in January of this year. According to this report, data regarding the labor market are weaker and conditions of financial markets remain worrisome. Retail sales and sales of new home also suggested continual slowing of economic activity. The director stated, 'projections do not show the slowdown in economic growth becoming severe enough to meet the economic definition of recession, the risk of a recession remains elevated.' (Orszag, 2008) I wonder did Chairman Kent Conrad even bother to read this report. He could have read this to the U.S. Congress to work on changing these predictions; instead our Congress is on 6 weeks of vacation leaving the economy to take care of itself. Maybe, because the Congress annual salaries; which the taxpayers provide, puts them in the high-income class status they do not worry about the millions of middle class who struggle every day.
The Federal Reserve District in July of this year reported on the current economic conditions from 12 federal reserve districts that consumer spending continues to be sluggish or slowing down further from previous months reports. Because of the high gas prices tourism activity was down and vacationers are staying closer to home. Real estate markets are still this economy's worst nightmare and consumer lending is showing more weakness than commercial lending. Poor automotive sales continue to weaken especially for large vehicles such as trucks, SUV's and some minivans. Dealerships are even reluctant to accept trade-ins on gas guzzling vehicles and the market demands are for small fuel-efficient or foreign vehicles leaving dealerships unable to sell their used inventory. Retail pricing will continue to see more cost hikes as manufacturers are receiving higher prices in their materials. With a decrease in customer demand manufacturers have no choice but to increase sale price to accommodate their own cost increase. Many manufacturers are voicing their concerns to Congress about elevated costs to materials, transportation and energy cost. They are expecting future hick in prices for oil, shipping and travel. With selling price hikes and too many competitors, the impact could begin to report more manufacturers closing their doors, in which more job losses and a continual downfall for the economy.
Figure 1 Personal income and real consumer spending.
Middle class American's are feeling sense economic insecurity from our government; with the costs of private employment-based health insurance and pensions fading away, employers are being radically transformed to shift more costs onto the workers. With government programs for economic security being cut it is no wonder the middle class is losing hope to remain financially secure into their retirement years. According to the bureau of economic analysis the gross domestic product increased 1.9 percent for the second quarter of 2008 after increasing only 0.9 percent in the first quarter. Consumer spending and exports both picked up but the prices of goods and services rose over 4.2 percent in the second quarter. (Figure 2). What does this mean? Our economy may be looking stronger, but because the government is allowing more export goods into our country to sell at a lower cost; we continue to struggle finding work for the American people.
Figure 2 Quarter to quarter growth in real gross domestic products.
Statistics show the erosion of America's distinctive economic security would be less worrisome; if work and family were stable sources. Unfortunately, the job market has grown more uncertain and risky. Other than the Great Depression has our economic downturn existed to this level. In these most recent economic down slide times, older more educated workers are losing their jobs due to higher pay scales than employers are willing to accept and are considered the hardest hit by long-term unemployment. (Bradbury, 2005), Many middle class citizens have given up looking for a job and are now choosing education to earn back the middle class status, yet in today's postindustrial economy; the cost of education continues to rise and gives no guarantee of a job that will provide that stability again. (Table 1)
The data and graph below shows how our unemployment rate for the last year and half continues to climb. In July 2008 alone the unemployment affected 8.8 million people. With fall and winter around the corner, these statistics are bound to increase as most seasonal most seasonal work is finished.
This new world for middle class families has produced even more alarming facts. Personal bankruptcy has become a routine with over 2 million people filing in year 2005. Married couples with children are more likely to file for bankruptcy than are couples without children or single individuals. These people are considered slightly better educated and are likely to have a good job; they are not persistently poor, looking for relief; they are middle class citizens wondering how they fell so far so fast. (Hacker, 2007). According to Hacker, income in 2004, total debt including mortgages, credit cards and other liabilities was more than 125% of their income. Because of our government official's lack of security over the banking institutions, many American's were allowed to borrow up to125% of their net worth. Now in 2008, those same federal funded institutions are being bailed out over those same housing loans that are now in their possession. Who does the government think is making those payments to bail them out? The middle class will be the majority of this foreclosure bail out. So when will the Feds jump in? According to economists Congress is asking each other if the government should meddle with this struggling economy. (Pressman, 2007). Most of the Republicans in the House are opposing this Democratic housing bill that can guarantee refinancing of 300 billion dollars for distressed mortgages into fixed-rate loans, as long as these owners agree to pay down the principle balances to fewer than 90%. Where are all those billions of dollars coming from? This bill includes increases in tax revenues to help bail out bankrupted Freddy Mac and Fannie Mae.
The middle class squeeze has become widely accepted among our Politician's that is a common place of stereotyping. Economists have devoted large amounts of energy in documenting this squeeze, including political messages to emphasize the failings of the economy for the middle class. (Rose, 2007) These economists state the typical middle-class family is worse off now than they were 25 years ago. To support this, private firm analysis are providing more information to Congress about the middle-class trends for household incomes, standards of living, debt burdens, employer sponsored benefit and the impact of more than one income per household. There is no doubt that the U.S. economy is heading for a transition that our U.S. Government have yet to address; without the middle-class stepping out of the comfort zone and yelling to our Congress that we must see change, we may never be able to see retirement.
With the election of a new President and some changes of venue for our Congress just a few months away, does the middle class Americas sit back and hope the election goes their way? Statistics show newly elected government officials need many months into office before they will consider expressing ideas to any changes. Why not write to the US congressmen and Senator who represent every citizen from their state and voice an opinion on how the current economic statue is not working. The middle class supports the government with salaries that should require work done by those officials. We can continue to sit back and watch the middle class erode, or we can stand up and voice for our government to do something now before it is too late for the middle class to ever get back the lifestyle they deserve.
Bradbury, K. (2005). Additional slack in the economy: The poor recovery in labor force
participation during the business cycle. Federal Reserve Bank of Boston Public Policy. 05-2, retrieved August 26, 2008 from www.bos.frb.org/economic/ppb052.
Congressional Budget Office (February, 2008). Current Economic Projections. Retrieved August 27, 2008 from http://www.cbo.gov.
Hacker, J. (2007, May). The Real Dangers to the American
Middle Class. Challenge (05775132), 50(3), 26-42. Retrieved July 25, 2008, from Business Source Complete database.
Hopson, James F. "Economic Stimulus Act of 2008; Analysis of major provisions. (emerging
issues) (Law overview)."The CPA Journal78.6 (June 2008): 9(2).GeneralOneFile Gale.
Apollo Library, retrieved August 27, 2008.
Orszag, Peter. (February 15, 2008) Director of Congressional Budget Office, U.S., Washington, DC 20515. Retrieved letter to Honorable, Kent Conrad, Chairman Committee on the Budget, United States Senate on August 27, 2008 from www.cbo.gov.
Steven Pressman (2007). The Decline of the Middle Class: An International Perspective. Journal of Economic Issues, 41(1), 181-200. Retrieved August 27, 2008, from ABI/INFORM Global database. (Document ID: 1274475231).
Thomas W. Synnott III (April 2008). The great inflation: inflation, inflationary expectations, and
the Phillips cycle 1960-2002: improvements in monetary policy tamed inflation once
can they do it again? Business Economics43.2 p34 (11).GeneralOneFile Gale.
Apollo Library, retrieved August 27, 2008.
Source: Essay UK - http://www.essay.uk.com/free-essays/economics/economy-as-middle-class.php
If this essay isn't quite what you're looking for, why not order your own custom Economics essay, dissertation or piece of coursework that answers your exact question? There are UK writers just like me on hand, waiting to help you. Each of us is qualified to a high level in our area of expertise, and we can write you a fully researched, fully referenced complete original answer to your essay question. Just complete our simple order form and you could have your customised Economics work in your email box, in as little as 3 hours.
This Economics essay was submitted to us by a student in order to help you with your studies.
This page has approximately words.
If you use part of this page in your own work, you need to provide a citation, as follows:
Essay UK, Economy as Middle Class. Available from: <http://www.essay.uk.com/free-essays/economics/economy-as-middle-class.php> [17-06-18].
If you are the original author of this content and no longer wish to have it published on our website then please click on the link below to request removal: