On the Way Down: The Erosion of America's Middle Class

By Thomas Schulz

While America's super-rich congratulate themselves on donating billions to charity, the rest of the country is worse off than ever. Long-term unemployment is rising and millions of Americans are struggling to survive. The gap between rich and poor is wider than ever and the middle class is disappearing.

Photo Gallery: The End of the American Dream? Photos
AFP

Ventura is a small city on the Pacific coast, about an hour's drive north of Los Angeles. Luxury homes with a view of the ocean dot the hillsides, and the beaches are popular with surfers. Ventura is storybook California. "It's a well-off place," says Captain William Finley. "But about 20 percent of the city is what we call at risk of homelessness." Finley heads the local branch of the Salvation Army.

Last summer Ventura launched a pilot program, managed by Finley, that allows people to sleep in their cars within city limits. This is normally illegal, both in Ventura and in the rest of the country, where local officials and residents are worried about seeing run-down vans full of Mexican migrant workers parked on residential streets.

But sometime at the beginning of last year, people in Ventura realized that the cars parked in front of their driveways at night weren't old wrecks, but well-tended station wagons and hatchbacks. And the people sleeping in them weren't fruit pickers or the homeless, but their former neighbors.

Finley also noticed a change. Suddenly twice as many people were taking advantage of his social service organization's free meals program, and some were even driving up in BMWs -- apparently reluctant to give up the expensive cars that reminded them of better times.

Finley calls them "the new poor." "That is a different category of people that I think we're seeing," he says. "They are people who never in their wildest imaginations thought they would be homeless." They're people who had enough money -- a lot of money, in some cases -- until recently.

"The image of what is a poor person in today's day and age doesn't fly. When I was growing up a poor person, and we grew up fairly poor, you drove a 10-year-old car that probably had some dents in it. You know, there was one car for the family and you lived out of the food bank," says Finley. "In the past, you got yourself out of poverty and were on your way up."

American Way Heads in Opposite Direction

It was the American way, a path taken by millions. "Today the image is you're getting newer late model cars that at one point cost somebody 40, 50 grand, and they're at wits end, now they're living out of the food banks. And for many of them it takes a lot to swallow their pride," says Finley.

Today the American way is often headed in the opposite direction: downward.

For a while, America seemed to have emerged relatively unscathed from the worst economic crisis in decades -- with renewed vigor and energy -- just as it had done in the wake of past crises.

The government was announcing new economic growth figures by as early as last fall, much earlier than expected. The banks, moribund until recently, were back to earning billions. Companies nationwide are reporting strong growth, and the stock market has almost returned to it pre-crisis levels. Even the number of billionaires grew by a healthy 17 percent in 2009.

Two weeks ago, Microsoft founder Bill Gates and 40 other billionaires pledged to donate at least half of their fortunes to philanthropy, either while still alive or after death. Is America a country so blessed with affluence that it can afford to give away billions, just like that?

Growing Resentment

Gates' move could also be interpreted as a PR campaign, in a country where the super-rich sense that although they are profiting from the crisis, as was to be expected, the number of people adversely affected has grown enormously. They also sense that there is growing resentment in American society against those at the top.

For people in the lower income brackets, the recovery already seems to be falling apart. Experts fear that the US economy could remain weak for many years to come. And despite the many government assistance programs, the small amount of hope they engender has yet to be felt by the general public. On the contrary, for many people things are still headed dramatically downward.

According to a recent opinion poll, 70 percent of Americans believe that the recession is still in full swing. And this time it isn't just the poor who are especially hard-hit, as they usually are during recessions.

This time the recession is also affecting well-educated people who had been earning a good living until now. These people, who see themselves as solidly middle-class, now feel more threatened than ever before in the country's history. Four out of 10 Americans who consider themselves part of this class believe that they will be unable to maintain their social status.

Unemployment Persists

In a recent cover story titled "So long, middle class," the New York Post presented its readers with "25 statistics that prove that the middle class is being systematically wiped out of existence in America." Last week, the leading online columnist Arianna Huffington issued the almost apocalyptic warning that "America is in danger of becoming a Third World country."

In fact, the United States, in the wake of a real estate, financial economic and now debt crisis, which it still hasn't overcome, is threatened by a social Ice Age more severe than anything the country has seen since the Great Depression.

The United States is experiencing the problem of long-term unemployment for the first time since World War II. The number of the long-term unemployed is already three times as high as it was during any crisis in the past, and it is still rising.

More than a year after the official end of the recession, the overall unemployment rate remains consistently above 9.5 percent. But this is just the official figure. When adjusted to include the people who have already given up looking for work or are barely surviving on the few hundred dollars they earn with a part-time job and are using up their savings, the real unemployment figure jumps to more than 17 percent.

In its current annual report, the US Department of Agriculture notes that "food insecurity" is on the rise, and that 50 million Americans couldn't afford to buy enough food to stay healthy at some point last year. One in eight American adults and one in four children now survive on government food stamps. These are unbelievable numbers for the world's richest nation.

Even more unsettling is the fact that America, which has always been characterized by its unshakable belief in the American Dream, and in the conviction that anyone, even those at the very bottom, can rise to the top, is beginning to lose its famous optimism. According to recent figures, a significant minority of US citizens now believe that their children will be worse off than they are.

Many Americans are beginning to realize that for them, the American Dream has been more of a nightmare of late. They face a bitter reality of fewer and fewer jobs, decades of stagnating wages and dramatic increases in inequality. Only in recent months, as the economy has grown but jobs have not returned, as profits have returned but poverty figures have risen by the week, the country seems to have recognized that it is struggling with a deep-seated, structural crisis that has been building for years. As the Washington Post writes, the financial crisis was merely the final turning -- for the worse.

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1. Key word in article: Billions
lakechamplainer 08/19/2010
The key word in the article is "billions". The billions the banks are earning even though they are not making making loans available to individuals and small businesses, and the billions that Gates and others can give away, because they own businesses that essentially have monopoly power. How can people have confidence in the future, especially in the financial system, when there has still not been even a minimal explanation of how the untold billions of "Rescue Package" money was spent?
2. Scheming Peasants like Blankfein
esperonto 08/19/2010
Since the US middle class is a fiction anyway, it only makes sense that it dissolves. You cant have this kind of pseudo-objectivity running 100% of the time. The American Way of Life is itself merely an elaboration on tho scheming peasant mindset of the old world. Its like the took the scheming peasant of Europe, and said okay here do whatever you want. Naturally the middle class, which thinks it is playing by the rules and deserves stability, will fall apart, because the stability they imagined was merely a fabrication invented by the scheming peasants who became the ruling class. And the education that the middle class received was tampered with. Figures were erased and penciled in to America's military favor. No one was taught Astronomy or anything classical important, just how to be drones. Then peasants like Blankfein at Goldman Sachs, who got rich from scheming, will turn around and say "we are just living a certain aspect of American life". Exactly: the "Crook" aspect, the "Swindler" aspect, the "Snakeoil Salesman", the "Scheming Peasant" aspect of America. They let them sleep in their cars, because the government is dependent on people's oil consumption. They are homeless but still oil consumers in their cars. They serve a purpose to keep the government afloat with its oil schemes.
3.
scipioafricanus 08/20/2010
This is a natural, to-be-expected result of democracy and other societal systems based on coercion. When one or a few people control the lives and property of all others. As Thomas Paine said, "they are usually the most unfit of all". (Don't think I remember the statement exactly, but that is the idea). And they effectively destroy the economy, as any incompetent would do if they try to run a business. Within the problem of democracy, there is the fact that all individuals are compensation improperly for production. "Production compensation, which includes compensation in the service industry, "must be based solely on the market value of error-free production." When there are products for which there is a market demand, or products can be imagined and created that have market value, there should be no unemployment. And companies, when managed properly, can not lose money and go out of business.
4. Production and Charm
esperonto 08/23/2010
Zitat von scipioafricanusThis is a natural, to-be-expected result of democracy and other societal systems based on coercion. When one or a few people control the lives and property of all others. As Thomas Paine said, "they are usually the most unfit of all". (Don't think I remember the statement exactly, but that is the idea). And they effectively destroy the economy, as any incompetent would do if they try to run a business. Within the problem of democracy, there is the fact that all individuals are compensation improperly for production. "Production compensation, which includes compensation in the service industry, "must be based solely on the market value of error-free production." When there are products for which there is a market demand, or products can be imagined and created that have market value, there should be no unemployment. And companies, when managed properly, can not lose money and go out of business.
Production is part of the problem. Also as you point out the few people are not fit to lead. The few have something like Charm, the charm of the wealthy, how someone who has made a lot of money develops an untouchable grace, unless on of them as an individual has made too many mistakes, thus becoming a scapegoat for the others, like Bernard Madoff. As far as production, in capitalism of course there is the production of unneeded items, simply to have a salable commodity. I consider a lot of Apple inventions, like the next weird touch screen device, to be not only unneeded but a damaging scam to one's mind and reality. In communism, one has only production for the people's needs, and the means of production is owned by the workers, not the few. I was looking at some video that showed a boy in Afghanistan who showed his only possession was a small ball he found in the gutter. That will make one think about how much stuff one really needs to own to survive. Like if there are some things you feel you cant part with. I pride myself on not owning too much. I feel I have beaten the system by staying materialistic into adulthood. Like I don't own a television or a car. Normal middle class people who bought a bunch of stuff are now sleeping in their cars! My way of living is actually much more stable than theirs it seems. Anyone who even did a surprise inspection of my apartment for conspicuous consumption would find almost nothing of value and barren white walls with nothing hanging on them. You wouldn't even find a cell phone.
5. Long-term unemployment
acala 08/23/2010
Interesting graphic on long-term unemployment. If you'd like to dig deeper into the data try this interactive graphic on long-term unemployment and recessions from 1970 to 2010: http://www.stateoftheusa.org/content/record-long-term-unemployment.php
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