Wednesday, October 22, 2014

Washington Post: The middle class is much poorer today than it was in 1989

Feelin' poorer every day; thanks 0bama (for not helping the middle class, but only helping the rich with the FED QE1,QE2,QEinfinity)
Washington Post

One of the biggest, and least appreciated reasons Democrats might be struggling, is that the middle class is poorer. Median net worth is actually lower, adjusted for inflation, than it was in 1989. Even worse, it's kept falling during the recovery.

Yes, even after the economy started to grow again, and the stock market started to boom, and housing prices began to bounce back, the median net worth of the average American household continued to decline.

Source: Federal Reserve Survey of Consumer Finances
Source: Federal Reserve Survey of Consumer Finances

This is a story about stocks and houses. The middle class doesn't have much of the former, which has rebounded sharply, but has lots of the latter, which hasn't. Indeed, only 9.2 percent of the middle 20 percent of households owns stocks, versus almost half of the top 20 percent. So the middle class has not only missed out on getting a raise, but also on the big bull market the past five years.

The only thing they haven't missed out on was the housing bust: 63 percent of that middle quintile own their homes, which are more likely to be a financial albatross than asset. And it doesn't help that, with student loans hitting $1.2 trillion, people have to take out more and more debt just to try to stay in, or join, the middle class.

It's no surprise, then, that people are still so gloomy about the economy. The recovery just hasn't been much of one, if at all, for most of them. Middle class wages are flat, and their wealth is still falling. At least during the bubble years, rising home prices gave people access to credit that helped mask their stagnant wages. But no more. Home equity lines of credit are down almost 25 percent from their peak, and are still declining. The middle class, in other words, can't borrow from the future to pretend that the economy is working for them today.

But people won't be happy until they don't have to pretend anymore.