stratfor | When I wrote about the crisis of unemployment in Europe, I
received a great deal of feedback. Europeans agreed that this is the
core problem while Americans argued that the United States has the same
problem, asserting that U.S. unemployment is twice as high as
the government's official unemployment rate. My counterargument is
that unemployment in the United States is not a problem in the same
sense that it is in Europe because it does not pose a geopolitical
threat. The United States does not face political disintegration from
unemployment, whatever the number is. Europe might.
At the same time, I would agree that the United States
faces a potentially significant but longer-term geopolitical problem
deriving from economic trends. The threat to the United States is the
persistent decline in the middle class' standard of living, a problem
that is reshaping the social order that has been in place since World
War II and that, if it continues, poses a threat to American power.
The Crisis of the American Middle Class
The median household income of Americans in 2011 was $49,103.
Adjusted for inflation, the median income is just below what it was in
1989 and is $4,000 less than it was in 2000. Take-home income is a bit
less than $40,000 when Social Security and state and federal taxes are
included. That means a monthly income, per household, of about $3,300.
It is urgent to bear in mind that half of all American households earn
less than this. It is also vital to consider not the difference between
1990 and 2011, but the difference between the 1950s and 1960s and the
21st century. This is where the difference in the meaning of middle
class becomes most apparent.
In the 1950s and 1960s, the median income allowed you to live with a
single earner -- normally the husband, with the wife typically working
as homemaker -- and roughly three children. It permitted the purchase of
modest tract housing, one late model car and an older one. It allowed a
driving vacation somewhere and, with care, some savings as well. I know
this because my family was lower-middle class, and this is how we
lived, and I know many others in my generation who had the same
background. It was not an easy life and many luxuries were denied us,
but it wasn't a bad life at all.
Someone earning the median income today might just pull this off, but
it wouldn't be easy. Assuming that he did not have college loans to pay
off but did have two car loans to pay totaling $700 a month, and that
he could buy food, clothing and cover his utilities for $1,200 a month,
he would have $1,400 a month for mortgage, real estate taxes and
insurance, plus some funds for fixing the air conditioner and
dishwasher. At a 5 percent mortgage rate, that would allow him to buy a
house in the $200,000 range. He would get a refund back on his taxes
from deductions but that would go to pay credit card bills he had
from Christmas presents and emergencies. It could be done, but not
easily and with great difficulty in major metropolitan areas. And if his
employer didn't cover health insurance, that $4,000-5,000 for three or
four people would severely limit his expenses. And of course, he would
have to have $20,000-40,000 for a down payment and closing costs on his
home. There would be little else left over for a week at the seashore
with the kids.
And this is for the median. Those below him -- half of all households
-- would be shut out of what is considered middle-class life, with the
house, the car and the other associated amenities. Those amenities shift
upward on the scale for people with at least $70,000 in income. The
basics might be available at the median level, given favorable
individual circumstance, but below that life becomes surprisingly
meager, even in the range of the middle class and certainly what used to
be called the lower-middle class.
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