The Middle Class is Moving Backwards

The Frontline episode about the middle class experience over two decades in the US, and it portrays the exact experience of my childhood. The hope and dream of the middle class, that a good paying job will carry them through and provide a modest improvement of life for their children. My entire life I have felt that dream slipping away.

In the 90’s, that dream was shattered for the middle class families. Jobs disappeared, and when they came back the jobs were minimum wage and little to no benefits. Families could not survive, so more women went to work, families broke apart under the stress, and now kids are struggling to cope with a difficult family situation and they don’t have as much time with their parents to get the guidance and love and support needed to deal with growing up. And the kids become more susceptible to making mistakes that have long term consequences such as dropping out of school, having kids, or gangs.

My dad worked as a civilian at a military base, which was shut down. He was laid off, after 18 years and missed the possible retirement benefits by 2 years. So he retrained and luckily found a job with benefits, but it did not pay as much. I remember being about 15 when we were standing in the front yard, he said “You will not have to pay for your college education.” Somehow I knew even then, that it was an unrealistic promise. I worked hard to get good grades and good scholarships to pay for my state education. By luck, I avoided the things that can derail people from going to college.

And what are we working so hard for? So we can buy cars and appliances that break easily or don’t last; we have to borrow big money to buy a house, and borrow to go for college. Credit card companies and lending firms trick people into thinking they can rack up the debt but it will be easy to pay off when we get a job. We’re told we can make a life for ourselves, if we work hard, but if there aren’t enough jobs we can take a risk to start a business. How often does this plan actually work for the middle class? Then the neighborhood goes south and crime elevates, until it’s no longer safe to live in the house you have worked 24 years to try and keep.

It’s a bit shocking to see these charts on the wealth and income of the middle class since 1980. But Wall Street was able to make big money in those times. Not to mention the successes of the people willing to cheat, lie, deceive.

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What will we miss Tomorrow?

I have a favorite towel.  It’s so old, I have no idea where it came from.  It’s super long, which is great for good wrapping coverage out of the shower.  And it’s really soft, like an old pair of jeans that you have worn everywhere.  A section of the towel is worn through, and my boyfriend has repeatedly commented that it’s outlived it’s useful life.  ABSOLUTELY NOT!  It still functions perfectly for my use.  I would be in favor of replacing the towel, but a search of the product name produced no results.  So I believe the company either changed names or went out of business.  Besides, who can survive making good products anymore?

Last year I purchased an immersion blender to ease with blending soups.  When it comes to kitchen items, I rely on the testing and comments by America’s Test Kitchen, I’m actually signed up through Cooks Illustrated to access their recipes and product info.  After extensive testing, they recommended the Kaloric Sunny Morning blender.  Later that year they revised the recommendation and I had a similar bad report to other people, after maybe 5 uses on soup the motor burned out.  I should have read the instruction booklet immersion-blenderdescribing the operating instructions and promptly returned the item.  You can’t operate the blender for more than 1 minute which must be followed by 10 minutes of rest.  That would require about 30 minutes to blend my soup completely.  So back to square 1 for research.

This time I thought to read the product operation manual online before purchasing.  Many amazon shoppers report loving their KitchenAid hand blender that lasted 7 or 10 years, and the revised test kitchen report also recommends that product.  After purchasing, I’m reading some reports of complications with the new model version of this blender.  No motor problems, but the connection of the motor to the shaft has a plastic piece that can break.  I hope this one lasts, but if not, I’m writing to KitchenAid and the Test Kitchen group.  The lack of descriptive information about the motor in all KithenAid info is a bit unsettling for me; if this one breaks, it appears that all major brands use the same plastic connection element so I will be struggling to find a suitable replacement.

It seems like all manufacturers are capitalizing on their past reputation of quality products to sell really cheap goods.  I don’t mind paying extra for reliable products from manufacturer’s like KitchenAid, Pella, Anderson Windows, etc.  But as we are learning in the building design, the products are cheaply made and do not perform well long term.  This certainly helps the economy, when people warranty_nuevohave to replace products every year.  But what is it doing to the environment, and our psyche that we can’t find anything of value.  No wonder we don’t want to spend a lot of money, we can barely stomach the issue of cheap stuff failing before their time.

Product warranties have very short lifespans, 1 year and sometimes 2.  In the world of building materials, even with a warranty you typically have to hire a lawyer to get manufacturers to own up to their responsibilities, and then spend a year arguing while the manufacturer blames anyone who even looked at the product for errors.

I read a post once of someone struggling through difficulties with multiple appliances.  We all struggle to find legitimate online consumer reviews.  Who can we trust?  Know any good repairmen to recommend?

The Truth About Retirement

In Western culture,  we currently view retirement as a right, not a privilege. It’s become an entitlement we consider as necessary as health care, education, and freedom.  According to this article on WBUR, the retirement concept and lifestyle is relatively new.  Although the concept was created around 1900 (A Brief History of Retirement), it really became popular when the Baby Boomer generation was entering the workforce, but there were not enough jobs for this generation.

Social Security (an ingenious Ponzi Scheme bringing in revenue for the government under a guise of workers insurance) was invented in 1935, but did not popularize retirement.  Alright, so it’s not quite the same formula as a Ponzi Scheme, the government calls it an insurance plan (LA Times Article), but the formula was designed to work with a pyramid population expansion which has not been consistent, and is not sustainable in the future.

Now the new generations (X and Y) are chasing down the Baby Boomers for their jobs, but the boomers plan to keep working.  As we have seen with housing, jobs, and social security, we need to modernize our social programs, and economy to address the reduced population size with subsequent generations.

But this probably won’t happen until it’s absolutely necessary.

Dispair.com view on Retirement

How do We Fix the Jobs problem in the US?

I’m not an economist, so I have little idea how to create decent jobs for people to earn w livable wage.  There are many factors affecting the current job situation, I think we need a national discussion on these issues:

–      Unrealistic Expectations: The baby boomer generation has experienced unique circumstances that provided significant improvements in their standard of living.  The situation allowed for pyramid based (similar to Ponzi scheme) support programs for wages, social security, health care etc.  Gen X following this group does not have the same circumstances of population growth to support the same standard of benefits.  It’s more damaging to people when these expectations disappear, as they need to do in this social/economic correction.  I don’t expect that the living standard of the last 30 years is sustainable in today’s world and we should not expect to get back to that situation after the recovery.

–      Giving Kids a “Childhood”:  Modern society in the US is focused on making it easy for kids.  We need to be teaching them how to be adults, how to get work done, and how to be group centered instead of selfish and self-centered.  We need to prep them emotionally to handle adult life, not protect them from reality.  The quality of our work force is diminishing and we will lose the justification for companies to keep jobs in the US.

–      Globalization: Now businesses have the resources to move their headquarters, outsource jobs (and insource jobs), and other measure to save money (i.e. increase profits).

–      Discuss Incentives: Business have many incentives for increasing profits, rather than improving working conditions and pay, health care, productivity etc.

–      Personal Commitment:  All of these ideas combine into a point “we are more concerned with personal growth and development on an individual basis than the good of society.”  The irony is we lost control over our own quality of life in the process.  Instead of shopping at Wal-Mart because we can buy more things (even though those items do not last long) we should be more conscience of buying local.  The US regulates human rights, working conditions, environmental impact, and other characteristics that are designed for sustainable living and protection of our way of life.  Then we kick that to the curb to buy foreign made products because they are cheaper.  http://www.madeinusa.org/

Congratulations to You

Thanks to all of you, our politicians have reached a consensus.  It appears that both sides of the isle agree that the needed fix to our economy is JOBS.  Yes everyone needs a job and that will make all our problems go away (except the real problem of corruption, deceit, foreign invasion, and other problems we don’t really care about).

Years of outsourcing, and insourcing (Wikipedia definition), allowing corporations to reap higher profits, resulting in a decrease of the quality of living for the working and middle classes and widened the income gap.  Well who let them do that?

We all did, anyone with the voting rights in the US allowed this to happen.  We allow government and corporations to keep wages and benefits low while the cost of living increases.  We sit on the sidelines complaining about life’s difficulties instead of participating in change and contributing what we can for our communities.  What kind of example is set of the upcoming generations?  How will they know how to get exercise their democratic rights?  The baby boomers fought the government during the Vietnam War, why are subsequent generations standing by and allowing their power to disappear?  You can bet there will be fierce opposition if social security benefits are threatened (again the baby boomers will not allow that to happen).   Why is my generation allowing our benefits to effectively be cut?   My generation can barely pay for health care, buy a home, rely on social security or other retirement programs.  What we are asking for is to be able to maintain the same standard of living for the same effort as previous generations.

We need meaningful jobs that will help our economy grow and develop a sustainable lifestyle in our country.  We need to increase the minimum wage and level of benefits to allow hardworking people to earn a decent standard of living.  We need to reward hard work with an adequate means.  And we need to stop rewarding substandard work without consequence.

Let’s help define the political discussion on jobs and the economic recovery.

The Loss of Education – Why Politicians are Confused and Corporations/Wall Street have run Amok

If you are paying attention to the US political debates and the Republican Primary presidential campaign, it’s clear that few politicians have a clue how to fix our economy or how to meets their constituents’ wishes.  Obama campaigned on the promise of “Change in Washington.”  The promise of “Change” is extremely vague.  What kind of change was he offering and what kind of change were people hoping for?

Now the key word is “Jobs.”  Many discussions are emphasizing the idea that an increase the number of jobs available will fix (= return to pre-recession glory?) our economy.  Well just how we go about increasing jobs is the real debate.  Republicans are striving for reduced taxes and less government oversight and deceiving voters to think that giving more money and power to the wealthy will result in them wanting to help the little guy and create jobs.  Since when does anyone sit down and say “I have enough money for myself and my family to live a comfort lifestyle, I’m going to create jobs for others to be able to earn a decent living as well.”  And second, isn’t that how we got into this mess to begin with?  Deregulation and lack of regulatory development to keep up with modern financial products, and lessening government oversight of risks to our economy, in large part created this recession.

Democrats are not much clearer in their suggestions for change.  Increasing taxes to maintain government support programs is not a long term solution.  So what are the experts saying is the path to create meaningful jobs and push us back to the pre-recession glory?  Well that is another topic entirely than the message of this post.

The message here is that we, the public, are not clearly voicing our opinion for the politicians.   “Change” and “Jobs” is not enough direction.  Our current education (in the classroom and through life experiences) is not providing us the tools we need to evaluate political decisions, or to participate in a meaningful way in current politics.  We are easily distracted by less important conversations and we are unable to get to the heart of an issue.

I wonder if it’s a lack of science in our everyday lives that results in our inability to have a meaningful impact; but we blame it on a lack of control over the politicians (we could gain control if we used our voice and voting power in unison).  Granted this takes effort and commitment to research the discussion topics and find the truth.  We are our biggest obstacles, not wanting to take control because of our laziness, or the fear we have of responsibility.

So what is important to you?  What should the government be focused on?  And what do you think is the answer to fixing that priority?

Economic Recovery? Are we there? When is it coming?

I’m not an economist.  Most of my news comes from listening to NPR, reading BBC news, Yahoo Finance news, CNN Money news, and This Week with Christiane Amanpour.  The Great Recession is over, because the economy is no longer contracting.  The recovery though is more of a flat-line average rather than increasing value that we are hoping for.  My understanding of our current economic situation in the US is that for many years we have spent more money than we had, enjoying a period of growth and prosperity, a bit more than we had actually earned.  Now the bill is due and we are struggling to pay all the debts.

Given that economic situation, why do we think that a recovery can be achieved so quickly?  We are in an economic “correction” and paying for the economic speculation previously enjoyed.  This will take time, especially when during the time period of overspending, wages of the working and middle classes have not kept up with inflation.

It seems that policies from the US Government and the Federal Reserve have propped up the economy above the natural strength, slowing the downturn during the recession enough to officially end the economic contraction.  As those policies are ending, we are facing the true value and independent strength of our economy.  With the upcoming political debates for the Presidential Elections, the focus is on plans and policies that will quickly regenerate the growth and prosperity.

The debate over plans and policies needed to regrow the economy will vary by many biases.  The politicians are divided between Republican (reduce spending and taxes) and Democratic (reduce some spending and increase taxes) ideologies; both of which are focused on an immediate support for the economy since their election cycle is on a 4 year schedule.  Are they going to falsely prop up the economy and leave the cost of these measures for future generations?  What will happen to the US if uncontrolled spending and debt causes extreme inflation?

What kind of policy and programs are needed to create a legitimate and long lasting economic recovery?  We need a means of increasing the value of our economy, at home and abroad.  That will likely come from technology and services which requires education and support for research and entrepreneurs.

We must tell the politicians how to address these issues, instead of leaving it up to corporations and the rich.  That might entail a continuation of the flat-line economy until we catch up with the debt and invest in our future.

A day after writing this, the radio program On Point discussed the status of our economy with Nobel Prize-Winner Peter Diamond.  He comments that the actions of President Obama’s administration have prevented a deeper recession/depression that likely would have included further job loss.  In order to get jobs regrowing again, we need more stimulus, but down the road everyone needs to pay more in taxes to reduce the debt (when will we agree to that?).  For long term development we should invest in education and focus on programs and policy with a proven benefit.  All of these points of view are contrary to the Republican point of view.

Current Problems with the Housing Market

NPR had a good discussion this week about the current status of the housing market.  We have heard over the last couple years about all the decisions leading up to the collapse of the housing market.  What’s in the past is history for now, and good learning lessons.  But we are encountering a whole new situation of unknowns to work out.  There are so many factors in this topic, it will make your head spin.  These are in no particular order:

  • The reduction of down payment requirements allowed many people to buy before they had saved the money needed.  Now that the trend is reversing, it will take longer for people to save a minimum down-payment to make a comfortable purchase.
  • It’s harder for the average person to save for a down-payment due to decreased wages compared to the increased cost of living. The average price to average salary ratio for a geographic location is used to determine affordability of housing for that region.  This ratio has significantly increased throughout the US adding to the difficulty of saving for a down-payment.
  • Baby boomers make up a large part of the population and are approaching retirement.  They will be downsizing their homes, or selling rental property to enjoy their retirement, adding to the supply of houses out there.  This is an example of a fundamental problem with our economy which is based on growth (a larger group coming up to support the top of the pyramid).

Maybe I’m pessimistic, but I don’t see how we are headed for the right track in the housing market.  Unfortunately, home ownership is another example of a means of wealth being taken from the average citizen and given to the rich.

Today’s article (29 March 2011) describes how the Case-Shiller U.S. house price index shows a discrepancy between home prices and general inflation that can take years to correct.  Home prices may not drop off in the steep decline of 2007 and 2008, but it will take years for inflation to catch up with increased home prices to increase their value beyond today’s values.

The Challange of Capitalism

Economies have evolved and for now we are settled on a Capitalists system.  Maybe that is the best system for us right now, I don’t know enough about economic systems to have an opinion on which may be better.  But I think we all should be more cognoscente of the challenges and disadvantages of this system, so that we avoid the pitfalls of the system as much as possible.

With Capitalism, individual benefit and prosperity is the focus.  I think the biggest problem with Capitalism is Fraud and Deceit.  Without significant regulation, and a source of fact checking, the consumers and average citizens have no way to get the right information through all the misinformation forced in front of us.  Even if we try to get a handle on the information needed, the information becomes so convoluted you have to hire a lawyer to explain each sentence.  How do we know who or what to trust?

  • We can no longer trust banking institutions to provide a reasonable loan given a person’s economic situation.  Nor can we trust the securities they are trying to sell.
  • Most commercials are obviously misleading and deceitful.
  • Can we trust our investment advisers?

The thing that worries me, we all know someone who is incompetent for their job, maybe we know many people who we would not trust in that profession.  Yet we inherently trust our doctors, airline pilots, funny guys on TV who give financial advice using funny sounds. Frontline on the public TV station has been highlighting cost saving short cuts taken by the Airline industry that are not regulated by the safety administrations.  Today’s episode of 60 Minutes highlights the hidden fees in 401k programs.  These fees are not hidden in the fine print, they are unpublicized fees that we have no way of identifying.

This could be the greatest opportunity for the government.  Modern society has a reasonable distrust of the government, as we should.  But why is out distrust stronger for the government than for commercials, business, safety regulations, etc.?  Do we really expect big companies, wall street, and real estate agents to be looking out for our best interests?  We have eliminated regulation in favor of cost savings on the various products and industries.  Hopefully with a democratic system, and with our bill of rights, we can have an effective government that is checked and regulated by the people.

We need to regain control of the government by voting, writing to the elected officials, and talking to each other about priorities and ways to solve the most important problems.  And we need to empower them to work against the negatives of capitalism.  Wrong doers should be fined an amount equal to the egregiousness of the crime, and publicized to allow consumers to choose other sources of business.

I think the public fight against fraud is key to this effort.  Individuals and companies should be publicly shamed for such wrongdoing, and others should fear repeating similar action.  We need more institutions to investigate and publicize the actions and promotions of companies.  This requires improved education to show people the difference between factual based news versus the  info-tainment of network news programs.

Is anyone else worried about the state of our Economy?

Well I know everyone is worried about the economy dropping further.  As you all know we are no longer in a recession, which only means that the downward trend has slowed and we are not bottoming out.  It does not mean that there is any improvement in conditions…. yet.  I’m sure in the near future (5 years) we will see the return to the highs we enjoyed before the most recent crash.

But why isn’t anyone worried about our economy’s reliance on growth to prosper? Our success is dependent on GDP growth, which relies on population growth and that can’t continue forever.  The pyramid system isn’t working for Social Security, and how long until it stops working for our economy?

Maybe an economist out there can explain to me that it’s nothing to worry about, or maybe they can trust that the system will be fixed before it becomes dire.

 

20 February 2011 – One economists says that population growth plays a small factor in overall economic growth, and therefore this is not a major concern.