Living beyond our means

I’m not trying to blame the victim here, but just from pure observation, it seems to me there are an awful lot of people out there living way beyond their means. And that says to me that we have practically no middle class — the conservatives have almost managed to completely eliminate that segment of people that actually operates as their base.

What we’ve really got these days are the filthy rich, the dirt poor and the people who live like they’re filthy rich even though they’re barely above dirt poor.

Now maybe that’s an exaggeration. Probably it’s an exaggeration. But I’m pretty damn sure that all these folks with $900 car payments, $2,500 mortgages and $200,000 in credit card debt are not rich. And I can all but guarantee that they’re just one major emergency away from bankruptcy and foreclosure.

The pay as a small cog in a big media outlet isn’t bad, but I still bought the small car with the good gas mileage — and it still got me a $300 payment. Ouch. My mortgage is pretty average, even with the second mortgage. It’s an older house, practically a fixer-upper. I have a 32-inch television. I have a smart phone, and I bought an iPad. And when I lost the job with the big media outlet, I was in trouble. Not foreclosure trouble, at least not yet, but it’s tight. Real tight.

So what’s with all these other folks out there with the big new houses and the multiple Lexi and the swimming pools, in ground, out back? Ah, I think I know the answer.

Ronald Reagan. He taught us that we could buy everything on time, jack up those credit cards. And now look at us. The economy’s tanked, as anybody with more sense than Ronald Reagan knew it would, and a whole bunch of us are in serious trouble.

But here’s the thing. Maybe we all thought we’d be OK if we got a decent job and kept it, working our way up. The American Way and all. And that’s how it was. Until Reagan. Here’s what happened. Oh wait, I could never explain this. Let’s let somebody with real knowledge do it — former Labor Secretary Robert Reich.

It’s easy to blame “globalization” for the stagnation of middle incomes, but technological advances have played as much if not a greater role. Factories remaining in the United States have shed workers as they automated. So has the service sector.

But contrary to popular mythology, trade and technology have not reduced the overall number of American jobs. Their more profound effect has been on pay. Rather than be out of work, most Americans have quietly settled for lower real wages, or wages that have risen more slowly than the overall growth of the economy per person. Although unemployment following the Great Recession remains high, jobs are slowly returning. But in order to get them, many workers have to accept lower pay than before.

Starting more than three decades ago, trade and technology began driving a wedge between the earnings of people at the top and everyone else. The pay of well-connected graduates of prestigious colleges and MBA programs has soared. But the pay and benefits of most other workers has either flattened or dropped. And the ensuing division has also made most middle-class American families less economically secure.

Government could have enforced the basic bargain. But it did the opposite. It slashed public goods and investments — whacking school budgets, increasing the cost of public higher education, reducing job training, cutting public transportation and allowing bridges, ports and highways to corrode.

It shredded safety nets — reducing aid to jobless families with children, tightening eligibility for food stamps, and cutting unemployment insurance so much that by 2007 only 40 percent of the unemployed were covered. It halved the top income tax rate from the range of 70 to 90 percent that prevailed during the Great Prosperity to 28 to 35 percent; allowed many of the nation’s rich to treat their income as capital gains subject to no more than 15 percent tax; and shrunk inheritance taxes that affected only the top-most 1.5 percent of earners. Yet at the same time, America boosted sales and payroll taxes, both of which took a bigger chunk out of the pay the middle class and the poor than of the well off.

OK, but even with all that, we kept buying rather than cut down on spending. Why? Three reasons, really. One, more women getting paid, bringing more money into the family. Two, longer hours. And three, drawing down savings and using credit cards.

And for all that, we’re still stuck in a bad situation. Robert Reich again:

The fundamental economic challenge ahead is to restore the vast American middle class.

That requires resurrecting the basic bargain linking wages to overall gains, and providing the middle class a share of economic gains sufficient to allow them to purchase more of what the economy can produce. As we should have learned from the Great Prosperity — the 30 years after World War II when America grew because most Americans shared in the nation’s prosperity — we cannot have a growing and vibrant economy without a growing and vibrant middle class.

If only our government had the will to do that. Instead, our duly elected officials look for more ways to stick it to the poor and what’s left of the middle class. The poor know the score. The remnants of the middle class, not so much. So they’re still driving SUVs and paying for houses way too big for them. And getting foreclosed on with abandon.

Nobody in Washington, or any of the state houses, seems to have a clue. We’d better get busy giving ’em one, before the Republicans finish the job they’ve started.