What's the tipping point?

Last week I canceled a trip to be with our grandchildren for Thanksgiving. The tipping point that forced the decision was a combination of unexpected medical co-pays on top of some un-budgeted car repair. While heartbreaking, it was not particularly serious and we expect to visit in a couple of weeks, but it made me wonder. I have made a living as a marketing version of the canary in a coal mine – a preeminent consumer of sorts. For whatever reason, I seem to experience things months or more before others. If something so insignificant could force my decision, could we, the formerly solid middle class, be on the edge of a more dramatic shift?

Hard working families all over our great country are facing tough economic decisions every day. Uncomfortable decisions. Decisions that seem different in scale than they used to be. Admittedly, living within a budget is a responsible and necessary way for each of us to live and manage our money. But what cumulative toll has the horrible economy taken on the type and frequency of such difficult decisions?

The Census Bureau defines poverty as $22,350 annually for a family of four, and near-poor as people within 200% above the poverty line. Officially, one in three Americans is poor or near-poor. Unofficially, it is at least one in two. The real life definition should also include people who are one unexpected event from being without money. Cash poor is not the same thing as poor, but it feels like it for a time and easily can become permanent.

Most of us have have taken some hits in the last few years. Someone in the family was laid off. Someone got sick. Someone entered the work force, but couldn’t find work adequate to pay their college loans. Credit lines dried up with house value. The house didn’t sell. The investment was made worthless. Your health insurance was cancelled, or only offered at a price greater than your house payment. But you endured. Party on.

There are Dominossteps down the ladder for the middle class near poor. Liquidate stocks and savings. Cash in retirement accounts. Sell your house for a smaller house. Sell that house for an apartment. Then a smaller apartment. Give up the life insurance you’ve paid on for twenty years. Give up the private schools. Gave up the extra car. Give up Whole Foods for Publix, then BigLots, then dumpster diving for food. Give up the malls for Walmart, then the charity store. Cancel cable and the newspaper. Unhook the land lines. Postpone preventative maintenance – dental care, health check ups, car tune-ups or new tires, overlook the minor car accident and cash the check. Let the dog die.

The middle class can take some hits. Americans are resilient. We can get smaller and leaner. We can do without. We can ask for help from friends or family. Wishing won’t change it. Remembering accrued disappointment makes it worse.

There must be a point in the spiral – the time or convergence of events, that leaves no options. The moment when all that you have worked for is gone. The time when you change economic classes. When there is no pretending.

A tipping point was first defined in physics as that “small amount of weight to a balanced object that can cause it to suddenly and completely topple.” Al Gore speaks of a tipping point for our environment – when it is too late to avoid the catastrophe that awaits. Is there a tipping point for the middle class? A moment when one extra burden, no matter its size or intended consequence, can cause millions, perhaps, tens of millions of families, to suddenly and completely topple?

What could be the tipping point?

  • This Great Recession is now entering its third year. Extended unemployment benefits, pitiful as they are, are about to expire and we do not have a Congress that will extend them.
  • The temporary payroll tax break is also expiring next month. The jury is out whether the Tea Party will make a deal to extend this tax break for working Americans. In real terms, the disappearance of payroll tax relief will cost the “average” worker about $2,000 next year. Will that be the tipping point?
  • The Bush tax cuts, now in their 10th year, are set to expire at the end of 2012. Included with the 4.6% increase in tax for the wealthy, is a 3% tax increase for most of the middle class – about $2,600 for a family of four – could that be the tipping point?
  • If the Tea Party holds Medicare hostage and Congress doesn’t pass the Medicare “doc-fix” by the end of 2011, something that has been passed every year for almost half a century, doctor and hospital reimbursements will be reduced by 27%. Will your doctor accept Medicare? Will that be the tipping point for millions of our seniors who are barely making ends meet?
  • Gas prices are rising again. Will that tip us?
  • The rising price of rents?
  • Next year’s expected Health Insurance co-pay increases?
  • The rising average credit card rates, fees and penalties? Or debit card charges?
  • Or will it be just one more group of layoffs that causes consumption to drop just enough for business to grind to a halt?
  • Or maybe it will just be something simple happening to one more family. A child who comes home sick from school that causes you to miss work that gets you fired? A speeding ticket that must be paid and causes you to miss a payment on a credit card that causes the rates on all your cards to go to 33.65%, plus late payments and interest on late payments, that can never be caught up? Or your furnace goes out? Or will a parent lose their job and helping them puts your family in the economic spiral?  Or, God forbid, you lose your spouse?

Just a few years ago, the monthly budget’s rounding error for the middle class near-poor was in the hundreds. Now, every penny is counted. They had a stack of credit cards with zero interest rates and seemingly unlimited credit lines. An unexpected expense would just go on the card. Since that time, home values have shrunk and with it, credit lines and flexibility.

The middle class near-poor may not look much different at a casual glance. They may decorate trees for Christmas, but they’ll wrap empty gifts under the tree. 2011 will be another year when Christmas giving will be postponed or homemade. The middle class near-poor are just one more bad thing away from the bottom and none of us are prepared for how to make it there. There is no longer any social safety net. The food kitchens are full and the pantries emptying more quickly than filled. Our government has borrowed all they will borrow and nothing else is expected until after the fall election, or the next.

How long will it take to recover? If all things go well, and they may not, the US economy will take a decade or more just to get back to where we were when Bush left. Another decade to get back to where we were when Clinton left. Given the life expectancy in poverty, two decades will go a long way toward wiping out poverty. The economy can come back more quickly, but only if and only when everyone can have a job and be back in the economy as consumers.

Trying not to leave this story on a gloomy note, there are things you can do.

  • You can join the 99%, occupy and march on Washington and call for repealing laws that caused the grotesque financial inequity in our nation.
  •  You can demand your Congress person do every stinking little thing they can do or spend to get rid of the extra weights on the middle class, the near-poor and those already in poverty. Tell them to stop listening to lobbyists and do what is right for the people they should be representing. Tell them to shut up with the election year fear mongering on issues meaningless to the economy and do something good before we vote them out of office.  Tell them specifically to vote for what’s left of Obama’s jobs initiative, for extension of jobless benefits, extension of the payroll tax cuts, the Medicare “doc-fix” and making permanent the Bush tax cuts for the middle class. Tell them to keep their hands off of Wall Street reform that protects American consumers. Tell them to stop trying to undermine health care reform, but be part of the Congress that will fix it. Tell them to break up the companies too large and with too many lobbyists to fail. Tell them to end special breaks for dirty industries. Tell them to quit wasting money on wars we don’t pay for. Tell them to keep investing in schools and re-training. And most of all, tell them to get to work on the peoples’ business.
  • Watch for the warning signs and stay in touch with those friends who seem to drop out of your circle – they’ll need your friendship.
  • Volunteer and help those who need it now.
  • Get involved with non-profits – each of which is still reeling from the terrible economy and from Bush ending the inheritance tax, but that’s another story. Help people who can’t find work to start a small businesses and teach them how to make it successful. Help feed the hungry. Help teach, mentor and take care of children. Get involved to help seniors and the disabled.
  • If you are in the top 30%, keep giving to charities which help people. Put some of your money toward micro-loans to launch new small businesses.
  • If you are a 1% executive, it is time to fire your lobbyist, take a pay cut and use the money to hire people who need jobs – especially those who have been out of work for a while or been fighting our wars.
  • If you think you are at the tipping point, reach out to agencies who can help you land more softly and not on the street.

10 thoughts on “What's the tipping point?

  1. Monica Smith

    Well, they got us hooked on money and then they took the money away to make us beg for our daily bread. But, we can do without money, especially in our daily interactions. We can return to barter and obligations cemented by trust. It’s not as efficient in terms of how much time it takes, but taking back our time from the system is salutary in itself. Think of all the practical skills that have atrophied because the economic treadmill left us without enough time.

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  2. Frank Povah

    Well put, Lee.

    I’ve done poor – grew up that way – and this is a poor created by the same cynical indifference on the part of most politicians and most Lords of Business.

    Perhaps a start could be made by charging the Congress with corruption or removing lobbyists entirely. In Australia (and England) governments were once advised by senior civil servants (a career) who knew their stuff, who were wiser in the ways of the world than most of their bosses, who made decisions based on “what you want and what is possible are two different things”. It was not without its faults, but it was certainly better than the “largesse for the ‘lawmakers’ and the money manipulators and bugger the people” that has replaced it.

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  3. Dallas

    Thoroughly felt and well said. Compassion-less, reason-less politics seems to be winning the day, but let’s hope and pray that reasonable hearts and minds prevail, come election time.

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  4. Jeff Cochran

    “One more bad thing away” serves as a proper gauge for all of us to realize how close we or our neighbor is to falling. And falling hard. Just recently, in the same week, our house needed a new roof, due mostly to hail damage. The insurance company took care of it, except for a thousand dollar deductible. Two days after the new roof was put on, a water pipe just outside our house breaks. $2,000.00. We handled it all and are thankful that we could. But you wonder, “What’s next?” As Buck Henry said in that great SNL skit, “It’s Anything Bad Can Happen Day.”

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  5. Will Nelson

    We can look out for our neighbors and contribute to soup kitchens, but what really needs changing is our minds. We have lived an unsustainable lifestyle for DECADES. It did not “get bad” overnight. How about real community, starting in our own homes. We have endless, unnecessary and expensive duplication because of our separation -- financially and otherwise from each other. Family needs replacing by a “community of family” that we each build -- with people who are not “fair weather friends” but committed to the survival, and more importantly, the thriving of others. I am single, rent rooms in my home to others. They live as if it is their own house, at a fraction of the cost and responsibility to them. Everybody wins.

    We pool resources for food, much cheaper that way. The amount of trash we generate is minuscule. Less utilities are used because they are divided by more people. We will put in a garden next Spring, large enough to not only feed us, but many of the neighbors on our cul-de-sac street. There are so many things we can share. We all don’t have to have one of everything that we pay for and maintain. Meanwhile, it sits idle most of the time. I see the day, fast approaching, where 5 or 6 neighbors can share a multitude of things with minimal hassle -- and still “live the way they want to.” Of course, this doesn’t even begin to include the benefits we each derive from having oversight in our lives. Another word is accountability. When people depend on me, my game tends to go up a notch or two.

    I trade many things with others, without the need for chit sheets nor endless documentation of who did what or got what. It’s time for a new spirit of living. They may have attempted this in the 60’s (before my time) but I gather it was about sharing sex and drugs. This is nothing like that.

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    1. Lee Leslie Post author

      Will -- Sounds as if you are on to something. Community seemed to go out of favor with onslaught of deregulated banking, franchises, mergers and superstores, which led to just-in-time-delivery via UPS; off-shoring corporations; lost industry, good jobs and local shopkeepers; winter tomatoes; too-big too fail; facebook “friends”; an explosion of lobbyists and special interests; hedge funds; and so much of the wealth disparity. We must fix some core issues nationally, then re-build our communities to get out of this mess. Thank you for sharing your story.

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  6. Cotterpen

    Too many discussions of this subject merely repeat economic theory and political rhetoric.  Thank you for keeping yours real and original.

    Reply

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