Tag Archives: middle class

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.

Learning from the Past

911For those history buffs out there, here’s a test. What country could be described by these conditions, which occurred over decade or so:

• Injured national pride;
• A new national leader who had not been elected by majority vote;
• An economic calamity that almost overnight destroyed the middle class standard of living;
• Long term unemployment/underemployment over 25%;
• A terrorist event, forewarned to the leaders, that set ablaze a symbol of the nation and resulted in laws passed allowing increased domestic security, monitoring of personal communications, arrest of suspicious people to be held without access to lawyers, military tribunals and an all out war on terrorism;
• Private army of over 400,000;
• Rise of a new minority political party that:

– is ultra right wing and fanatical;
– has a short and easy to remember name;
– funded by bankers and wealthy industrialists;
– panders to lower class white men with disciplined messages about Christian purity, anti-communism, free enterprise, the military, nationalism, freedom and the protection of the homeland;
– effective in propaganda, staged events and use of their own media;
– uncompromising in denying passage of emergency legislation needed during a crisis to undermine the sitting government;
– with leaders who make simplistic, often inflammatory rhetoric against well-educated elite in government and media.

Please use the comment box for your answer.

Authors note: For the last few weeks, I have been working on a story about the ethics of political hate. My intention was to discuss teachings of different religions and historic figures from political movements; examples of divided government and failed democracies; etc.  Each time I began writing, I kept returning to stories of one particular failed democracy. I’ve stopped working on the piece, at least for now, until I can approach it with a fresher angle. In many ways, my story kept sounding way too much like this piece, which I hadn’t read at the time, written eight years ago: http://www.commondreams.org/views03/0316-08.htm – I encourage you to take a look at it. We are living in scary times. I not referring to war and terrorism, though they are scary, I am referring to us.

“Those who cannot remember the past are condemned to repeat it.” – George Santayana, The Life of Reason The Life of Reason, Volume 1, 1905

Jubilee for the middle class

The American middle class is dying off in huge numbers. It has been going on for more than a decade, but we are facing a catastrophe of biblical proportions. I have a plan to stop it and to save those left.

Hyperbole? You decide.

Formerly known as the middle classWhen someone speaks for the middle class, most often they continue to use a post-World War II snapshot. Average salary. Average house. Average everything. Most Americans believe they are a member. Because of the enormous changes in concentration of wealth, they are wrong. More Americans than they realize are actually poor by prime time standards. More are joining them every day. But this piece is not about the poor.

Lcurve.com took the most recent census figures (it has gotten worse since then) and plotted it on a football field (sports metaphors are the best way to communicate complicated issues in terms that sound good, but seldom do more than confuse things further). If median income were used, the stack of money earned at the fifty yard line would equal a stack of $100 bills, 1.6 inches high (median household income ranging from $61,000 in Maryland to $31,000 in West Virginia  – 1.6  inches is about the size of your big toe, OK, a boy’s big toe). At the five yard line, the stack of $100 bills is 4″ high. At the one foot line, the stack of $100 bills is 40 inches tall, or 3-feet, 4 inches. At the one inch line, the stack is over 30 miles high.

The middle class now lives somewhere between the five and the ten yard line. At one time, and in my lifetime, they owned half the field.

There are many advocates for the poor – I am among them, but they can do without me for the day. Admittedly, the working poor are suffering something terrible and are too busy working three jobs to advocate for themselves and only have Joe Biden. The rich? They hire hire lobbyists. Today, I’m focusing on the middle class.  The faux alter ego of the rich… and the poor. The people who are portrayed on television commercials during prime time. Beautiful, healthy, making-it- in-America kind of people who bought in to the American work ethic, performed to it, and subsequently have more to lose and yet further to fall. They are the poster children for the American dream.

Formerly known as the middle classThese are the people who look as if they made it – good education, ambition, hard work and a couple of good decisions landed them with a good job and on a career path. They had the audacity of hope ten years ago. They bought into the ownership society. They believed. They purchased more home than they needed because they knew it would grow in value along with their wages. They had good credit and used it. They consumed and charged some of it on their single-digit-rate credit cards. They pay huge amounts of income, property and sales taxes. Buy or lease the new cars. Send their kids to private schools in new uniforms. And go out to dinner.

Where are they today? They are holding on by their nails (no longer professionally manicured). They are being squeezed to death. Those who didn’t get laid off are working longer hours, many for less pay. The raises and the bonuses, known as the big hits, didn’t happen as hoped and planned, unless they are on Wall Street.  The AMT (Alternative Minimum Tax) has hit them hard. Very hard, an annual battering. Their property taxes skyrocketed because they bought their houses before the prices fell, but after the reassessments. Some have extended families who are out of work or under-employed. They have had to help out. Their health insurance has gone up, along with their co-pays and their need for care. Their equity lines have been cut , and not-so-coincidentally, so too have their credit card limits. For the first time in modern history, consumers are paying against their credit card debt before paying their mortgage payments – a feeble attempt at false liquidity at the risk of the most basic of human needs – housing.

One by one, they were either a day late paying their credit card bill, or a dollar short on guessing their new lower credit limits. The late charge, or over-limit fee hit their Equifax report and their 3% Chase card with the $30,000 balance, and $35,000 credit limit overnight turned into a 33% card with a $30,000 limit. Their monthly payments went up by a thousand dollars and with it all their “disposable income.” Suddenly, all the other cards matched the 33% rate. They cut back immediately, but it wasn’t enough. They cashed out their retirement. Got rid of their extra car. Postponed their health needs. Then the collectors started calling. They never knew they were living on the edge. The precipice was looming.

I’m not making this up. Our middle class – those making $100,000 to $250,000 a year are suffocating – their financial livelihood is being squeezed out of them, and with it their contribution to consumerism. Almost all of the air is going to the bank (a euphemism for “the company store”). They have exhausted their savings, have no equity, no credit, less than zero leftover money, and are losing it. Sure, many have been able to hold on to that one nice car and that wonderful home with the for-sale sign in the front yard. But their “comfortable” life is only in the living room. Disposable income provides economic freedom – it is gone.

I realize that creating sympathy for those on the five yard line is almost impossible. These are the people that we all need to take us out of the recession. They are the customers of those who are still working. They are, or were , the employers of the working poor. These are the people who pay the taxes that keep our government working. Ironically, they are the only class who are still vaguely in touch with those on the one foot line, who otherwise, would (pick one or more: have no friends at all; no one to betray, or no one to aspire to them).

So, what’s my plan? My proposal? A middle class bail out that won’t cost the taxpayer a dime.
Premise: those who are already 30 to 90 days behind on their credit cards and owing the exorbitant interest rates are unlikely to make it. Fortunately for the banks, all of these accounts are insured… by AIG. Yes, the company that is 80+% owned by the US government. The insurance that banks have on these accounts returns 70-80% of the balance to them, which is why they add on all the late payments and hidden charges in order to jack up the balance prior to handing the debt to AIG. The banks get it all back and the government ends up picking up the tab.

I propose that we offer a deal to save those middle class patrons who can still be saved. A deal that won’t cost the taxpayers a penny. In return for cutting up their credit cards, getting no new ones, paying on time and not declaring bankruptcy, we (using the rates being charged to banks) would let them pay off their debt at near zero interest rate (the near zero will pay for the servicing). If they renege, the deal goes back to the bank to collect and they don’t get another chance.

For someone who has $100,000 in credit card debt, this will save them $25-$30,000 a year – about the same deal they had before this “greatest economic crisis since the great depression” began. Enough money to pay off their debt in a few years instead of never. To get their mortgage caught up and keep them in their home. Enough for them to get back soon to consuming, paying taxes and saving us all.

What about all that interest that’s being written off, is that a cost to someone? Only on paper. The government now lends money to banks for virtually nothing (it is why the banks have so much to gamble on Wall Street). The banks are charging exorbitant rates for credit cards, but their earnings are only on paper,  as much of it will never be collected. They justify these rates and charges because of the risk of default, but this isn’t new money or new risk. The only thing that changed was the economy. Why should we bail out the banks, give them free money for their bad decisions and not bail out the people, who – should they survive –  pay for the bank bailout? The banks do not deserve the spread and bankruptcy is bad for everyone (except the banks).

This solution is not another big government bailout (even the servicing can be privatized). It is simply extending, for a limited time, the rate we charge banks to a group who had the audacity of belief in the American dream and wants to pay their debt. They bear the costs, are responsible for their decisions, and will give us all a chance to get out of this mess.

One more note – this is fairly progressive. Credit card debt is relative. Credit card jubilee (at least in concept) could be just the thing to get us out of this mess.

Put the oxygen mask on yourself, first

An open letter to people who will show about $150,000 gross or less on their tax form this year.

tombstone: He was a priority for a whileThe present poverty line for a family of four is $21,834, but that doesn’t tell the story anymore. You make a lot more than that. You also have credit card debt and/or equity lines or ARM’s or contracts for services that can’t be canceled. One of you is not making the same as last year. A sane accountant looking at your situation would tell you that you that you no longer have “disposable income.”

Sure, you have a job. Sure, your house is worth more than you can sell it for. Sure, you have assets. You’re vested in your career. But once you pay the what-you-got-to’s, there’s nothing left. You have become the middle class poor. You are the responsible, tax-paying, hardworking, never quit household that is the backbone of our country. You are better off than the unemployed of your same caste, but you are one crisis from being equal to all those other people.

You are going to achieve. Whatever it takes. You pay your bills. You’ve cut back. No more e-bay. Wine at dinner is a memory or an infrequent special occasion. The boutique shopping for the kids has been replaced by trading clothes with friends and family, charity store visits or Walmart. You haven’t been to the dentist in a while and won’t go anytime soon. That 401-k won’t be matched this year. Your hair is longer and a color you haven’t seen since high school. If they say change your oil every 5,000 miles, it’ll probably be okay for 15,000 or so. You are one straw away from total meltdown. You, the admired among the admired, are one late fee and rate change — or, god-forbid, a medical crisis — from the poverty line. Those triple credit score dot com commercials are singing to you in every television break.

This healthcare debate is about you. Forget the poor. Save you.

This debate is framed by spin from all sides, none, not a one, is talking about you. You have healthcare insurance, but please, I beg you God, don’t let me get sick. Don’t make me spend the deductible. I can do a copay today, but a hospital stay? No, save it for the kids. I can’t. There’s a little room on that VISA; what the hey, I can afford to be against healthcare reform. After all, it will bust the budget. Won’t inflation take everything I’ve worked for away?

No. Not like one pain in the abdomen. Or lump in the breast. Or a little blood in your urine. “It won’t happen to me,” you say. “I’m young.” Don’t dance with that devil. He’ll win. It won’t be long before you or yours will hear it. The age of 65 is longer away in medical insurance terms than your mortgage payoff.

Healthcare reform is about you. About that moment, perhaps it is today, when your copay at CVS will mean you don’t have lunch money for the kids. About that moment when you have that follow up appointment you’ve been waiting three months for and your child needs medicine.

Healthcare reform is about what happens to priorities. Your priority list a year ago could go twenty deep. Now it is a list of two. All it takes is a little chest pain to make your priority list a list of one.

You may want to be a bleeding heart: Charity first, save the person on the phone, screw your health, whatever for the other, I’ll make time, I can match that, run for the other and walk for everything important. This is your moment to do something really important for yourself. For your family. For your friends. Because one of you, maybe not today, but certainly a day very soon, will be, for all practical purposes, poor. The working, hard-working, desperate, no place to turn, poor. The I can over achieve because I believe in capitalism and the American way gone wrong, poor. The I haven’t failed, just ran out of money at the wrong time, poor.

This debate, is about you. Your priority needs to be, call your congressperson and senators and light a fire up their asses. Read the bills that are being debated. Decide what makes sense to you for you and tell them. Don’t listen to Fox, CNN, MSNBC or anyone else. They don’t take the crisis calls from your family. Only you can decide. This is your moment.

The healthcare system is killing us

ilanakohn_sketchForbes, yes, Forbes, reports today on a new study finding that “medical problems and expenses contributed to nearly  two-thirds of all bankruptcies in the United States.”

In fairness, the American Journal of Medicine, Harvard Law School, Harvard Medical School and Ohio University study used data from 2007 and, according to the researchers, was “collected prior to the current economic downturn. It’s likely that the current rate of medical-related bankruptcies is even higher.”

Those of you who haven’t experienced how this can happen to “solidly middle class” people with jobs, insurance and college degrees, get ready. You will.

Generally, what happens first, is that you go to a doctor. Your financial advisor and the health insurance industry strongly discourages this step. After co-pays, deductibles, tests, more co-pays, referrals, uncovered expenses, out-of-network anonymous radiologists and labs, and more co-pays, you find out that you are sick and need treatment for something. Researchers estimate that the likelihood you will at some time see a doctor and find you are sick is 99.95%.

After a generation or so of cruelly strategic lobbying by the extremely profitable health insurance industry, your health care system is set up as a war of attrition. By severely limiting physician reimbursements for a patient visit, you are lucky to see a doctor for more than a few minutes. You are, however, likely to wait a month or more for the appointment and an hour or more in various waiting rooms.

With expenses for the office, practice insurance, professional staff and paperwork specialists, your doctor simply cannot afford to see you, test you and treat you in a single visit for $53.50. Your insurance company prefers a system requiring the scheduling expensive tests for diagnosis and subsequent treatment appointments on the theory that you will either get better on your own, run out of money for the deductibles, co-pays and non-covered expenses, or just die.

The only exception to the rule, is gun shot wounds. Our system works really well if you are bleeding in the waiting room.

Once you get in the system, it can easily take years to find out what is wrong and treat you. During that time, you’ll miss a lot of work. Even while at work, you’ll feel like miserable, your mind will be elsewhere and you will wish you were. Eventually, your employer will announce a “strategic restructuring” and you will be out of job. You will be able to keep that lousy great insurance at a much higher cost for a few months before you lose it. Then you’ll have a preexisting condition. Just try and find another job while you are sick and have a public record of a pre-existing condition – no company will ever hire you with benefits again. Next, your credit goes to hell. The credit card companies raise your rates to 30% or so, plus whatever fees they wish especially if they have been spying on your purchases and notice you no longer buy luxury, only meds. Your spouse will lose work time taking care of you and will risk your fate. You will lose your home and declare bankruptcy. This is what happens in America.

“Our findings are frightening. Unless you’re Warren Buffett, your family is just one serious illness away from bankruptcy,” lead author Dr. David Himmelstein, an associate professor of medicine at Harvard Medical School, said in a news release from the Physicians for a National Health Program.

“For middle-class Americans, health insurance offers little protection. Most of us have policies with so many loopholes, co-payments and deductibles that illness can put you in the poorhouse. And even the best job-based health insurance often vanishes when a prolonged illness causes job loss — precisely when families need it most. Private health insurance is a defective product, akin to an umbrella that melts in the rain,” Himmelstein said.

When your Congressperson speaks on CNN or Fox about your right to choose private health insurance coverage, keep in mind that what they are really saying is: Keep those campaign contributions coming and I’ll sell the chumps I represent on the idea that they already have truly great coverage as long as they are healthy. Who cares what happens went they eventually get sick? They’ll be broke, powerless and dead soon enough.


The illustration is a sketch by Ilana Kohn from IlanaKohn.blogspot.com

Are we looking at the right economic crisis?

We all know of the foreclosure crisis – 1.35 million foreclosed homes in 3rd quarter 08; 1 in 10 homeowners are either delinquent or in foreclosure; 1 in 5 with sub prime loans (Source: CNN Money, December 5, 2008). We all also know about the subprime crisis, the hedge fund crisis, the insurance crisis, credit swap crisis, the banking crisis, the Wall Street crisis and the international financial crisis. The crisis of consumer confidence. The gas crisis and the auto industry crisis. The looming Social Security crisis and the Medicare crisis. The looming pension fund crisis compounded with the 401K crisis. But all this talk about bankers and executives, leaves me worried that we aren’t talking about the right crisis. This collapse of jobs that leads to the collapse of credit that leads to the collapse of housing will lead to the collapse of our middle class.

The Middle Class Crisis:Middle Class in Crisis

This is the group we have to save. They drive our economy. The consumers who shop in malls, strip centers and on the internet. They buy the new cars, washer-dryers and clothes. This is the group who was sold the idea that the future will always be better, so buy as much house as you can afford a few years from now. The group with the 401Ks. This is the group with the gold and platinum credit cards. The group who studied, paid their student loans and invested in a career – or worked hard, consistently and modestly. Who had children and kept working. That define our moral fabric – our culture. Who pay most of the taxes, including the alternative minimum. This group is struggling mightily to keep it together. This is the group who is too big and too important to fail.

This is the group who was abused by the lack of government oversight, the fraud of Wall Street and the Œcopathy. This is the group who believed, kept the faith and has been betrayed, and is our hope to bring the America we knew back from the brink. The Middle Class, not the banks nor Wall Street, is the only group who can be, as JFK coined, “the rising tide to lift all boats.”

They aren’t necessarily who you think they are:

They vast majority of Americans consider themselves Middle Class. McCain guessed they made $5 million or less. Obama said about $250,000. But it is not about income.

It is about lifestyle and a belief that they have freedom and can have at least some control of their destiny. Sadly, in America, freedom is now mostly about financial freedom. Once, this might have been about savings or disposable income. For most, it is about room on our credit cards or equity lines. Imaginary money – the same type of money traded on Wall Street. It’s faith-based and our faith-based government has told us that they have lost theirs. That same government in a conspiracy of fear with cable news and the credit bureaus has now tested our faith to the limit. Those with jobs, have stopped spending. Those with credit cards have put them away. Those who have some financial freedom are living in self-imposed exile or confinement. But the vast majority of the vast majority are those not so fortunate. They have stopped believing they are Middle Class. It is so painful that they may never have their faith again.

The banker in the monopoly game we have been playing decided to put more currency in tray expecting the game would continue:

If being Middle Class is faith-based, do we just need cheerleading? I wish it were so. Perception has become an all too cruel reality and won’t change without real change. The first move by our government was an attempt to stabilize our financial markets and create liquidity so loans can be made again. Another way of looking at it is to say, our government wanted us to borrow more money, so we would spend more imaginary money, so everything would be alright. While history may prove them right, it looks right now as if the powers who lend realized that we are poor credit risks. That business won’t prosper until consumers consume. That housing and commercial real estate values won’t stabilize enough to be good collateral until someone wants to buy them. That individuals aren’t good bets for credit until their employment futures are better. Duh. Marketing 101 failed. Until which time we have stable jobs our Middle Class, and all of us will be in crisis.

Here are some aspects of the crisis you might have missed:

  • The collapse of housing prices has hit the bottom third of the market hardest: The collapse of the housing bubble has affected virtually all categories of housing in every part of the country, but the bottom third of the market continues to be hardest hit. This is not surprising since this is the segment of the market in which adjustable rate mortgages where most highly concentrated, and therefore has been hit hardest by resets. (source: CEPR)
  • Those with jobs are having their hours cut: In addition to cutting workers, firms are also cutting hours. The index of total hours for production workers fell by 0.9 percent in November and is down 2.0 percent over the last three months, the sharpest three-month decline in any period since 1964 when the series began. (source: CEPR)
  • There a lot more unemployed than it appears: Since the start of the recession in December 2007, as recently announced by the National Bureau of Economic Research, the number of unemployed persons increased by 2.7 million. Over the time, the number of persons who worked part time for economic reasons (sometimes referred to as involuntary part-time workers) continued to increase, reaching 7.3 million. (source: CEPR)
  • Net Job Losses

  • The temps have it worse: The employment services sector was an even bigger job loser, shedding 100,700 jobs in the month of November 2008 (3.2 percent of its total employment). This sector has lost 213,500 jobs over the last three months. Employers are dumping temporary employees as a way to keep on permanent staff. (Source: Department of Labor/Bureau of Labor Statistics)
  • The Shredded ‘Safety Net’: Employment insurance has highly restrictive rules and doesn’t help contract employees, the self-employed or many who worked in small business. John Clark of UppingTheAnti.org writes (formatting added), Welfare, in contrast, is a system of last resort that can only be accessed by those on the very edge of destitution. Those with any other sources of income are ineligible by reason of the welfare means test. In conditions of rapid economic downturn, that will translate into a whole mass of people who are without work but who cannot even apply for income support until they have exhausted their savings. Once they have reached the required level of poverty, those who were previously working for living wages will be expected to make do with the degrading pittance that welfare provides.
  • So where else can they turn: Not the nonprofits. At least 100,000 nonprofits nationwide will be forced to close their doors in the next two years as a result of the financial crisis, according to Paul Light, professor of public service at New York University. (source: Crain’s New York Business)
  • Not to the states: Tom Eley writes, “The states confront a cascading fiscal crisis. Including cuts already made in the current fiscal year, it is anticipated that the collective 2009-2010 budget deficit for US states will be a minimum of $140 billion. This figure could run higher than $200 billion by the middle of 2010, threatening infrastructure spending, unemployment benefits, public education at all levels, and social assistance programs such as Medicaid – the health insurance program for low-income people. (source: Interdaily.com)
  • Nobody knows how many are homeless or about to be: They don’t report in. We can’t count them well and don’t do it often. While foreclosures are reported, there are no good stats on evictions or people giving up and sleeping on the couches of friends and familes. The National Law Center on Homelessness & Poverty says there are 3.5 million of them, 1.35 million of them children. It is believed 23% are families with children and that 33% are veterans (source: National Coalition for Homeless Veterans).

  • Tent Cities: According to CNN and other sources, communities throughout the U.S. have tent cities springing up because of the increase of foreclosures and evictions. Encampments have formed in or near large urban areas including Reno, Los Angeles, San Diego, Chattanooga, Columbus, St. Petersburg, Seattle and Portland.

Here’s a slice of a great piece on imaginary money by Kim Pollock, (the full text can be read or downloaded at http://www.socialistproject.ca/inthenews/meltdown_chronicles.pdf)

“How can money be imaginary? To answer that, we have to go right back to the beginning. First, nothing exists without labour. You can’t have food on the table, clothes on your back, a roof over your head, put your kids through school, buy a car or save for your retirement unless you or someone goes to work and actually makes all those things. In our society, most people get those things by working at a job where they get a paycheque, which they exchange for money to buy things (just like the song A Hard Day’s Night!) Most of us work in places where we either make things or sell things and services to people who make things.

“But some people live not on work but on profits, the returns from hiring workers to make things, which again, they exchange for money. With their money they can either invest in hiring more workers and buying equipment to make more things to make more money – or they can save it. When they save it, what they are actually doing is lending it to banks or other financial institutions, which in turn lend it to other people who invest it again or lend it to another institution to hopefully make more money.

“That too might mean investment but it might also mean the sort of speculation we just saw Joe Bloggs, Jane Doe and their friends engaging in. These folks essentially take an amount equivalent to what has been loaned to the banks and trade it around among themselves, so that a growing amount of US economic activity is bypassing the hiring- workers-and-making-things world and being directed instead straight into the buying-and-selling-money world, as the following graph shows:

Profits By Sector

“Unfortunately, though, there can’t actually be any more real wealth than the amount of stuff workers have produced or the amount that they can realistically be expected to produce. Any apparent additions beyond that are based on simply inflating the prices people are prepared to pay for something in the hopes of selling it for even more. It’s actual value hasn’t gone up, just its price.

“You can certainly speculate up the price of money, then, but only to a point. And that point is sooner or later likely to be reached because the wealth needed to actually cover the value of all that money is still in the last instance based on real stuff workers have made. Beyond the point at which each dollar covers real stuff and the wages of people hired to make it, in other words, its value is more or less imaginary or speculative; you might get away with selling it to someone else and make a profit doing it; but the risk remains that someone will get burned, since at some point someone else will likely call in some of the money they lent and if the last person holding the potato doesn’t have the money or real assets to cover their inflated or suddenly diminished imaginary assets, the bubble is likely to burst.”