Melvin B. Miller
Editor & Publisher

Squeezing the middle class

Now comes the hard part. It is time to pay for those lavish Christmas presents purchased in a spirit of exuberant generosity. A review of the sales slips forces a return to reality. There will be no substantial year-end corporate bonus to help balance the budget.

Middle-class Americans have been financially squeezed for some time. Although economic reports in the press have been generally positive, more people are finding it difficult to maintain their customary standard of living.

The increase in the cost of a number of items has stealthily eroded middle-class purchasing power. First of all, the house that cost $150,000 several years ago now has a market value of $500,000. Consequently, real estate taxes have tripled. While the homeowner has a more valuable asset, the operating costs have greatly increased.

In addition to higher real estate taxes, the costs of heat and electricity have gone up. Neither of these are luxuries so there is no sense of self-indulgence as we pay the bill. And the cost of putting gas in the car, another necessity, has also substantially increased. As a result, disposable income is in serious decline.

The high cost of tuition for children in college or private secondary school will definitely require a lifestyle change for middle-class families. Financial assistance is available for low-income families, but middle-class families are expected to make the sacrifice. As a result, many have resolved to follow the financially dangerous strategy of putting retirement schemes on hold.

The announcement of extravagant year-end bonuses for Wall Street bankers and traders has caused many in the financially embattled middle class to question the nation’s economic policies. Bonuses from Goldman Sachs, Lehman Brothers and Morgan Stanley were as high as $60 million, and hedge fund managers earned even more.

Prior announcements about the increase in the compensation of CEOs of major corporations did not seem to have enormous political impact. The average CEO earns $10.5 million, 369 times the average worker’s yearly pay of $28,310. This is a big change from 1970, when the ratio was 28-to-1. Perhaps there was no outcry over this because top athletes earn as much and movie stars earn much more. But bonuses of $60 million are over the top.

Growth in the American economy seems to benefit only the super-rich. This is the top tenth of 1 percent of taxpayers, who had an average household income in 2004 of $4.5 million. Between 1990 and 2004, the average household income of this group grew by 57 percent. The top one-hundredth of 1 percent, those with a $20 million average income, did even better — their growth rate was 112 percent.

At the lower end, the median household income fell 5.9 percent between 1999 and 2005, from $49,133 to $46,242. The median is that point where the same number of households have annual income above and below a certain amount. The poverty level has not substantially changed for the past five years.

Given this information, there is no question that the rich are getting richer. Now that the standard of living of the middle class is under attack, perhaps those feeling the squeeze will begin to mobilize in search of a more equal distribution of wealth.

“If you had one of those Wall Street jobs with the big bonus, we wouldn’t have to worry about these petty bills.”