Why is the Middle Class Disappearing in the Usa?
Politicians tend to define "middle class" as the group of population most likely to listen to their latest sales pitch for re-election. recent studies done by the Us Census Bureau indicate that the middle half of household incomes falls between K and K in the Usa. Over the past two decades, the amount of households in those brackets decreased by 3.9%, from 48.2% to 44.3%. While the same time period, however, the amount of households with incomes below ,000 decreased 3.5%, from 28.7% to 25.2%, while the amount of households with incomes above ,000 increased over 7%, from 23.2% to 30.4%. (Income, Poverty, and condition guarnatee Coverage in the United States: 2006, U.S. Census Bureau). So if the middle class is admittedly shrinking, is it because more households are becoming wealthy or upper middle class? Or has the data changed recently? There has been much debate (most of it political) on this topic.
Why is the Middle Class Disappearing in the Usa?
Since this study was undertaken by the Census Bureau, some major economic changes have taken place in the Usa. In late 2008, the simultaneous collapse of the Us automotive industry, the housing shop and major investment portfolios created an economic crisis that rapidly became worldwide. The Us government responded by pumping large amounts of money (roughly trillion) into the banking theory and public infrastructure programs, hoping to speed economic salvage and stem the tide of job losses. However, we are not out of the water yet. As this report is being written, the unemployment rate in Ohio has topped 11%. In Michigan, it's even higher (15%).
It is easy (and tempting) to get "partisan" and blame these events on one national political party or the other. admittedly both have made their contributions to the problem. But we believe the current economic malaise is the corollary of the following trends:
1. Heavy national and personal debt. The Us national debt has risen more in the last five years than in the entire history of the country. Even worse than the debt are the unfunded obligations of the Us government in hereafter years. Trump and Kiyosaki say that the unfunded obligations for public safety are roughly trillion, and those of Medicare are roughly trillion. They correlate these to the estimated value of the entire New York Stock replacement at trillion. These Heavy obligations are the corollary of unfunded promises to the large generation of baby boomers who are approaching resignation age. There is naturally no way out of this morass that is without critical pain. Second, personal debt is also at an all-time high. One of the reasons for so many home mortgage foreclosures was homeowners using their home equity as a "piggy bank" to fund cars, vacations, luxury items, home improvements, etc. When the housing bubble burst, many of them could not keep up with their mortgage and prestige card debt.
2. The true emergence of the "flat earth." Thomas Friedman's book, The World Is Flat, warned us that this was coming. Many skilled jobs are being shifted from the Us and Europe to emerging nations like China and India. This, as well as the unfunded promises Us automakers made to their own workers, created the setting for their downfall. The Us government is tempted to engage in protectionism to turn this around, but history has proven that this approach will not work. So no matter how many diatribes you hear about Nafta or "big associates entertaining jobs overseas", the harsh reality is that we are rapidly shifting to a global economy. When the Us was a true economic power, we could have more sway on global trends. Now, we are a debtor nation. Like your Mom always said, "Debtors can't be choosy."
3. The growing cost of energy. Most population feel the cost of gasoline first, but the impact is also felt in natural gas and electricity. High gas prices were admittedly impacted by the Iraq war, but the shrinking contribute of "cheap" oil and the rising cost of "clean" vigor production is driving the price ever higher. High vigor prices attack at the very heart of job creation and personal finances. Most middle class Americans drive their cars to work, to buy food, etc. The price of food is also associated to the price of vigor because of the high level of automation in Us agriculture.
Debt, economic globalization and high vigor costs have creation the "perfect storm" for economic disaster. As Trump and Kiyosaki point out, a disappearing middle class is a threat to democratic capitalism itself. Well, enough of "bad news." How do we fix this problem? They advise some legislative and political solutions, but most of us are powerless to force our own government to do a lot of changing, at least as individuals. What can we do to safe ourselves and our children/grandchildren? We like the write back Trump and Kiyosaki give: We can choose to become wealthy. In today's world, the choice may not be either you want to be rich or middle class - it's either you want to be rich or poor.
You can choose to become wealthy by enrolling in the school of hard knocks and gaining a "financial education" - the kind that is (unfortunately) not offered in Us high schools or universities. Rather than turn your hard-earned savings over to a "money manager" who will charge you either he makes money for you or not, you can learn to make your own investment decisions. There is zero evidence that professional money managers, for example, can routinely outperform the appropriate and Poors stock index. So why should you pay them? Investing is not nearly as complicated as most would have you believe. And inescapable types of investing have immense leverage and tax advantages. The only intuit not to become informed in the Age of the Internet is laziness.
We very advise reading Why We Want You To Be Rich, but we also advise you become a serious pupil of your own wealth creation and preservation. either you are "middle class", "upper middle class", or "wealthy", you are responsible for your own financial condition. Only the very poor can afford to depend on the government to take care of them. And as financial reality hits the Usa, the Us government is going to be forced to disappoint us all.
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