'Everything's a Disaster'

Maybe it's my imagination, but it seems that people in the middle are generally ignored by the media.

No matter whether you are talking about political perspective (e.g., conservative vs. liberal), age group (young vs. old), morality (e.g., criminals vs. heroes), or social class (e.g., rich vs. poor), people who don't quite fit into one or other extreme are often treated as though they are invisible or irrelevant.

Yet, the reality is that those who are average or ordinary or near what you might call the statistical center generally comprise the largest segment of the relevant population.

Under the circumstances, the following article from the Wall Street Journal's Justin Lahart and Kelly Evans, "Trapped in the Middle," probably provides a better gauge on the state of our economy than the more voyeuristic reports on how the poor -- or the rich -- are doing.

The incomes of most Americans have stalled. Tackling voter angst in Pennsylvania.

Are you better off than you were eight years ago? For a growing number of middle-class Americans, the answer is "No."

Here and elsewhere, middle-class earnings aren't keeping up with the cost of living. Rising gasoline and food prices, health bills, child-care and education costs are leaving less to set aside for retirement. With the housing market in turmoil, even the asset many had come to count on -- the value of their homes -- is threatened.

It isn't just a reflection of the current economic slowdown and rise in commodity prices: Middle-class incomes have been stagnant for several years. The well-heeled keep doing better, with the wealthiest 1% of U.S. families garnering the largest share of income since 1929.

"This is a squeezing-down cycle, and people are trying to hang on," says Randy Riggs, pastor at First Presbyterian Church in this city in the heart of Pennsylvania Dutch Country. "Five years ago, I had these visions of what the church could do and hoped to raise funds to do so. I can't be a dreamer at the moment." Mr. Riggs says he recently tabled a project to renovate the church's chapel because he sensed he couldn't raise enough money.

Middle-class angst is front-and-center in Tuesday's Democratic showdown in Pennsylvania between Hillary Clinton and Barack Obama. The two have been crisscrossing the state, making stops at breweries and a biofuel firm, a chocolate factory and churches. On Saturday, Sen. Obama will be stopping at the Lancaster Rail Station on a "whistle-stop" tour that will take him from the Philadelphia suburbs to Harrisburg. Both candidates have been repeating a simple theme: Elect me and I will revive the fortunes of the American middle class.

Both Democrats offer similar prescriptions: tax cuts that would total about $1,000 per family; new tax credits for college costs; an overhaul of the health-care system to cover millions of people who are uninsured; aid to homeowners to reduce foreclosures and stricter enforcement of trade agreements. To help pay for the changes, they'd let President Bush's tax cuts for more-affluent Americans expire.

Sen. John McCain, the presumptive Republican nominee who preaches small government and self reliance, also hasn't ignored middle-class worries. He has proposed a gas-tax "holiday" for the busy summer driving season, steps to ease the mortgage crisis and more than $200 billion a year in new tax reductions. These include the elimination of the alternative minimum tax -- which he called a "middle-class tax cut," though it would help the wealthy as well.

In Lancaster County, long a Republican stronghold, the Democratic Party has been making inroads as the economy has become a more pressing issue. From January through March, there were 4,202 new voter-registration applications for the Democratic Party, compared to 1,952 new Republican voters and 955 with no party affiliation, according to county election data.

Among registered Democrats in Central Pennsylvania, an area that includes Lancaster, Sen. Clinton was ahead in a recent Quinnipiac University poll, with 48% of respondents saying they support her, compared to 41% for Sen. Obama The latest statewide polls suggest the race is tightening, but that Sen. Clinton is still ahead by a handful of percentage points. Nationally, the average of polls over the last two weeks shows Sen. Obama ahead by about seven points.

Democrats' message about middle-class woes resonates with 58-year-old Joyce Richards. In 1980, she was laid off from Hamilton Watch Co., once one of the area's biggest employers, and worked for a time as a bartender. Thanks to her husband's pension, she is now comfortably retired and works a few days a week at a bakery. But she worries about her son, who owns a local chimney-cleaning company and has two sons of his own. "Middle class families are becoming poor families and poor families are going into total poverty and it's really a shame," she says.

Ms. Richards, a lifelong Democrat, hasn't yet made up her mind about who she's voting for in Tuesday's primary. She says either candidate "would be better for the middle class" than a Republican.

An Uneven Prosperity

About 60 miles west of Philadelphia, Lancaster's location and ample farmland made it first a booming agriculture center and by the late 19th century, thanks to its rail lines, a manufacturing hub. Farming and factories have been eclipsed by an expanding service economy and a fast-growing retirement community. Lancaster General Hospital is now the largest employer in this metropolitan area of about half a million people.

For many here, as in the rest of the country, paying the bills has become harder since 2000. In Lancaster, median household pre-tax income -- what people in the middle of the middle class make -- fell to $54,419 in 2006 from an inflation-adjusted $56,805 in 2000, according to Moody's Economy.com.

Though incomes in Lancaster are ahead of the national average, their rate of decline mirrors -- and even exceeds -- declines across the U.S. Nationally, median household pre-tax income in 2006, though slightly higher than in 2004, fell to $48,223 from an inflation-adjusted $49,477 in 2000, according to the Census Bureau. Weekly wage figures from 2007 suggest the decline persists.

Recessions often depress middle-class incomes and moods. What's unusual about these declines is that they occurred during the economic expansion that began in 2001 -- the first time that's happened during a prolonged expansion in at least 40 years. The main reason: The benefits of prosperity have gone disproportionately to the families at the very top.

Adjusted for inflation, income of the top 1% of earners grew at an annual rate of 11% from 2002 to 2006, according to an analysis of Internal Revenue Service data by economists Thomas Piketty of the Paris School of Economics and Emmanuel Saez of the University of California at Berkeley. Incomes of the bottom 99% grew at less than 1% annually.

"If incomes are rising for everybody, but the rich are getting better off faster, then inequality isn't much of an issue," says Massachusetts Institute of Technology economist Frank Levy. "When people's incomes aren't rising, then inequality is a much bigger issue."

Longing for the '90s

In some ways, the American middle class is better off than it was eight years ago. It is paying less taxes, thanks to President Bush's tax cuts. The effective federal tax rate for the middle fifth of households declined to 14.2% in 2005 from 16.6% in 2000, according to the Congressional Budget Office. The rate of violent crime in 2006 was lower than in 2000. Death rates for heart disease and stroke have declined by about 25%.

Here in Lancaster, shops and art galleries are opening in the once-abandoned downtown. The Pennsylvania Academy of Music has a new concert hall in a building designed by noted architect Philip Johnson. The old Hamilton Watch factory has been converted to condominiums, and a three-year-old state-of-the-art stadium for the Lancaster Barnstormers minor-league baseball team is attracting flocks of fans. Partly because of agriculture's lasting role in the area, Lancaster's unemployment rate was 3.4% last year, compared to 4.6% nationally.

Nevertheless, Allan Ziegler, the business administrator at First Presbyterian Church in Lancaster, says he fears the future. "We're comfortable, but we're not set -- we struggle," he says. An Obama supporter, Mr. Ziegler says he has only meager savings and no pension, but that he draws some hope from the candidate's message: "He gets out there and talks about the dilemma of the average person."

Across the country, some Americans are feeling increasingly grim. In a recent Pew Research Center survey, 41% of respondents rated their lives as better than five years ago, and 31% said they were worse. That response is even glummer than in 1979, when, amid rising economic malaise, 25% of respondents to a similar survey rated their lives as worse.

Pressure on middle-class incomes pre-dates the Bush presidency. The seismic shifts in technology, trade, education, regulation and unions had eroded some workers' incomes as early as the 1980s. That decade also saw the changes in pay patterns that led to huge paychecks for athletes, rock stars and investment bankers while the inflation-adjusted value of the minimum wage declined.

But though the U.S. lost one million manufacturing jobs between 1980 and 1990, the 1990s turned out to be a good one for the middle class. Median income, adjusted for inflation, rose 11% between 1990 and 2000. As the benefits of computers and technology kicked in at long last, the growth in productivity -- or output per hour of work -- surged, allowing employers to pay higher wages and make higher profits. By the end of the decade, workers were scarce, pushing up wages. And a technology, investment and stock-market boom, unsustainable it turned out, lifted the national psyche.

When Mr. Bush took office on Jan. 20, 2001, the tech-stock bubble had burst and the nation was on the cusp of recession. Then came the 2001 terrorist attacks with their devastating blow to Americans' self-confidence and sense of security.

One source of the growing gap between rich and poor is education, says White House spokesman Tony Fratto. "We need to raise educational attainment for more people" through efforts like the No Child Left Behind law, he says. Mr. Fratto also points out that for much of the 1990s, middle-class income languished -- it wasn't until 1997 that median household income topped its 1989 peak.

The changes in Lancaster that are so unsettling to many long-time middle-class residents go beyond the dollars and cents in paychecks. After Sept. 11, Lancaster Airport lost its sole commercial carrier. Another airline began offering service, but pulled out in September 2007, forcing local travelers to use airports in Philadelphia, Baltimore or Harrisburg. While crime has declined for the Lancaster area as a whole, drug-related crimes are picking up downtown.

In Lancaster, as elsewhere, the rising cost of health coverage has prompted employers to ratchet up the costs to workers. Many small companies have dropped coverage altogether. Nationally, the share of people covered by employment-based health insurance fell to 59.7% in 2006 from 64.2% in 2000, according to the Census Bureau.

Health care is Deborah Diehl's main concern these days. A Lancaster county resident and Hillary Clinton supporter, Ms. Diehl, 50 years old, was working at Lancaster General Hospital in 2000, when she first suffered a series of heart problems that eventually left her unable to work. Her disability qualifies her for Medicare. But her husband of 33 years, Kevin Diehl, lost his health insurance last November when he began working for Wacor Electronics Systems Inc., a maker and installer of security systems that no longer offers health insurance to its employees.

Mrs. Diehl believes that as president, Sen. Clinton would provide the most help to people like her and her husband. "Hillary's health-care plan would benefit everybody," she says.

The area has also taken a hit from the mortgage bust. After Personal Financial Management Inc., a mortgage company based in nearby Reading, filed for bankruptcy in September, many Lancaster families discovered that they owed far more on their mortgages than they had thought.

Bill and Susan Lampariello, who refinanced their home through the firm to help pay for college for their two children, say they lost about $130,000 because the company didn't pass on all of their payments to the holders of their mortgage. To straighten out their finances, they sold their house last December for $400,000 and bought a smaller one for $299,900. "This isn't 'subprime' at all," says Mr. Lampariello, 48 years old. "We're people with good credit who did everything right."

Both Mr. and Ms. Lampariello are registered Republicans, but at the moment say they prefer Sen. Obama over the other candidates. "It's the economy, immigration, the war, healthcare -- everything's a disaster," says Mr. Lampariello, who puts the blame on the Republican party. "Invariably, the middle class pays for it."

Comments

[roger pasa]

ah yes the middle class a creation of Capitalism,is now in the process of being destroyed,why? because it no longer serves the purpose of accumulating wealth for the corporate structure to grow and expand corporations must find cheaper labor and ho yes they have found it in china and India

[Rocky]

The Middle Class isn't being ignored. It is being pandered to. That's why our gasoline taxes are so low, why there is no national sales and why Obama and Clinton say they will only raise taxes on "the rich". Unfortunately, the pandering often backfires. The government's ethanol program has been good for a few thousand Iowa farmers but has been a disaster for Middle Class food budgets, my own included. I would have more respect for both Democratic candidates if they stopped talking about raising taxes on the rich and started talking about shrinking the defense budget: closing bases in Asia, Europe and the US. Many Middle Class families are going to be hit with an income tax increase in 2009, even though they don't consider themselves part of "the rich". When the Democrats eliminate the dividend and capital gains tax breaks, they will also be eliminating them for the Middle Class. Where will the money go? To prop up the bloated defense establishment. As a recent Janes report on US military spending noted, defense contractors will do well under either a Democratic or Republican administration.

[Rocky]

The word "tax" should be added after "national sales" in my comment above.