The Incredible Shrinking Middle Class....

Today I picked up on an article on “Drudgereport.com” that 1 in 7 or roughly 14.3% of all Americans live at or below the poverty line, which works out to be about 45 million people. According to the article 2009 saw the largest single year increase in the poverty rate since these records have been kept, starting in 1959. Further, the US poverty rate ranks third from the bottom amongst developed nations.

Fortunately there are some safety nets in place to prevent wide spread starvation that could lead to civil unrest and chaos, but is taking its toll. Statistics provided by the various government safety net providers bear this out.  The food stamp program now provides 41 plus million with a subsidy and year over year participation in the program has skyrocketed by about 20%. 17% of all Americans are receiving aid from one anti poverty organization or another.  50 Million Americans are now on medicare which is taxing that program. 10 million or so of our fellow Americans are receiving unemployment benefits, which is up 60% since last year and quadruple the number in 2007. Of all households in the US 28% have at least one person looking for a job. Bankruptcy rates have risen 20% year over year from the period ending June 30th.  14% of all mortgages are delinquent or in foreclosure and 25% of Americans have credit scores below 599.

This is not a pretty picture and the fact that the statistics are rising is not a good thing either. The article that I culled these statistics from goes on to discuss the blame game and hints that Americans are more concerned with the latest TV show while politicians are to busy getting elected to really address the problems. While I agree with the assessment my interest is what can be gleaned from this information to help ourselves, remember knowledge is power and in the case of investing it is profit.

One thing is for sure we need action, simplification and real sensible change not left or right wing dogma.  It appears to me that change is coming but unfortunately at a glacial pace, as reflected by the Tea Party impact in the current election cycle. Not get to political but it is going to take this crisis period that we are currently in to come to a head before we get real change; I just hope it is change for the better and not worse. I mean if you look back throughout history you can find examples of crisis and change. The example of crisis leading to change that is familiar to most people is the post Weimar Republic scenario that paved the way for Hitler. I am not suggesting that we should expect that here in America but one would be foolish to think that type of scenario could not happen; just look at all the things that could never happen but did since 2000.

We as a nation need to come to terms with the cold hard facts that what has been done for the past 30 years or so and particular since 2000 has not worked; but instead created false prosperity and severe imbalances that have yet to be corrected. I believe that it was Einstein that said,  “the definition of insanity is trying the same thing over and over and expecting a different result". This is exactly what we as a nation have been doing since this crisis has begun. It seems that regardless of who is in power the same solutions are being applied, print our way out, monetize our way out, attempt to raise taxes, borrow further to finance and this is digging the hole deeper. Everyone knows when you are in a hole and trying to get out the first rule is stop digging.

I think much of the problem is a societal shift in attitude. The original can do American appears to have become outnumbered by those that believe the government can fix everything and that everything should be equal and fair. I am not sure when the average American became so dependent on government for survival and problem solving but we will not solve these problems until we take back the government and scale it down. This crisis will only get worse as the government keeps pulling levers with the intent of getting the economy going. We as a nation have to correct the imbalances that built up and return to the fundamentals that made America great in the first place. Policies that are akin to trying to cure a heroin addict by giving them more and more heroin are counterproductive as are the tax schemes to “redistribute”  which are as effective as trying to raise the level of water in your swimming pool by scooping buckets of water from the deep end and pouring the in to the shallow end.

Well we have established that there are some powerful trends and that things are likely getting worse not better and that change to fix this is arriving at a snail’s pace. So since we can’t change things what can we do to keep from disappearing like so many of our fellow Americans? That is for tomorrow’s blog post, in the meantime I can’t help but feel upset for so many of my Countrymen at the moment; especially in light of the dearth of leadership across the gamut.




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