Middle Class Bubble

Birchtree said:
All I want is a Dow 17,000 and I can step up to upper middle class. I'm currently in the distribution business of providing superlative bull manure to anyone with enough courage to accept a truck load.
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So 17,000 is your exit point. I always wondered what would be enough for Birch ;).
 
All I want is a Dow 17,000 and I can step up to upper middle class. I'm currently in the distribution business of providing superlative bull manure to anyone with enough courage to accept a truck load.
 
Frixxxx said:
Now, yes, based on economic situation (regardless of who's at fault) those who were lifted on the economy are now being pushed back out. So, the bubble has popped, and we are all scrambling to blame the contributing factors. But, if those factors weren't manipulated in the first place then the middle class would not have grown and our economy would be standing still.
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I agree with you Frixxx. I think most of the time we humans are very short-sighted. We can remember all the times we've lost but quickly discard as commonplace the things we've won. So we get used to the growth and start planning using it as a baseline. I think many middle class families have simply become accustomed to the wealth they have enjoyed without realizing that it is fleeting. I am hopeful, however, that the difficult financial times we're in will grow a new generation of folks who will make smarter choices about the "things" they need/want.
 
FireWeatherMet said:
Aitrus,


As for making the assumption the bottom group gets their $$ from the gov't...is that just a guess?
Because the bottom number lines up pretty well with the minimum wage...the "working" minimum wage.

As for food numbers...14.9% for poor (near 20K) that is about $2,980.
For the rich (lets use bottom number of 150K... 10.8% is about $16,200.
Guess that the wine snobs are buying high end Burgundies:rolleyes:
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Here's the reality I am exposed to everyday-the people on the lowest rungs of the ladder-I'm talking about young families with at least one partner working fulltime or near-fulltime at Walmart-would be spending far greater percentage of their incomes on food than what is shown in that article-IF they did not use food stamps AND have access to FoodBank supplies every single month. I support our statewide foodbank, but also our local Salvation Army, don't send donation $ too many other places these days.

and I still get hit up for assistance with utility bills 1-2x/year by my disabled vet neighbor on SSI who also uses foodstamps and goes to the foodbank-has to hitch a ride with the young working Walmart family next door to get to the foodbank each month. that's reality for the lower 5th.
 
The issue I have with this bubble discussion is it always goes back to taxes.

There are many factors that create a middle class. Many of those are culturally based. When middle class was "invented", it tried to show where the "bourgeois" were ruining the world by being the overseers of the rich to control the working/poor class.

But when the U.S. drew up a constitution, it paved the way to ensure that things were fair across the board for everyone to have a chance to do something in their society. The problem was that we didn't put our money where our mouth was. We still had slavery, indentured servitude, and a multitude of one-sided economical/social favoritism.

Usher in the industrial revolution. The unskilled worker needed more training and more education to handle the technology that was being created. Emphasis on education became paramount. Also, the working class needed help on ethical and safe environment to be productive. This allowed a "middle class" to evolve rapidly. It also allowed for smaller businesses to spring up in support of the economic growth.

But, the core of the family at this time was solid, man/wife centric. Social ladder was limited to how much one earned and how much the invested in their future (to include offspring). Then with equal rights and desegregation, the opportunities for multiple income earners allowed for a larger pool of possible employees for companies to choose from. Then two incomes in the family caused another class to emerge. This is why I posted the triangle-to-diamond representation of the class system. It is now almost a requirement to have dual incomes to stay above costs of what is happening in the economy.

Meanwhile, the entire concern of the poor was still a thought and care of our society. We created programs to support them in a fashion to ensure they had some form of existence rather than having no hope at all.

So, when the economy goes through it's expansion and decompression, it has to give. Mainly done at the middle of the pack, because it is inflated or bubbled. Unfortunately, the economy is a living organism. It's healthy/sick at times. If we review the past, we'll see a lot of similarities from the Great Depression happening to our current system. This has put a generation at risk and it is painful. It has taken people from able means and pushed them into a position of survival. Our social programs, designed when the means to support them are available are now in the same position as the very same people they support.

Now, yes, based on economic situation (regardless of who's at fault) those who were lifted on the economy are now being pushed back out. So, the bubble has popped, and we are all scrambling to blame the contributing factors. But, if those factors weren't manipulated in the first place then the middle class would not have grown and our economy would be standing still.
 
I was about to say the same thing FWM. It deals with percentages so that 11% the poor pay for utilities is still much less money than the wealthy pay overall, but the point is that it costs the poor much more than it does the wealthy. As for how the poor spend their money (cigs, beer), I actually read a great article about a guy who grew up poor and the bad habits that he still struggles with because of it: The 5 Stupidest Habits You Develop Growing Up Poor | Cracked.com. I have often felt the pull to harp on the poor for making bad decisions because I work really hard to not make bad spending decisions. But look what this guy says about not being able to save extra cash:

"When a windfall check is dropped in your lap, you don't know how to handle it. Instead of thinking, "This will cover our rent and bills for half a year," you immediately jump to all the things you've been meaning to get, but couldn't afford on your regular income. If you don't buy it right now, you know that the money will slowly bleed away to everyday life over the course of the next few months, leaving you with nothing to show for it. Don't misunderstand me here, it's never a "greed" thing. It's a panic thing. "We have to spend this before it disappears.""

It is foolish to think this way, yes. But it is amazingly difficult to operate on a tight budget while saving money. If you're smart you can do it, but many of the poor are not educated enough to do this, especially not on their own.
 
Boghie said:
I was including state taxes (but not ODSI - yuk yuk, Medicare and Social Security) in the mix. My state grabs 8% at my state marginal tax bracket. Your 28% bracket lands you squarely in the upper middle class. Welcome to the Bourgeoisie. Yuk, yuk. There are only two brackets above yours!!!

And, having your debt paid is very middle class. The rich never pay their debts because they are 'managing' their money till the estate is sold off, the poor never pay off their debts because they get stuck in a credit hole (the same type many of the rich get stuck in).

I love being in the middle with little debt. Yummy.

That might actually be a pretty good definition of middle class. Someone who has access to credit and is expected to pay it off. The rich are not means tested for credit and many never pay it off - thus leaving nothing for their children. The poor might attain credit but are gamed by the issuers to the point that paying it off is hopeless. What a mess.
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I had to go back and check the percentage out as I was using an off the cuff percentage from my withholding. All told it comes to about 20% including fed, and two states. Guess I'm not as middle class as I thought. This is using the standard deduction for MFJ.

It's still 1/5 my income.

Basically, we still have not decided what exactly defines the middle class. We all agree the bubble is at least deflating.

Aitrus and FWM, keep it up, I love the discussion.

SkyPilot, you are right, our standard of living is likely to decrease, especially after we retire.

I heard something on the radio this morning about trade schools enrollment being up. Hmmmm?

PO
 
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Scout333 said:
How The Poor, The Middle Class, And The Rich Spend Their Money How The Poor, The Middle Class And The Rich Spend Their Money : Planet Money : NPR
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Interesting graphic. Misleading, but interesting. Misleading because much of the money in the 15k-19k column isn't theirs - it's been "distributed" to them by the government. It completely misses two entire categories of earners (20k - 50k, and 70k-149k). It doesn't address something fundamental: individual choices. How many poor pay for cigs and beer instead of some other need (like retirement)? Take a look at the food numbers: a total of 14.9% for poor, 13.1% for middle, 10.8% for upper. I would think the wine snobs would be paying more than the beer-n-hot dogs crowd. Same thing for utilities: no way a singlewide uses that much more power and water than a 3-story mansion.

It's cherry-picked information. Very typical of NPR, and most all of the media for that matter.
 
FireWeatherMet said:
Interesting graphic link.

Probably a big reason why trickle down taxation (tax cuts for the rich) doesn't work.

The poor and middle class will spend most of their money pretty quickly in the economy.

The wealthy will stash more of their cash. A smart thing for themselves as individuals no doubt...but not an economically stimulating one for the nation as a whole.

The ultra wealthy (ahem) will stash any extra $$ outside of the US...in the Caymans, Bahama's and in Switzerland.
Not sure how tax breaks for them helps the Middle Class?
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Simple. If there aren't any rich, then nobody will have any money to risk on innovation and ideas.

Perfect example of how rich people make everybody's lives a little better: those little curving bends at the top and bottom of every can of soda and beer made in the last couple of decades. They used to be like oil cans - straight 90-degree angles at the top and bottom. Somebody came up with the idea to make a machine to press those curves into the cans, and in the process save a small amount of raw material in each can while at the same time keeping the same amount of liquid in the container. This would allow the company to save on manufacturing cost in raw materials, and lower the end consumer cost of each can by a few cents. The company would still make money because the savings passed on to the customer is made up by savings on raw material. Our intrepid inventor didn't have enough money to manufacture the machinery himself, so he went to a rich guy. Rich guy looks at the proposal, thinks it's an idea worth trying, and funds the research and creation of the means to put the idea into action.

Basically, the rich guy took a risk on an inventor's well-proposed idea. The end result is that a product is just as good, a little cheaper, and conserves raw materials. That's one example of how trickle-down is supposed to work. And that's exactly why, worldwide, the Middle and Lower Classes have a higher standard of living now than they ever did before - hardworking innovators supported by the free market and rich investors looking to make current products better or take a risk on new, profitable ideas.

If the rich are over-taxed and over-regulated, then they spend all their time worrying about lobbying to keep their money and lawyering to keep out of jail instead of investing in ideas. If you make it too costly and burdensome to run a business in America, then a smart business owner will take their business overseas. Taxation and regulation drive business away, not the opposite. If there's no compensation for the risk takers, where's their incentive? If the innovators don't get rewarded and recognized, then what's the point?

And history has proven, time and again, that governments are horrible at guiding innovation and invention because government bureacuracy always gets in the way. Always.
 
I may be "Middle Class" at this point, but will likely sink further and further down the classification ladder as I leave Federal Service and move through my retirement years....
 
FireWeatherMet said:
Interesting...but other G-20 countries that have had simolar reductions in their manufacturing base still have a larger, more well defined middle class than in the US.

SO I would just add that while the decimation of manufacturing in the US has significantly hurt the middle class, it is likley a flase assumption that a country needs manufacturing to have a large, well defined middle class (although it would greatly help). A progressive tax code (not a flat one) helps keep the middle class afloat with more purchasing power.

History has taught that a healthy middle class coincides with an overall higher standard of living...even for much of the upper classes.
The deciimation of the middle class makes a country's people resemble the "Serfdom" of the Dark Ages.
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Huh? The G-20s have large middle classes that compare to the US? Mexico, South Africa, Brazil, Argentina, China, South Korea, India, Indonesia, Saudi Arabia, Russia, Turkey all have middle classes that compare in quality and purchasing power with the US?

The others, namely Australia, Italy, Germany, France, UK and Japan are all highly socialist. Their middle classes are funded through lack of freedoms and high tax burdens, and their quality of life still sucks compared to the US. Healthcare and dental that sucks, expensive and cramped living arrangements, money problems just as bad as ours, etc. The only G-20 nation that has a middle class that comes close to the American version is Canada, whose middle class is supported by everything from fishing and lumber to tourism, high tax burdens, and a small population compared to GDP.

The last one on the list is the European Union, which really isn't a country unto itself but a conglomeration of other nations that don't really take part in G-20 activities.
 
If we aggregate our various understandings or perceptions of Middle Class, it seems that we are largely in agreement that there is a "bubble" and it is at least "deflating" if not popping... If Middle Class is dependent upon a manufacturing base to exist, then are we seeing the end of such a "class" at least as we have known it heretofore?
 
NINAs (no income no assets) were encouraged by democrats to seek the dream. Now Barry wants four more years to restore the dream - please don't let it happen.
 
PessOptimist said:
alevin, don't dis the maids. Many of these people claimed to be IT engineers. As in they passed the Cisco course.

I gotta say, birchtree if you are serious about that HELOC, I hope the other family members beat you badly.
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PO, no dis for the maids, or waitresses here. I did my time as waitress, part-time switchboard operator (back when they had switchboards), even applied for a maid job but circumstances resulted in non-followthrough on that one. during those times, I shared apartments or slept old friends couches or rented a bedroom in an elderly couple's home. never ever thought of being a homeowner during those years. I had a paid off car and a college education-my only assets. plus a little work experience.

People at that income level were led up the rosy path, didn't have the financial comprehension to understand pitfalls what they were encouraged to take on.
 
Frixxxx said:
Middle class as defined by Investopedia:
Individuals who fall between the working class and the upper class within a societal hierarchy. In Western cultures, persons in the middle class tend to have a higher proportion of college degrees than those in the working class, have more income available for consumption and may own property. Those in the middle class often are employed as professionals, managers and civil servants.
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Based on this using the two out of three rule, I am not middle class. I may be deluding myself but do not consider myself a civil servant. Based on the USC chapter I work under. Yeah, I will look it up and quote it if necessary. I am working class.


Frixxxx said:
I think what happened, is those below this were targeted to be "brought" into the fold. If you look at most of the foreclosures on homes and people in trouble, they were the first to be introduced to the money by proxy. Take equity and spend it. Making us look more like the diamond:
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Yeah, many people have cycled through the neighborhood. Some got in and out before the bubble burst. Some didn't leave in time. Many foreclosure sale signs. Most didn't want to introduce themselves. Just a starter home, leaving soon. Most moved themselves in and out with rental trucks. Interesting.

Oh yeah, most had very nice new luxury cars or bigger/newer pickups than I.

Frixxxx said:
Any way, middle class, yeah, we need a better term. Bubble? yep, popped a few years ago....
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alevin said:
SP, Frixxxx's diamond describes what I was talking about earlier. The "faux" middle class would be the ones in the lower half of the diamond that were encouraged to dream bigger than they could truly afford, encouraged to live on the lifestyle margin and whose margins got called but they couldn't cover-$300K houses on a maid's paycheck-near immediate defaults at the least little hint of a cold or sneeze in their financial circumstances.
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alevin jumped in before I could get this posted. Yeah what alevin said too.

alevin, don't dis the maids. Many of these people claimed to be IT engineers. As in they passed the Cisco course.

I gotta say, birchtree if you are serious about that HELOC, I hope the other family members beat you badly.
 
SkyPilot said:
Frixxxx, well done. To summarize, the "Middle Class" was oversold and artificially inflated and subsidized with unwarranted borrowing? Maybe the definition of "bubble" is worth as much reflection as "middle class"... Maybe the Middle Class should be understood to be a result of policy, not the object of it or a state to be created, maintained or expanded. Can we tolerate the concept of failure, or is the Middle Class just such an "institution" that "is too big"?
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SP, Frixxxx's diamond describes what I was talking about earlier. The "faux" middle class would be the ones in the lower half of the diamond that were encouraged to dream bigger than they could truly afford, encouraged to live on the lifestyle margin and whose margins got called but they couldn't cover-$300K houses on a maid's paycheck-near immediate defaults at the least little hint of a cold or sneeze in their financial circumstances.
 
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