- Important: All passwords were reset on 06/15/11. Old passwords will no longer work. Click here to retrieve your password.
- Subscribe to Our Free Dewsletter
We are non-commercial, all volunteer and supported by our readers. Please help sustain the Dew by making a donation.
Middle Class Near-Poor
What’s the tipping point?
Last week I canceled a trip to be with our grandchildren for Thanksgiving. The tipping point that forced the decision was a combination of unexpected medical co-pays on top of some un-budgeted car repair. While heartbreaking, it was not particularly serious and we expect to visit in a couple of weeks, but it made me wonder. I have made a living as a marketing version of the canary in a coal mine – a preeminent consumer of sorts. For whatever reason, I seem to experience things months or more before others. If something so insignificant could force my decision, could we, the formerly solid middle class, be on the edge of a more dramatic shift?
Hard working families all over our great country are facing tough economic decisions every day. Uncomfortable decisions. Decisions that seem different in scale than they used to be. Admittedly, living within a budget is a responsible and necessary way for each of us to live and manage our money. But what cumulative toll has the horrible economy taken on the type and frequency of such difficult decisions?
The Census Bureau defines poverty as $22,350 annually for a family of four, and near-poor as people within 200% above the poverty line. Officially, one in three Americans is poor or near-poor. Unofficially, it is at least one in two. The real life definition should also include people who are one unexpected event from being without money. Cash poor is not the same thing as poor, but it feels like it for a time and easily can become permanent.
Most of us have have taken some hits in the last few years. Someone in the family was laid off. Someone got sick. Someone entered the work force, but couldn’t find work adequate to pay their college loans. Credit lines dried up with house value. The house didn’t sell. The investment was made worthless. Your health insurance was cancelled, or only offered at a price greater than your house payment. But you endured. Party on.
There are steps down the ladder for the middle class near poor. Liquidate stocks and savings. Cash in retirement accounts. Sell your house for a smaller house. Sell that house for an apartment. Then a smaller apartment. Give up the life insurance you’ve paid on for twenty years. Give up the private schools. Gave up the extra car. Give up Whole Foods for Publix, then BigLots, then dumpster diving for food. Give up the malls for Walmart, then the charity store. Cancel cable and the newspaper. Unhook the land lines. Postpone preventative maintenance – dental care, health check ups, car tune-ups or new tires, overlook the minor car accident and cash the check. Let the dog die.
The middle class can take some hits. Americans are resilient. We can get smaller and leaner. We can do without. We can ask for help from friends or family. Wishing won’t change it. Remembering accrued disappointment makes it worse.
There must be a point in the spiral – the time or convergence of events, that leaves no options. The moment when all that you have worked for is gone. The time when you change economic classes. When there is no pretending.
A tipping point was first defined in physics as that “small amount of weight to a balanced object that can cause it to suddenly and completely topple.” Al Gore speaks of a tipping point for our environment – when it is too late to avoid the catastrophe that awaits. Is there a tipping point for the middle class? A moment when one extra burden, no matter its size or intended consequence, can cause millions, perhaps, tens of millions of families, to suddenly and completely topple?
What could be the tipping point?
- This Great Recession is now entering its third year. Extended unemployment benefits, pitiful as they are, are about to expire and we do not have a Congress that will extend them.
- The temporary payroll tax break is also expiring next month. The jury is out whether the Tea Party will make a deal to extend this tax break for working Americans. In real terms, the disappearance of payroll tax relief will cost the “average” worker about $2,000 next year. Will that be the tipping point?
- The Bush tax cuts, now in their 10th year, are set to expire at the end of 2012. Included with the 4.6% increase in tax for the wealthy, is a 3% tax increase for most of the middle class – about $2,600 for a family of four – could that be the tipping point?
- If the Tea Party holds Medicare hostage and Congress doesn’t pass the Medicare “doc-fix” by the end of 2011, something that has been passed every year for almost half a century, doctor and hospital reimbursements will be reduced by 27%. Will your doctor accept Medicare? Will that be the tipping point for millions of our seniors who are barely making ends meet?
- Gas prices are rising again. Will that tip us?
- The rising price of rents?
- Next year’s expected Health Insurance co-pay increases?
- The rising average credit card rates, fees and penalties? Or debit card charges?
- Or will it be just one more group of layoffs that causes consumption to drop just enough for business to grind to a halt?
- Or maybe it will just be something simple happening to one more family. A child who comes home sick from school that causes you to miss work that gets you fired? A speeding ticket that must be paid and causes you to miss a payment on a credit card that causes the rates on all your cards to go to 33.65%, plus late payments and interest on late payments, that can never be caught up? Or your furnace goes out? Or will a parent lose their job and helping them puts your family in the economic spiral? Or, God forbid, you lose your spouse?
Just a few years ago, the monthly budget’s rounding error for the middle class near-poor was in the hundreds. Now, every penny is counted. They had a stack of credit cards with zero interest rates and seemingly unlimited credit lines. An unexpected expense would just go on the card. Since that time, home values have shrunk and with it, credit lines and flexibility.
The middle class near-poor may not look much different at a casual glance. They may decorate trees for Christmas, but they’ll wrap empty gifts under the tree. 2011 will be another year when Christmas giving will be postponed or homemade. The middle class near-poor are just one more bad thing away from the bottom and none of us are prepared for how to make it there. There is no longer any social safety net. The food kitchens are full and the pantries emptying more quickly than filled. Our government has borrowed all they will borrow and nothing else is expected until after the fall election, or the next.
How long will it take to recover? If all things go well, and they may not, the US economy will take a decade or more just to get back to where we were when Bush left. Another decade to get back to where we were when Clinton left. Given the life expectancy in poverty, two decades will go a long way toward wiping out poverty. The economy can come back more quickly, but only if and only when everyone can have a job and be back in the economy as consumers.
Trying not to leave this story on a gloomy note, there are things you can do.
- You can join the 99%, occupy and march on Washington and call for repealing laws that caused the grotesque financial inequity in our nation.
- You can demand your Congress person do every stinking little thing they can do or spend to get rid of the extra weights on the middle class, the near-poor and those already in poverty. Tell them to stop listening to lobbyists and do what is right for the people they should be representing. Tell them to shut up with the election year fear mongering on issues meaningless to the economy and do something good before we vote them out of office. Tell them specifically to vote for what’s left of Obama’s jobs initiative, for extension of jobless benefits, extension of the payroll tax cuts, the Medicare “doc-fix” and making permanent the Bush tax cuts for the middle class. Tell them to keep their hands off of Wall Street reform that protects American consumers. Tell them to stop trying to undermine health care reform, but be part of the Congress that will fix it. Tell them to break up the companies too large and with too many lobbyists to fail. Tell them to end special breaks for dirty industries. Tell them to quit wasting money on wars we don’t pay for. Tell them to keep investing in schools and re-training. And most of all, tell them to get to work on the peoples’ business.
- Watch for the warning signs and stay in touch with those friends who seem to drop out of your circle – they’ll need your friendship.
- Volunteer and help those who need it now.
- Get involved with non-profits – each of which is still reeling from the terrible economy and from Bush ending the inheritance tax, but that’s another story. Help people who can’t find work to start a small businesses and teach them how to make it successful. Help feed the hungry. Help teach, mentor and take care of children. Get involved to help seniors and the disabled.
- If you are in the top 30%, keep giving to charities which help people. Put some of your money toward micro-loans to launch new small businesses.
- If you are a 1% executive, it is time to fire your lobbyist, take a pay cut and use the money to hire people who need jobs – especially those who have been out of work for a while or been fighting our wars.
- If you think you are at the tipping point, reach out to agencies who can help you land more softly and not on the street.
- Featured image licensed by LikeTheDew.com from iStock.com © alxpin. Thumbnail animation: free download from Animated-gifs.eu
This work by LikeTheDew.com is licensed under a Creative Commons Attribution-Noncommercial 3.0 United States License.
Worthy of Comment
Also on the Dew
Mankind has made remarkable progress in every arena of human endeavor--- except possibly getting Congress to do anything, getting women as hosts on late night tv and getting speedy service from the local pharmacy. Even in this Twenty-First Century, the time it takes to get a "fill" or refill of a script can take "from here to eternity." Recently, I trudged up to the neighborhood apothecary for a prescription re-up. It's toward the end of the work day, the place is crowded and I'm at the end of a long line of folks waiting to be served. (None of the folks Read on →
It’s fair to say that the South and Scotland go back a ways. For example, the cult of the “Lost Cause” that sprang up in the aftermath of the South’s failed fight for independence had something of an antecedent in the fabled “lost cause” of the Scottish Jacobites whose four-decade struggle to restore to the Stuart monarchy of Scotland to its rightful seat on the thrones of England, Scotland, and Ireland was heartily romanticized in the novels of Sir Walter Scott. Scott’s glorification of the swashbuckling supporters of the Stuart restoration was so popular with the southern upper classes in the antebellu Read on →
The mass killers came as stowaways aboard ships about the time the Wright brothers first took to flight along a North Carolina beach. Although these assassins were merciless, they probably did not even know themselves the great destruction they were to bring. Thus began the near complete killing of all the American Chestnuts in this country. The pathogens that had probably slipped into the country on infected nursery stock consumed relatively little time in destroying the forests of American Chestnuts ranging from Maine to the southern Appalachians. It took fewer than forty years. This past weekend I had the privilege of Read on →
I have a built in magnet. It works to attract people that I otherwise might not meet. My magnet can be depended upon to pull near to me the craziest, neediest, saddest, and loneliest people in proximity. Tales of woe, distress, illness, sabotage, conspiracy, and government plots all have been the subject of unprovoked sharing. Likewise I hear about triumph over adversity, evil corporations, and politicians. They approach in grocery aisles, department stores, ladies rooms, parking lots, and today in a crosswalk. What is it about me that says "Spill your guts, I can take it?" Having been told on numerous Read on →