Princeton economist Paul Krugman recently warned that the United States may be facing a “lost decade” from 2010 to 2019. Krugman should have added that many American households have already endured a lost decade spanning the period 2000-2009.
Let’s knock on the door of the average American household and see if we will be invited in. Once inside, we may be despondent with what we observe. Over 90 percent of Americans consider themselves as “middle class” and their wealth is usually derived from three major sources: jobs, home equity, and pensions. Today, job insecurity is rampant with 1 in 6 adults out of work or facing only part-time employment opportunities. Equity in homes is down sharply since 2007 and about 20 percent of homeowners owe more on their mortgages than their houses are worth. Pensions are generally linked to the stock market which is still down dramatically from its October 2007 peak.
Three million fewer private-sector jobs existed at the beginning of 2010 than at the beginning of 2000, even though the U.S. population expanded by nearly 30 million during that period. The median household’s real income was lower at the end of the decade than at the beginning. The average wage of workers was still below what was paid in 1972, factoring in inflation. A record 1 in 8 Americans, including 1 in 4 children, are reliant on food stamps in 2010. A higher percentage and higher number of Americans are without health insurance today than in 2000, and the average family’s premium for health-care coverage more than doubled during the past decade to $13, 375.
Many households are overwhelmed by factors beyond their control. Americans are very hard workers, laboring more days and taking less vacation time than their counterparts in all other major western nations. Many large and medium-sized companies once offered their U.S. employees generous defined-benefit retirement plans. Today, far more offer 401 (k)-style plans with the employees themselves putting up most of the money. Fewer companies also offer comprehensive health-care coverage, and even those that do require employees to pay a larger proportion of the premiums and the co-pays to visit doctors. Health care, higher education, and energy costs have all escalated far beyond the consumer price index.
Seven in 10 occupants of these households consider that the United States is headed in the “wrong direction.” Half of parents perceive that their children will have a lower standard of living than the parents enjoyed. They look into the future and wonder how they will be able to cope with the challenges ahead. Many are aware that the federal government’s debt doubled during the past decade and is expected to double again during the current decade. They know that they will eventually be saddled with the interest payments on this debt in the form of higher taxes. They are also cognizant of the impending retirement of the baby-boom generation which represents over a quarter of the U.S. population. Younger Americans will be asked to pick up the tab for these retirements because the Social Security trust fund is filled with IOUs and not real money, and Medicare costs are increasing at outlandish rates.
Modern technology permits us to take a satellite view of the earth and then to zoom in and focus on one typical house in a typical neighborhood. Within that house discontent is brewing which may be more virulent than at any time since 1933 when a tsunami of fury swept Franklin D. Roosevelt into office. Americans are fed up with a profligate federal government which spends far more than it takes in and still seems to do so little for the average American. They are dismayed at the Wall Street crisis which has distorted the capitalist system by privatizing profits and socializing losses. They despise crony capitalism which permits the rich and powerful to exercise the golden rule—he who has the gold makes the rules within the corridors of power in Washington, D.C. Ominously, 34 percent of all private wealth is now concentrated in the hands of the top one percent of U.S. households, more than the combined wealth of the bottom 90 percent of households.
The state of the union is not well. American households are suffering and they are beginning to mobilize on the right through the Tea Party movement which despises Big Government, and on the left through growing demonstrations protesting Big Business and Big Finance. A record 60 percent of Americans insist that the incumbents in Congress do not deserve reelection. Perhaps one day in the not-too-distant future the frustrations embroiling American households will result in a much-needed cleansing of the Augean stables on Capitol Hill.