A microwave isn't a future
By Robyn Blumner, Times Columnist
Published February 24, 2008
I find few things as maddening as when economists try to convince Americans that the middle class and poor are far better off today than a generation or two ago because of all the things we can now afford that used to be considered luxuries.
In a recent New York Times article, two top people at the Federal Reserve Bank of Dallas offered up this tired bromide again.
According to W. Michael Cox, chief economist, and Richard Alm, senior economics writer, economic prosperity is much more widely enjoyed than this country's increasingly skewed income distribution patterns would suggest. (In which the richest Americans are taking a massive portion of national wealth.) Instead, they say, to measure relative prosperity we should focus on household consumption, and by that measure the poor aren't all that much different from the rich.
"Nearly all American families now have refrigerators, stoves, color TVs, telephones and radios," writes Cox and Alm. "Air-conditioners, cars, VCRs or DVD players, microwave ovens, washing machines, clothes dryers and cell phones have reached more than 80 percent of households."
Please. Because the poor can now heat their canned beans on a stove rather than over a lit ashcan, they're doing well? This patronizing prattle channels Barbara Bush, who thought the Hurricane Katrina evacuees were making out rather nicely at Houston's Astrodome. "This is working very well for them," she said, chuckling.
The authors offered this song and dance to warn against a protectionist backlash on global trade if a recession arrives. They want us to understand that all those cheap imports are the reason the poor can afford to live so much like the rich.
Boy, have they missed the yacht.
Leaving aside the externality costs of buying so much stuff from countries that take our manufacturing jobs and then employ helots in unsafe factories that pollute the water, air and atmosphere, Cox and Alm just don't understand what makes people feel financially well off.
Prosperity is not how many DVDs you have stacked on a bookshelf. It is a sense of financial security and peace of mind. And by that measure only a small percentage of the middle class enjoy it today, and certainly none of the poor.
Cox and Alm need to read a disturbing report by the public policy group Demos and the Institute on Assets and Social Policy at Brandeis University. "By a Thread: The New Experience of America's Middle Class" says that only 31 percent of middle-class families are secure.
The report's authors studied those families earning at least $40,000 but not more than $120,000 annually. They then said to achieve a middle-class existence of having long-term financial security and the ability to raise a family with a decent standard of living, families need the following:
- Financial assets that provide a safety net in the event of job loss or illness, and allow for the building of a nest egg for retirement;
- An education level that makes one competitive in the job market;
- The ability to afford a decent house and reasonable living expenses for a family; and
- Dependable and affordable health care for all family members.
If a family had three or more of these factors, the authors said, they are securely middle-class. But families challenged by three or more of these are deemed at high risk of falling down the economic ladder.
Here's the scary news: Over half of all middle-class families have no net financial assets. That means no savings, or debts that exceed any assets. Nearly one in four middle-class families have someone who lacks health insurance. And 80 percent of middle-class families cannot cover the bulk of their essential living expenses for even three months if something should happen to their income.
On a whole, the report's Middle Class Security Index says that 25 percent of middle-class families are at a high risk of slipping out of that class entirely and another 44 percent don't have what they need to remain securely in it.
The Demos study gets to the heart of our national economic anxieties. Men in their 30s earn less today, adjusted for inflation, than did their fathers at that age, suggesting that social mobility is reversing. The cost of essentials such as housing and health care is outpacing income, and the thing that brought security to retirement - the defined-benefit pension - is a relic.
That's why the microwave oven argument just doesn't wash. Until the middle class gets back its economic footing, any talk about shared prosperity is a feint. Some Americans wake up every day with their stock portfolios bulging and others wake with foreclosure fears. The fact that they both have a clothes dryer doesn't make them the same.