Idol Chatter

The thing that made our country truly unique was the rise of the middle class.  Getting ‘in’ wasn’t that hard and once in, you were almost guaranteed of a solid future.  But now the middle class may be doomed.  In fact, it may have a terminal illness that cannot be reversed.  Consider the following:

After the economy collapsed in 2008, the middle class took it hard.  Unemployment of over 10% in many states was the norm and has been slow to come down.  While we are told now that it’s under 9%, understand that as people’s unemployment benefits run out, they are taken out of the count.

If you are among the 90% or so that didn’t lose their job – congratulations!  But don’t thing the worst is over.  Instead, think about your retirement.  Social security is anything but secure.  The only way out is to 1) extend out the official retirement age farther and farther, 2) cut benefits and 3) increase taxes.  Even with that there may not be anyway to save it unless the federal government decides that it has the right to go after your 401K and IRA accounts and force them into a government program.  So much for all your diligent saving!  Finally consider whether or not you think you are covered by a pension program.  Many pension programs are grossly underfunded.  And as the baby boomers start to hit retirement age, the strain of new claims may end up to be far too much for some pensions to cover.

Pretty bad – right?  Now let’s talk about inflation.  Did you know that the reported statistics have been revised to take out the impact of rising prices on core necessities like food and gas?  So reported inflation sounds acceptable but we are all finding it harder and harder to keep our grocery bills in line.  And gas?  We are all making trade offs to keep our cars running.  The net of this is that our ability to save for our future is getting squeezed.

Then there is the housing market.  Recent sales data says that now more than 2 years post market collapse, prices are still falling.  Many people lost much if not all of their equity and what was once one of the safest investments the middle class made, is now nothing more than paying rent to stay in a mortgage.

All of this is bad but the worst is yet to come.  This morning I listened to “Dr. Doom” Marc Faber go on about his concerns about the economy (http://video.cnbc.com/gallery/?video=3000015563) and he got off the main point for a moment and mentioned that 50% of all babies are born to unwed mothers.  Now that caught my eye so I did some research and based on government data (find it at http://www.cdc.gov/nchs/fastats/unmarry.htm) it’s 41%.  Now while this may be 9 points lower than Faber’s number, it’s still scary high.  And the reason why this is scary is that these babies are born into households that, on average, are much lower on the social economic scale.  That means fewer opportunities and more drain on our over taxed social benefit programs.

Somewhere along the way our quest for the American dream became a demand for entitlements.  We’ve dug ourselves a very deep hole and the next decade may well be one of significant upheaval.