Mr. Winchell, 46, having earned $24 an hour as a skilled electrician, seems paralyzed by the disappearance of his employer. He imagines that there is work for electricians in central Iowa but he hasn’t looked. ”Lisa is always on me because I’m so angry,” he said. ”She says, ‘What would your mom have said?’ My mom would have said, ‘Worrying is not going to help.”’


Likewise, the Journal’s Mark Whitehouse documented Detroit’s unraveling in the subprime catastrophe, including on West Outer Drive, an area of middle-class strivers. (2)

“It was like when you made it to Outer Drive, you’d made it,” says Deborah Herron, 52, a former administrative assistant who lived in the area for 35 years…

Over the past three years, three people on the 5100 block have used subprime loans to buy homes. In at least two of those cases, though, the experience has not gone well. Raymond Dixon, a 36-year-old with his own business installing security systems, borrowed $180,000 from Fremont Investment &Loan in 2004 to buy a first home for himself, his wife and six children…. After all the papers had been signed, he says, he realized that he had paid more than $20,000 to the broker and other go-betweens. “They took us for a ride,” he says….


Mr. Dixon defaulted on the loan after the monthly payment jumped to more than $1,500 from $1,142 — a rise he says put too much strain on his income from his security business. The foreclosure process began in late November, and Mr. Dixon says he expects an eviction notice this week. A spokesman for Fremont said the company, which is in the process of exiting the residential mortgage business, has taken measures to reduce defaults but does not comment on specific customers.

For a helpful primer on middle-class financial stress, I recommend, as always, The Two Income Trap, which documents how a typical two-income family then, after paying for housing, education and health care, had less disposable income than its counterpart in the 1970s. Warren and Leo Gottlieb, another Harvard law professor, found that health care expenses have added to middle-class pressure. In congressional testimony last year, they demonstrated that nearly half of bankruptcies came in the aftermath of serious medical problems.


Demos, a New York-based advocacy group, last year produced an eye-opening study that found that the overwhelming number (80 percent) of middle-class families don’t have enough assets to cover three months’ worth of expenses should they lose their jobs and that more than half of middle-class families, counting debt, have net financial assets of zero or less.

This is the middle-class here.

BusinessWeek shows how gas prices may be the last straw for consumers, while the Times picks up on what I saw in the South.

So, here are a few things to think about as we enter the general campaign

First, if you have felt increasing financial pressure the last few years, just remember, there is something structural at work; it may not be entirely due to hidden flaws in your character that have only recently begun to manifest themselves.

Second, when you see leading indicators about the economy, particularly the big three—GDP growth, the unemployment rate, and inflation—keep in mind that some compelling evidence is emerging that all three have been manipulated by both Democratic and Republican administrations dating to at least the 1980s to make the economy appear much healthier than it actually is. I’ll have more on this in another post.

Third, resist the temptation to see the current state of the economy, the wealth distribution, the stagnating middle-class incomes, and non-stagnating middle-class debt levels, as in anyway inevitable or a natural outcome dictated by the market’s invisible hand, or unrelated to government tax, trade, and regulatory policy choices, or, for that matter, to the ideological preferences of the major political parties.

Fourth, and a corollary to three, remember that not only does it not have to be this way, it wasn’t always this way. As economist and writer Jeff Madrick and many others remind us, the great postwar expansion was also the most broad-based.

Fifth, the best economic writing seems to include extensive on-the-ground reporting, which can provide information of surprisingly prescience.

1. Another Chapter: New Group Swells Bankruptcy Court: The Middle-Aged —- Job Losses, Illnesses Can Push White Collar Over Edge; Delay Can Make It Worse —- Mr. Hester Takes a Mall Job;
By Suein Hwang;
6 August 2004;
The Wall Street Journal;
A1

2. Debt Bomb: Inside The ‘Subprime’ Mortgage Debacle —- Day of Reckoning — ‘Subprime’ Aftermath: Losing the Family Home —- Mortgages Bolstered Detroit’s Middle Class — Until Money Ran Out;
By Mark Whitehouse;
30 May 2007;
The Wall Street Journal;
A1

Read parts one, two, three, and four of this series.

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Dean Starkman Dean Starkman runs The Audit, CJR's business section, and is the author of The Watchdog That Didn't Bark: The Financial Crisis and the Disappearance of Investigative Journalism (Columbia University Press, January 2014). Follow Dean on Twitter: @deanstarkman.