This is part five of a series on the start of the 2008 presidential election’s general campaign. Links to the rest of the series can be found at the bottom of the article.

In September 2005, I was reporting on Hurricane Katrina’s aftermath for The Washington Post and found myself in Wiggins, Mississippi, about forty miles from the coast, where thousands of displaced people had descended on a Red Cross station set up in the high school.


It was a mess—people waited in the sun all day for a number to come back another time, and more than half couldn’t even get that—but that’s not the point. What struck me was how close to the edge, financially, the people in line had been before the hurricane hit. Many among them—school-bus drivers, mechanics, clerks—couldn’t absorb a couple of weeks without a paycheck. Some had been sent from town to town by disorganized officials, but they were frustrated less by the hassle than by the cost of the gas it took to drive between cities. One man told of burning two tanks of gas on a dispiriting odyssey from Pass Christian, Mississippi, to Laplace, Louisiana, to Ocean Spring, Mississippi, to Wiggins—about 250 miles. At gas prices then, it cost around $35.

Political reporters, and anyone else, looking to catch up on the economy as an election issue this year can probably get away with reading a single Wall Street Journal story from April, by Justin Lahart and Kelly Evans:

Trapped in the Middle The incomes of most Americans have stalled. Tackling voter angst in Pennsylvania.

Say what you want about trade, taxes, heath care, the credit crunch, and oil prices; the meta economic issue of our time is the eroding financial position of the American middle class that is now reaching an acute stage.

This graphic that accompanied the Journal story provides a pretty good snapshot. On the right are the 14,836 families at the top of the economy. The left side is basically everybody else.

Okay, cover your right eye.











We learn, first, that nine of ten Americans average $30,000 a year, and, second, that that number has been going in the wrong direction. But wait. The economy was in a period of economic growth from 2001 through 2006. Where did the money go?

Cover your left eye.

And here’s one from a slideshow that accompanied the Journal story showing how much of the pie the top 1 percent has taken since 1913. Note the near vertical climb in the last few years, resembling the north face of K2. Tracing backwards, one can see the last time the nation’s best-off took that much of the nation’s income was, well, it was a long time ago and right before something very bad happened:












Here’s another one that shows median family income in the last couple decades. Up in the ’90s, down since 2000. (The second line is from Lancaster County, Pennsylvania, where the Journal did some on-the-ground reporting.)











And while we’re at it, here’s one by one of my favorite bankruptcy experts, Elizabeth Warren, and her daughter, Amelia Warren Tyagi, from their 2003 best-seller, The Two-Income Trap.










This is what happens when median family income stagnates while the cost of essentials—housing, education, and health care—have not.

And for good measure here’s the personal savings rate since the ’30s, thanks to The Big Picture blog:











But back to the Journal story. Here’s the lead paragraph:

Lancaster, Pa. — Are you better off than you were eight years ago? For a growing number of middle-class Americans, the answer is “No.”

It also makes the makes the point that income declines for the middle class during periods of economic growth are basically unheard of.

Recessions often depress middle-class incomes and moods. What’s unusual about these declines is that they occurred during the economic expansion that began in 2001 — the first time that’s happened during a prolonged expansion in at least 40 years. The main reason: The benefits of prosperity have gone disproportionately to the families at the very top.

No, this isn’t a Democratic National Committee press release. It’s the world’s leading financial news publication.

I also like the way the Journal upholds journalistic convention and gamely tries to point out the other side of the story—that the middle class is better off in some ways, somehow. The reporters have to stretch, as we see:

In some ways, the American middle class is better off than it was eight years ago. It is paying less taxes, thanks to President Bush’s tax cuts. The effective federal tax rate for the middle fifth of households declined to 14.2% in 2005 from 16.6% in 2000, according to the Congressional Budget Office. The rate of violent crime in 2006 was lower than in 2000. Death rates for heart disease and stroke have declined by about 25%.

I can’t say that 2.4 percent tax cut did much for me, but, still, I give the paper credit for trying, as it also does in trotting out crime and health statistics, neither of which has anything to do with a story on incomes.

I like this good story, which was pegged to the Pennsylvania primaries, because it is not overly sophisticated and does not assume everyone knows all this, even though most business reporters probably do. Economic news in a general circulation newspaper isn’t always for sophisticates, is it? Even Bloomberg readers might find this useful.

I also believe that after a slow start, most business reporters are starting to understand not just that the middle class is under significant financial pressure and that it has been building for a while, but that it has reached critical levels in the past few years, even before the country began to tip into a recession.

This is not to say that the economic battering of the American middle class—a true scandal—has received anything near the attention commensurate with its importance. That’s for another post. But it is to acknowledge the sporadic good work that occasionally fights its way to prominence in the publications that purport to monitor the nation’s economic life. It is also to point the way forward for the fall campaign. As far as domestic issues go, this is the one.

Among the more valuable work:

Peter Gosselin, now a fellow at the Urban Institute, laid the foundation for much future reporting with his extensive probes for the Los Angeles Times on the fraying middle-class safety net.

The Journal’s David Wessel in April 2004 pointed out what kind of jobs are being created as a result of outsourcing and other trade-related phenomenon. He says jobs have been breaking down into two categories—the high-end stuff and this category:

One sort requires physical contact — nursing-home aides, janitors, gardeners, dentists. Foreign-born workers may do them, but they’ll have to move to the U.S. A 2000 survey found that the average starting salary of graduates of community-college dental-hygiene programs was $41,900.

A hot program at many community colleges these days is massage therapy….

The story points to where all this is heading:

One unpleasant possibility, acknowledged even by those firmly in the trade-is-good camp, is that jobs will proliferate at both ends of the barbell — and fewer in the middle. The result would be an ever-wider gap between well-paying jobs and poorly paid jobs.

Actually, I found this excellent point underplayed. It’s clear that this phenomenon is not only a possibility, but has been happening for a long time. Second, this “barbell” is going to be so lopsided—many people on one side; only a few on the other—that the image doesn’t work. “Giraffe,” or some such, might be the better.

A BusinessWeek report in 2006 reinforced the point, finding that the only sector that produced any net new jobs in the U.S. economy between 2001 and 2006 was health care. That’s nuts.

The Journal in 2004 documented the growing phenomenon of bankruptcy among the middle-aged and formerly middle class. (1)

The New York Times in 2005 told how strapped homeowners are draining their home equity lines to pay off credit card balances and other day-to-day expenses.

The Journal expanded on the point just this month with a piece that explains how strapped consumers are selling their life insurance policies at pennies on the dollar and finding other expensive, non-conventional methods of raising cash; they have already tapped out on credit cards, to the tune of nearly $1 trillion, up by a third in the five years ended in 2006. (For a review of the reporting on credit cards, buy a copy of the March/April issue of the print version of the Columbia Journalism Review, or, okay, just click here.)

The New York Times’s Louis Uchitelle last November documented the scrambles of the erstwhile middle-class of Newton, Iowa, following the closure of the Maytag plant there.


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.