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How Middle-Class America Got Fleeced


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2017 Apr 7, 8:06am   10,663 views  41 comments

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If you’re a middle-class American baby boomer or Gen Xer, you might have spent much of the past decade wondering what went wrong. If you’re a boomer, there’s a good chance you’re still working well after you thought you’d retire.

And if you’re part of Generation X, you’re probably less wealthy than your parents were at the same age. Meanwhile, all across the U.S., pension funds are underfunded and will almost certainly have to default on some of their obligations to retirees.

It wasn’t supposed to turn out this way. Back in the 1980s and 1990s, middle-class Americans looked forward to a future of wealth and leisure. If you were a small business owner, or an engineer, or a lawyer at a small firm, you might not have expected to be rolling in it, but you probably didn’t think things would go so badly awry.

Who’s responsible? Who took your prosperity? Donald Trump's trade adviser Peter Navarro might tell you it was China, while his political aide Steve Bannon might tell you it was immigrants. Free-market think-tank types might tell you it was government regulation, while conservative lawmakers might tell you it was single moms on welfare or lazy people on food stamps. But these answers are mostly or completely wrong.

One partially correct answer is that your prosperity was taken by the very people who promised to ensure and enhance it. The decades from 1980 through 2008 were the age of neoliberalism -- the ideology of the free market. Financial deregulation, tax cuts and a lax attitude toward consumer protection and antitrust were supposed to free the entrepreneurial potential of the American middle class. And to some degree it did -- those decades saw plenty of wealth creation, and the U.S. economy performed a bit better than most rich nations in Europe and East Asia.

But along with real productivity, the neoliberal age saw plenty of grift and middle-class wealth extraction. In the book, “Phishing for Phools: The Economics of Manipulation and Deception,” Nobel prize-winning economists George Akerlof and Robert Shiller said that all free-market economies are accompanied by some amount of consumer error, simply because sellers are always exploring every possible method of parting people from their money.

Much of middle-class Americans’ prosperity wasn’t stolen -- it was never there to begin with. Hidden fees and overpriced services took away real wealth, but unrealistic expectations created fantasies of future wealth whose evaporation is probably an even bigger source of disappointment.

Full Article: https://www.bloomberg.com/view/articles/2017-04-07/how-middle-class-america-got-fleeced

#Economics

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1   GNL   2017 Apr 7, 8:29am  

People are stupid. Make more, spend more. Each one of us is in competition with each other. The only way you do better in life is if you beat out more and more people in comparison to income and savings/investments.

Arising tide lifts all boats? Bullshit. If all boats are rising, you don't do better than the person beside you. You have to beat out your neighbor in order to do better financially.

2   FuckTheMainstreamMedia   2017 Apr 7, 8:46am  

WorkInProgress says

People are stupid. Make more, spend more. Each one of us is in competition with each other. The only way you do better in life is if you beat out more and more people in comparison to income and savings/investments.

Arising tide lifts all boats? Bullshit. If all boats are rising, you don't do better than the person beside you. You have to beat out your neighbor in order to do better financially.

Leftists HATE the idea of competition. Abhor the concept entirely. This is why there was such a strong reaction to the thread about how people in various economic classes believe the rich obtain that status.

3   HEY YOU   2017 Apr 7, 8:47am  

anonymous says

Who’s responsible?

Millions of Democratic & Republican voters over the history of America.
Can't blame the FUBAR on Progressives & independents,not enough of them to win the POTUS or Congress.
And now we will MAGA.

WorkInProgress says

Make more, spend more.

John Mayer- "Gravity":
Oh twice as much ain't twice as good
And can't sustain like one half could
It's wanting more
That's gonna send me to my knees

"And gravity wants to bring me down"
This lyric needs to read:
Democrats & Republican voters want to bring America down.
Want? My ASS! They have succeeded.

4   HEY YOU   2017 Apr 7, 8:55am  

Fucking White Male says

Leftists HATE the idea of competition.

Rightwingnuts love competition as long as no one takes away their subsidies & their SOCIALIST BIG GOVT. TEAT.
When you're not busy make a list of Rep/Con/Freedom Caucus businesses & individuals on govt. handouts.
How many can't survive without govt. help.
........
BOYCOTT ALL Republicans.

5   BayArea   2017 Apr 7, 10:16am  

One big problem is that we've become a society of debt.

Far too many people in this country buy things that they don't need with borrowed money they don't have.

6   Heraclitusstudent   2017 Apr 7, 10:23am  

anonymous says

Donald Trump's trade adviser Peter Navarro might tell you it was China, while his political aide Steve Bannon might tell you it was immigrants.

Neo liberalism exists only based on free trade.
Free trade with countries like China implies large deficits.
This implies the need for immigration to keep wages competitive and the economy growing.
Low wages imply lack of demand, low rates, pensions deficits and growing debts.
The result is large and growing inequalities.

This is not liberalism in isolation, this is a specific form of liberalism that we might call "globalism", that is designed to profit a few rich people at the expense of everyone else.

7   Heraclitusstudent   2017 Apr 7, 10:24am  

The middle class didn't get fleeced, it got skinned.

8   Tenpoundbass   2017 Apr 7, 11:01am  

Oh so now it's the Gen-X'ers fault Millennials are feckless, shiftless and just un-ordinarily useless?
I guess too many Boomers died off over the last 8 years, you fuckers are running out of people to blame.

I'll be your Huckleberry.

Sucks to be you, I'll enjoy 7% pay raise increases for the rest of my life, I'll retire if I choose to.
I'll probably have a 200K ++ salary by the time I drawing my SS.
Stop me if you can you useless fucks.

9   bob2356   2017 Apr 7, 11:10am  

anonymous says

The decades from 1980 through 2008 were the age of neoliberalism -- the ideology of the free market. Financial deregulation, tax cuts and a lax attitude toward consumer protection and antitrust

The ideology of the free market. Financial deregulation, tax cuts and a lax attitude toward consumer protection and antitrust are pure libertarianism. Neoliberalism is like the blind men and the elephant, it depends on who you are talking to. Most talk about it in terms of globalization and deregulation.

There's a big difference. Neoliberals are policy wonks who's grand schemes have gone wrong. Libertarians are just plain old hypocrites who's only beliefs are I want mine and yours too. They believe in less government spending for other people and eliminating regulation that doesn't benefit them.

10   NDrLoR   2017 Apr 7, 12:00pm  

I think many Baby Boomers, and I know exceptions, always considered themselves superior to their parents' plodding, parsimonius ways of saving and living on what they made and being satisfied with what they had. They were ridiculed in the 70's for their stodgy 35-45 year employment with the same company, retiring with a gold watch and pension which included health care, never dreaming that that life would some day be unobtainable to them. Arthur Miller in Death of a Salesman portrayed Willy Loman, who owned his own home and was married to the same woman for 38 years, as a failure because he was fired, but he had been at the same company for 36 years and was 63 years old--how many Boomers had that luck? Instead, many Boomers and younger rejected marriage for shacking up and romance for relationships and were happy to abandon partners and offspring right and left because they couldn't stand committment--it seems like the reason was they wanted to leave all their options open, now look where they are in their 50's and 60's. Houses were never supposed to be more than shelter and debt with the exception of a mortgage was to be avoided except in dire circumstances. Pensions were only one of the what used to be called the three-legged stool of retirement, with interest from savings and Social Security providing the other two legs. ZIRP removed another leg when it made it impossible to have even a modest risk-free rate of return on savings--if you'd had only $100,000 at retirement, a 6% CD would provide an extra $500/month income which would have been spent and taxed.

11   Tenpoundbass   2017 Apr 7, 1:13pm  

anonymous says

Lets see..you're in your early 50s yes? Planning on adopting two more children yes? Grade school age children? The older ones haven't smashed any cars etc., yet or caused you any other financial burdens other than the normal day to day living expenses.

Yeah I was a tenacious hands on no nonsense dad that raised those other two.
I'm going to feel like crap if I don't give these two as much zeal. But I'm afraid a 65+ year old is going to be no match for Teen Age hormones.
Here's to hoping they are right about the next couple incoming generations will be the most conservative since the Greatest Generation.
Hopefully Liberal education and Liberal pop cultural Marxism will be passe. That will make every Parent worldwide task a hell of a lot easier.

anonymous says

Grade school age children?

Infant and a Toddler

12   marcus   2017 Apr 7, 2:08pm  

Fucking White Male says

Leftists HATE the idea of competition. Abhor the concept entirely.

Obviously the opinion of a right winger.

So in other words you honestly have no idea what the left is about.

At least I know what the right wing is about these days. Most of it is clueless and gullible middle class white dudes that like to take it up the ass, but they are selective. They prefer to be fucked by plutocrats and corporations, without any lube. They are hopeless sheep that buy whatever the most recent propaganda is that Brietbart and Fox tell them to believe. .

13   marcus   2017 Apr 7, 2:28pm  

Tenpoundbass says

Hopefully Liberal education and Liberal pop cultural Marxism will be passe.

You are so far from having a clue. Education isn't particularly liberal. And pop culture marxism isn't a thing.

What today's youth are learning is to hate the right with a passion. What we're going to get is a re-awakening of a real left.

14   marcus   2017 Apr 7, 4:27pm  

Ironman says

What today's youth are learning is to hate the right with a passion.

Gee, and all this time we thought you were teaching your students Math...

I didn't say they were learning it in school. They're learning it from watching reality. You probably forget that they take in reality without it first being filtered through the right wing propaganda.

15   Heraclitusstudent   2017 Apr 7, 4:41pm  

marcus says

What we're going to get is a re-awakening of a real left.

Not of the Hillary types can help it.

16   Bellingham Bill   2017 Apr 7, 6:46pm  

Labor's slice of the pie:

https://fred.stlouisfed.org/graph/?g=dhXQ

wages / (wages + corporate profits)

and things are worse than this since all the real wage gains have gone to the top 5-10% of wage earners.

annual % growth of workers

^ that's a pretty crazy graph, showing why pensions are as underfunded as they are -- through 1985 employment often grew by 5% per year, that's an immense natural expansion of output and thus profits (and growing productivity adds to this base expansion)

but housing is the main driver of why we're all broke.

with rents rising 5-10% per year you're better off buying, but to buy in high-wage areas you've got to outbid everyone else trying to buy.

plus all the parasitical operators in real estate also buying "income properties", looking to essentially enslave people seeking a place to live.

17   indigenous   2017 Apr 7, 7:46pm  

I don't disagree with most of the above, but they don't even mention demographics, or the growth in government.

In today's world an awful lot of the economy goes to the parasites in he name of something, but a complete drag on the free market.

18   GNL   2017 Apr 8, 10:46am  

Bellingham Bill says

Labor's slice of the pie:

https://fred.stlouisfed.org/graph/?g=dhXQ

wages / (wages + corporate profits)

and things are worse than this since all the real wage gains have gone to the top 5-10% of wage earners.

annual % growth of workers

^ that's a pretty crazy graph, showing why pensions are as underfunded as they are -- through 1985 employment often grew by 5% per year, that's an immense natural expansion of output and thus profits (and growing productivity adds to this base expansion)

but housing is the main driver of why we're all broke.

with rents rising 5-10% per year you're better off buying, but to buy in high...

Can you explain this please? I can't read the small writing. I'm not being sarcastic.

19   Entitlemented   2017 Apr 8, 10:53am  

Non of this is true, its mostly libby speak.

The drop in science degrees where 100M people got timewasting degrees, fed by a liberal goverment policies starting with Ted Rosevelt, perfected with the CRA and NAFTA. We got our manufacturing oblitorated, no real work, just make work, and concentrated liberalism in our large corrupt cities.

The democrats pushed back against all the progressive work, manufacturing, and innovation by making it hard to work, to establish a business.

Regulation, too many lawyers and timewasters, bias, corrupt government union with power to fleece, bureaucracy killed the US economy.

20   marcus   2017 Apr 8, 11:20am  

Entitlemented says

Regulation, too many lawyers and timewasters, bias, corrupt government union with power to fleece, bureaucracy killed the US economy.

Obviously an expert with his hand on the pulse of the American economy.

The idea that the proportion of corporate revenues and GDP that go to the middle has decreased substantially is an objective fact. Calling objective facts, logic and reasoning "libby speak" is what I call republitard speak.

I've heard those talking points about regulations and taxes, that you so obediently parrot, but the evidence doesn't back it up.

Entitlemented says

bureaucracy killed the US economy

Have you ever thought about how small businesses and our economy in general would be doing if wages had even almost kept pace with corporate profits and GDP ?

Don't strain yourself.

21   marcus   2017 Apr 8, 11:33am  

Supply side economics is an excuse for the rich to hoard assets. It's not that there is no validity to supply side arguments, it just that there is proof out there that the demand side matters too.

It's like the idiots that seem to think that becasue taxes can be too high and at a level that inhibits growth, that therefore any level of taxes is too high for growth.

22   Entitlemented   2017 Apr 8, 11:39am  

marcus says

Obviously an expert with his hand on the pulse of the American economy.

Right,

Much of the rapid rize in the chart are loopholes, and since you go into stores, flip over the merch, and its hecho "not in usa". In 1980 most of our big items like cars and planes, electronics and computers, tvs, washers, clothes were made in the USA, in 2000s few our our big and small items are made in the USA.

The US firms are marking up the products from overseas, and this was set into motion by democrats on their personal side of lazy degrees, and the political side by the Lawyers and timewasters creating laws that would benefit Lawyers, but fleece the American people.

So the chart is made by democrats to fool democrats, - show me the US driven production, not the 12 lawyer fleecing.

23   Entitlemented   2017 Apr 8, 11:41am  

marcus says

Supply side economics

The only economics is supply side. If you dont want it, you would not buy it. Companies decide what they can make and profit by.

Quite using irrelevancies to try to hop onto group think.

Think for yourself - you will be better off.

24   marcus   2017 Apr 8, 11:56am  

Entitlemented says

So the chart is made by democrats to fool democrats

I frame it this way. We as a country have fought for capitalism to win over communism, becasue we believe in it, and also becasue of influence it gave us in the world. Our international policies led naturally to globalization. This was not democrats or republicans. This has been American policy in the world since shortly after WW2.

Now suddenly you want to over simplify and conclude that we don't manufacture enough here and that's democrats fault somehow ?

I'm all for us manufacturing more here, and I would bet that automation will allow us to do so.

But here's what you seem afraid to consider. More money in the hands of middle class consumers (and more people in the middle class) would obviously mean a much bigger domestic economy. If supply side is pushed too hard, it leads to less demand. It takes more than want or need to buy products.

Entitlemented says

Think for yourself - you will be better off.

If you can think for yourself, please put together an detailed argument as to why I'm wrong, instead of this nonsense - which ironically indicates that you are the one without a justification for your beliefs.

Entitlemented says

Quite using irrelevancies to try to hop onto group think.

Great job understanding and responding to my points. I'll be expecting more of the same.

25   Bellingham Bill   2017 Apr 8, 12:05pm  

WorkInProgress says

Can you explain this please? I can't read the small writing. I'm not being sarcastic.

1955 - 85 during the "good times" the workforce -- people working -- peaked at a +5% expansion rate, with normal range falling to -1% during the short, sharp recessions and +2 to +3% otherwise.

But since 1985 we're not getting those +5% workforce expansions any more and are lucky to get +2%:

(same graph since 1988)

Pension funds planned on +7% yields on their investments, but if the economy isn't growing by 7% a year that's simply not going to happen.

And demographically we're no longer expanding like we did when the baby boomers (and women) flooded into the workforce 1965 - 1985.

On top of that,

shows that per-worker productivity growth has fallen since the 1950-2000 period.

During that period productivity gains were around +3% per year, but coming out of the 2007-2009 recession productivity is around +1% at best.

So this is as good as it gets!

26   Bellingham Bill   2017 Apr 8, 12:11pm  

marcus says

Obviously an expert with his hand on the pulse of the American economy.

I prefer to believe that all these idiots on Patrick's site are paid psyops types. Wages paid in Russia (~$20/week) make China look like Hawaii.

27   GNL   2017 Apr 8, 12:47pm  

Bellingham Bill says

WorkInProgress says

Can you explain this please? I can't read the small writing. I'm not being sarcastic.

1955 - 85 during the "good times" the workforce -- people working -- peaked at a +5% expansion rate, with normal range falling to -1% during the short, sharp recessions and +2 to +3% otherwise.

But since 1985 we're not getting those +5% workforce expansions any more and are lucky to get +2%:

(same graph since 1988)

Pension funds planned on +7% yields on their investments, but if the economy isn't growing by 7% a year that's simply not going to happen.

And demographically we're no longer expanding like we did when the baby boomers (and women) flooded into the workforce 1965 - 1985.

On top of that,

So, then, doesn't it make sense to believe an economic correction is inevitable and that staying in cash (or at least assets easily turned into cash) is advisable?

28   Entitlemented   2017 Apr 8, 1:10pm  

marcus says

Our international policies led naturally to globalization.

You wave wand stating international policies and globalization as this has any meat to a discussion.

Did you think that wrenching a huge percentage of real working/productive jobs was going to have a positive effect on the US economy, (and let the industrious countries also work productively)?

29   Entitlemented   2017 Apr 8, 1:14pm  

marcus says

Now suddenly you want to over simplify and conclude that we don't manufacture enough here and that's democrats fault somehow ?

http://www.history.com/topics/us-presidents/bill-clinton/videos/clinton-signs-nafta

See video, 200,000K job growth in few years promised, fears of US job loss are illegitimate, create a massive employment and trade zone, call on all of us for worker retraining, good jobs and better careers......................

30   Bellingham Bill   2017 Apr 8, 1:30pm  

WorkInProgress says

doesn't it make sense to believe an economic correction is inevitable and that staying in cash (or at least assets easily turned into cash) is advisable?

I rotated 75% of my 401K into the "safe 2% yield bonds" category late last year, yes.

I kept 25% in equities just to keep some upside exposure.

This is just for game-theory considerations -- market goes up, yeay, I still have a job and everyone is happy. Market is down or flat, no big losses to take.

Plus I can take long and short positions in my IRAs that are more flexible and leveraged than the 401K.

BUT . . . I don't necessarily see a "correction" coming anytime soon, as the Fed dumped a shipload of money on the economy 2011-2014:

and AFAICT we're still enjoying the after-effects of having too much capital in the system.

We could have smooth sailing for another 5-10 years for all I know. One of my theses is the ongoing baby boomer -> gen Y workforce rotation is going to be very stimulative, as all these retirees will switch from savers to spenders, increasing domestic demand a lot, while being retirees means there will be jobs opening for Gen Y too.

Plus when the boomers die they will pass on their wealth to their heirs, who are waiting, like me, with bated breath for all this free money!

31   anonymous   2017 Apr 8, 6:35pm  

WorkInProgress says

but housing is the main driver of why we're all broke.

with rents rising 5-10% per year you're better off buying, but to buy in high...

I agree with this wholeheartedly, in addition to the cost of healthcare. Most everything else seems to have tracked around normal inflation rates or less. Housing and healthcare have raped our standard of living.

32   marcus   2017 Apr 8, 9:38pm  

Ironman says

Bellingham Bill says

as all these retirees will switch from savers to spenders, increasing domestic demand a lot,

Not going to happen.

Of course it will. They aren't going to spend like drunken sailors, but many will be consuming almost as much as when they were working, but they won't be working, thus putting money into the economy that is in addition to wages (to others) that are being spent on consumption. It's a demand side thing.

33   Dan8267   2017 Apr 9, 1:32am  

anonymous says

Who’s responsible? Who took your prosperity?

That ass clown Ronald Reagan.

34   Strategist   2017 Apr 9, 7:48am  

Ironman says

Now solve this math equation: How long will their retirement money last before they just have Social Security as their only source of income?

See a problem?

Why do you confuse Marcus? His students aren't around on Sundays to help him.

35   Robert Sproul   2017 Apr 9, 7:55am  

"....said that all free-market economies are accompanied by some amount of consumer error, simply because sellers are always exploring every possible method of parting people from their money.
Hidden fees and overpriced services took away real wealth, but unrealistic expectations created fantasies of future wealth whose evaporation is probably an even bigger source of disappointment."

Maybe this helps explain why the poor saps have been so easy to mesmerize with bullshit:

50% of American adults cannot read a book written at an eighth grade level

45 million are functionally illiterate and read below a 5th grade level

20% of Americans read below the level needed to earn a living wage

50% of the unemployed between the ages of 16 and 21 cannot read well enough to be considered functionally literate

According to the 2007 California Academic Performance Index, research shows
that 57% of students failed the California Standards Test in English.

There are six million students in the California school system and 25% of those students are unable to perform basic reading skills

To determine how many prison beds will be needed in future years, some states actually base part of their projection on how well current elementary students are performing on reading tests

http://literacyprojectfoundation.org/community/statistics/

36   Strategist   2017 Apr 9, 7:58am  

Robert Sproul says

50% of American adults cannot read a book written at an eighth grade level

45 million are functionally illiterate and read below a 5th grade level

20% of Americans read below the level needed to earn a living wage

50% of the unemployed between the ages of 16 and 21 cannot read well enough to be considered functionally literate

90% cannot do simple addition.

37   marcus   2017 Apr 9, 11:28am  

Ironman says

What is the average life expectancy for a Baby Boomer?

Now solve this math equation: How long will their retirement money last before they just have Social Security as their only source of income?

See a problem?

Yes, I see a big problem. But this doesn't mean that boomers in retirement won't be consuming a lot and adding to the economy. If people had to be in great shape financially to drive the economy, we would already be in big trouble now.

THe point is that the boomers are a big demographic that's leaving the workforce but continuing to spend. Millions of them are well off. Perhaps half or more of them aren't, but they will still be living and spending.

Perhaps the situation you describe will cause an added cost to the government, and some govt spending that has to directed towards supporting these folks with subsidized housing or nursing or whatever - which would be money redirected away from military, corporate welfare, or we get less tax cuts or whatever, but in any one of these, it's adding to the domestic consumption driven part of the economy.

38   marcus   2017 Apr 9, 11:41am  

Robert Sproul says

Maybe this helps explain why the poor saps have been so easy to mesmerize with bullshit:

50% of American adults cannot read a book written at an eighth grade level

45 million are functionally illiterate and read below a 5th grade level

20% of Americans read below the level needed to earn a living wage

Yes this is sad, but also helps to explain how we got a President Trump.

39   Bellingham Bill   2017 Apr 9, 1:07pm  

marcus says

Perhaps half or more of them aren't, but they will still be living and spending.

Or just consuming without spending:

40   Strategist   2017 Apr 9, 8:41pm  

Ironman says

@marcus

OK, I realize the last math question was too difficult, here's an easier one (I hope for you).

If Boomers continue to spend in retirement like they did while they were still working (like you're asserting), how much money do they need to have saved at retirement?

Marcus won't get that either.
Hey Marcus, here's a hint.....It's more than zero. :)

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