Middle class nicked by self-inflicted wounds

Foreclosure Yard Sign / iStockphoto

(MoneyWatch) The middle class is hurting, partly because of self-inflicted wounds. That's the conclusion of a recent analysis by the Consumer Federation of America and Primerica.

Combining information from two surveys - one done by the Federal Reserve Board in 2010 and another by ORC International in July - the researchers found that the typical middle class family had lost about 35% of their net worth between 2007 and 2010. The cause of the loss? For the typical family, a portion of the loss could be attributed to one or more "really bad financial decisions."

Two thirds of middle class Americans - middle class is defined as families earning between $30,000 and $100,000 - said they had made at least one financial decision that cost them dearly; and half said they'd made more than one costly mistake. The median cost - that's the mid-point between the highest and lowest - was $5,000. The average cost was considerably higher -- $23,000. The surveys didn't elaborate on what these mistakes were, but given the spate of foreclosures between 2008 and 2012 -- and the number of individual investors who sold all their stock holdings at the market's nadir in 2008 -- these errors are likely to make up the lion's share. 

Between 2007 and 2010, the typical middle class family saw net worth drop to $94,700 from $145,600. Net worth is made up of two components - financial assets, which were primarily in retirement plans, and equity in real estate. 

Possibly because of the extreme volatility and the stock market's "lost decade," middle-income investors have become highly conservative investors, the July survey found.

When asked how they'd invest a $1 million retirement account, only one-fifth of the middle-income respondents would put the bulk in stocks and bonds. A nearly equal number would invest the money in savings accounts - despite the fact that these accounts yield almost nothing in today's low-rate environment. One quarter of respondents would put the money in real estate.

Higher-income respondents -- those earning $100,000 or more -- were far more confident in stocks, with some 48 percent saying they'd invest their $1 million nest-egg in stocks and bonds.

[pgb]

People are so eager to hold others responsible for their own mistakes. So bankers are to blame because people decided to take on mortgages for houses they couldn't afford? Those "evil bankers" were forced to lend recklessly by a Congress that wanted everyone in America to own a home. It was politics, not business, that cratered the economy, and it's going to be politics, not business, that leads to economic collapse.

[Osprey4]

Well said, but conspiracy theories suit small minds.

[LethargicSynapse]

So the "blame game" goes from bankers to Congress. Hypocritical, wouldn't you say?

Everyone shares a piece of the blame pie. The problem is the ones with a lot of money are in a better position to change things and don't, unless it suits their own interests.

[hypnotoad72]

And to think that, in 2010, we Americans were all saving too much and therefore risking the eradication of our economy too:

http://www.mainstreet.com/article/smart-spending/budgeting/are-americans-saving-too-much

[hypnotoad72]

Here are some articles that counter the claims I alluded to in my previous post and responses:




http://www.epi.org/publication/ib330-productivity-vs-compensation/
http://www.realitybase.org/journal/2009/3/10/the-american-dream-died-in-february-1973.html
http://www.csmonitor.com/Business/2012/0612/How-skewed-is-America-s-income-inequality-Take-our-quiz/Median-income/
http://www.nytimes.com/2012/05/13/opinion/sunday/fables-of-wealth.html
http://krugman.blogs.nytimes.com/2012/04/28/where-the-productivity-went/
http://motherjones.com/kevin-drum/2010/01/vicious-cycle-stagnant-wages
http://www.nytimes.com/2009/05/04/opinion/04krugman.html?_r=4
http://www.ctj.org/html/layoffs.htm
http://www.nytimes.com/2011/05/01/opinion/01eggers.html
http://greatdivide.typepad.com/across_the_great_divide/2009/06/walmart-workers-on-welfare-lets-look-for-the-spin.html
http://www.usatoday.com/news/nation/story/2011-09-13/census-household-income/50383882/1
http://www.thefiscaltimes.com/Media/Slideshow/2012/04/04/Minimum-Wage-and-What-It-Buys-You-1950s-to-Now.aspx?index=1
http://www.hollandsentinel.com/opinions/x13292164/COLUMN-American-workers-got-what-they-deserved
http://underthemountainbunker.com/2011/03/31/senator-bernie-sanders-guide-to-corporate-freeloaders/
http://www.truth-out.org/top-us-corporations-outsourced-more-24-million-american-jobs-over-last-decade/1303196400
http://www.ctj.org/html/corp0402.htm
http://money.cnn.com/2008/12/19/news/companies/auto_crisis/index.htm
http://www.sociology.vt.edu/course/socprobs/corporatewelfare.html
http://popwatch.ew.com/2011/05/02/undercover-boss-season-finale/
http://www.techrepublic.com/blog/career/supervisor-wants-employee-to-quit-part-time-job/2902
http://www.lawyersandsettlements.com/case/hiring-illegal-immigrants.html
http://www.cato.org/pub_display.php?pub_id=6283
http://ecosalon.com/squawk-our-tax-dollars-help-mcdonalds-hawk-chicken-in-europe/
http://drich13.newsvine.com/_news/2011/03/20/6307764-study-governor-walkers-budget-will-cut-21843-jobs-could-actually-hurt-state-economy
http://www.progress.org/cwfedex.htm
?http://www.infoworld.com/d/adventures-in-it/why-us-it-jobs-arent-coming-back-465?source=fssr
http://www.infoworld.com/d/the-industry-standard/beware-the-plot-increase-the-h-1b-visa-program-269
http://hubpages.com/hub/HowH1BVisaFRAUDiskillingAmerica?
http://www.computerworld.com/s/article/9133529/U.S._H_1B_workers_outnumber_unemployed_techies
http://www.ourfuture.org/corporate-welfare
http://mydd.com/story/2007/2/7/184312/5388
http://acsa.net/press/savearticlegates.htm
http://www.ritholtz.com/blog/2011/03/ronald-reagan-where-free-unions-and-collective-bargaining-are-forbidden-freedom-is-lost/
http://money.cnn.com/2009/08/28/news/economy/paycuts/index.htm
http://greatdivide.typepad.com/across_the_great_divide/2009/06/walmart-workers-on-welfare-lets-look-for-the-spin.html
http://www.larouchepub.com/other/2003/3045walmart_iowa.html
http://www.businessinsider.com/microsoft-to-grassley-were-still-using-h-1bs-no-moral-imperative-to-hire-americans-2009-3
http://www.google.com/search?q=americans+train+replacements+H1B
http://www.youtube.com/watch?v=uJDhS4oUm0M
http://anti-union.blogspot.com/2008/11/greedy-american-union-auto-workers-and.html
http://management.fortune.cnn.com/2011/03/25/unpaid-jobs-the-new-normal/

And this issue from www.ontheissues.org (amongst others):

"Voted NO on repealing tax subsidy for companies which move US jobs offshore. (Mar 2005)"

Now, read that - giving taxpayer money to corporations that offshore (to communist countries). This means people in America are out of work as we're shipping jobs overseas and are put into trouble. This also means we create a revenue problem because there are fewer working people to tax.

Count the politicians that voted to continue those handouts, and those that voted to halt them. Hint: Obama voted to halt the handouts... A lot of people voted to continue the handouts. And a lot of them are in the GOP...

[hypnotoad72]

Wow.

Just, wow...


Good Lord, where do we begin in countering that unfettered hogwash?

People losing jobs due to offshoring...

Devalued wages thanks to using illegals and H1Bs, with Americans training their own cheap replacements too...

Banks freely giving out $750k loans to teens making $12/hr in construction jobs, due to land and house prices having skyrocked with wages not following...

Companies demanding higher degrees for entry level jobs ($60k+ with ease for a 4-year degree)...

Companies demanding 5 years of Visual Studio 2008 experience, when the year those ads came out was 2010 and VS2008 was out for 2 years...

I could cite numerous examples... and articles... and articles to tangents... But I'm tired...

Still, anyone who says CBS is "main stream librul media" can zip it. Hogwash from both sides of the aisle frequently get put out. (and, yes, I know the correct words are "mainstream" and "Liberal"...)

[LethargicSynapse]

Well said, sir. Well said.

And Futurama FTW!

[rayward73446]

The reports failed to include the mortage scandals as a determining factor in the loss of wealth by the middle class. Unscrupulous mortgage companies, wall street crooks, and those who bundled bad mortgaes and sold them as AAA rated securities are to blame for much of the losses sutained by the middle class. To date none of these crooks have been prosecuted, even though they made millions by betting against the bad securities that they sold. When are these crooks going to be held accoutable?

[hypnotoad72]

And Enron -- execs telling workers to invest, the execs wait until the optimal time, and then cash in and holding the workers with nothing...

Later came 2008, with people who had done all the right things - now in their 70s - pissed off and wondering why they bothered.

The middle class does not make the rules but it has to live within them. IF reward for work done goes down, then the rules are being changed on an uneven level.

Anyone blaming the middle class for "self-inflicted wounds" is being grossly ignorant... to put it mildly.