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WSJBlog: Are You Better Off Now Than Eight Years Ago?

April 19, 2008, 12:31 am

Incomes are down, prices are up, and Americans are feeling increasingly grim. That’s not unusual during a recession. What is remarkable is that these patterns have persisted for years — starting long before the current economic woes set in.

An article in today’s Wall Street Journal examines the growing angst of the American middle class at a time when incomes of the top 1% of earners have expanded considerably. In Lancaster, Pa., people are concerned about health care and the economy — and many blame the current Republican administration, which they say has lost sight of the middle class.

Thousands of people in Lancaster have changed their party affiliation to Democrat from Republican ahead of the state’s presidential primaries, which will be held this Tuesday. For the first time ever, the drawn-out fight for the Democratic nomination makes the outcome of Pennsylvania’s primary race critically important.

Hillary Clinton and Barack Obama have criss-crossed the state in recent weeks as each fights to win the Democratic party’s nomination. John McCain, the Republican nominee, is looking ahead to November’s general election when he must convince the state’s traditional Republican base to stick with him rather than showing their frustration by voting Democrat.

Regardless of Tuesday’s outcome, the question of what can be done to help the middle class remains. “You can’t always trust these campaign promises,” says Hillary Buckwalter, who lives in Lancaster County with her husband and three kids. “Everybody forgets. They get inaugurated and off they go.” –Kelly Evans

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Thank God… for Kelly Evans… the only 24-7 WSJ… Journey into the present! Make the candidates sign a contract with … “WE the People!” Then go to the “Inauguration Dance!” You Think!
The OZ

Comment by The OZ - April 19, 2008 at 12:44 am
Wrong question.

Would you be better off with Obie or Hilly? NEITHER.

Comment by Hyde Parker - April 19, 2008 at 2:16 am
So invstors are buying again because they think the banks are candid.hmmmmm, think bout it.
Bear Sterns did it twice didn’t they before they went bust, all at the hands of evil speculators of course.

In fact let me quote them from USAToday Nov 30th:

“Bear Stearns taking $1.2B write-down, says worst is over”

http://www.usatoday.com/money/industries/banking/2007-11-14-bear-write-down_N.htm

3 months is such a long time these days in banking… apparently longer than people’s memories these days!

These bankers must think we are stupid? Oh hang on they might be right!

Comment by Sane investor - April 19, 2008 at 2:20 am
McCain is going to get walloped in November. WALLOPED, big time. American workers are the most productive labor force in the world, bar none. And what do they get for it? Damned little - they don’t make enough to save for retirement, let alone buy reasonably priced health insurance. Wake up, John Fund! Wake up, Neocon Right! The middle class is tired of being screwed!! The GOP hasn’t got a shred of credibility left! This country is drowning in debt, lies, corruption and failed policies. These are the things the GOP was supposed to FIX back in 1994 - remember??

Comment by Jed Clampett - April 19, 2008 at 3:01 am
For Sane investor, a thought… If you are levered up above 30-1, you may be concerned about un

Comment by James Jones - April 19, 2008 at 3:03 am
I thought we could have a better life if this Bush Administration will laid their knee down to HM, King Anthony S. Martin and financial assurance as he controlled out around the world will be shared to us also.

Comment by Prince Harry - April 19, 2008 at 4:28 am
That’s true that HM, King Anthony S. Martin had really a financial back - ups and he had so much money that to be kept around the world I am one of the member of the Federal Republican Reserve Board had disappointed as well as our dear Pres. Bush did when he rejected our plan to send him off here in US and I admit as well as our Republican Parties that HM will our payback to Iraq.

Comment by Leonnie Kennemer - April 19, 2008 at 4:32 am
I am Pres. Bush’s 6th degree nephew and I do admit that HM, King Anthony S. Martin in Hagonoy, Bulacan and who holds Infinite Wealth will be our uncle’s damage guarantor in Iraq.

Comment by Gerry Bush - April 19, 2008 at 4:34 am
I have been accompanying all the process of elections which will take next November. I realized that people are daughtful about whom to vote, some times prefer Hillary to Obama for Democratic, since for Republican the is gone and gone for good.
I would like to post this idea: There any information outskirts any where that children say “Obama” when asked to whom they will vote. It means that they like Obama, If their fathers need to provide better life to them, need to see them happy, might even be influenced by their positions and vote on ,fact that can benefits him.But children like Obama, why?. It`s easy to say Obama, it is on tong of anyone, it is not that they like him because they know what he is. So according to this situation it depends on the voters, on the fathers to beckon the future of USA, to end the worst situation in Iraq, to give the freedom to the Americans, to call the friendship from world out. We need to avoid the possible third world war.Have ever thought on whom to vote? Decide now looking to the peace in front, looking to the bad situation in USA and in Iraq. People need the peace and the peace is your decision , and the decision is your vote.

Comment by It`s up to whom deposits the vote - April 19, 2008 at 5:39 am
I have been accompanying all the process of elections which will take next November. I realized that people are daughtful about whom to vote, some times prefer Hillary to Obama for Democratic, since for Republican the is gone and gone for good.
I would like to post this idea: There any information outskirts any where that children say “Obama” when asked to whom they will vote. It means that they like Obama, If their fathers need to provide better life to them, need to see them happy, might even be influenced by their positions and vote on ,fact that can benefits him.But children like Obama, why?. It`s easy to say Obama, it is on tong of anyone, it is not that they like him because they know what he is. So according to this situation it depends on the voters, on the fathers to beckon the future of USA, to end the worst situation in Iraq, to give the freedom to the Americans, to call the friendship from world out. We need to avoid the possible third world war.Have ever thought on whom to vote? Decide now looking to the peace in front, looking to the bad situation in USA and in Iraq. People need the peace and the peace is your decision , and the decision is your vote.

Comment by Elias Matsinhe from Mozambique - April 19, 2008 at 5:47 am
Yes, I am better off than eight years ago. This is true in many regards but my financials are the easiest to illustrate. In 2000, I made $32K. In 2008, I make 95K w/ bonus potential. When I pass a well-respected industry certification - which my company is sending me to training for next week - I’ll make about $140K to $150K.

I make my own luck.

Comment by rcuadro - April 19, 2008 at 5:48 am
Let’s see… McCain and his wife are worth $100+million, Hillary and Bill are now also worth that much. Do they really feel the impact about the cost of a gallon of gas or loaf of bread?

Comment by Cactus Jack - April 19, 2008 at 6:22 am
Take home income is more important than income. Why send income to fund the Woodstock museum via taxes when I can volunteer to clean up a local park instead? A median pre-tax income of $48,223 with 16.6% going to the feds is better than a median pre-tax income of $49,477 with 14.2% going to the feds. When you factor in the tax cut and account for inflation, the median household had arround $100 more in their pocket in 2006 than in 2000.

Comment by Joseph - April 19, 2008 at 7:47 am
I am living the good life. Thank you! I am residing in the land of critical mass. Why? Good old fashioned investing!

Comment by WSW - April 19, 2008 at 8:05 am
Re: Comment by Jed Clampett

American workers may be the most productive, but not on a cost/unit basis.
The inability to save may be an inability to control costs.
The rapid rise in Health Care expense is, to a large degree the result of the Plainiff Attorneys. They are the most prolific donors to your beloved Democratic Party.
I’d say the Democrats don’t have a shred of credibility, period!

Comment by Capitalist...... - April 19, 2008 at 8:09 am
Agree with Capitalist!

Comment by WSW - April 19, 2008 at 8:35 am
Invest wisely. Dollar cost average into mutual fund equities!

Comment by WSW - April 19, 2008 at 9:17 am
These numbers are totally wrong. By many measures the middle class’s economic fortunes have been improving steadily, at least until the last year or so. A Google search will make this evident (though you have to read the materials carefully to see how the liberals have been distorting things). I don’t know why the media doesn’t get it–oh wait, yeah I do (hint: LIBERAL BIAS).

Comment by Anonymous - April 19, 2008 at 9:22 am
Liberal bias is the core of all of our economic ills and lack of values in our Country. Bring back the old, conservative way of life.

Comment by WSW - April 19, 2008 at 9:43 am
I have 4x the debt but only 2x the income now vs 8 yrs ago. Our government and the avg American is financially much much less off than 8 yrs ago. Today
CA has over 1.1 million unemployed (6.2%) and rapidly growing!

Comment by Rex - April 19, 2008 at 10:01 am
Treasury sell-off hits housing recovery hopes
US mortgage rates soared this week after a dramatic sell-off in the Treasury market that hit housing sector recovery hopes even as it suggested investors were growing more confident in the medium-term US economic outlook. The yield on the 10-year Treasury rose as high as 3.85 per cent on Friday from less than 3.50 per cent last week as investors sold bonds on expectations that the Federal Reserve could soon end its rate-cutting cycle.
The Fed sees the rise in yields as signalling increased market confidence in US economic prospects.
However, mortgage rates also moved higher, making it more expensive to buy homes and less likely that existing homeowners will be able to refinance mortgages. Rates on 30-year fixed-rate mortgages rose to 5.87 per cent from 5.63 per cent a week ago, Bankrate.com said. Jumbo mortgages, those of more than $417,000, rose to 7.19 per cent from 7.06 per cent.
“The back-up in yields is a concern as it will damage the economic outlook,” said Jane Caron, strategist at Dwight Asset Management. The three-month London interbank offered rate – Libor – increased to 2.91 per cent from 2.71 per cent this week, indicating underlying stress in the financial system.

Comment by ft.com - April 19, 2008 at 10:11 am
To Anonymous:

Liberal bias? In the WSJ?

Give me a break!!!

Comment by oakparkbob - April 19, 2008 at 10:25 am
Improve your life…invest in equities!

Comment by WSW - April 19, 2008 at 10:30 am
I thought this was suppose to be an economics blog? Yet the blog posting offers no analysis of the economic claims made in the article.

If I want to read about Clinton and Obama criss-crossing the state of Pennsylvania, I’ll read the political blog.

Comment by Marcus - April 19, 2008 at 10:32 am
Agree with WSW.

Comment by Shmuck - April 19, 2008 at 10:40 am
Yes, I am better off than eight years ago. This is true in many regards but my financials are the easiest to illustrate. In 2000, I made $32K. In 2008, I make 95K w/ bonus potential. When I pass a well-respected industry certification - which my company is sending me to training for next week - I’ll make about $140K to $150K.

I make my own luck.

Comment by rcuadro - April 19, 2008 at 5:48 am

And then your job will be outsourced!

Comment by Bush Sux - April 19, 2008 at 10:52 am
Yes, I am better off than eight years ago. I obtained a mid career Masters Degree to insure career success, I work week in and week out, invest regularly, live within my means, and educate and provide for my children. I don’t expect the government to bail me out of the mortgage I will pay off this month.

Comment by Johnny Lunchbucket - April 19, 2008 at 11:00 am
WSW is holding equities far, far below where several were at their peaks and he is still dollar cost averaging and advocating that everyone else does so also. Owned Microsoft when it was $105-110
just to name one and he has several others in a similar situation. That is a total lack of sell discipline, though previously he boasted that he had not sold a single share. Not to mention, although the weak dollar crowd won’t admiit it, is that the buying power of the Dow, S&P, etc, is substantially lower at 12,700
now than when it stood at it’s year 2000 peak of 11,700.
So let none of us kid ourselves that this is the way to wealth; it is only the way to the illusion of wealth.

Comment by Ex-Apostle of the $USD - April 19, 2008 at 11:10 am
Our family is better off because of our faith in the America we knew in the 80s; and we do not feel things are worse today. The strong Euro and weak doller will play out to U.S. benefit soon. High end real estate/coastal and blu chip stocks like Goldman Sachs will be bought on the cheap. The Euro will be a “fire starter” for our economy by the time the leaves turn color and Fall.
Please read for better insight:
http://psychologyofthecall.blogspot.com/
A neighbor from 2 blocks happens to be the head blog meister.

Comment by Fenner - April 19, 2008 at 11:15 am
Considering that WE will need to work together to get out of our current financial situation, it appears reasonable to ask if WE, as citizens (Republican, Democrat, Independent) are better off now than 8 years ago. Given that each person may view the same situation differently, the following FACTS are provided: (1) The New York Times reports that the number of Americans receiving food stamps is projected to reach 28 million in the coming year, the highest level since the program began in the 1960s. If families qualify, benefits average approximately $100 per month. Ohio, Michigan, and Illinois have high numbers, due largely to the loss of industrial jobs, with “one in eight” Michigan residents receiving food stamps.

(2)Bureau of Labor Statistics data illustrate selected price increases over the past “8 years” which account, in part, for the current problems of many families. They include: (A) Education books & supplies (+58%); College Tuition and fees (+72%); Child Care & Nursery (+42%). Matters ae made worse by the “drying up” of student loan funds due to the current credit crisis. (B) Hospital & related services (+70%); Professional Services, e.g., Doctors, Dentists, etc. (+31%); Prescription Drugs (+34%); ©) Funeral Expenses (+41%); (D) Automobile Insurance (+32%); Gasoline (+111%), Diesel (+147%); (E) Fuel Oil for the home (+172%); (F) Eggs (+137%), Ground Beef (+50%); Bread (+46%); Milk (+38%); Oranges (+57%); White Potatoes (+38%); and even Dried Beans (+52%).

Slow income growth of Americans contributed significantly to the problem. Although Average Hourly Earnings grew from $8.04 in 2000 to $8.41 in 2007, it pales when compared with the $8.41 “earned in 1979″. Data are “inflation-adjusted” and the source is the Bureau of Labor Statistics.

The picture looks even more bleak when the comparison of “Annual Changes in Hourly Earnings” is made with Canada and Mexico. When ALL categories of workers is compared, the “annual percent change” for the ten-year period 1996-2006 is: United States (+3.0%); Canada (+4.4%); Mexico (+4.8%). When the comparison is made among Production workers only for the period 2000-2006: United States (+3.3%); Canada (+7.7%); Mexico (+4.9%).

During the period 2000-2007, American consumers offset, in part, the high prices with a “46% increase” in Consumer Credit. Consumers are now burdened with debt. The federal government is burdened with $10 Trillion of debt as compared with approximately $5.4 Trillion eight years ago. Are we better off?

Comment by Phil, Nebraska - April 19, 2008 at 11:25 am
Americans prolly dont know their percapita debt

Comment by Anonymous - April 19, 2008 at 11:38 am
Re: Ex Apostle Comment…. My goodness, this individual is so far removed from reality, it does not warrant my answer but I will. Firstly, I am so blessed to have been invested all these many years in various issues and in funds that have appreciated in value. What is not mentioned is that all of these investments have “split” multiple times and the distributions have been re-invested (mostly) and with dollar cost averaging for all these many years, have accumulated greatly. As a result, I tout the importance of equity investing and reinvesting the distributions and disciplined monthly dollar cost averaging into no-load mutual funds and quality individual issues. ie. Microsoft, Google and Apple to name just a few!

Good luck!

Comment by WSW - April 19, 2008 at 11:54 am
Sad to say but when Bush got into office, I knew that he would invade someone based on his family history and Skull and bones connection, so i loaded up on gold, oil stocks, and haliburton stocks, and a company the Bushes own in Warren Mi, that makes tank parts, Thank you Bush yeah!!!!

Comment by great - April 19, 2008 at 12:01 pm
Ex Apostle

Agree that WSW may not have (mentioned) a “sell” strategy but that doesn’t mean that he doesn’t “rebalance.” Too, the strategy he espouses does work and when you achieve a “critical mass” the dividends (reinvested) do let you achieve a critical mass that allows one to weather out a storm.

That said, I do agree that equities are going to get hammered soon, and that investing over the last 10 years has brought a negative (real) return. However, if you were lucky and invested at the end of the last bear market (’02) you could be up substantially (as I am).

But, I bought puts yesterday on the index. As soon as the dollar rallies significantly (see Oz postings for details), I am going to stop lending to Americans by either going into another currency (FXF for example), or long commodities. There is a negative real return on cash right now and worse, you get taxed on a trivial gain on savings. Even holding physical gold/silver/platinum is better since there is no lost opportunity cost.

But whatever you do, don’t agree with Schmuck ;) (I do so like to play a little with you WSW :)

Comment by Anonymous - April 19, 2008 at 12:33 pm
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