A Era of Middle Class Crunch

The one big asset for most middle and working class people–their home–will most likely no longer be an automatic savings program.

Meanwhile, the big liabilities for most middle and working class people–credit cards–continue to drain away their purchasing power.

The government’s safety nets and mechanisms for upward mobility get thinner every day with the benefits going to privatization fanatics and the costs remaining with the American Family.

I worry about the future of this country and its children.

Part of my parent’s retirement and old age security comes from Social Security; an insurance program now being threatened with cuts and privatization. As you know, I’m vehemently against both and believe much of the problems with Social Security are in the minds of the people that want to reap the benefits of a large pool of money in their hands instead of the trust funds’ care. The future aged will have even more challenges when they find their homes no longer are the nest eggs they assumed they would be.

The wealth generated by housing in those decades, particularly on the coasts, did more than assure the owners a comfortable retirement. It powered the economy, paying for the education of children and grandchildren, keeping the cruise ships and golf courses full and the restaurants humming.

More than likely, that era is gone for good.

“There is no iron law that real estate must appreciate,” said Stan Humphries, chief economist for the real estate site Zillow. “All those theories advanced during the boom about why housing is special — that more people are choosing to spend more on housing, that more people are moving to the coasts, that we were running out of usable land — didn’t hold up.”

Instead, Mr. Humphries and other economists say, housing values will only keep up with inflation. A home will return the money an owner puts in each month, but will not multiply the investment.

We must prepare for that reality and this one. Credit cards are the worse use of credit possible and are getting worse by the minute. Cut them up and get rid of them now! They are at levels that would make a loan shark blush given the rate of inflation. Banks are milking them for all they are worth because one established, balances are hard to get rid of. Never pay minimum payments and try to keep them only for true emergency purposes. They are the yoke of oppression.

Interest rates continue to tumble for the U.S. Treasury, companies and home buyers alike. But for a large portion of 381 million U.S. credit-card accounts, borrowing rates have been moving only one way: up.

And average rates are likely to climb further in the near future.

New credit-card rules that took effect Sunday limit banks’ ability to charge penalty fees. They come on top of rule changes earlier this year restricting issuers’ ability to adjust rates on the fly. Issuers responded by pushing card rates to their highest level in nine years.

In the second quarter, the average interest rate on existing cards reached 14.7%, up from 13.1% a year earlier, according to research firm Synovate, a unit of Aegis Group PLC. That was the highest level since 2001.

Those figures look especially stark when measuring the gap between the prime rate—the benchmark against which card rates are set—and average credit-card rates. The current difference of 11.45 percentage points is the largest in at least 22 years, Synovate estimates.

The continued recession environment is cutting into our living standards, our chances for employment, and the necessary services that the government provides. Education is especially hard hit. There has been a lot of effort to privatize public services and this has led to some astounding changes in the effectiveness of the public arena to deliver benefits instead of profits to private individuals.

It has come to this: Parents are now being asked to send their children to school with their own toilet paper. And not just toilet paper, but all sorts of basic items that schools themselves used to provide for kids. It’s all part of a disturbing trend, highlighted by the New York Times last week, of cash-strapped public schools — their budgets eviscerated by state cutbacks — shifting more and more financial responsibility onto parents.

Privatization meant transferring responsibility for entire programs or functions to the private sector. But with the drastic budget cuts that states have been forced to make, responsibility for public services and programs is literally being forced into private hands one roll of toilet paper at a time. We’ve entered the era of backdoor privatization.

On the surface, these stop-gap measures don’t seem unreasonable. After all, it’s hardly new for parents in well-off school districts to chip in for supplies, music classes and even teacher’s salaries in an effort to minimize the effect of school budget cuts on their children. What is new, though, is the extent to which families are being asked to contribute basic items. This may be too much to ask of parents who are struggling to pay their own bills — especially since they’ve already paid taxes that are supposed to support the public school system.

Our war dollars do not go to paying soldiers decent salaries and to supporting veterans in their hours of need. They are increasingly going to line the profiteer’s pockets. Blackwater, Halliburton, General Electric, Boeing, are major recipients of government largess. In this day of tight wallets, corporations that step in to profit from government services are experiencing record profits. Meanwhile, the American middle and working class is left to fend for itself. None of this has changed under the current administration and will get no better in the future.

Be aware of this new and growing reality and do not play into the schemes. We have HAMP which is supposed to help with mortgage modification that has failed. There are early signs that the new federal health care reform is on the same path. The failure of these programs was in the design. The links I’ve given you in this paragraph are to right wing sites. This is to show you that their failure will be used by the right wing to force further privatization and ‘profitization’ of public suffering and need which will be a booming market in the future. The greedy will step in to take advantage of the opportunities and there will be politicians that will let them.

Don’t be caught off guard.