Researchers at Harvard University have concluded that the middle class of America is now a “minority.” This was deduced after observing a growing and disturbing number of Americans who are now spending more than 30 percent of their income to pay for and maintain their homes. The Harvard analysis on our country’s housing demand and home prices saw that the share of household burdens has been steadily declining for five consecutive years. The rate of decline is still in the single digits, but financial experts caution that this does suggest a potentially dangerous situation. With more people exceeding the traditional affordability standard, more working Americans are becoming burdened with debt.
This is yet another worrying symptom of our nation’s economic health. Already we are seeing people aged 65 and over refusing to retire because they cannot afford to and working professionals living from paycheck to paycheck. (Related: The end of retirement: Baby boomers working through their golden years.)
Skeptics maintain that the situation is not all that worrisome. Government perspectives have routinely concluded a positive, though gradual, improvement in our economy. The “dangers” of a failing middle class are mere observations which supposedly wilt under the glare of numbers.
So, let’s talk facts.
U.S. house prices rose by 5.6 percent in 2016, which surpassed all record numbers a decade earlier. Among areas with high appreciation rates, home values now average $575,000, which is four times the average of home value rates with lower appreciation rates. Despite there being moderate gains in construction and reported improved housing conditions, home ownership numbers remain sluggish.
This has led more people, the Harvard report stated, opting to rent; yet even then, they find the situation burdensome. The share of renters with severe financial burden does vary from state to state but the general conclusion was that more than 11 million renter households pay around half of their income just for housing alone. Homeowners, on the other hand, are shown not to spend that much, but still exceed the acceptable allocation of only 30 percent of one’s monthly budget.
In total, this equals to about 38 million American household that technically can’t afford their homes. This is a 146 percent increase in just 16 years.
A natural consequence of this is that we have less money to pay for other basic necessities such as food, clothing, transportation, and yes, even health care. In a passionate piece on The Economic Collapse blog, author Michael Snyder said that the shrinking middle class can be blamed on paychecks staying the same while cost of living expenses rise. The burden is made even more unbearable with forced medical insurance imposed by Obamacare. Despite many Republicans promising to repeal the law, Senator John McCain was recorded as saying to Face the Nation that the effort will “probably be dead.”
The lethargic action towards strengthening the middle class has been seen for several years now, regardless of the many initiatives begun by previous administrations. A 2009 summary made by ex-President Obama talked about the creation of the Middle Class Task Force which was aimed at boosting the living standards of middle class families. Four executive orders were signed relating to the task force, although results from these projects have seen little to no effect on the current economy.
More recently, President Trump is reportedly talking about a new tax plan which would help the middle class improve their situation. Bloomberg listed some of the supposed provisions which includes eliminating the Alternative Minimum Tax and taking out the 3.8 percent investment income tax under Obamacare which applies to individuals with incomes exceeding $200,000.
The new tax plan is still being scrutinized by economists who say they are confused as to how this would actually benefit the middle class.
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