Three nails in the middle-income family coffin

We hear the term “middle class” often in this country, but it is a subliminal use of

Marxist rhetoric.  There are no “classes” per se in this country, but the left would have you think otherwise.  Thus, I refer to “middle income” rather than “middle class.”  (The term “capitalism” is used in similar fashion rather than the more descriptive term “free enterprise.”)

Notwithstanding any labeling issues, the heart of America’s “bell curve” is being pinched by three major factors. 

ZIRP

The Federal Reserve’s zero interest rate policy (ZIRP) is stripping middle-income people of any fair return on their savings.  This is a great impediment to the consumptive economy, for there simply are more people who choose not to borrow to purchase than those who wish to run up credit card balances.  Low interest rates may initially help those who borrow to spend, but eventually those people get credit maxed out, and the consumption ends.  Debt is future consumption denied, and the Federal Reserve has now run out of rope for stimulating consumption with low borrowing rates.  Those who ran up credit card balances freeze, and those who are prudent remain prudent.

If the saver was rewarded for saving with historically reasonable returns, that interest rate return would transfer into disposable income and discretionary spending, a steady and reliable economic engine the Federal Reserve seems to ignore.  Nail #1.

Health Insurance Costs

Despite all the promises by Obama, the costs of insurance and the cost of health care, two distinctly different issues, continue to ramp up.  Blue Cross Blue Shield has announced that there will be dramatic rate increases in 2016.  Others have followed suit. 

Rates for Blue Cross plans on HealthCare.gov increase by an average of 13.5 percent this year.  Coventry Health Care of the Carolinas and United Healthcare, also offer plans through the HealthCare.gov marketplace to North Carolina residents.  "Coventry… has asked for an average 18 percent increase, while United submitted a request for an average 12.5 percent increase."  "Blue Cross Blue Shield of North Carolina has asked state regulators for a 25.7 percent average rate increase on individual insurance plans purchased under the Affordable Care Act for 2016."  Citing higher-than-expected costs, Blue Cross and Blue Shield of New Mexico wants to raise premiums by an average of 51.6 percent on individual Affordable Care Act plans in 2016. 

If you pay for your own health insurance and health care, the problem is obvious.  If you work for a business that provides your health insurance, as their costs accelerate, your chances of increased pay subside.  Nail #2.

Real Estate Taxes

With the higher evaluations of real estate due to the record-low mortgage rates come higher taxes based on those higher evaluations.  This routine is essentially a tax on an unrealized sale.  You may pay high taxes on high property evaluations for years but sell in a real estate market that is down from previous years’ evaluations. 

Public pensions and local school support costs also creep higher each year, raising real estate taxes.  All those promised pensions awarded by nameless bureaucrats continue to build.  In most cases, the pension promises are unfunded.  Higher taxes on the home owner are the government’s answer to the unfunded pensions.  Nail #3.

The reduced consumption, the costs of health care and insurance, and the higher taxes on housing all are drags on economic activity.  If the pattern holds, the Federal Reserve will take this data and use it to substantiate more ZIRP.  The arguments now arise that the zero interest rate policy, federal government health care mandates, and unfunded pension promises made by local governments have set the stage for the crushing of middle-income households.  Perhaps that is the goal of the great “transformation” of America that Obama promised.  One end of the bell curve pays for the $25,000 dinner/fundraisers; the other end of the curve (Romney’s 47%) provides the votes for the Democratic Party.  That leaves the middle of the curve, and what good are they to Democrats and big government proponents?