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Politicians tend to define "middle class" as the group of people most likely to listen to their latest
sales pitch for re-election. Recent studies done by the US Census Bureau indicate that the middle
half of household incomes falls between $25K and $75K in the USA. Over the past two decades,
the number of households in those brackets decreased by 3.9%, from 48.2% to 44.3%. During the
same time period, however, the number of households with incomes below $25,000 decreased
3.5%, from 28.7% to 25.2%, while the number of households with incomes above $75,000
increased over 7%, from 23.2% to 30.4%. (Income, Poverty, and Health Insurance Coverage in
the United States: 2006, U.S. Census Bureau). So if the middle class is indeed shrinking, is it
because more households are becoming wealthy or upper middle class? Or has the data changed
recently? There has been much debate (most of it political) on this topic.
Since this study was undertaken by the Census Bureau, some major economic changes have
taken place in the USA. In late 2008, the simultaneous collapse of the US automotive industry, the
housing market and major investment portfolios created an economic crisis that rapidly became
worldwide. The US government responded by pumping large amounts of money (roughly $1
trillion) into the banking system and public infrastructure programs, hoping to speed economic
recovery and stem the tide of job losses. However, we are not out of the water yet. As this article
is being written, the unemployment rate in Ohio has topped 11%. In Michigan, it's even higher
(15%).
It is easy (and tempting) to get "partisan" and blame these events on one national political party or
the other. Certainly both have made their contributions to the problem. But we believe the current
economic malaise is the result of the following trends:
1. Massive national and personal debt. The US national debt has risen more in the last five years
than in the entire history of the country. Even worse than the debt are the unfunded obligations of
the US government in future years. Trump and Kiyosaki say that the unfunded obligations for
Social Security are roughly $10 trillion, and those of Medicare are roughly $60 trillion. They
compare these to the estimated value of the entire New York Stock Exchange at $35 trillion.
These massive obligations are the result of unfunded promises to the large generation of baby
boomers who are approaching retirement age. There is simply no way out of this morass that is
without significant pain. Second, personal debt is also at an all-time high. One of the reasons for
so many home mortgage foreclosures was homeowners using their home equity as a "piggy bank"
to fund cars, vacations, luxury items, home improvements, etc. When the housing bubble burst,
many of them could not keep up with their mortgage and credit card debt.
2. The true emergence of the "flat earth." Thomas Friedman's book, The World Is Flat, warned us
that this was coming. Many skilled jobs are being shifted from the US and Europe to emerging
nations like China and India. This, as well as the unfunded promises US automakers made to their
own workers, created the setting for their downfall. The US government is tempted to engage in
protectionism to turn this around, but history has proven that this approach will not work. So no
matter how many diatribes you hear about NAFTA or "big companies moving jobs overseas", the
harsh reality is that we are rapidly shifting to a global economy. When the US was a true economic
power, we could have more influence on global trends. Now, we are a debtor nation. Like your
Mom always said, "Debtors can't be choosy."
3. The growing cost of energy. Most people feel the cost of gasoline first, but the impact is also felt
in natural gas and electricity. High gas prices were certainly impacted by the Iraq war, but the
shrinking supply of "cheap" oil and the rising cost of "clean" energy production is driving the price
ever higher. High energy prices strike at the very heart of job creation and personal finances. Most
middle class Americans drive their cars to work, to buy food, etc. The price of food is also linked to
the price of energy because of the high level of automation in US agriculture.
Debt, economic globalization and high energy costs have creation the "perfect storm" for
economic disaster. As Trump and Kiyosaki point out, a disappearing middle class is a threat to
democratic capitalism itself. Well, enough of "bad news." How do we fix this problem? They
suggest some legislative and political solutions, but most of us are powerless to force our own
government to do a lot of changing, at least as individuals. What can we do to protect ourselves
and our children/grandchildren? We like the answer Trump and Kiyosaki give: We can choose to
become wealthy. In today's world, the choice may not be whether you want to be rich or middle
class - it's whether you want to be rich or poor.
You can choose to become wealthy by enrolling in the school of hard knocks and gaining a
"financial education" - the kind that is (unfortunately) not offered in US high schools or universities.
Rather than turn your hard-earned savings over to a "money manager" who will charge you
whether he makes money for you or not, you can learn to make your own investment decisions.
There is zero evidence that professional money managers, for example, can routinely outperform
the Standard and Poors stock index. So why should you pay them? Investing is not nearly as
complicated as most would have you believe. And certain types of investing have tremendous
leverage and tax advantages. The only reason not to become informed in the Age of the Internet is
laziness.
We highly recommend reading Why We Want You To Be Rich, but we also recommend you
become a serious student of your own wealth creation and preservation. Whether you are "middle
class", "upper middle class", or "wealthy", you are responsible for your own financial condition.
Only the very poor can afford to depend on the government to take care of them. And as financial
reality hits the USA, the US government is going to be forced to disappoint us all.
"Dr. Dick" Pritchard is a successful high income professional and Internet marketer. He works with
other professionals like himself to create wealth and diversify income sources.
You can learn more by visiting Dr. Dick's website at [http://tr.im/sWzK]
Article Source:
http://EzineArticles.com/?expert=Dr._Dick_Pritchard
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