Whatablessing Reports .…American Standard of Living in Decline

We may have more vcrs, tvs, ipods, and computers but our standard of living is in the toilet. A look at some common stats will make that clear. The first step to fixing the problem is recognizing that we have one.

I don’t care what anyone says but it’s become totally clear to me that the economic path we have chosen is not working. Our standard of living is in decline. Sure, we may have more cars, more tvs, more iPods, but we’re working harder and harder to get them and borrowing more and more to afford them. As a country, I feel that we are poorer today than we were 8 years ago, and perhaps even than we were thirty years ago.

I believe at the root of the problem is one thing: the government’s calculation of inflation.

According to the government, inflation has remained tame over the last 8 years, rising less than 3-4% per year. Yet, we all know this number does not reflect reality. Here are some interesting stats:

The price of housing has more than doubled since 1997 in most parts of the country, resulting in mortgage payments that have taken a recent percent of a buyer’s salary. This is true even with record low interest rates factored in.
Health costs have been skyrocketing. In 2007, the average rise in health-care premiums is expected to be 12%. The average worker’s salary will go up less than 3%.
The price of energy is at record highs and shows no sign of coming down.
The price of food is increasing. Check how much you pay for a gallon of milk. I bet it’s almost double what you paid three or four years ago. I will concede that the price of junk food and McDonald's has stayed the same or dropped.
Many forms of entertainment have increased in price. Been to a concert or sports game lately? The prices are ridiculous.
Trips and vacations in foreign countries now cost almost twice what they did just three or four years ago. The falling dollar has made us poor in the international community.
College educations are increasing at three to four times the rate of inflation. An education at a four year private school costs between $40-50,000 per year.

Why does the government fudge the inflation rate number? It does that to keep the cost of entitlement programs down. If the government says that inflation is only 2% then it only has to increase social security payments by 2%. This change was originally made to reduce entitlements without having to actually cut them and taking the political heat. After all, if inflation is really rising at 5% and you only raise social security by 2%, you've effectively cut the benfit by 3%.

About the only thing that hasn’t increased in price are cheap lead-painted toys, cloths, and consumer electronics imported from China.

So, has our standard of living increased or decreased?

You tell me. If you like buying cars, eating at McDonald's, living in a household where two parents have to work to pay the mortgage, sitting in front of 3 tvs while you listen to MP3s on your IPod, I guess the argument could be made that thing have gotten better.

But if you are looking to eat healthy good, have time to exercise and spend time with your kids, want to take a trip, want to send your kids to college, want to see a concert, want to buy cloths from a place other than Target, then I'd say things have gotten worse.

So, I still wonder, are we living better now than we did 50 years ago?

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Whatablessing Reports…How to Fix Your Standard of Living

Not since at least 1960 has the US standard of living fallen so fast for so long. The average American has $1,315 less in annual disposable income now than at the onset of the Great Recession.

Think life is not as good as it used to be, at least in terms of your wallet? You'd be right about that. The standard of living for Americans has fallen longer and more steeply over the past three years than at any time since the US government began recording it five decades ago.

Bottom line:  The average individual now has $1,315 less in disposable income than he or she did three years ago at the onset of the Great Recession – even though the recession ended, technically speaking, in mid-2009. That means less money to spend at the spa or the movies, less for vacations, new carpeting for the house, or dinner at a restaurant.

In short, it means a less vibrant economy, with more Americans spending primarily on necessities. The diminished standard of living, moreover, is squeezing the middle class, whose restlessness and discontent are evident in grass-roots movements such as the tea party and "Occupy Wall Street" and who may take out their frustrations on incumbent politicians in next year's election.

What has led to the most dramatic drop in the US standard of living since at least 1960? One factor is stagnant incomes: Real median income is down 9.8 percent since the start of the recession through this June, according to Sentier Research in Annapolis, Md., citing census bureau data. Another is falling net worth – think about the value of your home and, if you have one, your retirement portfolio. A third is rising consumer prices, with inflation eroding people's buying power by 3.25 percent since mid-2008.

"In a dynamic economy, one would expect Americans' disposable income to be growing, but it has flattened out at a low level," says economist Bob Brusca of Fact & Opinion Economics in New York.

To be sure, the recession has hit unevenly, with lower-skilled and less-educated Americans feeling the pinch the most, says Mark Zandi, chief economist for Moody's Economy.com based in West Chester, Pa. Many found their jobs gone for good as companies moved production offshore or bought equipment that replaced manpower.

"The pace of change has been incredibly rapid and incredibly tough on the less educated," says Mr. Zandi, who calls this period the most difficult for American households since the 1930s. "If you don't have the education and you don't have the right skills, then you are getting creamed."

Per capita disposal personal income – a key indicator of the standard of living – peaked in the spring of 2008, at $33,794 (measured as after-tax income). As of the second quarter of 2011, it was $32,479 – almost a 4 percent drop. If per capita disposable income had continued to grow at its normal pace, it would have been more than $34,000 a year by now.

The so-called misery index, another measure of economic well-being of American households, echoes the finding on the slipping standard of living. The index, a combination of the unemployment rate and inflation, is now at its highest point since 1983, when the US economy was recovering from a short recession and from the energy price spikes after the Iranian revolution.

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