Americans on Wrong Side of Pay Gap Run Out of Means to Cope

The article quotes Republicans who blame President Obama, when it has been the Republicans who have blocked most of his attempts to stimulate the economy. It is the Republicans who pushed thru the anti-stimulus sequesters.

http://money.msn.com/business-news/article.aspx?feed=BLOOM&date=20131230&id=17222926

Rising income inequality is starting to hit home for many American households as they run short of places to reach for a few extra bucks.

As the gap between the rich and poor widened over the last three decades, families at the bottom found ways to deal with the squeeze on earnings. Housewives joined the workforce. Husbands took second jobs and labored longer hours. Homeowners tapped into the rising value of their properties to borrow money to spend.

Those strategies finally may have run their course as women’s participation in the labor force has peaked and the bursting of the house-price bubble has left many Americans underwater on their mortgages.

“We’ve exhausted our coping mechanisms,” said Alan Krueger, an economics professor at Princeton University in New Jersey and former chairman of President Barack Obama’s Council of Economic Advisers. “They weren’t sustainable.”

The result has been a downsizing of expectations. By almost two to one -- 64 percent to 33 percent -- Americans say the U.S. no longer offers everyone an equal chance to get ahead, according to the latest Bloomberg National Poll. The lack of faith is especially pronounced among those making less than $50,000 a year, with close to three-quarters in the Dec. 6-9 survey saying the economy is unfair.

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The diminished expectations have implications for the economy. Workers are clinging to their jobs as prospects fade for higher-paying employment. Households are socking away more money and charging less on credit cards. And young adults are living with their parents longer rather than venturing out on their own.

In the meantime, record-high stock prices are enriching wealthier Americans, exacerbating polarization and bringing income inequality to the political forefront. Even independent government agencies like the Securities and Exchange Commission and the Federal Reserve have been dragged into the debate.

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Even those with college degrees are having trouble keeping up, he said. While they earn more than those with less schooling, they’ve seen no real wage growth in recent years. The median income of men 25 years of age and older with a bachelor’s degree was $56,656 last year, 10 percent less than in 2007 after taking account of inflation, according to Census data.

“It’s very difficult for anyone middle-income and lower,” said Ryan Sekac, 26, a mechanical engineer in Westerly, Rhode Island. “There was a time when it was easier.”

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Government policies also play a role. The Treasury Department, for instance, taxes capital gains racked up by the wealthy on the sale of shares, bonds and other assets at about half the rate of ordinary income. The top 1 percent captured 95 percent of the gains in incomes in the first three years of the recovery, based on analysis of tax returns by Saez.

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Across companies in the S&P 500, the average multiple of CEO compensation to that of rank-and-file workers is 204, up 20 percent since 2009, according to data compiled by Bloomberg in April.

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