Obama's challenge: reversing a decade of middle-class decline

President Obama on Monday pitched a slew of measures to help middle-class families pay the bills. Living standards for many middle-class Americans have fallen during the past decade.

By , Staff writer

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    President Barack Obama and Vice President Joseph Biden attend the meeting of the White House Task Force on Middle Class Families in the Eisenhower Executive Office Building on the White House complex in Washington Monday.
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President Obama's latest economic relief effort, unveiled Monday, comes as America's middle class is by key measures slipping backward.

The definition of who is in the middle class is fuzzy, but it's not hard to see why the White House is pitching proposals directly the kind of families who work, vote, and traditionally have had opportunities to steadily climb the economic ladder.

After rising for generations, living standards have stagnated over the past decade for millions in this group. Real median incomes have been declining amid rising healthcare costs and college tuition. And an unprecedented pileup of household debt has accompanied greater risk of decline in the value of the typical family's major asset – a house.

Recommended: Are the rich getting richer? Take our quiz on inequality and incomes.

All this doesn't mean that middle-income America is falling off an economic cliff, or that it has been hit harder by recession than other groups. (The rich and poor have also seen their median incomes decline since 2000.)

But America's middle class represents a large swath of the voting public, a group more politically powerful than the poor and more vulnerable to economic swings than the wealthy. And the goal of an expanding and prospering middle class has long served as a litmus test for the nation's well-being.

Obama and his middle-class task force, led by Vice President Biden, propose doubling a child care tax credit for families earning less than $85,000 a year and ensuring that student-loan payments are capped at 10 percent of the borrower's discretionary income. They also propose new initiatives to help families supporting elderly relatives.

These measures won't fix all the challenges faced by working families, the president acknowledged. But the proposals indicate the political urgency of the issue, with unemployment at about 10 percent and congressional elections in the fall.

Here's a snapshot of where the US middle-class now stands:

• Median household income stood at $50,303 in 2008, according to a Census report released last fall. That figure is below where it stood a decade earlier, at $51,295, after adjusting for inflation, and a break from steady decade-by-decade gains seen since World War II. Stimulus programs, such as tax cuts, have helped many families avoid further declines in income since 2008.

• The middle group of households is earning a smaller share of US income now than it did a decade ago – and significantly less than in 1967, according to the Census report. The middle 60 percent of households received 46.6 percent of all income in 2008, down from 47 percent in 1998 and 52.4 percent in 1967. The share going to the poorest Americans has also fallen, with the top 20 percent of households seeing their share rise.

• Household debt levels, as a percentage of household income, are edging downward since the recession began. But they remain far above levels seen in the 1980s and earlier.

• Declines in home values over the past two years mean that about 1 in 4 homeowners with a mortgage is "under water," with a loan balance larger than the value of the house.

• The US now has barely the number of jobs it did a decade ago, even though the working-age population has risen significantly during that time. This has hit young people especially hard; many have high college-related debts amid high jobless rates for new graduates.

Who exactly is the middle class? The nebulous but important phrase has been the subject of the much debate. The Obama administration weighed in Monday with its own report on the subject, issued by the Commerce Department, suggesting that the label is defined not so much by income as by aspirations.

In a 2008 poll, more than half of Americans identified themselves as middle class.

The financial turmoil in US households includes an interesting phenomenon: Losses in income for husbands are being offset partly by gains for wives. Full-time working women have seen their median incomes rise over the past decade, while full-time male workers have seen their real median income decline, according to the Census report. Women also have a lower unemployment rate (8.8 percent) compared with men (11 percent).

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