Growing American Economy Leaves Middle Class Behind

LIKE shopping malls across the country, Wheaton Plaza in this D.C. suburb thrives on weekends when families run errands, retired folks stroll, and teenagers do what teenagers do best, hang out.

Some of these people shuffling in and out of Gap Stores and Stride Rites recall that when Bill Clinton made the recesion-weary middle class the centerpiece of his presidential campaign, he was talking to them.

But two years later, many don't feel their wallets or purses are any fatter. Though general economic conditions have improved in the country, economists say the average American has seen little improvement in living standards and in many cases has experienced a decline - a trend with important implications for 1996.

Take Frank Brown. A 20-year veteran of the Montgomery County police department, Mr. Brown typifies the vast number of Americans who are struggling to make ends meet. His income is failing to keep pace with inflation, and he can't seem to escape the squeeze on family finances.

Sitting on a mall bench with his two girls while his wife shops, he explains his dim view of government. ``Taxes are high but we've had a cutback on services - like no trash collection for six weeks,'' he says.

Brown says his wife's full-time retail-store salary is a necessity. But the dual incomes still don't put the Browns in sound financial shape. Middle Class, Left Out

Still, he says, ``We're more fortunate than most. We have a small savings. A lot of people live paycheck to paycheck.''

The Clinton administration, for its part, believes there have been improvements. Vice President Al Gore Jr., for instance, says low interest rates have helped spur a strong rebound from recession. Inflation is low and millions of jobs have been created.

``We have been focusing on working families,'' he said at a recent Monitor lunch.

But, as Mr. Brown knows, the past two years of recovery, while generating an impressive boost in worker productivity (because of corporate downsizing, cost-cutting, and technology), has produced only lackluster wages. The Census Bureau recently reported a 1 percent drop in median household income from 1992 to 1993. The current income is still well below the 1989 level.

Even housing, an interest-rate-sensitive industry and a traditional barometer of the nation's economy, has stumbled. Mortgage bankers report that the lowest rates in decades released a huge wave of home-loan refinancings, but business for home purchases has been far less brisk.

Reflecting the demand for affordability, prefabricated home sales have exploded, says Bruce Savage, spokesman for the Manufactured Housing Institute in Virginia. ``Most of the new jobs created in this economy today are service jobs that don't provide the salaries that can afford site-built homes,'' he says.

``For the middle class, the data is very clear: It has been declining,'' says Ruy Teixeira, director of the politics and public-opinion program at the labor-oriented Economic Policy Institute in Washington. ``People who can't understand middle-class bitterness and cynicism these days need to recognize a troubling development: The economy is growing without raising average living standards.''

For most Americans, Mr. Teixeira says, ``it's a question of their ability to move ahead. Their hold on middle-class status they've attained is tenuous.''

Economists warn that most Americans will be strapped during their retirement years unless they dramatically increase their savings rate. Current baby boomers - age 35 to 48 - must boost their savings by three times in order to maintain their current standard of living, says Stanford University economist B. Douglas Bernheim.

But if Budget Director Alice Rivlin's recently controversial internal White House memo comes to fruition - she wrote of ways to cut the government's deficit through such things as higher taxes and reduced spending on Social Security, Medicare, and Medicaid - the middle-class family will have to save even more.

Retirees on fixed incomes fear their spending power will be further eclipsed by higher health-care costs or reductions in their Social-Security benefits. Many were hard hit by the 1993 Clinton-congressional deficit reduction plan that established a new threshold for additional taxation ($34,000 for individuals and $44,000 for couples). With one-fifth of the elderly living near or in poverty, slight cuts in Social-Security payments can push many over the line.

Because of company cost-cutting and early-retirement plans, 55- to 65-year-olds experienced the largest negative change in their incomes during the past year, says David Certner, a lobbyist on economic issues for the American Association of Retired Persons (AARP) in Washington.

``Whatever savings they have, it is not enough to sustain their 25 years average in retirement,'' he says. ``Of all the polling we've done, this group is clearly the most nervous.''

Statistics show that this age group's chances of reentry into the work force is slim. What's ahead for those just starting their working life?

Eighteen-year-old Denidza, a cashier for one of Wheaton Plaza's T-shirt concessions, echoes a familiar comment: She and her friends have a tough time finding work. After her last job at a fast-food chain, she looked for a long time before she found work at the mall. If one of her applications is accepted at an area college, her biggest challenge will be how to pay for school. Scraping the money together will be worth it, she hopes. ``Then maybe I can find a better-paying job.''

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