A new survey released Monday by the Federal Reserve shows that middle class American families lost almost 20 years of accumulated wealth from 2007 to 2010. The median American family lost 39 percent of their net worth — from $126,400 to $77,300 — putting them roughly on par with their worth in 1992. The crash of housing prices directly accounted for three-quarters of the loss. The Washington Post reported that “Homeownership, once heralded as a pathway to wealth, became an albatross.”
Additionally, the Federal Reserve reported that median incomes fell across almost all demographic groups during the same period. The only groups to experience a rise in income were nonworking families — namely, retirees and the very poor. Some of that growth was due to an expansion of government aid programs that were part of Obama’s 2009 stimulus package. The decline in median income was most pronounced among more highly educated families and families headed by persons aged less than 55.
“The recession caused the greatest upheaval among the middle class. Only roughly half of middle-class Americans remained on the same economic rung during the downturn, the Fed found. Their median net worth — the value of assets such as homes, automobiles and stocks minus any debt — suffered the biggest drops. By contrast, the wealthiest families’ median net worth rose slightly.”
As Mark Zandi, the chief economist for Moody’s Analytics, told The Washington Post, “It’s hard to overstate how serious the collapse in the economy was. We were in free fall.”
The Fed’s Survey of Consumer Finances is released every three years to provide details on the finances of American families. Although the data is over 18 months old, it provides a snapshot of the staggering impact that the housing crisis and recession had on the middle class. In this morning’s Washington Post, political reporters Chris Cillizza and Aaron Blake write that we shouldn’t “underestimate the impact that those numbers could have on the 2012 election… There is lots and lots of other evidence … that suggests that voters are going to head to their polling place this fall with a pessimistic answer to the ‘are you better off’ question.”
While that remains to be seen, The Post’s Jonathan Bernstein writes that the big question is who voters blame for their pessimism. He writes that the 2007-2010 statistics are a reminder that this presidential election is “really a matchup between Obama and Bush…”
“Obama’s chances for reelection are going to depend heavily on whether the American people hold Obama or George W. Bush responsible for the economy. In effect, this is essentially a matchup between Obama and his predecessor in a way we haven’t seen in presidential elections before.”
The Atlantic’s Michael Hirsh writes that if Obama loses in November, it will be because he alienated the middle class. He writes that “[i]t’s hardly fair to blame Obama for what began in 2007, but there’s no reason why he shouldn’t also be saddled for some of the blame in underestimating the severity of the crisis. Indeed, as economist Emmanuel Saez has written, the wealthiest one percent in the country have actually made out better, in percentage terms, during Obama’s ‘recovery’ of 2009-2010 than they did from 2002 to 2007 under George W. Bush.”
“Judging from recent polls — my colleague Ron Brownstein parses one here — the perception of the president is that he’s spending a lot more time coddling the very poor (the uninsured) and the very rich (Wall Street) than he is the middle class. Obama spent a huge portion of his political capital on Obamacare, and almost none on helping underwater middle-class mortgage holders. Nor did he deploy, in a big way, the enormous leverage he had over Wall Street and Main Street both to induce more lending and hiring.
Hirsh writes that this “festering inequality at the heart of our economy is perhaps the main reason why Barack Obama may lose in November.” He concludes that if Obama gets voted out, the middle class “will be the ones to do it.”
Update: A new Gallup poll released today says more Americans blame Bush for the economy than Obama.