A Frustrated Middle Class Wants More Than Promises In 2024

Published Jul 5, 2023, 9:00 AM

The American middle class is feeling the squeeze: inflation, wages that haven’t kept up, higher interest rates and fluctuating markets are all adding up to a loss of collective wealth. Bloomberg’s Shawn Donnan and a team of journalists are following the economic lives of two dozen middle class families across the country as we head into the 2024 election. In this first installment we hear from four of them. What does it mean to be middle class in America today–and how will their shifting fortunes influence the way they vote? 

Read more: The US Middle Class's Economic Anxiety Will Decide the 2024 Election

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Have questions or comments for Wes and the team? Reach us at bigtake@bloomberg.net.

With the twenty twenty four US presidential election already picking up, we're once again hearing big promises from the candidates about how they'll make life better for you. Guessed it, the all important middle class.

The working class, the middle class. That's who built this country.

And by the way, the middle class build American and unions built the middle class.

Look at the economy. The Biden administration is doing all it can to make it harder for the average family to make ends meet and to attain and maintain a middle class lifestyle. The bill for the massive borrowing, spending and debt and record printing of money by the Fed that's falling on the American people.

Bloomberg Senior writer Sean Dunnan is back on the show today to tell us why the middle class isn't necessarily such an easy group to pin down or pander to.

The American middle class is one hundred million outs, and we often talk about those folks as a kind of amorphous mass that all share these common traits, and it's an incredibly diverse population. It's black and white and Latino. It's older, it's younger, it's a Republican, it's Democrat, it's increasingly independent.

Sean and a team of reporters went out to speak to middle class voters about their lives and how their circumstances will influence who gets their vote.

I've never needed to be the wealthiest person, but I need to have enough that I feel secure.

And I have still one child in college. We assist her with school in housing. I just don't know how much longer I can do that with prices going up.

I'm Wescasova today on the Big Take. What does the middle class really want? Sean. Good to see you again.

It's so wonderful to be here.

So on our very first show, you and I were talking about the fortunes of the American middle class, and we're back again talking about it eight months later. What's changed because you've been doing quite a bit of work on this.

So we're spending a lot of time looking at what we think of as the economic health of the American middle class. And that American middle class is those one hundred million people, those hundred million adults who make between forty five thousand dollars and one hundred and eighty five thousand dollars a year or so, and who have wealth of just under one hundred thousand dollars in assets to just over a million dollars in assets. We think that covers a pretty good portion of the American economy, and that's a portion of the American economy that is being hit by a number of different factors over the last year or the last couple of years really through the pandemic. One is the inflation we've all been watching and feeling. But they're also being hit by the reaction from the Federal Reserve in raising interest rates to that inflation as well, which has hit their wealth, and it's hitting the cost of their debt. In that American middle class, as we all probably know, has a lot of debt, whether it's in the form of mortgages, car payments, credit card balances, or student loans. And so we're watching this American middle class closely get buffeted by this end of an era. And that's the end of an era of easy money, low interest rates that have made life pretty good for the American middle class for over a decade.

And even in the time since we last talked about this, these wins that are buffeting the middle classes you describe it, have picked up and you found some pretty significant increases in just what it costs to live. We're all kind of feeling it, but you've put numbers on it. Can you give us a picture of that.

The American middle class, the average household in that middle class spend eight thousand dollars more each year than they did before the pandemic on household spending. And that's not just because it was easy spending and times were good. A lot of that was on items you can't escape, like transportation. The cost of owning a car last year hit over ten thousand dollars annually when you factor in car payments, insurance, maintenance, ands on. It's according to triple.

A and that's the first time ever.

That's the first time ever. It's cross that lot the median house. If you want to go out and buy it today. Before in twenty twenty one, that would have cost you a monthly payment about twelve hundred dollars. That's not twenty four hundred dollars. That's a doubling in the monthly payment that we've seen as interest rates have gone up. We've seen the Federal Reserve and its most dramatic tightening raising of interest rates since the nineteen eighties. In response to inflation that was at its highest level in forty years. It makes sense, but you know, you can talk about that in these kind of vague terms that make economic sense, but when you bring it down to the household level, there were just all of these costs. The household budgets have just been reordered, and that's really hard to escape.

And we've talked quite a bit on the show about how hard it is to find an affordable place to live, whether you're renting or buying a house. And one thing your research also showed is that how people are taking money out of their houses.

Again, right, so we're seeing people tap their home equity again. Over the last ten fifteen years, a lot of American middle class families that own homes have made a lot in terms of home equity, and they were refinancing during the pandemic. Well, now as costs have risen and they're trying to keep the household running and pay for new expenses like kids going off to college, or healthcare expenses or maintenance on the house, they're tapping that equity at a much higher level. And that is some people think often a sign of financial stress.

And in recent years, people were able to offset some of these pressures because their investments were doing well. The marcus were really high, and that too has given us all a reality check.

Yeah, and look, the American middle class was getting wealthier over the last fifteen years in a really dramatic way. In fact, in a pretty historic way. Over the last year and a bit. Since the Federal Reserve started raising the interest rates in March twenty twenty two, the American middle class has lost somewhere between two and three trillion dollars in wealth as an overall class. That's those hundred million people. Bring that down to the individual level, and that's somewhere between twenty five and thirty thousand dollars in lost wealth over that time, which is significant if you're talking about adults that are earning between forty five and one hundred eight thousand dollars a year. It's a big chunk to take. People say that's paper wealth. Well, paper wealth is also what you borrow against, right, It's also the thing that helps you finance the longer term investments like your kid's education. So many American families draw on home equity and their wealth to pay for their kids college, for example.

And to add to this, list of challenges is also that we're starting to see more layoffs across industries, whereas in the last several years that job market has been incredibly strong.

If you believe the economists, we are on the cusp of what's very likely to be a recession, certainly a slowing in the economy. Whether we actually get a contraction, we don't know yet, but we're starting to see layoffs in the tech sector, in finance, anything associated with mortgages. We are starting to see manufacturers do some laying off as well. And we've just described until now, you know, their rising household costs, that decline and wealth. That's all in the past. What's ahead is pretty frightening as well, potentially or anxiety inducing certainly for the American middle class. And that's a possible recession, possibility of job losses. And one of the features we've seen in these job losses, a lot of them have been white collar jobs so far.

And so here we are talking about this now at the very beginning of another long, contentious presidential election, and that gives it an extra layer of urgency too.

Absolutely, Look, there's an economic reason we're interested in the American middle class. Those hundred million adults are at the center of a consumer driven US economy. There are the people out there in the shops making the big purchases. They keep the American economy humming along. Those hundred million adults are also at the core of the American electorate. How they feel about the economy and how they feel about whether it's Joe Biden's manager of the economy and his vision for the economy, or whether it's his Republican opponent's dueling vision for the American economy. That is going to be one of the fundamental issues in this campaign. So it's one of the reasons we're going to be tracking the American middle class from here to forever.

I feel like, let's talk about what you did in a story, which was to take these big economic numbers and bring them to a personal level by talking to individual Americans in the middle class and what their experience has been like.

We are, and we're going to be running this through the election next year. Have teamed up with Harris the Posters, and they are running out a poll every quarter for us, and we're able with their cooperation to target this actual middle class, to make it a poll of the middle class, not just of the broader electorate or registered voters, which most posters do, and working with Harris, we've also been able to link up with some of these people that they're talking to. We did about two dozen interviews with people in the middle class. We're also bringing in people who we as reporters have met along the way. We've spent a lot of time on the road. We've all met characters in that middle class who we have stayed in touch with, and we're going to be coming back to them and liaising with them. And look, you know, the four people who we feature in this story are really emblematic of a broader class, and there's a couple of different themes that we can talk about.

And each of these people really exemplified one or more of these pressures that you were just talking about.

As you go through the American middle class, everyone has individual experience in terms of the Economist's part of the reason we're reaching out to all these people.

Being middle class in America today is not the same that it was ten years ago.

Middle class kind of tends sometimes to be in that range where you can afford some things, but you're still, you know, not able to maybe get everything you want.

We have been talking to folks in Florida and Minnesota and up in Michigan and New York State, all over the country, and what we're trying very hard to do is to make sure that we have diversity in terms of not just politics there's Republicans, Democrats, and a whole lot of independence out there right now, but also in terms of race and age and so on. What's very clear when we talk about the American middle class and we talk about this big population, is that there's a lot of different factions within that mass.

After the break, what do middle class Americans themselves have to say about all this? One of the middle class Americans who tells about her experience in this story is Lori Blumstein. Our Collie Claire Valentine spoke to her, and let's listen to some of what she had to say.

My name is Laurie Blumstein. I'm sixty four years old. Was born in Brooklyn, New York, but had been living in Florida for the last forty years. My main profession for the last forty years was in the finance mortgage business. Started out in banking as a tailer and worked my way up and then was a mortgage loan processor and mortgage a loan closer.

If you want to look at how the end of this era of easy money is hitting the American middle class, then Lawya is a pretty vivid example of that. She is white retiree in Florida. She was laid off last August from her job working in the mortgage industry because the mortgage industry just shut down, essentially.

Something that nobody would have thought just a few years ago.

Absolutely, and you know, even just a year before that was really booming. She's gone from living on a salary of roughly one hundred thousand dollars a year to living on just under two thousand dollars a month in Social Security payments.

So security is the greatest thing to live on and healthcare is not the greatest to have. Once I finally can get on healthcare, that is.

She's moved out of a three bedroom house into a smaller condo. She has reset her life in a very different way. She's loved to get back to work, but she says, I only know one thing, and that's the mortgage industry, and right now it's in the toilet.

And yet what I found interesting about her story too, was that she felt like even though her fortunes had changed dramatically, she still felt like she was okay and plans to take a couple of cruises this year.

And that's kind of crucial thing that we need to keep in mind as we talk about the American middle class. Right, being a member of the American middle class means having a measure of economic security. It means that when tough times hit, you have an ability to write it out. And Laurie has reset her life, but she also has plenty stashed away so she can have those cruises and has a fairly comfortable life.

And Sean Lourie Blumstein is, it's just one of many people. You say, you spoke to it, and you tried to get a pretty diverse cross section of American middle class people.

Absolutely, the American middle class is one hundred million adults, and we often talk about those folks as a kind of a morphous mass that all share these common traits, and it's an incredibly diverse population. It's black and white and Latino, it's older, it's younger. It's a Republican, it's democrat, it's increasingly independent. So we are trying very hard to make sure that we hear from all the different factions within that middle class.

Sean. Another person in the story is Ron Davis, and you spoke to him. What did he have to say?

Ron Davis is a white man married to a black woman, living in the suburbs of Minneapolis. He is a business executive, and he's a business executive whose fortunes really tell the story of the last few years for the American middle class.

And here he is.

My name is Ron Davis, and my age is fifty five, soon to be fifty six.

And how do you feel about that?

Turned it's better than the alternative, So you know, it's getting old is not necessarily fun, but it beats not getting old.

He used to run the loyalty program for North and South America at Radison, the hotel group. When the pandemic hit, he was laid off from them. At the end of twenty twenty one, for the first time in his career. He found himself unemployed and looking for a job, and he was a pandemic victim. Well, he found a job in the tech industry. He found a job with GoDaddy, where he was running a loyalty program for them. And in February this year, he was told that he had been laid off by them as well, so he's a victim of tech layoffs as well.

Loyalty is not just about customers to a brand and brand love. Loyalty's also about employees, because no one's going to be loyal to a brand that their employees aren't happy.

Ron is a relentlessly cheery person. Despite all of this, he will also tell you that he's been lucky and that he's managed to stash some money away over time. He and his wife, he'll tell you, slightly sheepishly, drive his and hers Mercedes. They just bought their twenty one year old daughter a Mini. They are in a pretty comfortable place as well. But what's interesting with Ron is when you talk with him, you also get a sense he's, for the first time in his career, perhaps encountered the vulnerability that's there in the American middle class.

Middle class. To me, I guess I would define it as somebody who is able to have shelter and food and healthcare and those those type of things and be able to afford it, but not to the point that they're no longer worried about money.

At all, it's been an uncomfortable few years for him, as a man in his fifties being laid off in an economy that tends to trend younger.

I kind of tested retirement at this time and found that it's not necessarily for me for a couple of reasons. One is I think I would drive my wife nuts, and then second of all, I think I still have more to give and more to give back.

Let's talk about another person too, and that's Mail Mills.

In many ways, he is emblematic a certain new black professional middle class that we're seeing in America.

Our Kellie Claire also spoke to him.

My name is Mail Mills. I'm thirty seven years old from Detroit, and I'm a digital marketer. I'm also an author, so going to be doing a lot of promotion for a coming book launch.

If you talk to him again, you scratch the surface. He's watched his investments take a hit this year.

I think being middle class in America today means being able to afford a kind of a certain lifestyle, right, and so you're in the better neighborhoods with the better schools, Maybe you have a degree or things of that nature. A fence, a nicer car, certain amenities, and certainly in terms of just economically, probably not living paycheck to paycheck.

He will tell you that his grocery bill each month is hired and it's ever been. And he will also talk through how he uses five or six different credit cards to make ends meet each month and to keep the household running.

You also spoke to a retired former police officer in Texas. Let's listen to what she had to say.

My name is Tammy Reno and I'm fifty six years old. I am from Temple, Texas. I retired after thirty years in law enforcement.

She's a white woman, a retiree who lives in Granbury, Texas, which is in the outskirts of Fort Worth, with her husband. She is, I think it's fair to say, an out and out Republican supporter of Donald Trump. And when she talks about the economy, she does it through a partisan lens, but also when you think about her personal situation, She's watched her retirement savings take a big hit in the markets over the last couple of years.

The one thing that I feel the most on is our retirements the stock market, and you know, our mutual funds and things like that have gone way down. I experienced over a twenty percent drop in my retirement funds, and I'm worried about it.

She also talks about going out to the grocery store and she's clipping coupons and looking to save and buying in bulk and freezing lots of stuff.

We started changing some of our lifestyle. We don't travel near as often, we don't eat out as often. I've always been a thrifty person, which helped me save quite a bit over the years. I was a single mother that was imperative. What it means to me middle class in America, I think is the middle class is getting squeezed. There's programs for people with less means, there's a lot of tax cuts for you know.

High earners.

But in the middle we're having to pay all of our taxes. We're having to you know, purchase groceries, We're having to purchase gas, which it's going high in price.

She's someone who feels the squeeze in retirement and is quite angry about it.

Then we come back, many fed up middle class voters are ditching party affiliations and calling themselves independent Sean as we talked about at this start. All the stories we're hearing right now are going to prominently figure into people's decisions about who to vote for in the twenty twenty four presidential elections, Who to vote for for Congress. What are you hearing about, how these different pressures people are feeling are affecting the way they vote.

We're entering in a really interesting election in that Joe Biden as president has pitched pretty much every policy that he does, whether it's economic policy, industrial policy, even foreign policy, has aimed at the American middle class and making sure that it benefits the American class. American presidents are always obsessed with the American middle class because the American middle class tends to vote a little bit more than some other classes. But Joe Biden is pretty unique in having pitched his entire presidency as being about the American middle class. Joe Biden, also, when you zero in on his economic policy, has really tried very hard to rebuild American manufacturing through industrial policy, to create incentives to have new electric vehicle plants, new battery plants, semiconductor plants. All of those are aimed at building, as he will tell you, new middle class jobs. Into the American economy bringing home a lot of those jobs that have been out sources, but those are also long term projects. A lot of those factories are being built now, but they may not be in place before the election. In many ways, the election in twenty twenty four is going to be a referendum on Joe Biden in the American middle class and how it's doing and right now. If you look at how the American middle class feels about the economy, the polls show that they're feeling pretty anxious. Our poll with Harris showed anxiety and stress topping the list of emotions for middle class folks when they look out at the US economy. We also see only about a third of middle class people that we pull think that things are going to get better in the year ahead in terms of their personal financial situation. That's not a good starting point if you're a president who's pitching to the American middle class. There is a partisan divide in that Republicans tend to view the economy as being worse than and to be more stressed about the economy than Democrats, but still only about forty percent of Democrats say they think that things are going to get it better in the yearhead Again, that's not a great starting point for a Democratic president. What we hear over and over again, also from people in the middle class, is that they're waiting to make a judgment. Lourie Blumstein will tell you that she is going to vote for Joe Biden no matter what. Tammy Pearson will vote for Donald Trump or whoever the Republican candidate is, no matter what. But we also have a much bigger mass of independence in America today. There's a Gallop Tracking poll that shows that forty nine percent of Americans now identify as independents. Used to be roughly a third Democrats, third independent, third Republicans. That's changed over the last few years. And that's true of the middle class. And so we're going to wait and see how they swing. It's too early to call it. But this is the reason we are tracking the economic health of the American middle class, because we know that American voters care about pocketbook and household budgets.

Well, what you said earlier is important. The idea that despite the fact that people are uncertain about the economy, most Americans have hardened their views on who they blame for almost anything. But it's that section in the middle. And one person who I thought was really interesting was mel Mills, who seem to have a very broad view of who he might vote for.

Yeah, and so does Ron Davis, by the way, you know, and this is a you know, white man in the suburbs of Minneapolis and the black man in the suburbs of Detroit, right, two very different people in different parts of America, and both of whom feel disenchanted with the regular parties and feel like the regular politicians, the Democrats and Republicans aren't really speaking to the American middle class. Which is really interesting because both of those parties are trying very hard.

And both of them signal that they may not vote for the ultimate Republican candidate or for Joe Biden, and may go looking elsewhere.

Right, which is another thing that we may see in terms of third party candidates popping up in the election next year, and maybe they will bleed off some of the votes from the middle class, which could have a significant impact on the election.

We've talked about several of the people you spoke to, but you spoke to many more. How do the politics line up among people you're talking about? How many people are saying they don't want the Democrat or the Republican.

The common theme you hear from folks is the economy and what I'm seeing and the squeeze that I'm feeling is causing me to look harder at my political decisions. The second thing you hear is I haven't made up my mind yet. You hear that a lot. I'm going to wait and see who the Republicans decide on as a candidate. And then the third thing you hear is just this anxiety and stress about the economy and frustration out there. There's a lot of policies being aimed at them, but the middle class doesn't necessarily think it's feeling the benefits.

The old cliche in American politics was always that people vote their pocket books. That if the economy is good, the incumbent wins. The economy is bad, they try somebody else. But lately, with culture wars and other issues coming to the fore, that's not so true anymore. That sometimes people will actively vote against their economic interest because a candidate is attractive to them for another reason.

Yeah, now, looking absolutely like I'm an economics reporter at Bloomberg News, a financial news service, I am conscious of the fact that I spend a lot more time thinking about the economy and economics and all of that data than a lot of people do, and that there are other issues out there. And we certainly saw that in the midterm elections right where a lot of people thought that inflation was going to fuel a red wave that was going to see the Republicans seize control of Congress, possibly even the Senate. That didn't happen. Why didn't it happen because these culture wars and other issues like abortion rights, guns even enter the debate, and so we certainly are likely to see that next year.

So ultimately, do you think that all of these things we're talking about are the thing that swing the election or is it just one important thing that goes into a big swirling pot. And it's hard to tell whether the economy will be one of the most important things that people make their choice on.

I'm going to vote for the big swirling pot. But I also think that in some ways, the economy is the stock, it's the broth, it's the foundation of that soup.

And of course, Sean, we're talking about the picture that we have in front of us now, and one of the reasons you're tracking this over time is it could look very different a few months from now if we should go into a recession.

We've already seen the story shift from household budgets and the impact of inflation on how househole budgets to now the impact of the fight against inflation and those higher interest rates on household budgets, whether it's mortgage payments, auto payments, credit card payments, student loans, and so on. And I think the next shift that we're going to see, we're likely to see is the impact of a slowing economy and what many economists still expect could be a recession either in the fourth quarter of twenty twenty three or the first half of twenty twenty four, that election year, and that is going to change the picture for the middle class. Yet again, one of the numbers I really keep in mind is one percent, and that is a one percent shift in the unemployment rate equals one point six million people in the US losing their jobs. We are now at historic lows in terms of unemployment, around three to three and a half percent. If we shift to four and a half five percent, maybe even five and a half six percent, we're going to see millions of people lose their jobs. What we've seen so far is that a lot of those people have been white collar, middle class workers, and we may see a lot more of that to.

Come, Sean, Just so you don't leave us in despair, is there another scenario?

Yeah, Look, the other scenario is that the US economy does what it has done so far, it's fair to say it this year, and that it's been remarkably resilient, and that the labor market and the jobs picture for a lot of folks holds up, and that we emerge next year from the pandemic and the economic damage that we've seen and all of the turmoil that we've seen in a much happier place, both of the American middle class and for America as a whole.

Sean, I was great to talk to you. Thanks for coming on the show.

It's always wonderful to be here.

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