Sentimental Journey

Two of the indicators we chart actively on our site deal with the consumer’s confidence and sentiment.  Lately we have mentioned a divergence within this data which suggests there are two Americas congealing into distinct groups.  Those who earn over $75,000 per year generally feel things are improving; those who don’t, don’t.  This suggests to us that the 50-50 split we have observed over the last decade or so in individual viewpoints and their attendant political expression may be shifting rapidly.  Are we to soon reach a point where increasing numbers of the middle class feel their lifestyle is threatened by business as usual, adding their voices to those who are less fortunate in an attempt to begin redressing a system that they see as increasingly out of balance?  Will they see themselves as having been robbed of their birthright by an establishment which has grown increasingly out of touch?  Will they be angry?

Chew on this for a second.  According to a recent Bloomberg piece, the 2008 IRS income tax statistics point out that the top 1% of income earners pay about 38% of all income tax receipts.  The bottom 45% pays nothing.  Look closer; who are these people?  If you earn $380,000 or more annually, you’re in the top 1%.  If you are a traditional householder, married with two children, and pulling down $26,000 or less, then you are in the bottom 45%.  Apparently, earning anything between those two sums means you provide the government with the balance of its individual tax receipts.  Where does that put you?

Allow me to go one step further.  How do you raise a family on $26,000 per year these days?  With energy and food costs soaring, surely wages are keeping up, right?  No, actually, adjusted for inflation wages have declined 1% over the past year.  The possibility of higher taxes combined with benefit cuts may push ever more families into a lower standard of living, eroding the middle-class base.  That will not make for good politics in the future for either of the major parties.