Poor and middle-class families are entering the recession in a precarious situation due in part to declining or stagnant income growth, a study released Wednesday has found.
Incomes, on average, have declined by 2.5% among the bottom fifth of families since the late 1990s, while inching up by just 1.3% for those in the middle fifth of households, according to an analysis by the Center on Budget and Policy Priorities and the Economic Policy Institute, two liberal think tanks.
The wealthiest slice of Americans, however, saw their incomes rise by 9 percent.
The average income of the bottom fifth of families was $18,116; the middle fifth, $50,434; and the wealthiest fifth, $132,131.
Unlike what happened during the economic boom of the 1990s, lower- and middle-class families did not share in the prosperity of recent years, the report found. In fact, the United States hashad its longest jobless recovery and slowest rate of payroll growth during this decade.
"We're worried about the impact of the downturn on the families whose incomes haven't recovered from the last recession," said Jared Bernstein, Economic Policy Institute senior economist and co-author of the report.
Wages have not kept up with inflation, families have loaded up on debt and homeowners have seen the value of their largest asset decline, he said. The situation will only get worse during the economic downturn.
"Families are uniquely economically exposed to the costs of recession," he continued. "As we head into a recession, their incomes will take a further hit."
The income gap between the rich and the rest of the population is widening. In 22 states, the top fifth of families made more than seven times what the poorest fifth took home, according to the report. In the late 1980s, only one state - Louisiana - had such a spread. Meanwhile, in more than two-thirds of the country, the wealthiest saw their income grow more than twice as fast as the middle-class over the past two decades.
State governments, however, can step in and help mitigate this growing inequality and insecurity, said Elizabeth McNichol, a senior fellow at the Center on Budget and Policy Priorities and the report's co-author. For instance, they can extend the amount of time workers receive benefits during an economic downturn. Also, they can offer or improve support services, such as child care, health insurance and transportation services.
Governments can also put resources into public services and infrastructure projects, which will help create jobs and stimulate the economy, said James Galbraith, professor at the University of Texas at Austin and income gap specialist. The federal government may also have to funnel more money to the states so they can maintain services at a time when tax revenues may decline.
The study is based on U.S. Census Bureau income data that have been adjusted for inflation, the impact of federal taxes and cash value of government subsidies. It does not factor in capital gains or losses. It compares data from 2004 to 2006 with that of 1987 to 1989 and 1998 to 2000.
In unrelated news:
T.I. Banned From Speaking at Atlanta Schools
Looks like T.I. might have a harder time serving his community than expected. The rap star has been barred from speaking at two Atlanta area school districts due to recent gang activity.
The Grammy award-winning rapper entered a guilty plea to three weapons charges last month and must perform 1000-1500 hours of community service, which includes speaking to youth about the dangers of gangs and guns.
Cobb County officials insist the rapper has not been permanently banned, but admit that recent troubles within the schools make T.I.'s appearance untimely. On the other hand, Fulton County schools said T.I.'s ban is a direct result of his gun conviction.
Beyonce, Jay-Z File Marriage License
Beyonce and Jay-Z have yet to confirm their union, but reports claim the pair filed the marriage license obtained on April 1. According to Scarsdale Town Clerk Donna Conkling, the signed license was received on Friday and confirms that the couple tied the knot on April 4.
The law requires that a couple file their marriage license no more than five days after the actual wedding date, but Conkling said the license is expected to be processed with the state without any penalty.
The couple have remained silent about their nuptials while those around them spilled the beans. Mary J. Blige congratulated the newlyweds during her set at the Greensboro, North Carolina, stop of the Heart of the City tour. Pop sensation Rihanna later admitted to be "shocked" by news of the private affair.
McCain Calls Obama Insensitive to Poor
Republican presidential candidate John McCain on Sunday called Democratic rival Barack Obama insensitive to poor people and out of touch on economic issues.
The GOP nominee-in-waiting rapped his Democratic rival for opposing his idea to suspend the tax on fuel during the summer, a proposal that McCain believes will particularly help low-income people who usually have older cars that guzzle more gas.
"I noticed again today that Sen. Obama repeated his opposition to giving low-income Americans a tax break, a little bit of relief so they can travel a little further and a little longer, and maybe have a little bit of money left over to enjoy some other things in their lives," McCain said. "Obviously Sen. Obama does not understand that this would be a nice thing for Americans, and the special interests should not be dictating this policy."
The Arizona senator deflected questions about his record on the Bush administration's tax cuts — he initially opposed them but now supports extending them — by again criticizing Obama.
"Sen. Obama wants to raise the capital gains tax, which would have a direct effect on 100 million Americans," McCain said. "That means he has no understanding of the economy and that he is totally insensitive to the hopes and dreams and ambitions of 100 million Americans who will be affected by his almost doubling of the capital gains tax."
In an interview with "Fox News Sunday," Obama said McCain "not only wants to continue some of the Bush tax cuts for the wealthiest Americans and corporations, he actually wants to extend them, and he hasn't told us really how he's going to pay for them. It is irresponsible. And the irony is he said it was irresponsible."
Obama also said he would not raise the capital gains tax higher than it was under President Reagan and added, "I'm mindful that we've got to keep our capital gains tax to a point where we can actually get more revenue."
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