Though they shouldn't have, the numbers released last week by the Federal Reserve shocked Americans. People knew in their pocketbooks, from the loss of value in their homes, from the increased struggle just to get from pay check to pay check and, most tellingly, in their guts that it was bad.
Still, it was astonishing to learn just how bad.
The Great Recession and its aftermath left the median American family in 2010 with no more wealth than in the early 1990s. That meant two decades worth of hard work to get no where in terms of economic growth, and for many it meant going backwards.
That hypothetical median family had a net worth of $77,300 in 2010, compared to $126,400 in 2007, before the recession hit, according to the Fed numbers. Median family income also declined, from $49,600 in 2007 to $45,800 in 2010. The middle class, long the backbone of the United States socially and economically, is breaking.
America's middle class cannot sustain another recession before it recovers from the last one. It would invite social unrest. It would challenge the very substance of what America is, a nation of haves, not haves and have nots. The poor have a social safety net, and it needs protecting. The rich have resources that cushion them from downturns. But the middle class supports it all.
Making sure the nation does whatever it can to prevent another downturn, to restart the nation's economic engine, should be the kind of imperative that unites. The financial crisis in Europe, the slowing of China's and India's economies, should add to the urgency for action. It is a threat as serious as any outside invader or terrorist network. Yet instead of action, our elected leaders in Washington do nothing, content to posture and position themselves to best advantage for an election still more than four months away.
Due to this inaction, tax increases and spending cuts equal to a staggering 5 percent of Gross Domestic Product (GDP) are set to take effect Dec. 31. The uncertainty over what will happen during that lame-duck period between the election and the swearing in of a new Congress and a new or re-elected president, discourages businesses from investing and hiring. Bank of America, in a recent report, cited this uncertainty and the potential double economic hit of spending cuts and a broad tax increase in setting a one-in-three chance of recession between now and mid-2013.
Action is necessary now. The compromise is obvious. Agree to let the Bush tax cuts expire for the rich, but maintain them for the middle class, which cannot suffer another blow to their collective incomes. Agree to long-term reforms to Social Security and Medicare, that are at the root of the long-term deficit danger, while avoiding immediate spending cuts so sharp that they invite a double-dip recession, as is being seen in Europe due in large part to self-defeating excessive austerity.
Republicans, in control of the House, appear incapable or unwilling to compromise. The party's no-tax-increase pledges poison the public policy debate. And Republican leaders see lingering economic malaise as in their party's political interest, the formula most likely to drive President Barack Obama from office.
For his part, the president should be hammering away at this issue. He should be demanding action by Congress. President Obama should be meeting with congressional leaders regularly as he turns up the pressure for action.
The tragedy is that perhaps nothing could do more to generate confidence in the markets and the corporate boardrooms than a demonstration that Washington can work effectively to address serious matters. Yet that is the very thing Washington will not do.