The Dow Jones Industrial average hit a five year high on Friday, as the corporate world is almost fully recovered from the effects of the Great Recession. But for many Americans financial security remains elusive, according to a new study.
The fact that the Corporation for Enterprise Development, a nonprofit organization, recently reported that 43.9%of all American households are living on the precipice of financial ruin should concern you. Regardless of your politics, the statistic reflects a breakdown of an American ideal. According to CFED’s report, in the event that these households experience an unexpected setback (such as a job loss or a health crisis), they lack the resources to cover three months- worth of their basic expenses at the federal poverty level.
This situation applies even to those Americans who consider themselves “middle class,” earning household incomes ranging between $55,465 to $90,000, who are what CFED categorizes as “liquid asset poor,” meaning they own less than three months’ worth of savings for basic expenses in their asset possessions. Moreover, CFED found that 26% of Americans households are “net worth asset poor,” which means that the worth of their few assets is overwhelmed by their amount of debt.
The CFED’s data directly contradicts a popular theory among the political right, that life for the poor and middle class is not as bad as it's made up to be. To support this argument, conservatives often turn to a consumption inequality theory, which claims that the disparity between the amount of money spent on services and goods by the wealthy, the middle class and the poor has remained relatively the same, despite deteriorations in income inequality. The cost of basic necessities, conservatives say, has been consistently declining as a proportion to income. Liberals, of course, argue that the increasingly disparate distribution of income threatens the American economy, and so the polarizing debate about moral responsibility and inequality rages on.
Regardless of your political persuasion, these economic inequalities should make the hair on the back of your neck stand up. The American ideal that binds this nation together promises that hard work ensures success. And yet the relationship between household income and college attendance has steepened substantially for those born in the early 1960s and those born in the 1980s, which suggests that the household you are born into and your future income (as education is a critical predictor of lifetime earnings) will be amplified more and more for each generation. Clearly, income inequality today threatens opportunity equality for the next generation — and that is the antithesis of the American ideal.