'Third World America': Is the U.S. middle class disappearing?

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"The slow economic strangulation of millions of middle-class Americans started long before the Great Recession, which merely exacerbated the “personal recession” that ordinary Americans had been suffering for years," wrote Edward Luce in a Financial Times article.

"Dubbed “median wage stagnation” by economists, the annual incomes of the bottom 90 per cent of US families have been essentially flat since 1973 – having risen by only 10 per cent in real terms over the past 37 years.

That means most Americans have been treading water for more than a generation. Over the same period the incomes of the top 1 per cent have tripled. In 1973, chief executives were on average paid 26 times the median income. Now the ­multiple is above 300.”

Recent home disclosure figures and underwater mortgage data are more tormenting.

By the end of the first quarter of 2010, the number of mortgaged residential properties with negative equity had declined slightly to 11.2 million, down from 11.3 million at the end of 2009, according to a report issued by real estate analytics firm CoreLogic.

However, data show that those 11.2 million loans make up roughly 24 percent of all U.S. mortgages. Add the 2.3 million borrowers who are close to slipping underwater (those with less than 5 percent equity), and the numbers rise to 13.5 million -- 28 percent of mortgages.

Moody's Economy.com, chief economist Mark Zandi estimated earlier this year that roughly 15 million American homeowners owe the bank more than their home is worth. The alarming fact is fact many homes are worth only half of their mortgages.

Across the country people who banked on the value appreciation on their homes are bracing up to the reality of tougher retirement days, and making matters worse, unemployment, especially in metropolitan areas, shows no signs of slowing down.

According to the Bureau of Labor Statistics, while the unemployment rate remained unchanged at 9.5 percent, the economy actually lost another 131,000 jobs in July. The data show that jobless rates were as high as 27.6 percent in El Centro, CA, 26.4 percent in Yuma, Arizona, 19.4 percent in Yuba City, CA and 17.3 percent in Merced, CA.

Speaking about her upcoming book “The Third World America” Arianna Huffington says the ongoing crisis has spawned developments that demonstrate what she calls an ‘’attack on the middle class” across the country.

She points to a New York Times report last week that said Hawaii has gone beyond laying off teachers and has begun laying off students -- closing its public schools on 17 Fridays during the last school year. The entire bus system was shut down in the Atlanta suburb of Clayton County while Colorado Springs turned off over 24,000 of its streetlights, she writes.

And it’s going to take more than a new stimulus to stop the country’s slide into Third World status, warns Huffington.

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