President Obama Describes the Role of the Middle Class

On July 24, 2012, the San Jose Mercury News ran an article by Josh Richman and Matthew Artz, “Obama’s campaign hits Oakland. “Obama campaign hits Oakland.”

The article covers the typical campaign rhetoric. It has its requisite Romney and Republican bashing, has the required promises that he will give us all everything we want if we just give him one more chance, how everything would be better already if it was not for those other guys, and of course it was all wrapped up with a large dose of scare tactics to convince those present in Oakland that the bogymen conservatives were about to take away their babies, force them into slavery to corporations and do away with fair labor practices.

Nothing in the article therefore was a surprise—it was Campaign 101.  But there was one exception.  President Obama made one of those slips of honesty in a statement that was almost an aside.  Like most such moments of clarity and honesty, it is likely none even gave it a second though.  Yet, this statement like the others tells us volumes about how the President sees each class and what their role is for our society.

This specific statement regarded the middle class.  The President said in a section of the speech on how he would recover the economy the following:

“I believe the free market is the greatest source of prosperity in our history,” but any business owner will also tell you success requires workers with the right skills and education, and a strong middle class that can buy products and services.” (Emphasis added)

So the role of the middle class in America is to buy products and services so others can get more.  This is not the first time this has been said by the president or democrats running for office.  It is a clear statement of what they believe the middle class’s role is.  Of course this is truly ludicrous.  And, I am sure that many will write and say this is taken out of context.  But, is it?  And, even if it is out of context, it still illustrates a fundamental disconnect. If the rich are stealing all the profits from the poor and the middle class, and the poor and the middle class are the workers who are creating the value that the rich are exploiting, and the poor are, well, poor then who is to buying the goods?  Well it must be the middle class! Because, if it is the rich, then taxing the crap out of the rich will have them stop buying and that will hurt us all!

The overall problem with the logic that the middle-class are buying our economic prosperity is such that even a 5th grader has enough sense to know this is not how the economy works.  And, while it may take a few more years of education after that, these now high school students soon start to realize that there is a cause and effect between wages and costs.  The more we pay workers, the more expensive the goods they produce become, and the more expensive the goods, the more money the workers need to buy those same goods.  And since money doesn’t come out of thin air…

Wait! That’s the problem!

Money has been coming out of thin air since 1972 when we got off the gold standard, and that has compounded the problem.

You see, the middle-class can’t afford to buy anything.  They do not get the government subsidies that the poor get, and they do not have the excess assets that the rich use to invest and hedge against the loss of buying power; so the “prosperity” (printing more money to pay for all this stuff) disproportionality affect them.  In other words, they will likely never have enough money to buy anything more than they do now.  The more money in circulation, the more money going to the poor and the more money available to the rich to gain from investment hence they continually decline in value. And while the aggregate dollars in circulation will in fact increase they will be getting less for those increasing dollars than everyone else.

We are a nation that has a continually accumulating deficit spend and trade deficit.  Each year our nation is spending more on goods and services from other countries than we generate in GDP therefore we lose value each and every year.  And we have since the 1960s.  It is the middle class who has paid the disproportionality higher burden during the period. While it is politically expedient to blame the rich it is fact the poor that are draining the middle-class. So how will the President create programs to get more money to the middle-class so they can buy more stuff so the poor can get their subsidies and the rich get their profits?  Well the President, and the Fed think they can keep printing and/or borrowing more money (quantitative easing) and they can just create more incentives programs to get more of this cash to the middle-class.  The problem is that systemically this doesn’t work. The more they give, the more they print – the poor get higher subsidies, the rich continue to invest the extra assets, and the middle class keep getting hosed!!

So when the President said, “a strong middle class that can buy products and services” did he really mean it, and if you are middle-class how do you feel about being the nations prosperity purchasing system while you continue to have declining value for each and every purchase?

(Thomas W. Loker served as the Chief Operating Officer of Ramsell Holding Corporation. Prior to joining Ramsell, Mr. Loker was the founder and senior partner of Wild Tiger Holding Company and Thomas Loker Consulting. Visit his website at www.loker.com and his blog at tloker.wordpress.com.)