Unease Over Economy Gnaws at Middle Class

NEWBURGH, N.Y. â€”  As Gail Fedigan, a 44-year-old mother of four, sits in her brick Tudor home in this Hudson Valley town on a quiet afternoon, her world seems comfortable and secure. Her husband is working steadily as a lighting technician and, while some of his extra free-lance work has dried up, there is no family financial crisis on the horizon.

Still, things don’t seem quite right to Fedigan anymore. Something has gone wrong in her America, and she is battening down the hatches, slashing her plans for the future. “There is a feeling that the rug has been pulled out from under all of us,� says Fedigan worriedly. “Everyone I know feels the same way.�

Certainly Joan Slocum, a 58-year-old Newburgh art instructor, and her husband, Kenneth, a 62-year-old independent trucker, do. They have raised and married off their three children, and Kenneth’s business is going well. But Joan is increasingly uncertain about health costs, retirement and her children’s future. They have just canceled their medical insurance because of skyrocketing premiums for the self-employed.

“Everybody’s a lot more cautious, and is playing it a lot closer to the vest,� she says. “I don’t know how the middle class is handling all of this. I don’t think it’s fair.�

Henry David Thoreau once wrote that the mass of men lead lives of quiet desperation. Now, it seems that the middle class is getting more and more desperate--and is in no mood to keep quiet about it.

In Newburgh and towns like it all across the nation, public opinion polls, political pulse-takers and scholars report that the middle class is increasingly uneasy about the future. Even relatively affluent families such as the Fedigans and Slocums, who have not been directly hurt by the recession, are giving voice to a vague, yet growing sense that the walls are closing in.

Options are becoming more limited, they feel, and their children’s generation will inherit a society in which prosperity is problematic and opportunity far from assured.

“Americans have always expected their lives to be better than their parents’,� observes Columbia University historian Alan Brinkley. “That belief is a mainstay of middle-class culture. And I think the experiences of the last 20 years, and more immediately this past year, have shaken that belief. Some of that pessimism may wane with a recovery, but I do think there has been a deeper change in the level of optimism about the future.�

Indeed, upward mobility, which once seemed to be the birthright of the middle class, now appears to many Americans to be an increasingly distant goal. So does the time-honored tradition of helping the next generation move ahead. The rising costs of health care and college tuition, the growing uncertainty over the security of pensions, soaring local taxes, an inadequate day-care system, declining home values, the growing worry that few jobs can still be considered permanent--all contribute to a sense of being overwhelmed.

Such fears are palpable here at the outer edges of the New York metropolitan area, where people are struggling with the same problems that haunt middle-class families almost everywhere now.

“Where is the next generation going to live?� asks Walter Millman, a Newburgh school administrator, whose 25-year-old daughter is now struggling to start a career. “What kind of message are we sending to these kids about their future?�

And it’s not just the future of their children that worries people. Many feel the distance is narrowing between their own secure middle-class lives and what they perceive as the abyss of poverty.

“I’ve been through crunches before, but I have never seen one like this, where you see middle-class people in bread lines,� sighs Susan Fink of Newburgh, whose husband, Gerald, lost his job on Madison Avenue when his advertising firm went out of business this fall.

“It’s complicated, it’s hard to explain,� says Georgianna Pentinen, a single parent whose son is just entering a community college in the Newburgh area. “I guess there is this feeling that you’ve got one class down there that’s homeless and has AIDS, and then you have the middle class, and they look over and see themselves slipping down into that, and that means, like chaos for them.�

That angst has helped make this recession feel much worse to many Americans than the bare economic statistics might suggest.

In dramatic testimony before Congress last week, Federal Reserve Board Chairman Alan Greenspan warned the lawmakers of that grim mood in stark, even historic terms. “There is a deep-seated concern out there, which I must say to you I have not seen in my lifetime,� the 65-year-old Greenspan said.

Consumer confidence plunged to the lowest level recorded in more than a decade in November, and skidded to the third-lowest monthly rating ever, according to the Conference Board, a New York research group. In addition, a Newsweek magazine poll found in October that 53% of Americans are now worried about their ability to maintain their current standard of living given the current state of the economy.

Observes Wall Street economist Lawrence Kudlow: “There’s no animal spirits, no juice to get this economy moving.�

Yet the depth of the fear suggests that there is something more going on than a simple response to a cyclical downturn.

In fact, the Conference Board has found that American expectations about the future, as measured by its consumer confidence index, are now lower than at any point in the severe recession of the early 1980s. Even America’s victory in the Gulf War and the West’s historic triumph over Communism in the Cold War have failed to generate any lasting optimism. A November poll by CBS News and the New York Times found that 43% of those surveyed believed that future generations will be worse off than Americans are today.

“There’s a helplessness that is layered on top of the recognition that current economic conditions are not good,� observes the Conference Board’s Jason Bram.

The White House acknowledged last week that the nation is still in a recession, although Administration officials have repeatedly pointed to data that indicates the slump has been quite mild.

They point out that the unemployment rate, now at 6.8%, is far lower than the levels of the last recession. They add that inflation, which has fallen to a rate of just 2.9% so far this year, seems to have been all but defeated.

Outside analysts argue that the data has failed to detect important distinctions that make people feel under constant pressure, no matter how the White House describes the economy.

“These are very rational concerns that people have,� Bram argues. “Nothing looks secure. There is no feeling of progress.�

A key indicator is that middle class-incomes have stagnated over the last decade, leaving a majority of Americans facing a worsening cost squeeze even during good economic times and lower levels of inflation. The middle fifth of American taxpayers, for example, saw their incomes rise by only 3%, after inflation, between 1980 and 1990, and those gains came largely from working longer hours, according to a new study by the Progressive Policy Institute, a research group affiliated with the Democratic Party.

And, while job losses were much worse in the recession of the early 1980s than they have been in the current downturn, they were mainly confined to blue-collar workers in Rust Belt manufacturing industries. This time, the losses have cut a wide swath through the salaried middle class in service and manufacturing industries alike, and in virtually all sections of the nation.

And they have hit at solid companies like IBM, which once seemed recession-proof. The message to many middle-class workers is that no matter how solid or successful their careers have been thus far, they could be shattered at any moment by forces outside their control.

More ominously, many economists now believe that this is the first “balance sheet� slump America has endured since the 1930s--a recession brought on by a mountain of debt left over from the 1980s.

Crushing debts burden federal and state governments, corporate America and individual consumers; the average American household now has debts that equal 94% of its annual income, the highest level on record. Total household debts reached $4.1 trillion in 1991, up from $3.3 trillion in 1988, according to DRI-McGraw Hill, a Lexington, Mass., forecasting firm. At the same time, with many of their loans going sour, banks and other financial institutions also face their worst crisis since the 1930s.

“This is a debt recession. We are going through a long process of paying off what we bought on credit in the 1980s,� says Lacy Hunt, chief U.S. economist for the Hong Kong Bank Group. “We borrowed to keep our standard of living up, and now we have to pay it back. And being forced to live within your means can be a rude awakening.�

All of that has also severely limited the government’s ability to respond to the recession.

The result: Americans have been left with a sense that the entire nation is in over its head.

“I’m beginning to feel like I should just feel lucky to have a job,� complains Bobby Doyle, a 31-year-old computer specialist in Newburgh--who by rights should be feeling wonderful these days. His wife, Lenore, is expecting their first child, and his job at Kraft Foods seems solid.

Yet his mood is turning dark. “My condo is worth less than what I paid for it five years ago, and I’m sure we won’t get a big bonus or raise this year, but all my bills keep going up.

“I think the economy is going to keep getting worse and worse,� mutters Doyle.