BY JOHN GALLAGHER
FREE PRESS BUSINESS WRITER Ron and Laurie Kopack are educated, hard-working suburban Detroit homeowners who, by American middle-class standards, should have earned comfortable family evenings, a little peace of mind and a few luxuries. Instead, they are struggling. Ron, an electrician, spent most of his summer living in a tent city while doing flood repairs in Iowa because he couldn't find work at home. Laurie, who just got a bachelor's degree but is paid only $15 per hour, faces $30,000 in student debt and a teenager coming of age with his dad often gone. "The whole American dream, that's a snow job," Laurie says. "I mean, who tried to sell us that? Is that to keep us good consumers?" Without question, the U.S. economy is an engine of prosperity that produces comfort and wealth admired worldwide. But the Kopacks' plight illustrates an uneasy truth for millions today: Our middle-class standard of living, a seemingly unstoppable vehicle that has carried generations from dirt-floor cabins to manicured suburban subdivisions, has sputtered and stalled. This is a long-term shift, under way long before this year's financial crisis made the economy the key issue in the presidential campaign. The common link is debt. It's swallowing family budgets, with the average household now owing more than $110,000 while saving only about $400 a year. Much of this decade's middle-class spending -- critical to the nation's economic growth -- has been fueled by borrowing. But forces other than debt are pulling down the standard of living. Increased borrowing has helped mask the fact that middle-class household incomes have stagnated for years as expenses rise from cradle to grave. Health care, college education, food and energy costs have risen far more rapidly than inflation. Retirement is riskier: One study -- done before the latest stock market dive stripped $2 trillion from retirement plans -- suggests eight in 10 workers face a lower living standard in retirement. So it is that in El Paso, Texas, Ivonne Moreno, 37, a single mother of two teens, crosses the border to Mexico to find cheaper doctors and medicines because she can't afford U.S. health care. In Tampa, Dalia Pereira, 59, a veteran ticket agent with Northwest Airlines, says cutbacks by the airline have reduced her pay to what agents made in 1996. And in rural Iowa, Scott Davis, 33, and his wife have become a three-income family -- she's a teacher while he farms and runs a trucking business -- yet they pinch pennies at the grocer, limit trips to town, eat out less and worry more. The implosion of major Wall Street firms has pushed the economy to the top of the news in recent weeks. But Wall Street isn't feeling any pain today that middle-income families haven't been struggling with for years. Americans' incomes were losing ground to inflation even in 2002-04, when the national economy was booming, gasoline was selling for $1.50 a gallon and subprime mortgages weren't yet a problem. With gas prices at record levels this year and families burdened with rising debt and falling home prices, the likelihood of Americans seeing their incomes keep pace with inflation grows less and less. Even so, many have faith in the economy's resilience. Certainly, the United States remains a wealthy country, the fruit of decades of innovation and hard work. Productivity, or output per worker per hour, has risen steadily for generations, thanks to new technology and higher education levels. For this reason, Dana Johnson, chief economist with Dallas-based Comerica Inc., says the free market will correct itself as it has in the past. "At the end of the day, we have an incredibly productive economy that's going to continue to get even more productive and evolve in reaction to the changing relative price of things," he says. "The idea that you would look to the future with the idea that standards of living in the United States are generally going to be lower is absurd to me." Others argue that unemployment and inflation remain modest by historical standards. But Jared Bernstein, an economist with the Washington, D.C.-based think tank Economic Policy Institute, says almost none of the new wealth created by rising productivity of recent years has made its way to the middle class -- the broad swath of U.S. households generally described as those making around $40,000 to $100,000 a year, although no official definition exists. Productivity has risen 20% since 2000, he notes, while working families' incomes lost ground to inflation in five of the past seven years. "What's really been violated here is that the bakers themselves, who have been baking a better pie, are ending up with smaller slices," Bernstein says. "We're not talking about the Great Depression," he adds. "We're not talking about massive homelessness. We're not even talking about huge losses. We are talking about stagnation, and we're also talking about inequality." Charles Ballard, an economist at Michigan State University, agrees that prosperity gains have gone mostly to those at the top. "This is a rising tide that has lifted about a quarter of the boats a lot, a quarter of the boats some, and the other half of the boats has essentially not been lifted at all," he says. Rising prices, debt Middle- and working-class Americans' standard of living has been buffeted by the disappearance of manufacturing jobs in states like Michigan, by aggressive marketing of consumer debt and by household incomes' failure since the late 1990s to keep up with inflation. From 1999 through mid-2008, the price of milk has risen 35%, ground beef 54%, eggs 128% and gasoline 244%, government data show. Yet middle-income Americans saw their yearly household incomes fall by $408 during that period when adjusted for inflation, the Census Bureau reports. Over that time, Americans turned more and more to credit. Credit card and other consumer debt, not counting the dramatic growth in mortgages, has soared 150% since 1994, more than four times faster than inflation, according to Federal Reserve Board data. The increasingly easy availability of credit to fuel consumer spending, which accounts for about 70% of the U.S. economy, has been important to growth as real income has stagnated. Consumers aren't hapless victims in the explosion of debt; not only rising costs, but also their expectations for how they should live have led them to take on debt -- for necessities and luxuries from cars to college educations, vacations and more. Most families are getting by -- even if the value of their home has fallen or a secure retirement program has been converted to a voluntary plan that is exposed to stock market swings. Still, economic worry and discontent has taken center stage as the country heads into the home stretch of the presidential campaign. Rising living standards are part of the American story. Over the past century, the steady growth created the middle class, defused economic unrest and helped the nation absorb millions of working-class and immigrant families into the mainstream. Against this backdrop, Jacob Hacker, a political scientist at the University of California at Berkeley who studies the risks facing Americans, says he sees a broad decline in the economic security of most Americans. "The unemployment rate or the inflation rate doesn't capture the degree to which people are at risk of losing their home, or see their finances crumbling, or the risk of high health costs without insurance coverage, or the risk of retiring without adequate income," he says. On the road For Ron and Laurie Kopack of Oak Park and millions like them, what philosopher and economist Adam Smith called the invisible hand -- the knack of free markets to reward effort and innovation -- has become an invisible fist, pummeling even those who show old-fashioned American grit. Certainly Ron, 53, is used to working hard. A unionized electrician who helped build the Chrysler Tech Center in Auburn Hills and the McNamara Terminal at Detroit Metro Airport, he has spent several months on the road this year, first in West Virginia and more recently in Iowa, seeking the jobs he cannot find at home. In Iowa, he worked 12-hour shifts, seven days a week, repairing flood damage at a Cargill grain plant in Cedar Rapids. Living in a small tent in a campground filled with itinerant electricians and other tradespeople, Ron says life on the road makes sense only when a job is big enough to pay lots of overtime. When the overtime runs out, he and the other nomads move on. In the meantime, his life, once focused on family and friends in Michigan, has shrunk to encompass little beyond long days of work and phone calls home. "I get back to the tent, by the time I eat and shower and maybe drink a beer, it's time to crash," Ron said this summer in Iowa. "Maybe I'll read for a half an hour. And then up at 3:30 or 4 in the morning. It's not the type of life I consistently want to do for a long time." Yet despite such effort, Ron, and Laurie, 50, a secretary at a college in Detroit, have been unable to put away savings toward retirement. They don't know how they'll pay for their son Leo's college tuition in a few years, particularly after going in debt for Laurie's recent college education. "We're not financial planners," Laurie says, sitting in the living room of the family's bungalow. "We haven't done everything right. But we certainly don't live extravagantly. Our vacations have been camping trips. ... I'm not begging on the corner. It hasn't come to that. We're just doing what it takes to get by. But it's not good, and it's not normal." It is startling for families like the Kopacks how different their lives feel from their upbringing. Laurie's father, a plumber, raised six children on one income while Laurie's mother stayed home with the children. Their family lived in a suburban waterfront house on popular Lake St. Clair and still managed to save money long-term. That secure, slowly improving family lifestyle, once so common as to virtually define America, has become increasingly hard to find in a world of rising prices, risky employment and rocketing debt. "There's no way we could afford that today," Laurie says. "Things have changed radically." Canary in a coal mine Michigan is a good place to help bring this story into focus, and not just because families like the Kopacks abound here. Michigan is the nation's economic story writ large: The state gave birth to the American middle class in the early years of the 20th Century, as rising productivity in the new auto industry boosted incomes for millions of working families. Today, though, Michigan's pain is a portent for what the rest of the nation might soon be feeling. Layoffs are rising as national unemployment is at the highest level in five years. High gas prices have crimped travel plans, with the Federal Highway Administration reporting that Americans have driven 53.2 billion miles less from last November through June than during the same period the year before. These economic pressures, known to Michigan families for years, are increasing elsewhere. And, as a result, Americans everywhere are dialing down their lifestyles in ways large and small. They are giving up vacations and putting off trips to the dentist. They're dropping out of health clubs. They're packing their lunch instead of buying it, taking in roommates to share living expenses. Some of the adjustments, like Ron Kopack's summer in a tent city, run counter to what most Americans think of as their promised standard of living. In Oregon City, Ore., landscaper Gordon Westfall, 39, still walks with a limp two years after an accident mangled his foot because he and his wife, April, could not afford health insurance. Like Ron Kopack's months-long exile from home in search of work, Gordon Westfall's limp doesn't show up in the nation's economic statistics. But it says a lot about how Americans live today. Political scientist Hacker, in his book "The Great Risk Shift: The New Economic Inequality and the Decline of the American Dream," wrote that the American dream itself is at risk. "It is a fixed American belief that people who work hard, make good choices and do right by their families can buy themselves permanent membership in the middle class," he says. "The rising tide of economic risk swamps these expectations." Trying times Some ideas to help working families might emerge from this year's presidential campaign. Repeated campaign trips to Michigan by Democratic candidate Barack Obama and Republican John McCain demonstrate that, if nothing else, the nation is focusing on economic issues. But in the meantime, Laurie Kopack expects Ron to spend many more months on the road. Ron is slowly moving up the list of unionized electricians on a job-call list in the Detroit area. Several hundred names remain on the list ahead of him. When he moved into his tent city in Iowa, Ron met other electricians from Michigan, and he and a few of the men bought a refrigerator and installed it in their campground. But they had to padlock it when they were away so others didn't steal their food. For Laurie, the image of itinerant workers living in tents reminds her of photos of Depression-era Civilian Conservation Corps camps. She says the late songwriter Woody Guthrie, who put the Great Depression to song, should come back to write an anthem for today's struggling families. "These are historical times, I'm afraid," Laurie says. And she gives a small, mirthless laugh. Contact JOHN GALLAGHER at 313-222-5173 or gallagher@freepress.com. 
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