76% of American Middle Class Households Not Financially Secure According to New Report

/PRNewswire-USNewswire/ -- As the economy continues to reel, a new report finds that 4 million American households lost economic security between 2000 and 2006, and that a majority of America's middle class households are either borderline or at high risk of falling out of the middle class altogether. The new report, "From Middle to Shaky Ground: The Economic Decline of America's Middle Class, 2000-2006" was published today by the policy center Demos and the Institute for Assets and Social Policy (IASP) at Brandeis University.

"From Middle to Shaky Ground" is based on the Middle Class Security Index, co-developed by Demos and IASP/Brandeis, which uses government data and measures the financial security of the middle class by rating household stability across five core economic factors: assets, educational achievement, housing costs, budget and healthcare. Based on how a family ranked in each of these factors, they were defined as financially "secure," "borderline" or "at risk". In addition to the report, Demos and IASP/Brandeis have published an "Economic Security Scorecard" that the average family can use to measure where they fall on the Middle Class Security Index.

"The increases we're witnessing in housing costs and the number of families who lack health insurance, coupled with the extreme volatility of the average household's savings, show that a large percentage of America's middle class are not well equipped to weather this current economic storm," said Jennifer Wheary, one of the report's co-authors and a Senior Fellow at Demos.

"From Middle to Shaky Ground" shows some worrying trends in America's households, including:

--The median financial assets held by middle-class families declined by 22 percent. This means that for every dollar in median assets that middle-class families held in 2000, they held just 78 cents in 2006. These figures do not include home equity and therefore do not reflect additional losses families may have experienced due to a decline in their home values.

--Monthly housing expenses for the middle class rose by 9 percent. As a result, the percentage of middle-class families who match the Department of Housing and Urban Development's definition of "housing burdened" rose from 31 percent in 2000 to 37 percent in 2006.

--The number of middle-class families in which at least one member lacks health insurance grew from 18 percent in 2000 to 25 percent in 2006.

"Declines such as these in any one area are alarming," said Tom Shapiro, Professor of Law and Director of the Institute on Assets and Social Policy at Brandeis. "Bad news across a range of areas supporting financial stability means the middle class is confronting its greatest challenge since the Great Depression."

This is the third report in a series based on the Middle Class Security Index. The first examined the overall economic security of the middle class, the second focused on African-American and Latino households. To download the report, the household financial security scorecard or the factsheet, visit www.demos.org.

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New Cases of Diagnosed Diabetes on the Rise

The rate of new cases of diagnosed diabetes rose by more than 90 percent among adults over the last 10 years, according to a study by the Centers for Disease Control and Prevention (CDC).

The data, published in CDC′s Morbidity and Mortality Weekly Report, show that in the past decade, the incidence (new cases) of diagnosed diabetes has increased from 4.8 per 1,000 people during 1995-1997 to 9.1 per 1,000 in 2005-2007 in 33 states.

“This dramatic increase in the number of people with diabetes highlights the increasing burden of diabetes across the country,” says lead author Karen Kirtland, Ph.D., a data analyst with CDC′s Division of Diabetes Translation. “This study demonstrates that we must continue to promote effective diabetes prevention efforts that include lifestyle interventions for people at risk for diabetes. Changes such as weight loss combined with moderate physical activity are important steps that individuals can take to reduce their risk for developing diabetes.”

The study used data from CDC′s Behavioral Risk Factor Surveillance System, and provides incidence rates of diabetes for 43 states and two U.S. territories. Only 33 states had data for both time periods, but 43 states collected data in 2005-2007.

State-specific, age-adjusted estimates of new cases of diabetes ranged from 5 per 1,000 people in Minnesota to 12.7 per 1,000 in West Virginia. The number of news cases was highest in Puerto Rico at 12.8 per 1,000. States with the highest age-adjusted incidence were predominately Southern states: Alabama, Florida, Georgia, Kentucky, Louisiana, South Carolina, Tennessee, Texas and West Virginia.

“This report documents the geographic distribution of new cases of diabetes and is consistent with previous studies showing an increase in new diabetes cases,” said Kirkland. “We must step up efforts to prevent and control diabetes, particularly in the Southern U.S. region where we see higher rates of diabetes, obesity and physical inactivity.”

CDC, through its Division of Diabetes Translation, funds diabetes prevention and control programs in all 50 states, including the District of Columbia, and seven U.S. territories and island jurisdictions. The National Diabetes Education Program, co-sponsored by CDC and the National Institutes of Health, provides diabetes education to improve treatment for people with diabetes, promote early diagnosis and prevent or delay the onset of diabetes.

For more information about diabetes, visit www.cdc.gov/diabetes. The MMWR report is available at www.cdc.gov/mmwr.

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Duke: Treasury Action Should Work, But at High Cost to Taxpayers, Professor Says

The Treasury’s proposed action to use government money to purchase mortgage-backed securities held by financial institutions should work, but at an unnecessary cost to taxpayers, says Steven Schwarcz, the Stanley A. Star Professor of Law & Business at Duke University.

Schwarcz has studied systemic risk for more than a year and has suggested, in congressional testimony last October, that the government should consider acting as a market liquidity provider of last resort, but to do so at the outset of a financial market panic. His article, “Systemic Risk,” will be published next month in the Georgetown Law Journal.

“The focus from the outset should have been on treating loss of confidence in the financial markets, which is the underlying cause of problems in the financial system,” Schwarcz says. “While it may have been necessary under the circumstances for the Fed to act to prop up AIG and Bear Stearns, among others, preventing financial institution failure amounts to treating symptoms of the disease, not its underlying cause. By delaying, the government missed a vital opportunity to nip the problem in the bud at a much lower cost to the American taxpayer.”

The Treasury’s proposed bailout plan is a semi-strong version of Schwarcz’s proposal, which he said would work most effectively if used at the outset of a market panic. The current panic has become so entrenched, however, that financial institutions now distrust the creditworthiness of other financial institutions; they do not know how much in mortgage-backed securities those institutions hold or the value of those securities.

The Treasury, therefore, needs to address both this counterparty risk perception and the market collapse. It is proposing that government money be used to purchase, at a deep discount, mortgage-backed securities held by financial institutions, which would stabilize market prices and reduce counterparty risk.

'This should work," says Schwarcz, "but it will be much more expensive than if the government had stabilized the market at an earlier point."

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