06/13/2010 05:12 am ET | Updated May 25, 2011

Zero Hedge: What Life Is Like For The Median Earner

Over at Zero Hedge, guest blogger Graham Summers of Phoenix Capital Research has laid out what life is like for Americans earning the "median" income ($50,300, based on available data from 2008) -- and quickly discovers that, even under optimal circumstances and monastic spending habits, it's terribly hard for ordinary Americans to simply "get by" in today's economy.

In 2008, the median US household income was $50,300. Assuming that the person filing is the "head of household" and has two children (dependents), this means a 1040 tax bill of $4,100, which leaves about $45K in income after taxes (we're not bothering with state taxes). I realize this is a simplistic calculation, but it's a decent proxy for income in the US in 2008.

Now, $45K in income spread out over 26 pay periods (every two weeks), means a bi-weekly paycheck of $1,730 and monthly income of $3,460. This is the money "Joe America" and his family to live off of in 2008.

Now, in 2008, the median home value was roughly $225K. Assuming our "median" household put down 20% on their home (unlikely, but it used to be considered the norm), this means a $180K mortgage. Using a 5.5% fixed rate 30-year mortgage, this means Joe America's 2008 monthly mortgage payments were roughly $1,022.

So, right off the bat, Joe's monthly income is cut to $2,438.

Summers proceeds from there, ticking off typical expenses related to food, utilities, transportation costs and health insurance. If you allow the median earner expenses related to cell phones, cable television and Internet service, Summers figures they are left with about "$100-200 discretionary income left at the end of the month."

One can quibble at the margins of this analysis, certainly. Available public transportation can eliminate the need to maintain an automobile, there are strategies for reducing the cost of food and no one really needs cable television if it means starving to death. But I'd point out that there are plenty of median earners in expensive rental markets, a family medical crisis could easily blow this budget to shreds and I don't see any line items for childcare expenses (or, indeed, clothing, which last time I checked is a necessity).

Oh, and maybe we should drop the curtain on the economic cheerleading?

This is why there simply cannot be a sustainable recovery in the US economy. Because we outsourced our jobs, incomes fell. Because incomes fell and savers were punished (thanks to abysmal returns on savings rates) we pulled future demand forward by splurging on credit. Because we splurged on credit, prices in every asset under the sun rose in value. Because prices rose while incomes fell, we had to use more credit to cover our costs, which in turn meant taking on more debt (a net drag on incomes).

I'm reminded of Dale Maharidge, who told me that "we're a nation of the working poor, and it's something that people don't want to acknowledge," and that more journalists should get beyond the idea that economic realities can be adjudicated in a white paper or in a boardroom. Summers's contribution is a rare one that works to reveal the nuts-and-bolts reality of what the average American is going through.

And, naturally, that's the median experience in America. There are people doing a lot worse. Many of 2008's median earners, in fact, may be un- or underemployed in 2010. But, as David Brooks reminds us, these are all just losers who don't work as hard as rich people, never mind them.

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