The recent study based on data from the Luxembourg Income Study Database, revealed that our northern neighbor-Canada's middle class is now more prosperous than in the United States.
There are several reason for Canada’s middle class surpassing America’s. If you own a home, that is usually your most valuable asset. It increases your net worth even if you don’t own it free and clear.
This is only true however under normal conditions. But with the subprime mortgage debacle, many homeowners in America are still under water turning their ‘asset’ into a liability, at least for the foreseeable future.
Canada unlike the U.S, didn’t have a significant subprime mortgage market. As a result their real-estate market didn’t crash, as America’s did in 2008. Their mortgage regulations have always been more conservative and stricter.
Because the U.S. recession was caused by a banking crisis, rather than the usual economic culprits, such as inflation, the recovery has been meek to say the least. In other words, when an economic slowdown is caused by irregular means, it takes longer for the recovery to happen.
But it just isn’t their higher net worth in their residence for the disparity. Canadians pay significantly lower college tuition, often a tenth less and far more inexpensive medical care and because of progressive taxation- less income inequality.
What is the US doing wrong? As I mentioned in my last column on Obamacare, the main reason people go bankrupt is due to a medical emergency. Those who don’t have insurance or couldn’t get it because of a pre-existing condition, can now acquire health insurance now through the Affordable Care Act-exchange.
When it comes to student loans, those don’t even get discharged in a bankruptcy. They stay with you for life. In essence they’re on a par with tax lien, which also can’t be discharged in a Chapter 7 or 13.
Most of the employment that has been created in the recovery have been low wage service sector jobs. In fact the inequality gap is the widest it has been since just before the Great Depression in 1929 The growing inequality gap isn’t just bad for our economy, it’s bad for our national security.