Moderate and lower earners under more pressure

By Joanne Morrison

WASHINGTON (Reuters) - The trouble that began last summer in the financial markets raised the likelihood of a U.S. recession, but for America's middle class, the downturn has been under way for many years, experts plan to tell a congressional panel on Wednesday.

Hit with higher gasoline prices, declining home values, rising health-care costs and little or no income growth since 2007, the outlook for those in the middle class and those with even lower incomes is dire.

"In the post-war period, the country grew together. Now we are growing apart," said Kristen Lewis of the American Human Development Project, in testimony prepared for delivery on Wednesday to the congressional Joint Economic Committee.

A report showing the growing disparity in wealth in the United States was released recently by the American Human Development Project, a nonprofit project whose major backers include Oxfam America and the Rockefeller Foundation.

Citing Census Bureau data, Lewis told the Joint Economic Committee that in 2006, the average annual income in the top quintile of U.S households stood at $168,170 -- nearly 15 times the average income of $11,352 a year in the lowest quintile.

The richest 20 percent in the country earned more than half of the nation's total income.

"The American meritocracy, the foundation of the American Dream, is at risk. Social mobility is now less fluid in the United States than in other affluent nations," she said.

The top 1 percent of U.S. households possess a third of America's wealth and the bottom 60 percent only 4.2 percent, according to Lewis.

POVERTY AND RACE

When categorized by race, the disparities are even more stark.

Federal Reserve data show that in 2004, the median net worth was $140,800 for whites and $24,900 for non-whites, a nearly six-fold difference.

"Minority families have much less to fall back on than white families on average," Lewis said, cautioning with other members of the panel that debt is on the rise, particularly as home values decline.

GASOLINE PRICES BITE

Higher gasoline prices, over $4.00 a gallon in many areas, have eaten away at American incomes, most dramatically the middle class. Over the last year, price increases have cost consumers an extra $1,100 a year, according to David Kreutzer, an economist at the Heritage Foundation, a conservative think tank in Washington.

"Price increases have the obvious direct impact on gasoline expenditures. But these direct impacts ripple through the economy and produce additional burdens on households," Kreutzer said.