American nightmare

Will Hodges sends an economic postcard from one of the nation's major cities

It's been two and a half years since my last visit to Philadelphia, and there is a depressing feel to this metropolis, the United States' fifth largest urban area. The US, once untouchable as the world's foremost economic power, now finds itself struggling.

I was last here during December 2008, at the height of the global economic downturn, but there is little around me to suggest improvement in the economy. I take the bus out to King of Prussia, one of the largest shopping malls in the Northeastern region. As I sit down, I catch a glimpse of the front page of a newspaper over the shoulder of the woman in front of me. "Law school grads try out their skills on their schools". According to the article, out of work law graduates with mountains of debt are suing the universities at which they studied, claiming that they exaggerated the job prospects and potential future starting salaries available to their students.

Unemployment has always been a key concern for Americans, who live in a country where there has historically been little in the way of state subsidies or free healthcare to protect those out of work. What's more, contrary to what you might think, the nation is no stranger to poverty. Working class Americans living in the inner cities or in rural areas generally have a far lower standard of living than their western European counterparts. And walk into a "bad neighbourhood" in any American city, and poverty is all around you. But it has rarely been a middle class issue, much less one to worry wealthy graduates. Until now, that is. For the first time, America's predominantly white middle class, for so long the engine of its consumer-driven economy, is feeling the pinch.

My arrival at the King of Prussia confirms this state of affairs. The upmarket stores are largely empty during what is traditionally one of America's busiest retail periods. In one well-known clothing chain I am served by a pleasant man named Paul. In most respects, Paul is your average American store assistant: polite, friendly, and well-groomed. But there is one subtle difference. Paul is in his fifties and looks like he should be working in a bank or a high-rise office downtown, not for a minimum wage surrounded by people half as old as him.

Paul might be counting himself lucky to have a job at all, as 9.1 per cent of Americans are officially unemployed. Having receded below 9 per cent in the early part of the year, the percentage of those out of work is now rising as the country braces itself for another recession.

From the half empty stores that line the corridors of the shopping centre, it's clear that consumer confidence is suffering. If confirmation is needed, the most recent US consumer confidence index - the main gauge of the spending habits of everyday individuals - fell to its lowest level in 28 months at the end of August. Yet the measures the government is taking to ease peoples' concerns appear few if any.

As I browse in the mall, President Barack Obama is embarking on a speaking tour of the Mid-West, gearing up for his re-election campaign. Keen to put the country's economic woes in context, the president has pointed to a series of global events to account for the country's predicament, including the Japanese tsunami, the European debt crisis, and the increase in fuel prices in the wake of the Arab Spring uprisings.

But some have accused him of apathy where the economy is concerned. Mitt Romney, a leading candidate for the Republican party 2012 presidential nomination, has criticised the president for showing little interest in fixing the economy as he begins his tour. Mr Obama, he says, is "more interested in campaigning in swing states than working to solve the economic crisis that is crushing the middle class".Others have gone further, condemning his extravagant public spending programmes (including the $787 billion economic stimulus package and the healthcare-for-all scheme) as the root cause of the country's current debt crisis.

Obama is unlikely to be able to ignore his critics for long, however. The United States is currently in a unique and unnerving financial predicament. Back in July the Democrats and Republicans found themselves at loggerheads as the government reached its debt ceiling (the limit pre-agreed by the US Congress on how much debt the country is able to incur), putting the nation at imminent risk of an, admittedly technical, bankruptcy. The two parties were divided on how best to cut the country's spiralling financial obligations, now estimated to be worth 70 per cent of its GDP, and counting. Obama's Democrats proposed an increase in state taxes, whereas the Republicans favour heavy cuts in public spending.

The parties were able to come to an agreement in time to persuade Congress to raise the ceiling again, but the crisis has not been forgotten. Nations have credit ratings which affect how they operate just as individuals do, and a matter of days later, ratings agency Standard & Poor's downgraded the US's credit rating for the first time in its history, cutting it from highest grade AAA to AA+. China, the largest single holder of US debt, added salt to this significant wound by criticising Obama's "short-sighted" approach to managing the US's debt problems and demanding strict international supervision to monitor the country's financial dealings going forward.

Where the country's current predicament leaves everyday middle class Americans is anyone's guess. With consumers spooked, how long will the fancy clothing stores at King of Prussia be able to stay in business, paying wages to people like Paul? One thing's for sure, the "American century", as historians often dub the hundred years that ended on the turn of the millennium, feels like a long time ago in Philadelphia.

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