America's Two-Tiered Economy Reshaping Markets — And Politics

There's been some leftist talk about how with the economy picking up steam Republicans won't have their most potent issue to hammer the depraved Democrats in 2016.

Don't believe it for a second.

The Democrats are the party of the rich new "liberal gentry" class. Especially on the West Coast, in the rich technology sector, wealthy new gentry liberals have been enjoying the benefits of a top-tier economy while giving overwhelmingly to Democrat Party candidates, especially President Obama. Meanwhile, the poverty rate under the Obama administration has skyrocketed to levels not seen in 50 years. And the rolls of Americans dependent of food stamps for their daily food survival is unprecedented in U.S. history.

In short, the affluent have prospered enormously under the Democrats these last few years, while those on the bottom rungs have become increasingly marginalized and dependent of government welfare programs. For those made worse by Democrat failure to expand the economy for all, the idea of an "opportunity society" is a cruel joke.

The GOP presidential field would be wise to adopt Bill Clinton's mantra from 1992: "It's the economy, stupid."

A smart, talented Republican nominee should be able to eviscerate Democrat Party inequality politics, making the case for the expansion of the economy to benefit everyone, not just the rich gentry leftists connected to the far-left, Democrat-insider crony regime.

In any case, at WSJ, "How a Two-Tier Economy Is Reshaping the U.S. Marketplace":

WOODINVILLE, Wash.—Five years ago, Quadrant Homes churned out starter houses in the Seattle area with an average sales price of $269,000 and the marketing slogan, “More House, Less Money.”

But facing a debt-burdened middle class and rising land prices, Quadrant has since exchanged entry-level buyers for customers free of credit worries and ready to splurge. Its new slogan, “Built Your Way,” accompanies homes with vaulted ceilings and gourmet kitchens that last year sold for an average price of $420,000. “We used a lot of market research to tell us that our old model wasn’t going to work,” said Ken Krivanec, Quadrant’s chief executive.

The emergence of a two-tiered U.S. economy, with wealthy households advancing while middle- and lower-income Americans struggle, is reshaping markets for everything from housing to clothing to groceries to beer.

“It’s a tale of two economies,” said Glenn Kelman, chief executive of Redfin, a real-estate brokerage in Seattle that operates in 25 states. “There is a high-end market that is absolutely booming. And then there’s everyone in the middle class. They don’t have much hope of wage growth.”

The recession blew holes in the balance sheets of all U.S. households and ended a decadeslong loosening of credit for middle-class borrowers. Now, credit is tight, and incomes have been flat or falling for all but the top 10th of U.S. income earners between 2010 and 2013, according to the Federal Reserve.

American spending patterns after the recession underscore why many U.S. businesses are reorienting to serve higher-income households, said Barry Cynamon, of the Federal Reserve Bank of St. Louis.

Since 2009, average per household spending among the top 5% of U.S. income earners—adjusting for inflation—climbed 12% through 2012, the most recent data available. Over the same period, spending by all others fell 1% per household, according to Mr. Cynamon, a visiting scholar at the bank’s Center for Household Financial Stability, and Steven Fazzari of Washington University in St. Louis, who published their research findings last year.

The spending rebound following the recession “appears to be largely driven by the consumption at the top,” Mr. Cynamon said. He and Mr. Fazzari found the wealthiest 5% of U.S. households accounted for around 30% of consumer spending in 2012, up from 23% in 1992.

Indeed, such midtier retailers as J.C. Penney , Sears and Target have slumped. “The consumer has not bounced back with the confidence we were all looking for,” Macy’s chief executive Terry Lundgren told investors last fall.

In luxury retail, meanwhile: “Our customers are confident, feel good about the economy in general and their personal balance sheets specifically,” said Karen Katz, chief executive of Neiman Marcus Group Ltd., last month. Reported 2014 revenues of $4.8 billion for the company are up from $3.6 billion in 2009.

Revenue for such luxury hotel chains as St. Regis and Ritz-Carlton rose 35% last year compared with 2008, according to market research firm STR Inc. Revenues at midscale chains such as Best Western and Ramada were down 1%.

On grocery aisles, the recession and its aftermath boosted sales of economy brands. At the high end, Whole Foods Market Inc. reported record sales per gross square foot last year.

“Demand bifurcated,” said Jason Green, chief executive of the Cambridge Group, a growth strategy firm that is part of Nielsen NV. “The familiar stuff my middle-class family had in the pantry, those are under significant pressure.”

In the grocery market’s middle tier, Safeway Inc., the second-largest supermarket chain in the U.S. was purchased last year by the private-equity group that owns Albertsons, the fifth-largest grocery retailer. Company officials said the deal would allow the companies to reduce costs—and lower prices for customers—as they fend off competition from low-price outlets and high-end stores.

In the cold case, sales of premium lagers are up 16% since 2007 after adjusting for inflation, while sales of economy brands grew 8%, according to research firm Euromonitor International. Sales of midprice beers are down 1%.

The trend hit auto makers some years ago, when BMW AG ’s former chief executive Helmut Panke described the U.S. market as an hourglass: lots of demand for budget and luxury brands but little in between.

Steve Bates, general manager of BMW Seattle for the past 12 years, said new-car sales at his dealership were up 25% last year, while used-car sales were flat. The M4 series, a sporty coupe priced from $64,000, has been “selling out as soon as it touches the ground,” he said.

Then there are consumers like Vicki Oliver, 68 years old, of Temecula, Calif. She bought a used Hyundai Sonata last year to replace a wrecked 1995 Ford Explorer. Ms. Oliver and her husband, a real-estate agent, added onto their home two years ago so her daughter and son-in-law, a general contractor, could move in with their family.

“That was a way to make things work in hard times,” Ms. Oliver said. Caribbean cruises and trips to Florida are now memories. “We haven’t done that for years,” she said...

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