The politics behind Barack Obama's State of the Union speech this week carefully disguised a frightening new development in U.S. society -- poverty is stalking the American middle class.

The "Yes We Can" optimism that drew its strength from the middle-class dream of a nice house in the suburbs, two cars, good schools and a comfortable retirement has been replaced by an alarming new uncertainty.

A year after a world-wide economic meltdown, triggered by a U.S.-based banking and mortgage crisis, one in five Americans is unemployed or underemployed; one in nine can't make their minimum credit card payments; one in eight have defaulted on mortgages or are facing foreclosure; and 120,000 families a month are filing for bankruptcy.

The U.S. economy remains in a perilous state. Fifty million Americans have no health insurance; 32 million are receiving food stamps; and 15.2 million are out of work.

While the global financial crisis and subsequent stock market crash wiped more than $5-trillion off U.S. middle-class savings and pension plans, an unprecedented string of multibillion-dollar government bailouts and an explosion in government spending to stimulate the imploding economy have wreaked havoc with the deficit and raised fears of increased taxes.

"This is a continuing disaster for American families," the U.S. President admitted in a White House speech on the economy before the State of the Union address.

The American dream and the middle class are being transformed by the risks and realities of the global economic crisis.

A report released this week by the U.S. Commerce Department concludes it is "harder to live a middle-class lifestyle today than it was 20 years go."

Defining "middle class" as a combination of values, expectations, and aspirations, as well as income levels, the report notes those who aspire to this level now face a double-barreled problem -- middle-class incomes have been almost stagnant for a decade and the price of essential components of the American dream have increased faster than income.

"It is more difficult now than in the past for many people to achieve middle-class status because prices for certain key goods -- health care, college and housing -- have gone up faster than income," the report says. "Extra medical bills or higher family expenses for child care or elder care can easily make a middle class lifestyle unattainable."

The study notes the median price for a home in the United States has increased by 150% in the past 20 years; the cost of health care jumped 325% and the price of college climbed 60%.

"Only a few unplanned expenses can dispossess any of these families from their middle-class dreams," the report says. "Loss of a job, unexpected illness that isn't covered by health insurance, or the need to help out an elderly parent can create a severe budget crisis for any of the families."

Many two-income families may be just a paycheque away from losing their middle-class status. A lay-off, a sudden medical problem or a messy marriage breakdown could plunge them into poverty.

"The financial security of America's middle class has dropped since early 2001, easily erasing all gains made during the 1990s," says Christian Weller, a fellow at the Center for American Progress.

"Incomes have fallen as a result of the weakest job growth since the Great Depression, flat wages, and declining benefits. At the same time, prices for necessary items, such as food, energy, housing, and transportation, have all risen sharply.

"Finally, personal wealth has been decimated, first by the mortgage boom, which allowed more families to build wealth by purchasing homes but also required them to take on higher debt levels, and then by the bursting housing bubble, which of course depleted the value of those home investments, and then by much weaker financial markets."

A survey by the Pew Research Center -- described as "the most downbeat short-term assessment of personal progress in nearly half a century" -- found Americans said in the past five years they either haven't moved forward in life (25%) or have fallen backward (31%).

"The security of middle-class life has disappeared," said Elizabeth Warren, a bankruptcy law expert at Harvard University. "The new reality is millions of families whose grip on the good life can be shaken loose in an instant."

U.S. families spend less on food, clothing, furniture and appliances than they did a generation ago, but they also spend twice as much now on mortgages, Ms. Warren says.

"Fixed costs for the typical American middle-class family -- home mortgage payments, car payments, health insurance, child care, education and taxes -- have risen more rapidly than income over the past 30 years, eating up many of the gains from having two parents in the work force," she said.

"America today has plenty of rich and super-rich. But it has far more families who did all the right things, but who still have no real security.

"Going to college and finding a good job no longer guarantee economic safety. Paying for a child's education and setting aside enough for a decent retirement have become distant dreams. Tens of millions of once-secure middle-class families now live paycheque to paycheque, watching as their debts pile up and worrying about whether a pink slip or a bad diagnosis will send them hurtling over an economic cliff."

pgoodspeed@nationalpost.com