WASHINGTON (MarketWatch) — Those who say that uncertainty about the future is weakening the economy have it exactly backwards.

It’s the weak economy that’s feeding our uncertainty.

The American economy is losing momentum because it’s running out of fuel. Our economic fuel is income, and it’s in short supply.

Right now, real disposable incomes are growing at barely 1% a year, the slowest growth on record outside of a recession.

Real per capita disposable income has been flat for the past two years. At $32,716 per person, incomes are no higher than they were in early 2007. That big spike in 2008 was due to a one-time tax rebate. The smaller spike in 2009 was due to a one-time payment from Social Security.

Without income, people can’t spend. If people don’t spend, businesses won’t expand. And if businesses won’t expand, incomes won’t grow.

For a while, back during the housing bubble, lots of people were able to pretend their incomes were higher by borrowing heavily against their homes and spending the proceeds. From 1998 to 2007, U.S. households withdrew an estimated $5 trillion from their home equity, amounting to an additional 5% of personal income over that period.

Then, after the bubble burst, the federal government stepped in to support incomes by cutting taxes and expanding the safety net, which boosted after-tax incomes by about $3 trillion over the past four years, or about 6% of incomes. That support was absolutely critical in preventing an even deeper depression, but now it’s disappearing.

Running as fast as we can

Absent a housing bubble or extraordinary government support, what do we have that can keep the economy humming? Not much.

The initial surge we got from increasing our exports has faded, now that the rest of the world is slowing down. Housing investment is recovering, but until the foreclosure crisis is resolved, housing can only contribute a modest amount to our gross domestic product.

No, our economy is tied to the fortunes of the consumer sector, for good or ill. Consumers are doing as much as they can.

Compensation received by workers — the wages, salaries and benefits that together account for about two-thirds of all income received — is rising because more people are working. But the average paycheck isn’t rising any faster than prices are.

Lots of people are running as fast as they can just to stay in the same place.

Over the past year, total consumer spending has increased 1.9% after adjusting for price changes, quite a bit faster than the 1.1% growth in incomes. As heroic as consumers have been, there’s a point at which they just can’t do any more. Read “U.S. consumer spending falls in May.”

Worried couple doing their accounts in the living room at home.

The numbers that we’ve been discussing are aggregates; they treat 310 million people as if they were all the same: consumers. But, of course, there are big differences within that label. Some are rich; some are comfortable; some are poor. Some are saving a healthy portion of their income; many more are simply living paycheck to paycheck. Some are losing their homes; some are just trying to pay down their debts a little; others could spend more without breaking the bank.

Vanishing middle class

We know that the working class was battered by the recession, and it hasn’t gotten back on its feet yet. The poor are still with us. It’s the upper middle class, and those who are genuinely rich, who are doing all right. They have been the engine of growth in our economy.

Disturbingly, the upper middle class now appears to be throttling back its spending, perhaps in a delayed reaction to the bear market, or perhaps because they still don’t know how much they’ll have to pay in taxes next year.

Consumers unlikely to boost recovery

According to the University of Michigan’s consumer sentiment survey, confidence within higher-income households plummeted in June. In May, 37% of those making over $75,000 a year believed their own financial situation would improve over the next year. In June, that percentage had fallen to 24%. Read our news coverage of the drop in the UMich survey.

The decline in the UMich index from 79.3 in May to 73.2 in June “would normally be consistent with a somewhat slower spending growth rate,” said Richard Curtin, who heads the UMich survey. “The sharp declines among upper income households, however, may have a greater impact on the economy since their spending accounts for a large share of the total.”

This is the price we are paying for hollowing out the middle class and transforming America into a sort of Third World country, where only the relatively few are secure and where everyone else scurries to grab the crumbs that fall their way.

An economy that’s supported by just 20% of the people is too fragile. The strongest economy is one in which everyone shares in the gains.