Middle class began shrinking years ago
When we were house hunting, the realtor told us there was great demand for high end homes and starter homes, and a lot less need for those in the middle, so we had quite a selection. That was 1999, and my first hint that the middle class was in trouble.
Candidates have made the middle class a hot campaign issue, so I went looking for information. It was hard to find anything not tainted with political spin.
A 2011 study from the leftish Center for American Progress catalogued the Romney-Ryan budget’s hit on programs relied on by the middle class. New Mexico, for example, would lose $30 million from highways in 2013 alone. From the right, a Forbes article last week blamed blue states’ tax policies for their ills. Both studies are notably shallow, their conclusions predictable.
Economists and politicians agree that the middle class is squeezed, but discussions tend to fit in sound bites and bumper stickers. Last week, the news website www.GlobalPost.com published an ambitious portrait of the endangered middle class, “America the Gutted,” that gathered all the threads – trade policy, automation, globalization, business trends, consumerism and tax policy. I divine a little attitude, but for the most part the stories are balanced and don’t endorse any candidates.
One important point: The decline started decades ago, so you can ignore the “failed policy” rants that blame one administration or the other. (Are you listening, Martin and Heather?)
The thumbnail version: After World War II, the U. S. encouraged trade with Europe and Japan and overlooked their trade barriers, assuming they would buy from us when they recovered. It didn’t happen. By the 1970s manufacturing weakened and jobs began moving overseas. Congress passed a few bills that decade, but industry had discovered outsourcing and no longer clamored for tougher trade legislation.
Also, the inevitable trend toward automation cost more jobs, the nation’s capital swooned to the siren calls of deregulation, and corporate executives began to care more about shareholders than employees. In the 1990s we began to see five-digit layoffs along with stratospheric CEO pay – a long stretch from Henry Ford, who believed in paying his workers enough so they could afford one of his cars.
In 1993, the North American Free Trade Agreement was supposed to stimulate markets and create jobs for everyone, but it cost more than 650,000 jobs. American workers now had to compete with workers around the world. The trickle of jobs moving overseas became a flood – nearly 3 million since 2000.
The ballyhooed tax cuts, believed to encourage job creation, were kinder to the rich than the middle class, so kind that Warren Buffett and other heavy hitters have offered to pay more taxes.
Americans didn’t feel the pain because they were engaged in retail therapy – lots of it. As incomes stalled in the 1980s, credit card debt and mortgages mounted, encouraged by lax lending policies and new kinds of securities. We know how that ended. Having come to their senses, Americans post-recession began paying down debts with smaller earnings and consuming a lot less, which triggered more layoffs and closures.
The middle class (households earning $33,000 to $100,000) has shrunk, said the Pew Research Center, from 61 percent of the population in 1971 to 51 percent today (another study pegs the middle class at 42 percent), and its income and wealth have eroded.
The author of one such report worries that “we’re becoming a barbell society” with wealth and power concentrated at one end, increasing hollowness in the center, and the poor massed at the other – a prescription for instability.
Whose bumper stickers and sound bites are more credible now?