The Vanishing Middle Class

The Vanishing Middle Class

By Jake Whitney

“Thirteen years ago, the economists Sara Solnick and David Hemenway conducted a study that revealed a great deal about how Americans define happiness. Subjects, all of whom were middle class or lower, were asked which they wanted more: to earn $50,000 while everyone else got only half as much, or to earn $100,000 while everyone else earned $200,000. The increase in the subject’s earnings from the first scenario to the second was, of course, dramatic. But that didn’t matter to most. What mattered was how rich they were compared to others: 56% said they would take $50,000 less as long as they were richer than everyone else.”


“And it’s gaping in a lot of places. In case you haven’t heard, the gap between the rich and poor in the US is currently wider than it’s been since the Great Depression. It’s even worse here than in Egypt or Tunisia, where the income gap helped ignite the unrest. In the last 30 years, the richest 1% of Americans has seen its share of wealth jump from under 9% of the total pie to approximately 25%. Many fiscal conservatives argue that this is good because of the trickle-down theory that says increased riches for the wealthy eventually find their way to everyone else. But this simply hasn’t happened. Over the past three decades — the period when the rich have become superrich — real wages for the middle class have declined and the poor have only gotten poorer. The truth is that the dramatic increase in the wealth of our richest citizens has had devastating consequences for our middle and lower classes.”


“What political and corporate pressures? Congresswoman Marcy Kaptur (D-Ohio), the longest serving woman in the US House of Representatives, told me in an interview that when Republicans took control of Congress in 1994, one of the first things they did was to impose fees on savings accounts to encourage spending. At about the same time, as a recent book about the 2008 financial crisis reveals, the large banks and mortgage companies undertook an advertising campaign to de-stigmatize second mortgages and home equity loans. These efforts went far in changing American thinking that had previously held saving money and fiscal responsibility in high regard. Suddenly being in debt wasn’t frowned upon. In fact, it became the norm — for the middle and lower classes, that is.”


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