The Shrinking Middle Class in America

The middle class in the United States has been shrinking because it has been under attack from both ends for over 50 years. Politicians have figured out a very effective election formula.

1. Grant special favors and give payouts to mega-wealthy donors in exchange for money to run election campaigns.
2. Grant special favors and give payouts to poor people in order to “look compassionate” and buy votes.
3. Get the money for all of these favors and payouts by taxing the middle class and rendering their savings useless through deficit spending.

A middle class family now pays over 1/2 of their income in taxes and gets little to no value for it. Fifty years ago, taxes like that would have caused a riot. The middle class family could afford to buy just about everything the government provides if the government wasn’t always taking their money. Deficit spending hits the middle class disproportionately. The poor don’t have the extra money to save so don’t notice the effects as sharply, unless the price of food or gasoline is increasing. The rich make money from deficit spending. the middle class have some money to save, but what is the use? It used to be a middle class family could put $1000 in a jar or a bank and have something 10 years later. Now, that $1000 doesn’t buy much ten years later. The middle class family that saved $1000, or $10,000 or even $100,000 sees their net worth disintegrate over an average lifetime. A lifetime ago, a millionaire in the United States could afford just about anything they could desire. Now a millionaire cannot afford to live a middle class lifestyle for more than a few years.

So, the middle class worker who has seen their salary go up 30% but their after tax income rise little and the buying power of that money drop feels uneasy. The middle class person who saved their whole life to have $200,000 in a 401K, only to realize that is not enough money to live for 20 years, feels uneasy. The middle class person who just had their health insurance cancelled because of the ACA feels uneasy. Most middle class people don’t understand all of the details of this, they just feel it in their gut.

Real World: When I was young, if I had $100,000, I could have bought the house I live in currently (it sold for $55,000 in 1977), the car I drive (MSRP $3,371 in 1978) and had enough money left over to live for 20 years (at $3000/year for food and utilities). Now, for $100,000, I couldn’t buy the vehicle and have enough money left over for a year. The MSRP on the vehicle ($45,765) is about the price of an average house in 1977 ($49,000).