Once upon a time, there was a middle class: This election year will determine whether the middle class falls into obscurity.
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In the not too distant past the United States had a vibrant middle class. Prosperity for most families was the rule rather than the exception. This didn’t happen by accident or some odd twist of luck. It happened because as a country we setup a foundation that valued a robust middle class. The Great Depression had taught us some profound economic lessons and humility. But like a car that is neglected and falls into disrepair, the middle class is now a minority group in this country. We tend to romanticize the past but in this case there is some truth to this view of history. Going to college is now putting millions of Americans into incredible levels of debt. Buying a home is moving further out of arms reach for most working families. And the notion of a secure retirement is turning out to be more of a fairy tale than reality. Once upon a time, the U.S. had a majority living in the middle class.
Where does the middle class go from here?
The middle class used to represent economic stability. For anyone with the desire to work hard providing economic stability was doable. That is no longer the case. And this isn’t some relentless free market capitalism that we are seeing. It is financial cronyism in many cases. The public is pushed into a narrative that discusses austerity and financial belt tightening. Then you have financial institutions using the government as a piggybank and gaming the system – bad bets they win, good bets they win. The losses are charged onto the public’s credit card. Privatizing the gains, socializing the losses.
So it is no wonder why the middle class has eroded into a minority:
Most Americans that took a hit from the Great Recession went from middle-income to lower-income households. The good paying jobs simply did not come back at a rate in which they were lost. We also have a large number of Americans not in the labor force. What is being asked of many younger workers is for higher taxes, bigger college expenses, smaller paychecks, and a less certain future. They hear their parents saying, “once upon a time, the U.S. had a vibrant middle class.â€
This isn’t intended to be some long lament but a recognition that many families are being shafted under the guise of free market capitalism. This is not that. There is largely no disagreement that on a large scale, competition is extremely healthy because it caters to what people know best, their self interest. The financial system should serve as a means of revving up the real economy. Yet what we have now is a financial system that largely operates as a predatory vampire extracting real wealth from the economy and families and funneling it into the wallets of few on Wall Street that essentially operates as modern day loan sharks.
Once upon a time, the financial system operated more like a utility rather than a casino. Glass-Steagall a law that came about in 1933 after the economic horrors of the Great Depression was repealed in 1999 by Bill Clinton and fully supported by both Republicans and Democrats. This legislation that largely separated commercial and investment banks was broken down. So it is no surprise that subprime lending took off nearly at the same time:
These were the toxic mortgages that set the American housing market on fire. But what brought the system down was the side bets made by Wall Street (see The Big Short for a short crash course). When everything came crashing down the financial system was bailed out at the expense of the U.S. middle class. Now the homeownership rate is near a generational low. Once upon a time, we had a sane financial system.
There was once a vibrant and healthy middle class in the United States. Today that is not the case. The anger you see in the country today being manifested in a contentious election year stems from this. Once upon a time, our representatives cared about a middle class. Now most are millionaires serving those with the deepest pockets.
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roddy6667 said:
What made America rich and expanded the middle class was WWII. America made a fortune supplying war needs for the rest of the world, while losing a relatively small percent of its men. The war was not fought on American soil.
Afterwards, large parts of the world needed to rebuild their infrastructure and we supplied the materials and machinery. That era is over now. The next war will be fought at least partly on American soil, so war cannot be used to bring wealth from other countries into America. The manufacturing that made the country great in the 1950’s is mostly gone.
Every empire peaks and fades.May 17th, 2016 at 4:54 am -
Dennis said:
It is a little late to retrieve the middle class. Adding to the losses that have already occurred are the future effects of low population growth and low productivity growth.
All developed nations are burdened with these two problems and economic growth will be slow for decades, as a result.
Maybe infrastructure spending or other fiscal stimulus would help, but the fact is entitlement spending is growing faster than incomes or the economy. Trillion dollar deficits will be the norm in a few years.
This is a mult-hundred year event.May 17th, 2016 at 7:44 am -
Michael Lewinski said:
It’s called Crony Capitalism, a Fascist enterprise that is morally bankrupt. We will not get out of our hellhole until the Progressive nightmare, which brought it, has been replaced by a competitive free market platform empowered by a Judaeo-Christian moral backdrop. Let us all pray for wisdom from We the People.
May 18th, 2016 at 7:34 am -
Uncle Frank said:
A new word has emerged in the lexicon of the new economy – financialization- defined as the “growing scale and profitability of the finance sector at the expense of the rest of the economy and the shrinking regulation of its rules and returns.†The success or failure of the financial sector has had serious effect on the rest of the economy and most of its returns have gone to the wealthy driving inequality.
May 18th, 2016 at 1:28 pm -
Kris said:
Over the course of world history, how often has there been a robust middle class? More often than not, there has been some form of feudalism. Our founding fathers were great students of history and the human nature that forms it. The United States made a “5 thousand year leap” in history by fostering the individual freedom that led to a robust middle class. Essentially, one can use the health of the middle class as a measure of freedom.
While I worry about the economic consequences of the direction of our government, the more insidious threat this represents is to the freedom of its people.
” Good intentions will always be pleaded for every assumption of authority. It is hardly too strong to say that the Constitution was made to guard the people against the dangers of good intentions. There are men in all ages who mean to govern well, but they mean to govern. They promise to be good masters, but they mean to be masters.”
Daniel WebsterMay 19th, 2016 at 6:24 am -
Leonard said:
Middle class, wow what a depressing thought. Traveling around the country to small town America has revealed that the middle class for the most part are now living either on the street or in Apartments or Trailers. Criminals and Prisoners eat better and live better than most nowdays.
May 19th, 2016 at 10:46 pm -
Edward said:
We all have a lot to learn IMO, this is a complicated and dynamic systemic issue(s). We have had a lot of things happening, including wars, corruption and inaction by many. We have a long road ahead in troubleshooting these issues.
June 19th, 2016 at 10:57 pm