An Explanation Of The Deterioration Of America's Middle Class

 

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The above graph from the September 2015 U.S. Census Bureau report Income and Poverty in the United States: 2014 shows that median earnings for men working full time year round was stagnate @ $50,000 per year in constant 2014 dollars from 1972 to the present – a horrible record even considering that income mobility is dynamic meaning it is different people moving above & below the green horizontal median line throughout this entire time frame.  The purchasing power of the middle class has not increased by this measure in over 40 years.

 

Not all of the data presented in the report is terrible – there were periods of prosperity.  From 1981 to 1989 real inflation adjusted median annual household income (2014 dollars) increased from $47,658 to $53,306 & from 1993 to 1999 the increase went from $50,421 to $57,843 - the all time peak in median annual household income.  These periods correspond to 1) the Reagan presidency & 2) the combined Clinton presidency & Gingrich House speakership respectively. 

 

Since 1999 there is a 7.2% decrease in median constant dollar annual household income from the peak & a 6.5% decrease since 2007 to $53,657 in 2014 under Bush's & BO's presidencies.

 

The phenomenon of men's median annual income stagnating for the past 42 years & household income showing periods of increases as indicated above is explained in the report by women entering the work force in larger numbers over the years & their incomes not stagnating – going from $30,000 to almost $40,000 per year during this period in constant 2014 dollars as indicated on the above graph.  According to Harvard economics Professor Martin Feldstein the Bureau of Labor Statistics reports that 38% of married women with income in the U.S. earned more than their husbands in 2013.  The above graph shows a rise in the earnings of women & when you couple this rise with two people getting married & forming one household you can see that any rise in household income is due to the larger number of women entering the work force over the past four decades.

 

But all of this in totality indicates that something is terribly wrong & has been wrong for decades. 

 

Manufacturing plants & jobs have disappeared from America.  Rick Santorum reports that just since 2007 fifteen thousand manufacturing plants have shut down & more than 2 million manufacturing jobs have been lost.

 

From a technical standpoint the dollar has lost 96% of its purchasing power since the Federal Reserve was created in 1913 (with the goal of preserving the value of the dollar).  Also in 1913 the federal income tax system was put into place - the income tax system has damaged America because it taxes work, savings, & investment & as such is the basis of so many ill-advised incentives that have nothing to do with our prosperity except for destroying it.  The inflation that followed Nixon taking the U.S. off the gold standard in 1971 is more than coincidental when you look @ the statistics from 1972 to the present as the report does.  It was this inflation that forced more & more women to enter the work force to help make family ends meet – but this started another problem with mothers not being in the home like many of the members of this readership benefitted from.

 

Lenin was an advocate of putting an end to enemy countries by destroying that country's families as well as overturning a society by debauching the currency so that not one man in a million would be aware of the subtle destruction going on.  The U.S. has experienced & is experiencing both of these phenomenons.

 

Every time government gets bigger free enterprise principles are distorted thereby putting more of a drag on the entrepreneur – the creator of wealth & meaningful jobs that support a family - the foundation of the self-respect & dignity that not only promoted but naturally bred the country's original mindset.   In 1930 federal government spending equaled 3% of GDP. Today federal government spending approximates 20% of GDP.  State & local government spending approximates 17% of GDP for a government spending total of 37% of GDP.

 

Of course all of this government spending started as part of FDR's New Deal in the 1930s & was expanded by LBJ's Great Society programs of the 1960s & continues with BO's pet project – ObamaCare.

 

The 1930s started as the complacency to apathy stage & with our very own eyes we have seen our country move to the apathy to dependence stage & if we don't turn the current mindset around we will witness the dependence back into bondage final stage of the Death Of Democracy.

There are many features of WW II that ended the Great Depression but by the time the war ended many Americans were very used to & liked government dependence – whether they readily admitted it or not. It was the wage & price freeze during the war that resulted in employers finding (with Congress's help) the loophole to provide medical insurance that would not count as wage increases that resulted in the insurance-dependent system we have today.

 

The U.S. dominated the world economy for the next two to three decades following WW II until the economies of Europe & Japan were restored - thereby creating competition to challenge America's dominance.  Along the way China & other Asian countries entered the global economy bringing over a billion low-wage people into the world work force.  The onset of capital automation & innovation replacing labor & relocating American manufacturing facilities overseas resulted in Americans competing for jobs against people who make pennies per day.

 

School quality started to deteriorate in the 1930s along with the expansion & centralization of government until today it is hard to find employers who are satisfied with the quality of graduates whether from college, high school, or vocational school.  See the graph below for the latest evidence of the skills mismatch in openings & hires for construction workers in the residential home building industry.

 

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The above narrative & statistics explain what happened to the American middle class during the 42 year period 1972 to 2014 – & there is no end in sight of this deterioration until our schools improve & the citizenry is motivated to get the education that will allow them to compete with the market forces that exist around the world.  The seeming infinite number of government dependent programs provide all the wrong incentive for any improvement to this situation – young people trading leisure time off & rotten part time jobs in exchange for the benefits of one government program or another or moving back with their parents is a slow burn to the oblivion of being totally unaware of the end that is becoming more clearly in sight for @ least some of us.

 

The more alert readers of this post may feel that the American citizenry has been cheated by the country's succumbing to the mixed economy that still includes some degree of capitalism but an ever increasing proportion of socialism.

 

John C. Webb, writing in the WSJ last month, uses Table A-4 of the report to quantify just how much we have been cheated out of.  Please direct your attention to the slope of the green line on the left hand side of the top graph that shows the growth in real median annual earnings for men between 1960 ($37,564) & 1972 ($51,649).  Mr. Webb calculates that had this growth continued @ the same rate that the typical male worker would today be making $157,400 per year.

 

Reference post:  Death Of Democracy