American Middle Class

Written by Frank Li

Talking about America’s middle class is both essential and fashionable today. So let me add my two cents worth with three clear messages:

1. America’s middle class, as we knew it in the 1990s, is gone for good.
2. America’s middle class, as a whole, must prepare for a lower standard of living due to the rising living standards of the rest of the world in a global economy like ours.
3. By pulling down the top 1%, all Americans will be worse off.

First of all, what is America’s middle class?

1. What is America’s middle class?

Here is an excerpt from Wikipedia – American middle class:

The American middle class is a social class in the United States.[1][2] While the concept is typically ambiguous in popular opinion and common language use,[3] contemporary social scientists have put forward several more or less congruent theories on the American middle class. Depending on the class model used, the middle class constitutes anywhere from 25% to 66% of households.

Below is a chart from What Is Your U.S. Income Percentile Ranking?

Here is my simple and quantifiable definition of an average American middle class family: It has

1. A household annual income of $60,000.
2. A house with two cars, two children.
3. Two weeks of vacation yearly.

2. Where did America’s middle class come from?

After WWII, America became the economic monopoly in the world. America’s chief competitors were either destroyed through the war (e.g. Germany and Japan) or self-destructed by adopting/continuing a fundamentally flawed system called “communism” (e.g. China 1949-1976 and the former Soviet Union) after the war. In other words, America was left as the only viable producer, making and inventing virtually everything and therefore dictating prices. This not only got America out of the Great Depression finally, but also created unprecedented prosperity in America throughout the second half of the 20th century, dramatically growing the middle class in America!

3. Where did America’s middle class go?

The middle class has been significantly diminishing in size since the turn of the 21st century for two main reasons:

1. International competition: The rest of the world, especially the BRICS led by China, finally got their act together and started pursuing their own “inalienable rights of life, liberty and the pursuit of happiness”. This not only ended America’s economic monopoly, but also planted the seed for a huge middle class all over the world. For example, over the past three and a half decades, China has lifted some 600 million people out of poverty, with many joining China’s burgeoning middle class! In other words, worldwide, there are more people in the middle class than ever. They are just no longer mostly in America anymore, as they were in the 1990s!
2. Self-destruction: The bill for many bad and even communistic policies initiated in the 1960s (e.g. The New Frontier and The Great Society) has finally come due! Worst of all, by signing off Executive Order 10988 on January 17, 1962, President Kennedy allowed public-sector workers to unionize against their employers, the people of the United States of America! This communistic act did help millions of government employees join the ranks of the middle class, at the cost of America’s future though: It ensured a spectacular failure of America down the road, city by city, state by state, as we have been experiencing over the past decade, with no end in sight! For more, read: Detroit, Public-Sector Unions, and JFK.

4. Will America’s middle class be back to the 1990 level?

Highly unlikely! As a matter of fact, America’s middle class, as we knew it in the 1990s, was actually the upper class by global standards. Even the poor in America were often better off than the middle class in most other countries. As our economy becomes more and more globalized and wealth is further spread worldwide, America’s middle class will inevitably have to realize that government overspending/borrowing will drive their standard of living further down with respect to the rest of the world.

Unfortunately for America, rather than fixing the communistic policies, most American politicians keep doubling down as most Americans keep demanding more, and electing whoever promises more. Three informative readings:

1. American Dreams: Over Sold and Over Bought!
2. Equality in America: Oversold and Overbought!
3. Civil Rights Act: 50 Years Later.

Now, let’s discuss income inequality …

5. Income inequality in America

Is income inequality in America today worse than it was in the gilded age some 100 years ago? No! As a matter of fact, John D. Rockefeller and Andrew Carnegie remain among the two richest Americans, ever!

Income inequality today is indeed worse than it was throughout the good old days (i.e. from 1946 to 2000). But those good old days were the exception, not the rule, as I argued earlier in this post!

Is income inequality a big problem today? Maybe! But taxing the rich is not the solution and will likely hasten our decline! Note: The Top 1 Percent Pays More in Taxes than the Bottom 90 Percent! In other words, by pulling down the top 1%, all Americans will be poorer! It is communistic – been there, seen that, escaped from it once!

6. Closing

American middle class, as we knew it in the 1990s, is gone for good for two main reasons:

1. The world has changed for the better, with a middle class bigger than ever.
2. America’s self-destruction over the past 50 years, at least.

While reason 1) above is inevitable, reason 2) is not. How to truly right the wrongs in America? Read my book: “The GOP Bible for 2016”!