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Middle Class Sank and Shrank During Recovery

The latest Pew survey of the state of America’s middle class doesn’t mince words: the subtitle of the report is “smaller, poorer, gloomier.” The lost decade for our middle-class is something to lament in itself, but its effect on the upcoming election may be equally significant.

According to Pew’s data, President Obama is enjoying a slight lead among adults who identify as middle class, but as the report notes niether candidate has “sealed the deal” with the key voting bloc:

About half (52%) of adults who self-identify as middle class say they believe Obama’s policies in a second term would help the middle class, while 39% say they would not help. By comparison, 42% say that Romney’s election would help the middle class, while 40% say it would not help.

There is much more variance in the judgments of the middle class about the likely impact of the two candidates’ policies on the wealthy and the poor. Fully seven-in-ten (71%) middle-class respondents say Romney’s policies would help the wealthy, while just a third (33%) say they would help the poor. Judgments about Obama tilt the opposite way. Roughly four-in-ten (38%) middle-class respondents say his policies would help the wealthy, and about six-in-ten (62%) say they would help the poor.

But a deeper look at the data shows some troubling signs for the president. Although 52 percent of the middle class express faith in the President, 42 percent believe they are worse off than they were before the recession. And as Timothy Noah notes in the New Republic, most of the income losses these families suffered occurred during the recovery rather than the recession itself. Regardless of race, education, or marital status, the middle class took one on the chin after 2009.

Although Obama retains his narrow lead in the middle class, he clearly can’t take their support for granted. Governor Romney has a chance to make the case; ten interesting weeks lie ahead.

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  • WigWag

    “About half (52%) of adults who self-identify as middle class say they believe Obama’s policies in a second term would help the middle class, while 39% say they would not help. By comparison, 42% say that Romney’s election would help the middle class, while 40% say it would not help…But a deeper look at the data shows some troubling signs for the president. Although 52 percent of the middle class express faith in the President, 42 percent believe they are worse off than they were before the recession.” (Via Meadia)

    So let’s get this figured out. 52 percent think Obama’s policies will help the middle class and 42 percent think Romney’s policies will help the middle class.

    71 percent think Romney’s policies are tilted to towards the wealthy while 38 percent think Obama’s policies will help the wealthy.

    Yet Via Meadia characterizes the difference as a “slight” Obama advantage. Sorry Via Meadia, this just doesn’t pass the smell test. What we have here, at least for the group which self identifies as middle class and for this particular issue, is an overwhelming Obama lead.

    It is unclear whether their feelings about the their personal prospects translates into more “middle class” Obama votes than Romney votes come November. Maybe self-identified middle class voters have other issues that they consider more important than their personal financial prospects (doubtful but possible) or maybe they will decide that Obama’s tilt towards the poor is more annoying to them than Romney’s tilt towards the wealthy (this is entirely possible).

    But the idea that the Pew poll shows a small Obama advantage instead of a substantial Obama advantage with this group of voters on this specific issue is absurd.

    The gap is gaping.

  • cacrucil

    Anyone interested in this blog post would really enjoy this op ed by Robert Samuelson, a business journalist endorsed by Richard Posner. “Saving the middle class”.

    “This psychological pall is compounded by widespread wealth loss. According to Pew, the Americans in the middle half of the income distribution — defined as households from $39,418 to $118,225 — suffered an almost 40 percent wealth loss from 2007 to 2010. Adjusted for inflation, their wealth, consisting mostly of homes, stocks and bonds, was barely greater than in 1983. “Everyone was getting wealthier through the first half of the decade,” says Pew’s Paul Taylor. “Well, a lot of that was paper wealth and housing wealth” — which went poof. Richer households didn’t fare so badly, because they had a smaller share of their wealth in homes.”

    “Obama and Romney can’t do much to aid the middle class. They face a dilemma. The middle class can’t regain its self-confidence and financial health without a strong economic recovery. But the economy can’t recover strongly without a financially healthy middle class, which provides most consumer spending. Not surprisingly, the economic expansion is glacial. Household debt is reduced gradually. Wealth is slowly rebuilt through higher saving and stock prices — and the hope that home values will follow.”

  • Jim.

    The problem here began way back with Clinton, when the “Wealth Effect” idiocy came into vogue.

    “People who feel wealthier spend more, and that is good for the economy”, was the thesis.

    Clue, guys: if you feel wealthier but aren’t wealthier, you shouldn’t be spending more money.

    Borrowing the money, even or spending down your wealth in unsustainable ways, just leads to the sort of crash we just lived through.

    If the Middle Class is going to rebuild, it’s going to rebuild itself on the virtues of working hard for the money you get, saving much to spend later, and avoiding leverage wherever possible.

    The Obama presidency is dead set against these virtues. Rely on government handouts instead of paying your own way, spending instead of saving, and borrowing as much as you possibly can are the order of the day.

    People who believe that Obama will help the middle class are just plain wrong.

    Anyone who can write a book like “God and Gold” should be ashamed to put together an article like this and leave out that analysis.

  • Tom Gates

    As others have pointed out in other posts, the County is a powder keg. No matter who is elected President the energy boom will commence. It may take a little time for the “money” to shift its way out of alternatives to fossil fuels, but it and the jobs it will bring are coming, despite whatever money the mideast countries pour into the “green” organizations to slow it down. US energy independence and becoming a net exporter will make the world even more a dangerous place as the foundations of the resource nations begin to crack. Want to increase your wealth ? Triple down on energy and defense in the coming months.

  • John

    Obama hurts the middle class by offering them a false rationale for the current economic failure and the false hope of something for nothing. Typical left wing promises that deliver–by force–money for left wing followers and money and power for left wing leaders. Gaining such power is the core competency of the Left worldwide.

    Romney is likely to win this fall (my educated guess, but just that), but demographically Obama and the Democrats have a smart strategy: by maximizing welfare state dependency, he seriously damages America’s future (an economically dependent and dysfunctional America is a weak and unproductive America) BUT brightens his party’s (an economically dependent and dysfunctional America is a left wing America). He only needs 50% of Americans to go for that, and then we may have an irreversible one-way trip to the bottom, as our current economic path indicates, never mind what happens when the dollar collapses (America could fall much, much harder than Greece, but hopefully not for years to come). The more the economy fails, the more money and power must be given to Progressives, the more the economy fails, and so forth.

    After all, once a formerly responsible citizen delusionally buys into “the path to success is paved with other people’s money taken by force by genuinely generous and carefully caring pols”–and that is nearly the entire appeal of the Democratic party, at both the low end (the romanticized, subsidized, dysfunctionality-has-its-privileges underclass) and the high end (crony capitalists and the Progressive ruling class), the solution to its inevitable failure is always more of the same. The problems have increased?! We need more Progressivism! Progressivism never fails–it’s just needs more time and money.

    Eventually, as Margaret Thatcher noted, you run out of other people’s money–but it can be a long way to the bottom, and a GREAT ride for the self-serving Progressive ruling class (of either party).

    Ask any community organizer: nothing says enduring power and comfort like the harnessed rage of the rabble you’ve roused! (see, e.g., Saul Alinsky, father of community organizing, and his Rules for Radicals; Barack Obama, his (now) most famous follower; and ACORN, the most famous (now disgraced and disbanded) community organizing group with which Obama participated as a trainer). The worse the better!

    Or ask government workers (outside of defense or intelligence, puh-lease). Ask union leaders. Ask university tenured faculty and administrators. Ask California. They’ll all tell you the truth: Obama is correct, and Progressivism works–it just needs a bit more time and money and then it will finally, as always promised, more than pay for itself by yielding the Great Society! BUT the additional money and power transfers come first; of course; obviously. This should be the last time we need the bump in payments, since, as Lyndon Johnson sagely predicted in 1964: “the days of the dole are numbered.” And the great man was right, of course!* But first come additional money and power transfers. To deal with the root causes and break the cycle of poverty.

    (Note to complainers: for pete’s sake, it’s only been 48 years since the Great society, or 75-80 years since the New Deal–I hardly think it’s time to start jumping to conclusions about the effectiveness or viability of these programs, not when so much Progressive power and money are at stake.)

    It’s not just the loss of liberty with Progressivism that is bad, but the truth that when it “succeeds”, it serves only Progressives (more benefits for those whose lifestyles don’t include meeting their own needs, and more benefits for the Progressive ruling class), but when it fails, it drags down everyone (cf. Europe).

    Even so, maybe agitprop works (did you know that Romney is a racist who causes cancer? And Ryan worships zygotes and bizarre novelists? Both while _refusing_ to subsidize Sandra Fluke’s extensive sexual needs?! _Inconceivable!!_), and the voters will give this another try in November. Because the record of abysmal failure with Obama’s Progressive policies proves that we need much more of those same policies, but with substantially increased funding.

    (Inspirational note: how did America ever survive without leftism? It must have been a hellish land of pathetic economic stagnation, collapsing standards of living, and mass emigration! Thank goodness Obama leads us Forward! Pre-Obama, America was a nothing little country, but now, we have seen the future, and it works!)

    *Mathematicians call this number “aleph null”.

  • Luke Lea

    Real wages must fall in order for employment to expand. It is just that simple.

    Why? Automation, immigration, Nafta, Gatt, WTO are all contributing. The supply of labor increases, the demand for labor decreases. Supply and demand.

  • Luke Lea

    You’ll notice by the way that the demand for luxury goods is sky-rocketing.

    Why is that? It is just the other side of the coin. When we say the demand for labor is decreasing, that means relative to capital. I.e., the demand for capital is increasing relative to labor. Wages go down, return on investment goes up. The pie gets bigger but each worker’s share gets smaller. You can deduce where the rest of the pie is going. It is simple mathematics. Inequality will continue to grow for a far as the eye can see. It’s no use crying about it. Policy makers in Washington could attack the problem though. They could tax capital to subsidize labor. A graduated consumption tax would be the most effective way to raise the revenue. In the final analysis it is inequalities in consumption and in workers’ real hourly take home pay that really matter. We could expand the earned-income tax credit.

    We could also legislate a six-hour day with time-and-a-half for overtime. That would effectively reduce the supply of labor, hence raising its price (on any hourly basis). A six hour day would be family friendly for obvious reasons.

    So why aren’t these policy options on the table? Because the donor class doesn’t want them to be. Is there another explanation? I haven’t heard it.

    Is WRM too conservative to even consider the alternatives?

  • Luke Lea

    Am I the only conservative liberal out there? It sometimes feels like it. Wig Wag and thibaud are much more conventional.

  • f1b0nacc1


    Taxing capital to subsidise labor means that you will have less capital over time. Why bother investing (which is never a sure thing, no matter how much the Left likes to pretend othewise) when the returns on that investment will be taxed away? Capital is mobile, remember, it will simply go where it is welcome if we decide to make it unwelcome here. If you doubt me, take a look at how capital has been ‘on the sidelines’ for much of the last 3 1/2 years. If you are looking at 5-8% profit margins, and the goverment suddenly decides to add 3-5% additional taxes to subsidse labor (or whatever other client the government needs to pay off that particular cycle), you don’t have to be Gordon Gecko to figure out that your continued investment is unlikely to be worth the risk over the long-haul.

    As for the 6 (or 6.5) hour workday, if you are going to mandate the same pay for lesser hours, you have raised the price of labor, so employers will be strongly incentivized to reduce their consumption of it. hence you will have FEWER jobs, and more unemployment. This will be delightful for capital, as the natural choice is to replace labor with capital (for instance, automation), which seems to me to be the opposite of what you are trying to achieve. Of course if you combine this policy with a tax on capital, you simply reduce productivity and competitiveness, and EVERYONE’s standard of living declines. Somehow, I don’t think that this is what you have in mind…am I mistaken?

    You correctly point out that there is a decreasing demand for labor as a result of many factors, but then seem to ignore that these very factors also make your ‘solutions’ problematic at best. Globalisation, immigration, automation, free flows of capital all undermine any attempts to undercut the basic dynamic…capital is inexorably replacing labor as time goes on. Perhaps a better suggestion might be to encourage more entrepenaurial activity to get more people involved in capital, so that the benefits of these dynamics might be more equally spread?

    Finally, a comment on inequality. If you make $20k/yr and I make $50k/yr the difference (hence inequality) is $30k/yr. If we now double our incomes (a good thing, no?) you are making $40k/yr and I am making $100k/yr. We are both better off, but the level of inequality has doubled as well! It isn’t inequality that matters, as long as MOBILITY remains unfettered. In the US, the lower two income tiers tend to migrate upwards over time, i.e. low income people tend to become richer as they get older (this is typically because low income people tend to be young folks just starting out, while higher income people tend to be more mature folks with greater experience and skills), so comparing income data from two points in time is often comparing apples to oranges. The person who made very little in say, 1982, might be making quite a lot in 2012. Inequality when coupled with mobility, which is what the US does well, is often the best of both worlds….

  • f1b0nacc1


    My apologies, I omitted a comment on your suggestion that a consumption tax might be an effective revenue raiser. If your concern is that the lower strata of the income spectrum is suffering, a consumption tax is likely to punish them more severely in proportion to the wealthy. After all, the poor consume most, if not all, of their available income, while the wealthy are likely to be able to save or invest at least some of theirs. A consumption tax punishes consumers at the expense of savers, so you will be working against the interests of the very people you wish to help. As for making it ‘graduated’, the rich also can afford more accountants and lawyers to game the system (and in a pinch, they can ship their incomes out of reach of the tax-man), as well as simply lobbying Congress to write the tax code in such a way as to shield their income from confiscation. My point is that unless your sole purpose is to raise revenue (which is unlikely to work over time, as the natural response to being taxed for a given activity is to do less of it, thus giving the government less to tax in the first place), a consumption tax is actually counterproductive. Worse still, if you are a Keynsian, a consumption tax will depress overall consumption hence aggregate demand, which will push the economy into a deflationary spiral.

    Once again, I dont’ think that this is what you intend, is it?

  • John

    Luke Lea, the reason those policies are not on the table is that economists generally (centrists and those on the right, anyway) consider them defective because they exemplify the “lump of labor” fallacy, that is, the mistaken (but understandable) view that the amount of labor required is fixed, and the only issue is how to distribute it. This is the labor version of the socialist argument that the amount of wealth is fixed, and it’s just a matter of how we (that is, the government/politicians) distribute it.

    Even leaving aside the moral/political issue of freedom from government control, the purely economic point is that the amount of labor is NOT fixed, and that it’s entirely possible for the need for labor to skyrocket if the obstacles to economic growth are reduced or removed. (E.g., the traditional energy sector, which is flourishing despite extensive and coercive Obama efforts to constrain it and convert it to Progressive energy projects.) Indeed, this creative destruction (both aspects are real, not only the latter) is, crudely, the whole history of economic growth under capitalism.

    The Obama administration sees regulation and Progressive social control as enhancers of growth rather than restrictors, and so this is not likely to change soon, IMHO. If the postal service, government-backed green energy, California, etc. (or even GM, since the government bought much of that and turned it over to the unions) were shining examples of success, they might conceivably have a point. But instead, Obama’s policies have had the predictable results, at least broadly predictable from a conservative perspective.

  • John


    Thanks for your thoughtful comments!

    I still think a consumption tax as an _alternative to_ an income tax has much appeal (extremely simple for individuals, harder to game it, rewards investment), but I agree there would need to be some sort of strong effort to protect the poor, and fear it would be both a very painful transition and, like our current tax system, a target for “it’s a wonderful idea, here are 20 completely disintered ways to make it even better for protecting my clients and the planet/women/children” adjustments, just like our current system.

    So it will likely never happen, at least not as a replacement.

    And as a supplement to our current income tax system, it could be disastrous.

  • f1b0nacc1


    Thank you for your kind comment.

    My concern with regard to a consumption tax (or really pretty much anything other than a flat tax with no exceptions) is that it is too easy to game, and in fact opens the door to all sorts of regulatory capture. I suspect that this is what you are saying in your comments regarding how a consumption tax might be implemented. Our founders were wise indeed, and part of that wisdom was their clear-eyed understanding of the inherent desire of those in power to extend their power, and the dangers that this presented. The more complex a law (complexity is often created with the sometimes noble intent of making things ‘more fair’), the greater the openings for manipulation and/or corruption.

    A flat tax would hardly be perfect (inevitably there would be some flaws in application, if nothing else), but it gives the least scope for manipulation, offers the greatest transparency, and provides the smallest opening for interested parties to attempt to capture and control the legislature for their own interests.

    Which is, of course, precisely why it will never be adopted.

  • Jim.

    @John: Great post!

    @Luke Lea:

    France tried legislating a shorter work week. It didn’t help anything.

    One thing that might help America is encouraging employers to increase the number of part-time jobs (in professional job types too) to allow women to spend more time with their children, raising and educating the next generation. That would increase quality of life, education outcomes, and significant number of other desirable goals, for just about everybody.

  • Sam L.

    Hed should be:

    Middle Class Sank and Shrank During “Recovery”

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