DESTRUCTION OF THE AMERICAN MIDDLE CLASS

The American middle class is rapidly disappearing.  The rich are getting richer and the poor are getting poorer, and the disparity is growing at blinding speed.  At one time America had the most widespread prosperity of any middle class in the history of the world, but no more. 

The causes are many: globalism, supply side economics, growing corporatism and greed  — for starters.  The pie chart below shows us how real wealth in our country is now distributed. 

As can be readily seen, the top 1% of our population holds a whopping 34.3% of the country’s wealth.   When we add to that number the holdings of the next 9% of the population, at 36.9%,  we can see that the top 10% of America’s population holds 71.2% of our national wealth, leaving the bottom 90% of the American people with only 28.7% of the wealth –– just a little over 1/4th of our nation’s wealth. 

Stagnation at the bottom and modest growth in the middle: In inflation-adjusted dollars, among the poorest 20% of households, average income was $14,500 in 1979 and $15,500 in 2005 — an increase of 7.6%.   Among the middle 60% of households, average income rose from $42,000 to $51,000 — an increase of 21.4% — while household income among those in the top 1% averaged $325,000 in 1979.  By 2005 that had increased to nearly $1.1 million — an increase of 238%!  Today, the bottom 50% of income earners in the United States now collectively own less than 1 percent of the nation’s wealth. 

According to Nobel Prize winning economist, Paul Krugman, the growing inequality in America is unprecedented.  

“Most people assume that this rise in inequality was the result of impersonal forces, like technological change and globalization. But the great reduction of inequality that created middle class America between 1935 and 1945 was driven by political change; I believe that politics has also played an important role in rising inequality since the 1970s. It’s important to know that no other advanced economy has seen a comparable surge in inequality – even the rising inequality of Thatcherite Britain was a faint echo of trends here.” 

“On the political side, you might have expected rising inequality to produce a populist backlash. Instead, however, the era of rising inequality has also been the era of movement conservatism,  the term both supporters and opponents use for the highly cohesive set of interlocking institutions that brought Ronald Reagan and Newt Gingrich to power, and reached its culmination, taking control of all three branches of the federal government, under George W. Bush. (Yes, Virginia, there is a vast right-wing conspiracy.)” 

“Because of movement conservative political dominance, taxes on the rich have fallen, and the holes in the safety net have gotten bigger, even as inequality has soared. And the rise of movement conservatism is also at the heart of the bitter partisanship that characterizes politics today.” 

From the 1940s to the 1970s the marginal income tax rate was in the 70% to 90% range. So, there wasn’t much incentive for the ultra-greedy to demand $100 million bonuses if the government would get $70 to $90 million of it.  It was a de facto executive pay cap. 

By lowering the high marginal rates — reduced first to 50% and then to the 30% range — an incentive did develop for a demand of big salaries and bonuses: there is no longer any reason not to be as greedy as possible. 

DATA PROVES THAT THE AMERICAN MIDDLE CLASS IS BEING WIPED OUT:  According to The Business Insider      

• 61 percent of Americans “always or usually” live paycheck to paycheck, which was up from 49 percent in 2008 and 43 percent in 2007.
• 66% of the income growth between 2001 and 2007 went to the top 1% of all Americans.
• 36 percent of Americans say that they don’t contribute anything to retirement savings.
• A staggering 43 percent of Americans have less than $10,000 saved up for retirement.
• 24% of American workers say that they have postponed their planned retirement age in the past year.
• Over 1.4 million Americans filed for personal bankruptcy in 2009, which represented a 32 percent increase over 2008.
• Only the top 5 percent of U.S. households have earned enough additional income to match the rise in housing costs since 1975
• For the first time in U.S. history, banks own a greater share of residential housing net worth in the United States than all individual Americans put together.
• In 1950, the ratio of the average executive’s paycheck to the average worker’s paycheck was about 30 to 1. Since the year 2000, that ratio has exploded to between 300 to 500 to one.
• As of 2007, the bottom 80 percent of American households held about 7% of the liquid financial assets.
• The bottom 50 percent of income earners in the United States now collectively own less than 1 percent of the nation’s wealth.
• Average Wall Street bonuses for 2009 were up 17 percent when compared with 2008.
• In the United States, the average federal worker now earns 60% MORE than the average worker in the private sector.
• The top 1% of U.S. households own nearly twice as much of America’s corporate wealth as they did just 15 years ago.
• In America today, the average time needed to find a job has risen to a record 35.2 weeks
• More than 40% of Americans who actually are employed are now working in service jobs, which are often very low paying.
• For the first time in U.S. history, more than 40 million Americans are on food stamps, and the U.S. Department of Agriculture projects that number will go up to 43 million Americans in 2011.
• This is what American workers now must compete against: in China a garment worker makes approximately 86 cents an hour and in Cambodia a garment worker makes approximately 22 cents an hour.
• Despite the financial crisis, the number of millionaires in the United States rose a whopping 16 percent to 7.8 million in 2009.
• Approximately 21 percent of all children in the United States are living below the poverty line in 2010 – the highest rate in 20 years.
• The top 10% of Americans now earn around 50% of our national income.