The Myth of the Middle Class

Article excerpt

The American middle class has disappeared. Despite frequent reference to "the middle class" by commentators and columnist, statistical evidence does not support the conventional wisdom of a vast middle class.

Downward pressures upon middle incomes began to appear in the 1970s when high inflation and a sluggish economy--stagflation--began to erode purchasing power. A trend was developing, but it was camouflaged by the growing number of two income families, an effective social safety net, and a two pronged corporate policy of loyalty to workers and support for community endeavors. A recent Census Bureau report (see Table I) provided conclusive proof that, beginning in 1969, the household income gap between the upper and middle quintiles began to accelerate, and the lowest fifth saw their incomes remain relatively flat.


Another study, this one drawn from a 1991 House sub committee hearing and covering the period 1977 to 1989, documented a 5 percent decline in after-tax family income in the middle quintile and a 10 percent drop in the two lowest quintiles, representing 40 percent of all families.

During the period 1969 to 1994, mean (average) household income in the top quintile shot up S25 percent, whereas the middle average increase was 350 percent, reaching an average income of $32,385 in 1994. The disparity between the top and bottom quintiles is a staggering 1,376 percent (see Table I), and the gap continues to widen as increasing numbers of families slip through the social safety net. The Urban Institute, a conservative think tank, estimated that the recently enacted "welfare reform" bill will push another one million children into poverty. What we are witnessing is a complete reversal of economic policy, resulting in a kind of reverse Robin Hoodism or, more descriptively, socialism for the rich and capitalism for the poor.

The Corporate Equation

Any discussion of family income would not be complete with out an analysis of corporate policy vis a vis its central role in precipitating the demise of Middle America. Big corporations have historically extracted handouts from a compliant Congress, but the Reagan Bush regime raised corporate welfare to new heights. For example, President Reagan's misnamed 1986 Tax Reform Act included 600 separate corporate tax loopholes, most of which were either introduced or strongly supported by Senator Robert Dole. Other regressive actions since then have driven nine inch nails into the coffin of the middle-class:

* Offshore business investments doubled in just two years--from about $29 billion in 1991 to $58 billion in 1993.

* Despite being the most productive workers in the world, US. workers have been subjected to 40 million "job displace meets" since 1980.

* Temporary employment agencies are our number one growth industry.

* Federal Reserve Bank policy is predicated upon the assumption that 6 percent unemployment represents a "natural" or normal rate--a policy ratified by President Clinton when he reappointed Alan "the Grim Reaper" Greenspan as head of the Federal Reserve.

* Over the past decade, military weapons production has become increasingly capital-intensive, thus causing countless millions of high paying jobs to disappear.

This corporate hit on the middle class has been abetted by the Reaganesque Four Horsemen of union busting, rapid automation, downsizing, and the exponential growth of huge transnational corporations. In addition, the Gingrich Congress' Contract with America (some of which has already been signed into law) calls for gargantuan handouts to corporate and wealthy elites, all of them to be bought and paid for by those in the lower income brackets.

Professor Ralph Estes of American University, writing in the journal Public Interest Accounting, estimates that yearly corporate handouts and external costs imposed upon customers, employees, communities, and society are in excess of $2. …