Is There a Middle Class in America ?
There is a 40 to 1 ratio between two equal halves of Americans. Half of America owns, on average, 40, the other half owns 1. This is not the egalitarian republic we wish it were. Where is there any middle in this equation?
When extended into dollars, in rough terms, this means that the average savings, the wealth, of one half of American households is $1,000,000, while the other half owns $25,000. Those are the averages. The total national wealth is over $50 trillion, and the bottom half own 2.5% of it. There are 114 million households. The wealth ratio between the top one percent and the bottom half is almost 700 to one.
Yes, the middle class has shrunk, about by 10%, over the past thirty years by the traditional measure of annual income. But that is solely a measure of annual income. Giving consideration to wealth shows a picture of really great inequality. I think that most economists and commentators do not give enough value to the importance of savings or wealth. We consider ourselves to be a nation of mostly equal citizens, even 80 percent consider themselves to be middle class. But do 80% believe they own more than $1,000,000? In fact only about 8.1% of the nation falls into that class.
Most of these details about wealth are found in the report by the U.S. Treasury, Federal Reserve Bank, Survey of Consumer Finances, Currents and Undercurrents, 2006, Arthur Kennickell, page 11 and 29.
If you want to learn more you can read the works of Edward Wolff, his book Top Heavy, or go to the web page toomuch.org., or inequality.org.
On the other hand, in regards to income reading from two books, Robert Kuttner’s The Squandering of America, page 20, and The State of Working America, 2006/2007, page 79, we learn that the incomes of the top one percent exceed the combined incomes of half the population. Sixty percent of the households take in 20.3% of the national income, and the top one percent take in 18.4%, in 2004.
We are a nation where 1 out of 8 in live poverty, 1 out of 6 forego regular medical care for lack of money, and 1 out of 3 do not have savings sufficient to survive independently for more than six months living at the poverty level.
These conditions conflict with our ideals, quite bluntly and rudely. It is far easier for many to ignore those facts. And politically there has not been an alternative available to change those facts. Yet they are easily changeable.
The best idea is to create work through government sponsored employment. We did this in the 1940s with the war effort, and the result was not the repeat of the 1930s as you might guess would happen, but a decade, the 1950s, that created the best broad-based growth in U.S. history. It was the result of transfering money out of wealthy private portfolios of corporate bonds and stocks and moving it into the paychecks of Americans working for the war effort. This created a large national debt, and, more importantly, the foundation for aggregate demand that led to economic growth in the 1950s.
House Speaker Nancy Pelosi states that the “economic stimulus” passed by Congress in February, 2008, is designed to inject “demand” into the economy. This shows plainly that purchasing power, or aggregate demand, has sunk to dangerous levels, and the economy, if left alone, would spiral into depression --- which it is still in danger of doing. Aggregate demand is propped up by high wages. Why aren’t the wages high enough to sustain the economy? The genius of capitalism is that it constantly lowers costs, including labor costs, at all cost. Taken to an absurd and inhumane level capitalism will destroy the collective economy. That’s not a totally wild claim. When enough workers cut back their purchases because they can’t afford what they produce, that is a depression. Mexican autoworkers and Chinese computer assemblers know this personally. We are tending to a world society where fewer and fewer will afford what we could all afford if income and wealth were more equal. The pseudo-solution, the easy solution, is an “economic stimulus.” The economists L.Randall Wray and Frank Stricker are authorities on this problem. Also economist Jeff Madrick details the strategy of demand-led growth in an article in Challenge Magazine.
Other plans to revive equality and sustain the economy involve raising the minimum wage to a living wage, expanding the Earned Income Tax Credit, creating a labor friendly monetary policy, protecting unionization rights, changing trade policy, and together we could create an egalitarian society. Forty to one is not egalitarian. It is a shame, and a sham. Many are those who do suffer from overwork, low pay, disrupted lives, and non-marital births. Some 37%, 3 out of 8, of the children born in the U.S. in 2005 were non-marital births.
A democracy that works for all citizens must be self-informed and knowledgeable. There is good reason to push against the inequality we experience. Many young people face a future that we older Americans did not have to confront. And shouldn’t it be our responsibility to provide the most wide open path to economic security as we can?
Keep this fact in mind, a half of America owns a million dollars, and the other half owns $25,000, a 40 to one ratio.
Ben Leet
benleet@earthliink.net --- 928 words --- February 15, 2008 --- See this blogspot for more of my essays --- http://benl8.blogspot.com
