The Vanishing American Middle Class

The Wall Street Journal (8/22/12) reports online:

The middle class — defined as households with between two-thirds and double the nation’s median income — has shrunk considerably over the past few decades, a decline that has been greatly exacerbated by the recession and housing bust.

In 2011, the nation’s middle class income bracket held 51% of households, down from 61% in the 1970s, according to this report released today by the Pew Research Center. Over the same period, both the upper and lower income brackets have grown. Pew notes that while middle class incomes fell over the 2000s decade, the bigger hit was falling home and asset values. The median middle class income fell 5% over the decade, but total wealth — assets minus debt — fell 28%.

The recession has left many middle class families feeling more pessimistic about their future — only 23% said say they were very confident that they would have enough income and assets to last throughout retirement — and even eroded their faith in hard work. About two thirds middle class people believed most people who want to get ahead can do so if they work hard, down from 74% in a 1999 survey.

It’s amazing. Government policies of wealth and income redistribution are supposed to help the middle class. For a century now, the federal government has been increasingly in the business of moving income around. Obama is explicit and unapologetic about it, but his predecessors, Republican as well as Democratic, have all been part of expanding the role of government in the economy. (Most recent example: George W. Bush’s intervention in the real estate market leading to the crash.) A majority of voters when polled are against Big Government in principle, but when it comes to specific income redistribution which might benefit them—they’re all for it, and heaven help any politician who even momentarily questions it.

What has it got the middle class? You just read the numbers. The middle class is shrinking.

People ignore the reality that a rising tide lifts all boats. It’s derided as ‘trickle down,’ but facts are facts. The middle class—i.e., the majority of people in a free society, by definition—cannot benefit unless there’s a growing economy. Yes, a growing economy means that the rich get richer. But a growing economy is the only thing that can enable anybody in any economy to get anywhere at all.

Mitt Romney is no advocate of unhampered capitalism. His words and actions all suggest he wants to keep the redistribution of wealth game going, only at a slower rate than Obama would do (which isn’t saying much). But it’s interesting how Romney has become a symbol of this whole issue of capitalism versus government control.

We’re supposed to believe that ‘because Mitt Romney has a lot of money, and many other people do not, it’s unfair.’ But why is it unfair? How did Mitt Romney, or anyone who makes a lot of money in business, harm others merely by becoming successful? Although his goal was presumably to make a profit, in so doing he managed to contribute to an expanding economy rather than a declining one. What’s wrong with that? How is it more in the interest of the middle class to support greater government wealth redistribution when in the process government is making wealth more and more scarce all the time?

Too many people refuse to see the bigger picture. They look at government programs they like and conclude, ‘Those programs help me.’ If that’s true, then how do you explain the decline of the middle class throughout all this government expansion of the last few decades (intensified during the Obama years, for sure)? If Medicare, Social Security, food stamps, federalized education and government mandated health and flood insurance all create growth for the middle class’why aren’t we seeing it?

Capitalism is not parasitism. Capitalism does not refer to some living off of others at their expense. This is actually what we have now, with the policies of Big Government. If the goal is to help the middle class, then the primary goal should be to expand capitalism. Capitalism is a synonym for ‘freedom.’ Properly defined, capitalism and freedom are one and the same. Everybody is free to buy and sell on the open market with no restrictions whatsoever. The only requirements are not to initiate force or fraud, and to honor contracts to which one voluntarily agrees. That’s it.

People fear genuine, unhampered capitalism because, at the core, most people fear freedom. In America, many (perhaps most) want the freedom to be happy, but they don’t want to apply that principle across the board. In other words, if ‘making me happy’ includes having government grants or programs paid for by someone else, but also being able to pursue my own career and job as I see fit, and buy what I want to buy at the cheapest possible price, then that’s ‘freedom’ as most people comprehend it.

This isn’t freedom. It allows YOU unfettered freedom, including to (at least part of the time) live off of others; but it doesn’t grant those others the same freedom. Actual freedom is where everyone is left to his or her own rational judgment about how to pursue each area of life. This includes how much to charge for products, how and where to sell them, whether to sell them or buy them at all. Decades of government intervention has transformed capitalism into a ridiculous and incomprehensible mixture of state controls and remnants of freedom as it might and ought to be.

Bottom line? Americans must learn to accept that you cannot have your freedom and eat it too. Freedom is a principle, not merely a want or a desire to do whatever YOU want to do while others only get to do what they want to do sometimes.

Obama appeals to this nasty little evasive side of many people. It’s an appeal to the worst within us. The only alternative is freedom as a matter of principle, applied equally to everyone. The minute you deny freedom to another while still granting it to yourself is the minute you have abolished freedom for everyone—yourself included. Eventually, that chicken comes home to roost and the nasty little evasive side of people gets what it deserves. As evidence, witness these statistics on the decline of the middle class.


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