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Allow me to make the most charitable (read: pessimistic) observation about what has happened to the incomes of the “middle-class” since 1980. Since the propitious election of Ronald Reagan, a culture of rugged individualism and corporate greed have overwhelmed the country. An unfortunate byproduct of this revolution has been the enrichment of the gilded class of Americans at the expense of just about everyone else. The once prosperous middle-class is being hollowed-out, tearing at the very social fabric that holds American civil society together. Policies of lower taxes (how does that hurt the middle class?), freer trade (how does that hurt the middle class), massive deregulation (such as?), and a general hostility against traditional American middle-class values have made it harder for families today to do what their parents and grandparents did. Never mind the fact that these same middle class make up the solid majority of voters that the political class must pander to (think about the strong opposition to cuts in Medicare).

Without providing lots of detail, I think that is a decent summary of the critics. Here is an illustration:

Very few of us can afford to live like the Bradys; even the hope of such a lifestyle, which once seemed an obvious promise of the future, is fading as the middle class shrinks, and as having just one or two children requires both parents to work.

That’s Bill McKibben writing in the March 9, 1992 New Yorker. It might as well have been written yesterday. My point here is simple: let’s assume the data and the criticisms are correct. What do the data show? They would show that, in real terms, median household incomes (ignoring non-money compensation) have stagnated since Ronald Reagan destroyed America. But reflect on what that means, literally. For real income to be flat (there are strong arguments in both directions here, so let’s not get into them) it means that a family today is in EXACTLY THE SAME POSITION in 2011 as they might have been in 1980. That’s what “real income” means. It is the actual quantity (and quality) of goods and services you can buy today.

If the actual quantity and quality of goods and services the typical family can buy today is exactly the same as the actual quantity and quality of goods and services they were able to buy 30 years ago (note I am granting the awful assumption that the median family today is the same exact family as the median family 30 years ago, which is not only silly but physically impossible) then how is it possible that it is worse or harder or out of reach for middle class families today to obtain a lifestyle that their parents and grandparents enjoyed?

Remember, that the quantity of goods and services available today is unconscionably larger than it was in 1980. Note that the quality of goods and services available is unconscionably better than it was in 1980. Note, that family sizes are smaller than they were in 1980 (so that a given family income, even if it is constant, goes further today than in 1980). Note that real average and median wages have not fallen since 1980 — so that if a husband was the sole worker in 1980, his real wages today would be no worse than they would have been in 1980. Note that individual income taxes are lower today than in 1980, so take home incomes are likely to be larger than they were in 1980. My point is to ignore all of this, and to accept the critics’ data as being a 100% accurate depiction of life today. How does their data support their claim that living like their parents requires both parents to work today but not in the past? How does their data support their claim that life for the middle class is harder than it was for their parents? Even on their own terms these claims are totally not supported by the data. At best they are supported by the feeling that things are just harder. They are supported by the vague notion that since more people hold politically unpopular ideas today respecting freedom and property than in the past, that somehow, middle class families (who of course must hold communitarian values) have to be worse off.

I can be sympathetic to the idea that middle class families are somehow worse off today. But the data do not make that case. The least charitable interpretation of the data suggests that life for the middle class today is the same as it was a generation or two ago. That sounds like the folks who love government spending – any time a budget increases more slowly than it did in the past, all kinds of whining begins about how programs are being “cut” and things are worse, while in real, per-capita terms, spending is increasing. I don’t get it. A final conundrum: wouldn’t the “E”nvironmentalists among us not only not be upset about the trend in stagnating incomes, but also celebrating it? Isn’t the “consumerology” of middle-class Americans what is killing the planet?

I don’t have any idea how anyone would begin to show in any convincing way that the middle class of today have it worse than the middle class of the past. Anecdotal stories are lovely, and it is easy for readers to tell themselves that they have it tougher than people in the past do — but there is really no objective way for a reconciliation here. Certainly, the data (and a look around you) do not demonstrate that the world is worse for the middle class today. And listening to someone tell me that my family’s life is tougher than it would have been 30 years ago is a bit odd, no? Is there anything that would persuade you that the critics’ feelings (and that’s all they really are, just feelings) are correct? What would you want to look for? In a future post, I will share some of my thoughts on that query.

2 Responses to “The Brady Bunch Crunch”

  1. Rod says:

    I would argue that it has been deficit spending and the resultant inflation that has had a large part in degrading the American standard of living, as the purchasing power of our fiat currency has steadily declined at a faster rate than real incomes have grown.

    If all it took to make us rich was to print more money, all we’d have to do is to have the Fed give everyone whatever money they wanted to cover their spending. Easy, huh?

  2. Harry says:

    In 1980, Jimmy Carter was president. We were entering a deep recession, comparable to what we have today, neither of which resembled the decade of the ’30’s. If you lived in Maryland, there were gas lines, thanks to the newly-created Department of Energy. Gold was $800 an ounce.

    Money market rates were, as best as I can remember, were in double-digits, enough to make it worth one’s while to enjoy the float on one’s credit card.

    Two years before the Federal Reserve under William Miller had attempted a QE2-style move that caused interest rates to decline about two percentage points, but inflation had come roaring back.

    Therefore any analysis that starts with 1980 as the base cannot be blamed on what GHW Bush called Voodo Economics.

    Anyone who was there from 1981 to the next decade knows what happened, and the players who want to tax everybody have been sore ever since.

    For political reasons, largely because of slavery to Congressional bean counting straight-line reasoning, income tax rates were “phased-in” over three years. Simultaneously, Paul Volcker closed the money spigot. Oil got deregulated, gas lines disappeared.

    So let’s judge Reagan’s record from, say, 1982 to 1989, just after GHWB’s Thousand Points of Light, a kinder, gentler approach to spending, and his caving in to George Mitchell at the summer retreat at Andrews AFB.

    At one point in his career, Phil Gramm dared his colleagues to keep cutting tax rates until revenues actually declined.

    By the way, when I was at the library today I ordered The Road to Serfdom. Apparently the whole county has only five copies, and they are currently on loan. Is this the Wintercow Effect?

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