What Happened to Our Middle Class?

I am a proud American. I was born in a Navy hospital at the end of the last war this country fought and won. I watched as the nation prospered when the soldiers came home with the G.I. bill that helped them buy their first homes. They came home to a post-war economy that had to be rebuilt with American labor for the new peacetime era. Labor unions provided a balance where fair wages were provided for an honest day’s work and corporations still made profits.

I had an “I Like Ike” sticker on my little red wagon. It didn’t matter that my parents were registered Democrats, they liked the Army general who led our nation to victory in WWII. Eisenhower had seen the impressive Reichsautobahn system in Germany during the war. He was but a 28-year-old Lieutenant in 1919 when he was part of a convoy evaluating our existing highway system. That convoy would take 62 days to drive 3,200 miles from Washington, DC to the Presidio in San Francisco. Much of that road trip was spent on, as Eisenhower would describe, “a succession of dust, ruts, pits, and holes. As president, he signed the Federal-Aid Highway Act of 1956, which would build 40,000 miles of divided highways that would link all American cities with a population over 50,000.

Before and After WWII Highway System

The middle class in America flourished. With a single income, families could expect to own a home, a car, provide a college education for their children, and take vacations each year. In 1956, I took one of those vacations with my family, and we drove on the existing roads before the Interstates would be built. That trip took over a month as we crossed the country through the south, down into Mexico, up the California coast, across the northern plains, up into Canada, back into the U.S. at Niagara Falls, and down the eastern seaboard where I saw our nation’s capital for the first time.

It was a good time to be a middle-class American. I grew up in a G.I. Bill home. It was a two-bedroom, one-bath, 1,175 sq. ft. house (816 sq. ft. living area) with a garage sitting on a 10,200 sq. ft. lot. We had one car and eventually two. My brother and I were able to complete college educations without accumulating any debt. I spent four years in the Navy before beginning a 35-year working career. I am into my 14th year of a comfortable retirement.

Typical GI Bill Home 1940s

My life, as related in the paragraph above, would have been entirely different if I had been born into the “middle-class” decades later. Now, you need two income providers in a family just to make ends meet. Savings are generally too low to cover a loss of income for more than a couple of months. A family of four will typically be facing over $65,000 in student loans with two children in college. The starting salary for those college graduates in 2020 will average $55,260.

When I graduated, I could expect about $47,000 less than that 2020 figure. What I actually made, was considerably less. As an E-3 in the Navy in 1968, my monthly payment was $137.70, which works out to $1,652.40 a year. That of course included “3 hots and a cot.” I also had free medical and dental and a clothing allowance to keep me in uniforms.

So, what happened to America’s middle class over the years. For one, labor unions have been marginalized. College educations have been moved out of reach for many and will involve a burdensome debt for those lucky enough to get one. In a recent article in Vox, they gave the example of a teacher in New Jersey who was married to a carpenter. Between them, they made $160,000 which places them solidly in the “middle-class.” While this may sound like a lot of money, their expenses for things like housing, medical, debt payments, child care, and a $150 monthly contribution to a retirement fund, means their savings account averages only $400 and a family vacation involves juggling credit card debt.

Part of the problem lies in the fact that, while the wealthy are expanding their affluence, the rest of Americans have seen stagnant wages for the past 40 years. Raises seem to be pegged as “cost of living” bumps in income which translate to the status quo. For many, these raises are pegged to inflation but not the actual cost of living. Rent and not homeownership is the norm with 30% of household income going to pay that rent. Now that middle-class membership entails two incomes and childcare for two will run over $25,000 a year, or about 35% of a median family income.

In my many years living in the middle-class, my major debt was only my mortgage. Credit card debt was never seen as an alternative to a higher standard of living. Today, household debt is pegged at around $14.3 trillion with much of that on high-interest credit cards. My generation was able to work hard, save for the future, enjoy a good life, and retire with dignity. Today, that dream has all but evaporated for the new “middle-class.”

When I graduated college in the 60s, after-tax savings were around 11%. In 2007 it had fallen to 3.6%. In 2016, the median debt for someone of retirement age was $31,300. Some of this debt is in a mortgage but some are also in student loan debt for themselves or their children, and credit card debt is common, especially for someone who may have had periods of unemployment. Some mortgage debt is also onerous as any who perhaps refinanced around the time of the housing bubble when home values got over-inflated, and equity was withdrawn.

Income inequality is a harbinger of our nation’s future as a little debt begets even more debt. High levels of income inequality are linked to economic instability, financial crisis, debt, and inflation. For the wealthy, wealth and assets generate more wealth. Access to education and better healthcare aids the wealthy in their pursuit of more wealth. The “non-wealthy” struggle to get an education and the burden of healthcare and childcare make it difficult or impossible for them to even tread water.

Income inequality is no longer the exclusive realm of women, minorities, and immigrants. It is no longer a comparison of the traditional poor compared to all of those above the poverty level. The gap between even the upper middle class and the wealthy has widened to a chasm. Government bailouts of large industries may have saved some big corporations but not much of that largess made it to the average worker.

The social stability inherent in a strong middle class is all but a memory. Most societies with a healthy middle-class have higher levels of social trust in their governments, lower levels of crime, better health, and generally, and they would rate their lives as satisfying. With the loss of our middle-class, we find higher crime rates, declining health, and a severe distrust of government. Recent events with the last election and the pandemic have highlighted the lack of trust many feel with our government.

In 2017, three individuals in America owned half of the net worth of half of the country. In June of 2021, the top 1% in America controlled $41.52 trillion while the bottom 50% controlled only $2.62 trillion.

In their 1975 hit, Rich Get Richer, the O’Jays lament about income inequality and the conflict between the “super-rich” and the “super poor.” They took some inspiration for their lyrics from Ferdinand Lundberg’s book, America’s 60 Families, written in 1937. In his book, Lundberg asserted that 60 interlinked American families controlled mainstream media, the U.S. economy, and had unchecked influence over American political institutions. At that time, his list included the families of Rockefeller, Morgan, Ford, Vanderbilt, Mellon, Guggenheim, Whitney, Du Pont, and Astor. [aside, Lundberg also wrote Imperial Hearst and sued Orson Wells charging that Citizen Kane was an unauthorized adaptation]

Wealth is not inherently evil. Our capitalist society is founded on the acquisition of capital. When all the playing field is level, this is a fair and equitable means of rewarding hard work and enterprise. When, however, the game is rigged in favor of a few, then it is time for a change. I have several friends who claim to be independent in their political thinking, but I find much of what they support is biased in the name of limited government where an unregulated capital free-for-all would be a survival of the fittest. To them, welfare is for a bunch of lazy freeloaders trying to force others to support them. While I will agree that there are those who would take advantage of any government dole, I would not criticize anyone while we are still playing a game rigged in favor of the wealthy few.

Yes, when access to higher education is equitable, childcare is affordable, wages for a 40-hour workweek exceed the cost of survival, and healthcare is available for everyone, I would support a rethinking of our welfare system. When the very wealthy start paying taxes on all of their income, perhaps we can afford to provide enough social services to make America great in the first place. Our last president could be the poster child for hiding income, undervaluing property for tax purposes, overvaluing the property for loan purposes, and basically gaming the tax system to better his financial position at the expense of others. It should not be the case that once you accumulate enough wealth to afford to have a team of lawyers on retainer, that you are allowed to pick and choose which laws you will obey.

In an almost complete departure from all of what has been written above, I would recommend that those of you with Netflix consider watching the limited series Maid. While the main theme is about emotional abuse, the young woman protagonist in the story also shows what it is like to need government assistance. The built-in gotchas, government hurdles, and convoluted red tape in our assistance programs are part of the subtext.

Rich Get Rich, The O’Jays, 1975

Some people have more than enough

When you got you got you got people starving

Babies crying

People living just for dollars

That's tough, tough luck, that's what they say man

I know there's got to be a better way

People living in one-room shacks

Sleeping on top of each other's backs

Now that's tough, tough luck

That's what they say

I know, I know there's got to be a better way

The rich, well, the super-rich, lord

The poor, well, the super poor