American Elephants

Denying Middle-Class Prosperity for Political Purposes by The Elephant's Child

President Obama, when he speaks about the economy or unemployment, always tells us how he wants to build the economy from the bottom up, and the middle class out. He usually goes on about middle-class stagnation, and how the middle class is suffering, which he blames on inequality and declining incomes. But the facts suggest otherwise. Members of America’s middle class are far better off than they were 30 years ago, and they live much more comfortably than their counterparts in other countries.

The research that shows the middle class stagnating looks at market incomes, which is an accurate gauge of employment compensation, but a misleading way to look at a family’s financial resources. It does not consider how Big Government redistributes income.

The rich are not getting richer at the expense of the poor while the middle class stagnates. The CBO adjusts market income by subtracting taxes and adding in the cash value of social benefits. When you then divide households into five equal groups, the data reveal that average disposable household income grew by 40% for the middle quintile and increased by 49% for the bottom quintile.

The average American family has 38% more disposable income than an Italian family, 25% more than a French family,  and 20% more than a German family, when adjusted for purchasing power. The public unknowingly often agrees with politicians who claim the middle class is struggling to make ends meet. We are most aware of inflation at the grocery store, when we watch the price of beef go up and the size of packages of other products go down while the price stays the same. Add that to constant worry about unemployment and deficits and debt.

Mobility is still working, and things are not as bad as we are told.

%d bloggers like this: