While there isn’t an “official” definition of what the “middle class” really is, many agree it generally involves households earning between about two-thirds to double the median national income, adjusted for family size and local living costs.
Looking back fifty years, these households accounted for 62% of the nation’s income; now, that figure has dropped to 42%. It’s also telling that the number of people classified as middle class has fallen from 61% of adults in 1971 to just 51% today.
Once a clear majority, they are quickly becoming a minority. Income distribution in America, which used to be most concentrated in the middle, is now widening at both the top and bottom, resembling an hourglass.
A stark illustration of this can be seen in the increasing CEO-to-worker pay ratio at major U.S. firms. In 1989, it was 60 to 1; by 2024, it’s expected to soar to 281 to 1. I wonder — do we really believe these CEOs are adding that much more value to society than they did three decades ago?
I hesitate to place all the blame on capitalism itself, as crony capitalism seems to be the real issue here. Supporters of free enterprise should take note of this widening income gap, or they risk inciting a backlash from groups like the Democratic Socialists of America.
The question of whether we’ve entered a new Gilded Age is still up for debate. But history shows that a weakened middle class isn’t sustainable politically, despite what some may say about joblessness and the need to “learn to code.”
Such advice overlooks the more pressing problem of a significant devaluation of the dollar. Between the bailouts from the Great Recession in 2007 to the inflationary COVID stimulus and the costly war in Iran, there’s a lot weighing on our economic foundations.
Even with Treasury Secretary Scott Bessent attempting to keep long-term interest rates low, concerns are rising. The so-called bond rout is sending clear signals about the risks associated with holding U.S. debt. Essentially, repaying creditors with diminished dollars isn’t a strategy that can last indefinitely.
To make matters worse, American workers face a severe decline in purchasing power compounded by elites encouraging a race to the bottom regarding wages, all while outsourcing essential jobs. And now, with the prospect of a jobless recovery due to AI, it feels grim.
The wealthiest ten percent of households dominate asset ownership — holding nearly 90% of all stocks, for instance. They seem to be doing just fine, while ordinary folks struggle to build wealth. It’s frustrating to see the market reaching new highs while median wealth plummets.
Younger Americans are increasingly feeling as though the elite are thriving while so many others are “falling down.” Homeownership, once viewed as the American Dream, appears out of reach for many. Young people can hardly afford rent, let alone homeownership, which has skyrocketed to five times the median household income.
As for that cabin up north, well, forget about it. Even decent properties by lakes or near the ocean are priced in the tens of millions, pushing homeownership further away from the middle class, and even the affluent are feeling the pinch.
First-time buyers are left out of the market, and the overall affordability crisis is worse than ever. It seems like families are increasingly moving back in with their parents.
So, what’s the response from the current political establishment? More subprime mortgage mandates that, frankly, only inflate asset values for the already wealthy, repeating past mistakes without fixing the underlying issues.
Injecting artificial low interest rates into an economy already burdened by a staggering $40 trillion debt only delays a more severe correction — perhaps a depression — waiting to happen after today’s politicians have moved on. Kicking the can down the road seems to be their go-to move.
The White House’s continuous call for lower rates, even from the central bank that contributed to our current mess, seems puzzling. Additionally, designating the Fed as the first lender at low rates may have saturated the market with cash, driving up costs for everyone.
This isn’t just misguided; it amounts to a massive tax on those whose wages don’t keep pace with rising prices.
As some DC insiders pointed out, during the period from January 2021 to June 2022, American workers saw a 5% loss in purchasing power as real wages barely kept up with inflation — a situation that still hasn’t stabilized.
Eventually, true leadership must acknowledge that only sound fiscal policy can manage consumer prices, curb national debt, and restore the middle class. First, we need to contain the spiraling federal budget that consumes a significant portion of national income.
Alongside spending restraint, a revamp of a tax code that benefits those who don’t need it is also critical. There are numerous tax benefits, like subsidized insurance programs, that should be reevaluated.
If the Republican Party, aside from a few notable figures, wishes to win back blue-collar voters, some key changes might help. While some may bemoan the notion of challenging the wealthy, the tax code shouldn’t inherently favor them either.
For instance, terminating the subsidy for “carried interest” on Wall Street could be a positive step. These private equity firms benefit from lower tax rates on profits tied to investments where they’ve put little to no capital at risk.
Moreover, social welfare spending has skyrocketed, yet it seems flawed to use it to subsidize large corporations. Interestingly, some wealthy companies have compensation structures that put them in a position to qualify their workers for food stamps despite their immense revenues.
With reasonable training, any business whose workforce relies on public assistance should face significant profit surcharges until those numbers improve.
And for the commercial trucking industry employing undocumented drivers in precarious situations? Prosecution should be strict and unapologetic.
Many of the worst offenders are in states with “sanctuary” policies. Why continue to support high-tax states flaunting the law, particularly concerning illegal immigration?
Unfortunately, some bipartisan Republicans from coast to coast seem adamant about maintaining a tax code loophole, the SALT deduction, which ultimately benefits their constituents. Eliminating it could help Democrat governors bear the cost of their policies.
Plus, getting rid of this deduction could open up around $2 trillion over the next decade to help resolve deficits. It’s puzzling to reward states like Minnesota for their major fraud scandals.
However, taking on this issue is more than many establishment Republicans seem willing to manage, especially with other contentious topics on the table.
Lastly, it’s essential to reevaluate the tax-exempt status of sprawling organizations that award their executives exorbitant salaries. These so-called “non-profits” that compete with for-profit businesses while amassing significant revenue are costing taxpayers.
So, here are a few tax policy changes that might seriously address the federal fiscal situation without raising personal income taxes, ultimately leveling the field for those often overlooked in our society.
This echoes what President Trump once promised to do, though it seems like now he’s leaning on AI data centers to understand the economic landscape.
