Economics of Liberty Opinions

Actually Bernie, The Middle Class Is Thriving, Not Dying

One of the major talking points across the political spectrum in 2016 has been the so-called “death of the middle class.”  From Trump’s plan to uplift average Americans on his quest to “Make America Great Again”, to Sanders’ dream of massive wealth redistribution, candidates on both sides of the aisle have engaged in tremendous class-warfare fear-mongering.

A new report from The Urban Institute, first reported on by The Wall-Street Journal, shows that not only is the middle class not dying, but rather that it is actually growing.

The analysis performed by economist Stephen Rose shows that the upper-middle class is larger and richer than ever before in the history of the United States. In 1979, the estimated size of the income group was only about 12 percent of the country’s population. As of 2014, the size of the group has grown to 30 percent of all Americans.

(c/o The Urban Institute)
(c/o The Urban Institute)

Terms such as middle class and upper-middle class are difficult to define, as there are many different competing metrics. Some economists define upper-middle class as households or families with incomes in the top 20 percent, excluding the top 1 or 2 percent. In his study, Rose uses an inverted model similar to how researchers calculate the poverty rate. This formula allows for growth or shrinkage over time, and adjusts for family size.

Politicians such as Sanders who warn of the growing gap between the “dreaded” 1 percent and the rest of the country get it all wrong. What Rose notes is that the real gap is between the middle class and those at the bottom of the economic totem-pole.

“Any discussion of inequality that is limited to the 1% misses a lot of the picture because it ignores the large inequality between the growing upper middle class and the middle and lower middle classes,” Rose told WSJ.

(c/o The Wall-Street Journal)
(c/o The Wall-Street Journal)

So is it a coincidence that the groups who receive the most government assistance are those being held back the most? Of course not. Despite harmful government programs such as welfare entrapment and the job-killing minimum wage, every income group – with the exception of the bottom 5 percent – has seen a growth in income since 1979.

As for the bottom five percent, their income growth rate since 1979 has been negative 12 percent, even though the amount of government support for them has only grown. Even the Affordable Care Act (ObamaCare), which provides health care subsidies for those at 400 percent of the Federal Poverty Line and below, has not been able to reverse the trend.

Since the War on Poverty began in 1964 in the Johnson Administration, poverty rates in the United States have stagnated. Much like the War on Drugs and the War on Terror, government intervention has had at best no effect, and at worst stagnated the natural progress of free enterprise.

(c/o the Heritage Foundation)
(c/o the Heritage Foundation)

Nobel Prize-winning economist Milton Friedman said, “the only cases in which the masses have escaped from . . . grinding poverty . . . in recorded history are where they have had capitalism and largely free trade. If you want to know where the masses are worst off, it’s exactly in the kind of societies that depart from that.”

While the argument was incredibly strong while he was alive, history has only strengthened it since his passing. The economic rot in Venezuela is precisely the result of such policies aimed to help the poor, but which always have the opposite effect. To quote President Reagan, it is not that liberals are ignorant: they just know so much that is not so.
Central planning and “welfare” have not helped the poor. I think it is time we try a dose of freedom instead.

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