New Elite v. Middle Class

The facts are in. The American middle class is hurting.

In the Washington Post, Neil Irwin writes,

In 1989, the median American household made $51,681 in current dollars (the 2012 number . . . $51,017). That means that 24 years ago, a middle class American family was making more than the a middle class family was making one year ago. This isn't a lost decade for economic gains for Americans. It is a lost generation. [emphasis added]

Similarly, Eduardo Porter in the New York Times tells us:

America has been standing still for a full generation[--]36 years ago. . . 11.6% of Americans were officially considered poor. . . Using the same official metric — which actually undercounts the poor compared to new methods used by the Census today — the poverty rate is 15%.

Americans work about as much as they did a quarter-century ago. Despite [that], the net worth of the typical American family in the middle of the income distribution fell to $66,000 in 2010 — 6% less than in 1989 after inflation. Though the bursting of the housing bubble and ensuing great recession takes a big share of the blame for families’ weakening finances, it is nonetheless startling that a single financial event . . . could erase a generation worth of progress for those in the middle. [emphasis added]

But is it really a lost generation? Has America truly been standing still for a full generation?

Look closely at the graph above. Notice how income rose, fell, and rose again, peaking in 1999 with the dot.com bubble, then hit that peak again in 2007 with the housing bubble before crashing to current lows, as we dropped to the 1989 peak to which our leading newspapers refer.

The graph tells us what’s bad is our failure to recover from the Great Recession of 2007-9; in fact, it’s gotten worse. Well, worse for those of us living outside the Washington D.C. area, as National Review’s Mark Steyn reminds us:

According to the Census Bureau. . . between 2000 and 2012 the nation’s median household income dropped 6.6%. Yet in the District of Columbia median household income rose 23.3%. . . Washington does nothing but government, and it gets richer even as Americans get poorer.

So, are people getting mad at the elite that makes out while the rest of the country’s middle class suffers? Maybe not the D.C. elite, but they are mad at wealth on up the East Coast. A September NBC News/Wall Street Journal Poll found bad news for Wall Street: 42% have a negative view of the New York financial institutions while just 14% have a favorable opinion.  That is the lowest rating of any institution included in the poll.

And 52% think they have been either greatly or somewhat affected by Wall Street crises and its housing market collapse, a number just 7% lower than during the 2008 financial collapse’s immediate aftermath. Only 27% think the economy will get better in the next year, while 48% think it will be about the same.

But here’s another poll finding that explains how people stick with an elite that fails repeatedly to deliver economic growth:

Democrats continue to be seen as the party that is most looking out for the middle class. They lead on the question by 17% and have led on it all the way back to 1989 when it was first asked – although this was the narrowest margin in the poll. . . By contrast, just 23% say the Republican Party represents the middle class and 22% say so of the Tea Party.

That’s a mystery conservative Jonah Goldberg seemingly attributes to bad history:

It’s a little bizarre how the Left [conflates] statism with modernity and progress. The idea that rulers — be they chieftains, kings, priests, politburos, or wonkish bureaucrats — are enlightened or smart enough to tell others how to live is older than the written word. And the idea that someone stronger, with better weapons, has the right to take what is yours predates man’s discovery of fire by millennia.

And yet, we’re always told that the latest rationalization for increased state power is the “wave of the future”[, a] phrase [that] became famous thanks to a 1940 essay by Anne Morrow Lindbergh. She argued that the time of liberal democratic capitalism was drawing to a close and the smart money was on statism of one flavor or another — fascism, Communism, socialism.

The only truly new political idea in the last couple thousand years is this libertarian idea, broadly understood. The revolution wrought by John Locke, Edmund Burke, Adam Smith, and the Founding Fathers is the only real revolution going. And it’s still unfolding.

Goldberg is right, though he doesn’t explain here that statism, which supports a New Elite for a period of time, doesn’t generate middle class prosperity the way capitalism does.

Capitalism works because it decentralizes decision-making to millions who in striving for their own betterment, lift the whole economy. More and more, we are learning how the “white hats” are regular folks, and the “black hats” are the national elite, working top-down through government. Listen to ex-pollster Scott Rasmussen:

The new reality is captured in Nicco Mele’s book, The End of Big. “The devices and connectivity so essential to modern life put unprecedented power in the hands of every individual — a radical redistribution of power that our traditional institutions don’t and perhaps can’t understand,” he writes. In America, power is decentralizing and individuals are being empowered. While the trend has been building for decades, the politicians are just starting to recognize it.

One big reality check came [from] the “sequester”. In D.C., many expected the American people would rise up in revolt when the so-called “cuts” took effect. Instead, no one noticed. Outside of those who work for the government, there was hardly any impact. For those in power, that was a terrible glimpse into the reality of how irrelevant much of what they do has become.

More recently, Rasmussen added:

On gun control, the sequester and Syria, the political class showed how little grasp it has about the attitudes of mainstream America. Other issues are likely to reveal the same cluelessness as 2014 approaches. The political class world is crumbling. That’s something to celebrate.

Yes but alas, not until those outside “the political class” have mustered the organization and resources needed to force change.