Now is the Time to Re-consider: ‘Is the Middle Class Shrinking?’

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Leave it to Beaver
When I was watching Leave It To Beaver with my family around the living room TV set, I believed that, later in my life, I too would achieve this ‘Middle Class,’ wholesome status (as the Clever family). For me, this status was The American Dream! Fantasy, but real nonetheless…
Super Investing

This is one of the scariest thoughts that I could ever consider, but is the middle class shrinking, or will it maybe disappear altogether through time? This nightmare, for a cult of baby-boomer-believers, that middle class status is no longer attainable, was first accentuated in a Time article: Is the Middle Class Shrinking? Time Nov. 03, 1986.

Erosion has been rampant since 1986, with the exception of the late 1990s, when the middle class experienced rejuvenation. But in order to understand why it is shrinking, one must channel a capsulized history lesson. The middle class was created, possibly artificially, by FDR’s GI Bill, which made a college education affordable for millions of GIs returning from the European theater.

They could also afford to buy a home, which was partially (50 or 60 %) funded by their government stipend. So these guys got married, went to college, had lots of babies, and moved into fair to midland houses that they called home. Thus, the middle class was born. This is where the baby boomers enter the picture and where the Leave It To Beaver kids come into focus. Now the American Dream could be lived without interruption.

So FDR created the middle class out of nothing and pulled us out of the Great Depression, when he signed into law the Serviceman’s Readjustment Act (June 22, 1944). Naturally, that’s a rather easy way to describe a complex socio-economic phenomenon. But it is a good starting point to trace the history of a class of Americans that are the majority, that are the engine, and the heart and soul of the United States.

Without a strong middle class, we will no longer will be a strong nation. If we don’t come up with a plan to grow the middle class, we will descend the ladder of greatness amongst nations. Tax cuts for average Americans, the middle class, will do a great amount of good for our economy. People will spend more in the retail market, and this will help small businesses. And remember to buy from the local, little guy, not Wal-Mart.

And yes, the wealthy must start paying higher taxes. Tax rates for the wealthy 1% of Americans were much higher in the 1950s, when a Republican, Dwight D. Eisenhower was our president. And to be honest, this is what boosted the middle class. The GI Bill bought these guys time to educate themselves, so they could be reinvented into a new professional class of workers. Something similar needs to happen today.

The reasons why our middle class is experiencing erosion are much more complex than just the tax structure. You will benefit from a read of: America’s Middle Class Has Become Globalization’s Loser, by Gabor Steingart. Crack those books. Manufacturing is dying in the U.S. Furniture, electronics, automobile parts and microchips are all made abroad. Export/import imbalances. We buy from China, but they don’t buy from us. Why? American ingenuity has been on the decline. I would attribute this to a faulty educational system. We need to fix this. Our educational system no longer targets the areas where there is growth in the job market. Green, green, green jobs. We must change, and quickly.

Okay, it’s difficult to zip-lock 65 years of economic and social history (1945-2010) in a few paragraphs. Fear can be a great motivator, though. For those who have lost their jobs in this last Great Recession, a desire to trace just what happened in America since WWII, must be a consuming passion. History has a way of repeating itself. The simple lesson for me, is that without a strong middle class, the U.S. will perish off the face of the earth.