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Washington essay: US middle class shrank and professor lamented widening gap of rich and poor
By Donghui Yu Translator Sheng-Wei Wang
September 1, 2016


Source: http://hk.crntt.com/doc/1043/3/9/6/104339653.html?coluid=148&kindid=7550&docid=104339653&mdate=0806003618

 

Forty years of shrinking of the US middle class

 

American writer Neal Gabler recently published an article on The Atlantic website, which sparked heated debate in the US. He wrote that the Federal Reserve Board’s survey found that 47 percent of the American respondents said that they would have trouble finding $400 to pay for an emergency. Even some middle class people including himself did not have this emergency fund. He is a successful author who has written five books and is a visiting professor at the State University of New York. Once his home ran out of heating oil, he and his wife had to borrow money from their adult daughters to buy it. Gabler positioned himself as the "upper-middle class,” despite facing this embarrassment. What he was talking about was the “unspeakable shame of the middle-class Americans" - "financial impotence." 

 

 

Middle-class families are no longer the majority

 

Gabler said that American society is confronted with this reality: on the one hand, the phenomenon of a shrinking American middle class is drawing more and more concern from the American society; on the other hand, Americans are still accustomed to living beyond their means and borrowing on the future. A large number of Americans are living “week to week, paycheck to paycheck, expense to expense".

 

According to a recent study by the Pew Research Center using data from the US Census Bureau and the Federal Reserve, the proportion of middle-income families decreased from 61 percent in 1971 to 49.4 percent in 2015, namely the US middle-class families were no longer the majority. At the same time, the proportion of low-income families increased from 25 percent to 29 percent, while high-income families also increased from 14 percent to 21 percent. That is, the American family structure was gradually changing from the "football" shape, having more middle-class families in the middle and fewer low-income and high-income families at the two ends, toward a "dumbbell" shape with more low-income and more high-income families at the two ends of the dumbbell and fewer middle-class families in the middle portion. Although at present the middle portion is still relatively large, the trend indicates that the wealth gap between rich and poor is growing. The trend of middle-class shrinkage is obvious.

 

The Pew Research Center has always been tracking changes in the US middle-class configuration. An earlier report from the Pew Charitable Trusts analyzed the status of middle-class shrinkage in the various states since 2000. This study used the median household income of the various states as reference points. The middle-class families were defined as having income equivalent to two-thirds to double the median income. The study found that in all 50 states, the proportions of middle-class families from 2000 to 2013 shrank. These were the figures calculated statistically based on the declining median household income in the past more than ten years in the majority of the US states. If taking into account that the reference points themselves had declined, the actual state of the US middle-class shrinkage was more serious than what the numbers reflected. In most states the middle-class families spent more than 30 percent of their income to cover the cost of housing, whether it was mortgage or rent. This stretched the ability of many Americans to meet other needs.

 

Take for example the several states where the Chinese had their largest concentration. In 2000, the California median household income was $65,000, but dropped to $60,000 in 2013, while the proportion of middle-class families declined from 46.7 percent to 45.3 percent. In 2000, the New York median household income was $60,000, but dropped to $57, 000 in 2013, while the proportion of middle-class families declined from 45.1 percent to 42.3 percent. In the quite affluent state of New Jersey where the Chinese had a larger population, the median household income dropped from $76,000 to $70,000, while the proportion of middle-class families declined from 48.8 percent to 44.8 percent.

 

Middle class squeezed between the two political parties

 

Many reasons caused this phenomenon. In 2012 the Pew Charitable Trusts did a survey, according to which the respondents blamed the Congress as the main reason for the middle class shrinkage, followed by the large financial institutions and large companies. In the Congress, the bipartisan disputes intensified; Republicans fought for the interests of the rich and the large companies and protected the wealthy from tax increases, whereas Democrats spoke for the poor and industrial workers trying to expand their benefits coverage. The final result of the compromise was taking into account the interests of the rich and the poor, but the middle class had to bear the resulting cost. The health care reform in the US was a typical example. Over the past decade the rapid development of globalization has benefited the rich and the big companies, but production workers have been seriously affected. During the financial crisis and economic recession led by the speculation of the big financial firms, the lower-middle class suffered the most severe damage, because, after the real estate bubble burst, the market values of many houses dropped below the mortgage amount. If, during this time, the owners became unemployed, or became ill, it was very likely for them to fall from the middle class into poverty.

 

Some analysts believe that the middle-class shrinkage and the intensified rich-poor wealth divide is related to the neo-liberal economic policies pursued by the US, namely, emphasizing the role of the market and letting the market adjust itself by relaxing regulations and reducing taxes for the rich, encouraging the private sector and so on. The analysis of senior researcher Jared Bernstein of the US think tank Center on Budget and Policy Priorities concluded that factors including economic globalization and global competition, technological changes, education barriers, de-unionization, financial and real estate bubble, rarely seen recession, and employment market downturn exacerbated the gap between rich and poor.

 

In the US, there are domestic controversies over the consequence brought by the shrinking middle class and the rich-poor wealth divide. The Republican politicians and scholars tend to believe that, as long as there were more rich people, the middle class shrinkage was not a big deal. After all, high-income families increased by 7 percentage points, while low-income families increased by only four percentage points; this indicated that the American society in general became more affluent. But some people argue that the trend of the middle class shrinkage is quite obvious, the most critical factor is that social problems caused by the growing disparity between the rich and the poor are increasingly prominent. The underlying causes of the “Occupy Wall Street” movement occurred in recent years, as well as the continuous Afro-riots and people-police confrontations which occurred since last year were all related to the widening wealth gap.

 

Post-middle class impacts political  elections

 

The Gallup poll last year found that since the 2008 financial crisis, the US population that  considered itself middle class or upper-middle class decreased by 12 percent, and nearly half of the respondents thought they were working-class or even lower-class.

 

The shrinking middle class and the rich-poor wealth divide are having an impact on American identity and political attitudes. The New York Times magazine recently published an article entitled “Is the US Ready for a Middle-Class Politics?”, stating that "A particular vision of the American dream has shaped elections for decades. What happens when people stop believing in it?”

 

In April last year, when Hillary Clinton announced her presidential candidacy, she launched a video to play the “middle class" card and branded herself as a defender of the middle class. Donald Trump was a dark horse in the Republican primaries, while Bernie Sanders surprisingly also had a strong performance in the Democratic primaries. Election analysts found that a large proportion of Trump’s supporting base were whites with only high school or lower education and earning an annual income of $50,000 or less.  For Bernie Sanders, in the New Hampshire Democratic primaries, his supporting rate from voters earning an annual income below $50,000 was 33 percent higher than Hillary Clinton’s. These largely reflect the growing frustration and dissatisfaction of the middle and lower levels of the middle class against the establishment.

 

This is why Donald Trump, the "real estate magnate", plays the "middle class" card.  He wants to tell the American white middle and lower classes that “Only following me can you have a better life.” By contrast, Hillary Clinton, who is actually close to Wall Street, when she gave her speech at the Democratic convention, had to "soothe" the depressed Bernie Sanders by saying: “I want you to know, I’ve heard you. Your cause is our cause. Our country needs your ideas, energy, and passion,” and “We wrote it together — now let’s go out there and make it happen together.”

 

Sweet words during the election campaign sound nice to the middle class. But once the politicians really hold power, will the middle-class families still be pinched? People are not optimistic.

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