A Middle Class Should Be a Dream and Not a Nightmare
Most of the countries of Europe & Asia (Australia, South Korea, Japan, Taiwan) have laws in place that guarantee a healthy middle class: poverty, like in America, doesn't haunt their dreams
The Washington Post just published a heartbreaking story about Dave Ramsey Jr., a working class American who fell out of the middle class and couldn’t afford an urn for his father’s ashes, much less a memorial ceremony.
To save money, the funeral home gave him his dad’s ashes wrapped in a cloth bag:
“Like a record 23 percent of Americans who’ve died in the past five years,” Eli Saslow writes for the Post, “the ultimate financial worth of his father’s life was nothing — a number somewhere below zero.”
In fact, it’s worse than that, as Saslow points out, noting that Dave Jr’s family is:
“[A] case study in what economists called ‘backwards mobility’ into the bottom 50 percent of Americans who now collectively have a negative net worth.”
A “negative net worth” takes you beyond mere poverty: it means you have virtually no way to ever economically catch your breath or sleep at night without worry.
It usually also means your children are doomed to a life of grinding poverty as well, since America is now the least socially mobile country among all developed nations as a result of Republican tax policies.
It’s no secret what a nation must do to produce a middle class that’s growing rather than shrinking. And it’s not impossible. In fact, it produces the best long-term quality of life for all of a nation’s citizens, regardless of how rich or poor they are.
That’s why wealthy people and business leaders in other developed countries generally support the union rights, high taxes on the wealthy, and regulation on money in politics that produce a growing middle class.
If nothing else, well-paid families in a strong middle class are reliable customers when they have enough money left over after payday to buy things. It’s why, before Reagan came along, business leaders here in America generally supported unions, regulation of money in politics, and a 74% top tax bracket.
That, after all, is how you get a middle class.
It’s straightforward, we’ve done much of it in the past, and all of the world’s other fully developed countries are doing all or almost all of it right now as you’re reading these words:
Regulate money in politics so oligarchs can no longer block legislation that would restrain their greed and provide for the needs of working people.
Set a floor through which people can’t fall, using meaningful food and housing aid to families who’ve fallen into poverty.
Guarantee workers the right to unionize and enforce that right vigorously.
Tax the morbidly rich and profitable corporations enough to both regulate their excesses and pay for the economic floor on which working people stand.
Provide healthcare at little to no cost so no American family will ever again get wiped out by somebody getting sick or in an accident.
Provide higher education and trade schools at little to no cost so every American, regardless of social station, can reach their full potential.
Strengthen public schools back to their world-class quality before Reagan, and ban most government money from going to parasitic private schools, particularly all-white “religious academies” and for-profit “charter schools.”
Invest in the nation’s infrastructure used by the majority of families, from mass transit to community-owned broadband to new public schools and public hospitals.
Enforce the nation’s anti-trust laws to break up monopolies in every sector, particularly including the media, healthcare, and finance.
So many American families have fallen out of the middle class because of a few simple economic and political realities that Reagan and his buddies either failed to understand, ignored, or simply overlooked.
Republicans in the 1980s thought America’s vibrant and growing middle class that they inherited from the New Deal was simply a perfectly normal thing and it had always been that way.
They thought that a middle class would always naturally emerge, like flowers in the spring, and would continue regardless of tax and unionization policy.
They were wrong. A middle class is not a normal thing in a capitalist economy, and the middle class that emerged in the 1933-1981 period was the first in American history to crack the 50%-of-the-population ceiling.
It was one of the first in the history of the world to do that, in fact.
The healthy middle class Reagan inherited was constructed across decades of specific legislation and hard work. It didn’t appear naturally.
If a country wants to have one, they must put into place very specific laws that will bend capitalism to cause a middle class to emerge, all while constraining the greed and power of the morbidly rich.
And that’s exactly what FDR did, and his tools — Social Security, Unemployment Insurance, Public Works infrastructure projects (TVA, Hoover Dam, etc.), the Wagner Act legalizing unions, raising the top tax bracket to 91 percent, enforcing our anti-trust laws — created the first more-than-50%-of-Americans middle class.
It was hard fought, but those Democrats back in the 1930s did it, pulling America out of the death spiral that the GOP created during the 1920s.
Republican President Herbert Hoover had three years to try to stop the Republican Great Depression, from the crash in October 1929 until he left office in March 1933, and he totally failed.
Democratic President Franklin Delano Roosevelt, though, pulled it off, both pulling us out of the Depression while building the foundation for America’s first great middle class.
Without those laws listed above, the economy of any country — including the United States — will eventually become like the economy of Victorian-era England that Charles Dickens described so elegantly. That’s the homeostatic point for unregulated capitalism.
In a “normal” unregulated capitalist economy there’s a very small number of very wealthy oligarchs; a small professional middle class of the doctors, lawyers and bankers who serve the oligarchs; and a mass of the working poor who will never break out of their debt and poverty.
A middle class, through most of the history of our nation and the western world, was an unattainable dream for working people. It wasn’t until the 1950s that more than half of Americans and Europeans began to move into the middle class.
In Dickens’ Christmas Carol, for example, Scrooge was that middle class, and Bob Cratchit and his family were part of that vast roughly 90% of people who made up the working poor.
England’s oligarchic rich — the British nobility — don’t even show up in most of Dickens’ works; they were as distant from the average person then as America’s billionaires are from you today. (Dickens knew the situation well: his father was sentenced to the Marshalsea debtors’ prison in 1824 when Charles was 12 years old.)
And make no mistake: Ever since Ronald Reagan took a meataxe to those laws that create and maintain a middle class, America has been on a steady decline toward that Dickensian nightmare.
In the 41 years since the institution of Reaganism, we’ve gone from our middle class constituting about two-thirds of us — a clear majority of Americans — down to fewer than half of us. Being middle class is now the exception, rather than the rule.
The largest group of American families today live in poverty. They’re the bottom half of this country who literally have no assets or a negative net worth.
Reaganism has raised American poverty levels back up to those we experienced through most of our history before the New Deal.
It’s taken as long as it has to reach today’s crisis of poverty because of how much wealth the middle class had accumulated during the years (1933-1981) we had those laws in place. But working people have been steadily burning through that equity for forty years, and thousands of Americans reach the end of the line every day.
It doesn’t have to be this way.
Most of the countries of Europe and Asia (Australia, South Korea, Japan, Taiwan) have laws in place that guarantee a healthy middle class. As a result, fears of sudden poverty and homelessness don’t haunt their citizens’ dreams.
They live pretty much like our middle class did forty years ago, before Reagan’s neoliberalism bit into America. Since Reagan’s radical “reforms,” though, our economy has been relentlessly sucking the wealth from working people and handing it off to the small group of American oligarchs who brought Reagan to power and today sustain the GOP.
For the two generations that came of age before Reagan began deconstructing our middle class, life was very different from today.
When Reagan took power, a third of Americans had a union job, and — because union jobs in those quantities set local wage floors that non-union employers had to compete against — roughly two-thirds of Americans were doing well.
That meant they had an income that, with one person in the family working, could support buying a house and a car, raising kids, and taking an annual vacation.
Because most states required hospitals and health insurance companies to run on a strict not-for-profit basis, healthcare was readily available and inexpensive. All the “gotcha” games for-profit insurers and for-profit hospitals play with their customers these days were mostly unknown then, as were things like “surprise billings” and obscenely expensive drugs.
America still had a healthy crop of rich and morbidly rich people before Reagan, but they were largely restrained in their greed by a top 74 percent income tax bracket.
Corporations were profitable, too, and the healthy competition fostered by the enforcement of anti-trust laws and a roughly 50% top corporate income tax bracket on corporate profits kept prices reasonable and wages rational.
And government was active on behalf of middle class working people, as I point out in The Hidden History of Neoliberalism: How Reagan Gutted America.
College was free or inexpensive in most states; I paid my tuition and apartment rent during my brief college experience in the 1960s with a part-time job at Bob’s Big Boy and pumping gas at the Esso station, both on Trowbridge Road in East Lansing. My mom put herself through MSU in the 1940s with a summer job as a lifeguard.
Dwight Eisenhower, the last Republican president who didn’t use fraud or treason to gain the White House, built on FDR’s and Truman’s work to crisscross the nation with new infrastructure.
Every president thereafter compounded those investments in America, including Kennedy (NASA), Johnson (Medicare/Medicaid), Nixon (the EPA, National Cancer Centers, Title IX), Ford (Energy Policy and Conservation Act, Federal Elections Campaign Act) and Carter (who maintained and expanded most of these programs).
As a result, in 1981 Reagan inherited a nation with the world’s healthiest middle class, longest life span, best job opportunities, cleanest air and water, and cheapest higher education in American history. Life was good for most white people, and minorities were beginning to build their own first widespread middle-class experience.
America, in other words, was on a roll. For working people and the nation itself, debt was low and opportunity abounded. And it was all because of those laws that guarantee a nation will have an ever-expanding middle class.
When Ronald Reagan took office in 1981, for example, the US national debt stood at a mere $908 billion; we funded things with taxes instead of debt, and mostly maintained a necessary national debt so savers and federal and state agencies would have a safe place to park cash.
And we understood that investing in America produced great returns on that investment of our tax dollars.
When World War II ended and our national debt was 119% of GDP (about where it is now), President Dwight Eisenhower borrowed even more money to build the interstate highway system. That produced such an explosion of economic activity that the added tax revenues paid down the national debt to 60% of GDP at the end of his presidency.
Similarly, the GI Bill that gave 7.8 million mostly young men (including my dad) free college and low-interest home loans proved a fabulous investment.
Since college graduates make so much more than people who only have a high-school education, and higher-income people pay higher tax rates, every $1 invested in the educational part of the GI Bill during its life from 1944 to 1956 produced an additional $7 dollars in tax revenue to our government over the lifetime of those now-well-educated and well-paid Americans.
And college generally continued to be cheap and accessible, while small business flourished.
But then, of course, came Reagan. He cut that top tax rate from 74 percent down to 28 percent and tore corporate taxes almost in half, producing an explosion of wealth at the very top of the economy.
Fat-cats got fatter, and when Reagan stopped enforcement of the nation’s anti-trust laws in 1983, giant corporations started getting fatter, too, as they went on a 40-year binge of buying out or simply destroying medium-sized and smaller family-run businesses across the country.
Remember Reagan’s “Mergers and Acquisitions Mania” (“M&A Mania”) that was lionized in the movie Wall Street with Michael Douglas? “Greed is good!”
That was when the feeding frenzy began.
Then Reagan went after America’s middle class working families, who he saw as “too dependent on government.” The dream soon became a nightmare for millions of Americans.
His administration slashed federal aid to education, gutted Food Stamps, defunded most of the Comprehensive Employment and Training Act, dialed back federal guaranteed loan programs for higher education, and took a hammer to Legal Assistance for poor and working class people.
Thus, today America is at a fork in the road:
Republicans (and two sold-out Democratic senators) want to keep things the way they are and let the middle class collapse even more; after all, the oligarchs pay well and Republicans have learned how to make it hard for low-income people to vote.
President Biden, on the other hand, wants to move America back in the direction of FDR’s and Eisenhower’s dream of a great middle class. Polls show, on nearly all the issues, Biden and progressive Democrats have broad public support.
None of this effort to rebuild our middle class is impossible or even particularly difficult, once the biggest barrier — the nightmare of oligarchs’ money contaminating politics — is overcome.
If most of Europe, Canada, and the Asian countries mentioned earlier can make a middle class work, America can as well.
After all, we’ve done it before.
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Whenever I see one of those polls rating presidents, I always choose Reagan as WORST. Todays GOP rave about him. And that’s exactly why we’re in the awful situation we’re in now. I felt a gut punch when I first heard the news he’d been elected. I knew he was going to be bad for Women’s rights. But I didn’t realize all the vast damage he would do. Trump was awful but Reagan started our terrible slide down to where we are. And likely led to an electorate capable of electing Trump. I was sick with a dire illness over an 11-year period leading to organ transplant. Because of our current system of healthcare, I ended up with none of my resources left. I had worked for 40 years of my life, but I am at net worth zero. Oh I’m very healthy now but I live on Soc Sec only and pay half of that to rent. Had to sell my car. So at age 74, though I was born into the middle class, earned a bachelors and masters degree with honors, I live in poverty. There’s something wrong with this picture. I’m a writer but life is so hard at this point I don’t work on any of my projects anymore. Just worry about what the GOP will do next
Dear Thom - I believe that your newsletter needs to be required reading for The House of Representatives the Senate and the Supreme Court - plus read out loud every day in the oval office. In my humble opinion, too many people are unaware of how we got to where we are or they chose to conveniently forget. Your newsletters are so educational and well written. Thank you for all the books you have written and for all that you do to educate us.