Who Lost the Middle Class? - A question for historians in the not-too-distant future

Forty years from now, politicians, writers, and historians may struggle to understand how America, once the quintessential middle-class society, became as socially stratified as Europe or even Brazil. Should that dark scenario come to pass, they would do well to turn their attention first to New York City and New York State, which have been in the vanguard of middle-class decline.

It was in mid-1960s New York—under the leadership of a Barack Obama precursor, Hollywood-handsome John Lindsay—that the country’s first top-bottom political coalition emerged. In 1965, Gotham had more manufacturing jobs than any other city in the country. But the city’s political elites used eminent domain to push manufacturing aside in favor of business services; they also expanded social programs to help African-Americans and Puerto Ricans. The service sector proved rough going for the less educated, and the social programs failed. New York City responded by inflating its unionized public-sector workforce to incorporate minority workers.

Higher taxes to pay for bigger government joined higher crime to produce a massive exodus of manufacturing and middle-class jobs. Over the last 45 years, New York has led the country in outmigration. A recent study by E. J. McMahon and Robert Scardamalia of the Empire Center for New York State Policy notes that since 1960, New York has lost 7.3 million residents to the rest of the country. For the last 20 years, “New York’s net population loss due to domestic migration has been the highest of any state as a percentage of population.”

New York City, meanwhile, solidified its standing as the most unequal city in America. Twenty-five percent of New York was middle-class in 1970, according to a Brookings Institution study. By 2008, that figure had dropped to 16 percent, and the numbers have only plunged further since the financial crisis, with virtually all the new jobs in the city’s hourglass economy coming at either the high end or the low. Only high-end businesses can succeed in a local economy that has the nation’s highest taxes and highest cost of living—and even those businesses, in many cases, weathered the downturn only by living off the Fed’s policy of subsidizing banks. Despite the federal largesse, more of the city’s new jobs are in the low-wage hospitality and food-services industries than in the financial sector. The middle has lost its political voice in a city dominated by the politically wired wealthy and the public-sector unions that service the poor.

New York is the picture of what the Tea Party fears for the country at large. In the 1970s, liberal mandarins seized the high ground of American institutions in the name of managing social, racial, gender, and environmental justice on behalf of the disadvantaged. Their job, as they saw it, was to protect minorities from the depredations of middle-class mores. In the wake of the Aquarian age, the U.S. developed the first mass upper-middle class in the history of the world. These well-to-do, often politically connected professionals—including the increasingly intertwined wealthy of Wall Street, Hollywood, and Silicon Valley—espoused what might be called gentry liberalism, a creed according to which the middle classes had to be punished for their racism, sexism, and excess consumption.

And they have been punished—with job losses. These losses are the inevitable result of the costs of an ever-expanding, European-style public sector; environmental restrictions on manufacturing, mining, and forestry, which push high-paying jobs offshore; and illegal immigration, which reduces overall wage levels. At the same time, the decline in the quality of K–12 schools has undermined what was once a ladder of economic ascent. After completing high school today, students are likely to require a raft of remedial courses in college. Then, after college, many middle-class students graduate not with an education but with a credential—and a bag of enormous college loans that paid for the intermittent attention of a highly paid, tenured faculty.

The private-sector middle class’s plight has been exacerbated by international competition and technological innovation, which have undermined job security, including for unionized manufacturing workers, who had enjoyed an unprecedented prosperity for about a quarter-century. Median household incomes have grown only marginally since the early 1970s, despite the mass movement of women into the workplace. Many dual-earner families have been caught in the two-income tax trap: on the one hand, they pay for services once performed by the homemaker; on the other, notes economist Todd Zywicki, they’re pushed into a higher tax bracket when the wife’s salary is added to the husband’s.

Adding to the woes of the middle and lower classes is that their families are far less stable than they were a generation ago. The decline of marriage has been driven not only by changing mores but also by a decline in male employment. In 1970, only one of 14 working-age men was out of the workforce. Today, notes Nina Easton, one in five is either “collecting unemployment, in prison, on disability, operating in the underground economy, or getting by on the paychecks of wives or girlfriends or parents.” Whites who don’t attend college have out-of-wedlock birthrates approaching those that triggered Daniel Patrick Moynihan’s concerns about the black family in 1965. Today, four in ten American babies are born out of wedlock.

During the current downturn, the black and Hispanic middle class has been particularly hard hit. From 2005 to 2009, according to a recent Pew survey, inflation-adjusted wealth fell by 66 percent among Hispanic households and by 53 percent among black households, compared with 16 percent among white households. These families worry with good reason that in the face of continuing high unemployment, they may fall out of the middle class. For the Obama administration and the public-sector unions, the solution to this slide is to force the nearly one in four employers that have contracts with the federal government to pay above-market wages. Here again, New York has been a pacesetter. Recently, public-sector unions and their allies tried to force a developer rebuilding a decayed Bronx armory to follow their wage and hiring guidelines; the deal collapsed, leaving one of the poorest sections of Gotham in the lurch.

There’s a major difference, though, between New York and the country as a whole. The New York option—move somewhere else—doesn’t apply to private-sector middle-class workers fighting adverse conditions that exist throughout America. So they’ve exercised the classic democratic right of political action, organizing themselves to compete in elections. The Tea Party is the national voice of the private-sector middle class—despite the demonizations heaped upon it by public-policy elites whose own judgment and competence leave much to be desired.

Middle-class decline should be front and center in 2012, which is shaping up as a firestorm of an election. It’s likely to be a bitter contest, in which the polarized class interests of those who identify with the growth of government and those who are being undermined by its expansion face off without the buffer of mutual goodwill. Liberals, unless they change their tune, will blame Tea Party “terrorists” for the tragedy of a fading middle class. They will continue to delude themselves into thinking, as Al Gore said in 2000, that their rivals represent “the powerful” and that they themselves act on behalf of “the people,” even though President Obama’s policies have poured money into Wall Street and the politically connected “green” businesses that form the upper half of his top-bottom electoral coalition. The question is whether the country will buy this line and, more broadly, whether it will follow the New York model. Should it do so, those future historians will no doubt look at the election of 2012 as the contest in which the middle class staggered past the point of no return.

Fred Siegel is a contributing editor of City Journal, a senior fellow at the Manhattan Institute, and a scholar in residence at St. Francis College in Brooklyn.

Its not that complicated.

Taxes on the “rich” are really income taxes on people trying to become middle class and upper middle class. Government has been taking more and more from these people along with adding more and more burdens through regulation on what they do to earn those incomes. Income taxes on this group directly affect their wealth status. Their ability to buy things and their ability to save for the future. Basically the ladder is being pulled away from these people.

The rich are already rich. Income taxes on the truly wealthy have little if any affect on the their “wealth”. The ladder means nothing to them because they're already on top. So when government aims at taking away from the "rich" it always comes out of the middle class. Over time all that is left is the uber wealthy and everyone else.

The moronic left can never figure that out. Cause and effect are beyond their ability to reason.

A more important question to be asked first will be where did the middle class go and what is its status?

Just as the Money Trust was discredited and morphed as a “solution” into the Fed Reserve, composed of the same controlling interests as the Money Trust, so it seems the current Fed Reserve with Congressional support plans to morph into a supranational entity with the former to be central banks of Europe with its shadow banking, derivative system intact.

As the entire population of the “US trading zone to be” has been encapsulated into the CFPB for complete management by the executive branch, and housed and funded into the Federal Reserve, Congress so washes its hands of those pesky voters who will have to tow the line or ...else.

The answer is present right now as whom to blame.

"Middle-class decline should be front and center in 2012, which is shaping up as a firestorm of an election."

There's a middle class with government jobs and pensions...for now. In accordance with political pleas such as that quoted above, expect politicos and their politicians to keep the debt regime going, refusing to repudiate, until you all see squalor and ruin.

When the history books are written, I feel that to some extent the middle class of 1950-1975 will be viewed as artificially large due to post-WWII effects - that is, we supplied the rest of the world with what it needed to rebuild itself.

What I worry about now is that it will shrink to something below 1930 levels, i.e., pretty darned small.

“Liberals, unless they change their tune, will blame Tea Party “terrorists” for the tragedy of a fading middle class.”

Interesting since the Tea Party movement has only been around a few years while various flavors of nationalist progressives/socialists have been in power, raiding the middle class, almost non-stop since FDR with the exception of the Reagan era.

They might even be successful though, since they manage to get people to completely ignore the concept of tax incidence. That’s the main reason we’re bleeding jobs left and right. And of course Sarbanes-Oxley and Dodd-Frank don’t help either.

It doesn't have to be that way. As the other points out - big Gov't is directly proportional to the loss of middle class, and Gov't is the cause of income inequality. The middle class CAN return, if we return to local Gov't and responsibility.

The moronic left can never figure that out. Cause and effect are beyond their ability to reason.

The "moronic left" may not be able to figure it out. But the their leadership understands it full well.

Indeed, that's the point. Establishing a socialist regime starts with throttling the middle class. As Lenin said, "Elimination of the bourgoisie is the necessary first step toward winning the revolution."

The Tea Party is the national voice of the private-sector middle class—despite the demonizations heaped upon it by public-policy elites whose own judgment and competence leave much to be desired.

“Progressivism is a coalition of the top and bottom against the middle.”

Exactly - and the Tea Party is the subset of the Republican Party which defends the middle class. The subset which calls the rest of the Republican Party "RINOs."
The fact that the middle class is the core of the Republican Party is the reason that the Republican Party, with historically fewer members, has historically gotten the larger number of political contributions while the Democrat party has depended on fewer, larger contributions. The salvation of the Republican Party, and of the Republic itself, has been that the numerical core of the Democrat Party has neither turned out to vote nor made political contributions to the same extent that the middle class has.
The bifurcation in the Democrat Party can be seen on the red-state/blue-state map of counties; the Democrats tend to carry not only the "inner city" but also the upscale inner suburbs.
Al Gore spoke of "the forgotten middle class" - but only the Democrats could ever have forgotten the middle class, which is the air the Republican Party breathes.
But always remember that those are generalizations, and that a "red" or "blue" county is indicated as such on the basis not of unanimous sentiment for one party or the other but only on the basis of the preference expressed by the median voter.

The middle class, like the serfs and peasants who preceded them in the past, are viewed by the elite, in this case the liberals/communists as a cash cow to milk for all it's worth. They know that the middle class are the producers of the true, physical wealth in this country, which is why they have to use every means at their disposal to debase the middle class and make them subservient to the government.

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