Over at the Agenda, the excellent Scott Winship of the Brookings Institution isn’t convinced by claims that the middle class is disappearing:
Krueger’s claim of a shrinking middle class relies on the same peculiar definition. Specifically, “middle class” is defined as having a household income at least half of median income but no more than 1.5 times the median. I re-ran the numbers using the same definition and data source as Krueger and found that the entire reason the middle class has “shrunk” is that more households today have incomes that put them above middle class. That’s right, the share of households with income that puts them in the middle class or higher was 76 percent in 1970 and 75 percent in 2010—two figures that are statistically indistinguishable. For that matter, I am not discovering fire here; Third Way made the same point in early 2007 (page 7). A shrinking middle class is only a problem if it reflects fewer people reaching the middle class.
I do have to say that America has come a long way if all we have to fight about is how well the middle class doing rather than say, poverty. I thought about that on Sunday when I heard Sen. Harry Reid explain that voters know what the Democrats stand for, and that is the middle class. Not the poorest Americans, but the middle class.
That should be no surprise. Think about it this way. In Washington, priorities are often measures by how much the government spends. By this standard, the middle class is ahead of the game. According to OECD data, the U.S. federal tax system is the most progressive of any in the OECD (the top 10 percent in America pay way over 45 percent of income taxes, at least as tax incidence is normally estimated). Yet government spending is rather regressive, meaning that the U.S. taxes the rich and redistributes most of that money not to the poorest Americans but to the middle class. If we add state and local taxes, the tax system is much flatter but the spending remains regressive.
A good example of this is the share of the budget that goes to senior Americans who, contrary to common belief, aren’t the poor ones anymore. (My Washington Examiner column on the issue is here.)
While I find this very disturbing, I shouldn’t be surprised. The middle class, and senior in particular, are a big voting bloc — unlike the poor.