In this presidential campaign, like others before it, several candidates describe themselves as champions of the middle class — a group their rivals have supposedly forgotten.
Bill Clinton’s 1992 campaign appealed to “the forgotten middle class.” Senator Hillary Clinton’s campaign bus is called “The Middle Class Express.” She says, “America’s middle-class families have been invisible” to President Bush. “For middle-class Americans,” she pledges to “extend the tax cuts including the child tax credit, the marriage penalty relief, and lower income tax rates that they currently pay.” Ironically, all of those tax cuts were enacted in 2003 by a president accused of forgetting the middle class.
No politician could possibly forget the middle class, because that’s where the votes are.
A recent CBS polls defined middle class as those with incomes of $30,000 to $75,000. Yet that amounted to only 44 percent of those who described themselves as middle class to CBS pollsters. In reality, we can’t know tell if $75,000 buys a lot or a little unless we ask whether that refers to single-person households or large families and whether they live in Honolulu or Little Rock.
Polls tell us that nearly everyone with incomes from $30,000 to $200,000 think of themselves as middle class. That encompasses 73 percent of all families, with fewer than 5 percent earning more.
Median household income in 2006 was $48,200. That figure was still slightly below the cyclical peak of 2000, which was not unusual. Median income did not get back to the peak of 1989 until 1996.
Besides, “median household” does not mean typical family. There were nearly 115 million households last year — including many young singles and elderly widows. There were only 59 million married couples; only 21 million with children under 18.
Third Way, a progressive Democrat think tank, notes that “among households headed by adults between the ages of 26 and 59 the median household income is about $63,000. For prime age married households the median income is over $70,000.” Those defining middle class as those with incomes below $75,000 are excluding about half of all mature married couples.
Another statistical blunder lies behind periodic claims the middle class is shrinking. A 2004 feature story in the Washington Post – “The Vanishing Middle-Class Job” — feigned outrage that the percentage of households earning between $35,000 and $50,000 a year (adjusted for inflation) had dropped from 22 percent in 1967 to 15 percent in 2003. Yet the same article showed that the percentage earning more than $50,000 soared from 25 percent to 44 percent in those years. By the quaint standards of 1967, the middle class appeared to vanish only because millions of family incomes had climbed above $50,000.
Some presidential hopefuls claim wages are falling because profits are rising. In reality, employee compensation accounted for 65.3 percent of national income from 2001 to 2006, up slightly from 65 percent from 1993 to 2000. The share going to profits did increase to 11 percent in the past six years, up from 10.4 percent in 1993 to 2000, but that was because the share going to interest fell to 5.3 percent from 5.9 percent .
After adding benefits and adjusting for inflation, the Bureau of Labor Statistics says real hourly compensation in business rose by 1.2 percent a year from 2001 to 2006. That was not bad considering the worldwide spike in energy prices. It was certainly better than 1993 to 1997 when real compensation rose by only 0.1 percent a year.
All of these income and pay figures are adjusted for inflation, which means they take into account the extraordinary increase in oil prices in the past few years as well as increased costs of health insurance and college. Unscrupulous politicians count these expenses twice. They claim wages and benefits were stagnant after adjusting for inflation, yet go on to complain about prices of gasoline, health insurance, and college tuition as though these had not already been accounted for when adjusting incomes for inflation.
In a sense, politicians are nonetheless correct to depict the middle class as struggling to make ends meet, because that has always been true. If people had no budgets to worry about and no trouble buying whatever they want, then they wouldn’t be middle class would they?
– Alan Reynolds, a senior fellow with the Cato Institute, is the author of Income and Wealth (Greenwood Press 2006).