Conservative Think Tank: The Middle Class Has Never Had It Better (Unless You Need a Doctor or an Education)

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Middle Class
Mark Twain once said that there are three types of lies: "Lies, damn lies and statistics." On Tuesday, economists Mark Perry and Donald Boudreaux offered an interesting illustration of Twain's oft-quoted line when they refuted the argument, expressed by many top economists and analysts, that the middle class is in decline. Calling the claim a "myth," they argued that things are brighter than ever for the average American.

Perry and Boudreaux's analysis, which appeared on the website of the American Enterprise Institute (and which they summed up in The Wall Street Journal) focuses on the fact that the middle class is living longer and spending less on many consumer goods than it did 60 years ago. Unfortunately, while bold, this argument ignores several key economic realities. As numerous economists have noted, the income gap between the rich and the poor has been widening, even as middle class incomes have plummeted. The numbers are hard to ignore: In 2000, the median household income in America peaked at $54,841; in 2011, it hit $50,054 -- the lowest it had been since 1996.

To counter this, Perry and Boudreaux point to a significant drop in the percentage of their income that most families pay for food at home, cars, housing, furnishings and utilities. Citing statistics from the Bureau of Economic Analysis, they claim that in 1950, the average family spent approximately 53 percent of its yearly income on these products; today, they say, it only spends about 32 percent.

To begin with, the Department of Labor offers a slightly different perspective. In the 2011 Consumer Expenditure Survey, they calculate that the average family spends $30,666 on housing, food at home, transportation, and apparel and services. Given an average pre-tax income of $63,685, this works out to 48 percent of the average family's income -- a far cry from the 32 percent of disposable income that Boudreaux and Perry cite.

Middle class neighborhood in in East Haven, Connecticut.

A Rosy Picture ... With a Dark Underside

Even if we accept Boudreax and Perry's numbers at face value, there is still a fundamental problem: Their analysis ignores education and health care, the two key elements that have contributed the most to the economic struggles of the middle class. Not coincidentally, costs in those two categories have skyrocketed in the past few decades.

According to a 2008 report by the Congressional Budget Office, the amount that the average American spent on health care more than doubled between 1965 and 2005, from $1,000 (in 2005 dollars) to over $2,000. The report went on to note that the rise in health care spending was largely due to "ongoing increases in costs per beneficiary."

And the rise has continued: According to a 2012 survey by the non-partisan Henry J. Kaiser Family Foundation, the average family cost of a family health insurance program rose by 4 percent between 2011 and 2012, and almost doubled between 2002 and 2012. Today, taking care of the average worker costs almost $9,000 per year. And medical bills are by far the No. 1 cause of personal bankruptcy filings in America.

For that matter, the Department of Labor also weighs in on the cost of medical bills: According to the Consumer Expenditure Survey, the average household now spends $3,313 a year -- more than 5 percent of its pre-tax income -- on health care.

life expectancyA Longer Life ... For Some

Even so, as Perry and Boudreaux point out, there is a bright side to America's pricey health care system: "Happily, an American born today can expect to live approximately 79 years, a full five years longer than in 1980 and more than a decade longer than in 1950." They go on to note that this improvement has extended across racial barriers, citing a June 7, 2012 New York Times article that stated "The gap in life expectancy between whites and blacks in America has narrowed, reaching the lowest point ever recorded."

As that Times article noted, this gap has been steadily narrowing since 1993. However, a September Times article pointed out that things haven't been quite so good all over. In the later article, the paper reported that, since 1990, life expectancy for white people on the lower end of the income spectrum has been steadily declining. In that period, among those without a high school diploma, white men saw their life expectancy drop by three years, and white women by five years. In fact, since 2008, life expectancy for black women without a high school diploma has been higher than that of white women at the same educational level.

The life expectancy gap between high school dropouts and college grads is staggering. For white women, a college diploma equates to 10.4 more years of life. For white men, it adds 12.9 years.

EducationThe Rising Cost of Clinging to the Middle

The idea that a college degree makes a big difference in one's life is nothing new: A 2011 Pew survey found that college graduates could expect to make almost twice as much money over their lifetimes as high school graduates.

The trouble is, tuition is moving out of reach for the middle class.

In constant dollars, the cost of tuition at a four-year university has almost tripled during the last 40 years, going from $4,785 per year to $13,608. This rise is even more stunning when compared to the general rate of inflation: Between 1985 and 2012, overall consumer prices rose by 114.85 percent; in the same period, education prices rose by almost 500 percent.

In other words, as analysts have noted, while a college education increasingly translates into a longer, healthier life, its rising price tag is restricting it to an ever-smaller group of people.

So where does all this leave Perry and Boudreaux? On the one hand, they are absolutely correct: Improved technology and globalization have helped make many of the necessities of daily life cheaper than they have ever been. Food, clothing, housing, and other requirements, are more affordable for an ever-broader swath of the populace, and -- by those measures, at least -- the cost of a middle class lifestyle has dropped.

All of this assumes, however, that one is healthy, is well educated, and has a consistent or rising income level. Unfortunately, for workers without a college degree, the last 20 years have witnessed a solid, steady decline in wages, health and life expectancy. And for families hoping to send their children to college, the cost of a bright future has gone up sharply and steadily. In other words, statistical manipulation aside, the economic trends of the last 30 years have made it harder to become -- and stay -- middle class.




Bruce Watson is a senior features writer for DailyFinance. You can reach him by e-mail at bruce.watson@teamaol.com, or follow him on Twitter at @bruce1971.

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224 Comments

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setanta_1

yo bRucie ! and exactly WHAT conservative think tank IS THIS ? your fish tank ? toilet tank ?

anyway,this long winded tripe offa huffpOOp DESERVES REPEATING-
from their bs about ob ummer_care and HOW MANY CANNOT AFFORD THIS garbage either-
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January 31 2013 at 10:59 AM Report abuse rate up rate down Reply
Timmy

i am low income and feel like people have to earn their wealth. it is up to us to be what God intended for us to be . be it low income ,middle income or wealthy, we all should be happy with our place in life. if all was rich,then we all would starve because no one would work and grow food for us to eat. if all of us rich ,no one would work at all and we would be naked because there would be no clohtes. this liberal nazi socailist way of thinking only leads to a few select government people being the rich ones and the rest work for the governemtn and are poor. instead of sitting with your hand held out for whatever freebie obama and the liberals promise to give, get out and do some work to become rich or get a education. no man owes another man a damn thing in lfe. we need to fish and not expect others to fish for us.

January 29 2013 at 7:07 AM Report abuse +1 rate up rate down Reply
1 reply to Timmy's comment
setanta_1

well said BUT how many CANNOT simply sit down and do the MATH as to HOW MUCH IS A DOCTOR visit
how many times do the GO ?
LOL
it NEVER WAS IN THE THOUSANDS a year and if it was,then it would be time to GET A DISABILITY AWARD

mygawd all that IS NEEDED IS THE RETURN to a MAJOR MEDICAL FORM OF HEALTH INSURANCE to cover hospital bills and WHEN WE HAD THESE POLICIES it was a lousey couple of bucks A MONTH .

January 31 2013 at 11:03 AM Report abuse rate up rate down Reply
franzr00

The rich elites have looked down from their pedestals of power, and declared all is good. And for them it certainly has been.

The world of Ozzie and Harriet and Leave it to Beaver is the world they want back, where the woman knows her place, and all the faces are white. The white male is in charge, dispensing all the wisdom others need.

Medical costs were not a big deal then, because you either stayed well, or got sick and perhaps died. And college costs were actually small, since one was not supporting a massive number of deans, nor a huge sports empire on the campus.

But one also had limited options. You rarely traveled, and probably lived your entire live in a small region.

Seems like each generation looks back quite a few decades and declares them wonderful, without really remembering what it was like to live then.

Divorces were few, because one couldn't get them. Unwed pregnancies? Well, that is what forced marriage was for. But there wasn't the gun violence. Bishop Sheen was on TV to let people know how they were to live. Lots of people were smoking, since that was glamorous, and cancer hadn't hit yet. TV was B&W, radio was AM. People still referred to an icebox rather then a refrigerator. No A/C for most.

No credit cards, and no safety net. You were on your own, and paid your own way, or did without. You knew your bank and they knew you. The bank was either for savings, or had your mortgage.

I lived through the 1950's, with the Red Scare, the fall out shelters, segregation, discrimination, the Cold War, and a lot of things that do not bring back great memories of opportunities.

January 28 2013 at 8:52 AM Report abuse rate up rate down Reply
andycutler

Basically the things the middle class needs that the government is involved in - health care and education - are a catastrophe. Everything else, which is provided privately, is doing great.

January 28 2013 at 3:17 AM Report abuse +1 rate up rate down Reply
1 reply to andycutler's comment
setanta_1

aaaaaaaand this is why the gubmint WANTS to take it AWAY.

January 31 2013 at 11:05 AM Report abuse rate up rate down Reply
vlady1000

Now days. sorry

January 27 2013 at 10:39 PM Report abuse rate up rate down Reply
vlady1000

No days it takes BOTH people working to be middle class. 40-50 years ago, it could be down with one wage earner

January 27 2013 at 10:39 PM Report abuse rate up rate down Reply
Ann Johnson

I get so sick of hearing how wonderful the 1950's & 1960's were and the people who miss it so much. As a Black woman I am so thankful to NOT be living in the damn 1950's or 60's, with all of its segregation and poor treatment of anyone who was not white. I wonder what it is that people really miss? Seems almost like the movie "The Help."

January 27 2013 at 7:45 PM Report abuse -2 rate up rate down Reply
1 reply to Ann Johnson's comment
setanta_1

cry US a river baby as IT always DEPENDED ON WHERE YOU LIVED even in the 50s.
you really believe the bs that whitie GOT A PASS ? LOL

January 31 2013 at 11:08 AM Report abuse rate up rate down Reply
kmsbears

it's obvious the author wasn't middle class in the fifties. My dad had a white collar job, a stay at home wife, and five kids. We NEVER ate out as a family of seven EVER. We had a stripped down station wagon with no AC and a crummy AM radio that never worked. The average middle class person then HAD to know how to work on their car because they were so unreliable--few made it past 75,000 miles. No house AC. One black and white TV. One phone in the house for seven people. No clothes dryer--everything got hung out to dry. No pediatrician or internist--our family doc did it all. We all wore hand-me down clothes. The only fresh veggies I ever ate was iceberg lettuce. Everything else was frozen or canned. When mom cooked a meat course, it always had to last for two dinners. My parents were both college educated and my dad was an accountant. He told me that we lived pay check to paycheck until he reached 50 and he could start putting some money aside as the older kids left home. I'm the same age as Jerry Mathers of Leave it to Beaver and I grew up very much like the show portrayed. Some things were certainly better for the middle class back then--there was far less divorce, far fewer single mothers, more social cohesion. But, economically and lifestyle-wise, people have it 10 times better than we did in the "prosperous" fifties.

January 27 2013 at 3:01 PM Report abuse rate up rate down Reply
1 reply to kmsbears's comment
andycutler

Nice to see someone uses their brain for thinking!

It is truly incredible how people not only forget all the lessons of history, but don't even know what happened within living memory.

I grew up a few years after you and it was somewhat better, but not a lot. We did get to eat out occasionally - at McDonald's. That was about it.

I remember my dad incessantly taking apart the air cleaner in the dodge van to fiddle with the carburetor and get it to start so we could go places. Eventually a burr on it cut his wrist and he needed stitches. So he filed the burr off and just kept doing it because nobody could make the thing work like it was supposed to.

I'm not sure if we had the iceberg lettuce or not, but I do not remember any fresh vegetables. I do remember a lot of TV dinners. I do not remember eating much in the way of tasty food as a child, either. That's a modern innovation for the middle class!

January 28 2013 at 3:24 AM Report abuse rate up rate down Reply
jbrown5001

"Figures lie and liers figure." This article referencing proclamations by Mark Perry and Donald Boudreaux, two empty suits, who arn't in the trenches, perfectly dermostrates this quote. Middleclass jobs are disapearing rapidly. The college degree is worth less. The fringe benefits provided by the job makers is diminished to the point of eliminating the safetynet of heathcare and pension plans as we know them. The developed world is developing into a digita world where the few cyberspace and vertial reality giants control the economy. We the people must adapt or vanish into poverty.

January 27 2013 at 12:46 PM Report abuse +3 rate up rate down Reply
investrman

This country will never be like it once was when we grew up in the 1950's-1960's or so....

I actually feel for ANY child born today and the future they will have to endure and live.

January 27 2013 at 10:59 AM Report abuse +7 rate up rate down Reply