Social Question

ETpro's avatar

Does America really need a middle class?

Asked by ETpro (34472points) July 26th, 2010

Take a look at, The Middle Class in America Is Radically Shrinking. Here Are the Stats to Prove it. And here’s some additional data to highlight the facts of the issue.

There are those who tell us that we must give more and more tax breaks to the wealthiest Americans because they are the ones who create the jobs. Interestingly, 83% of all the stocks in America are held by 1% of the population. So are the wealthiest people really creating jobs with the money, or are they profiting mainly by investments? And if they are creating all these jobs with the 30 years of tax cuts for the rich, where are the jobs?

If the trickle-down theory that was supposed to help the middle class destroys it instead, does that matter? Or is the problem just that we haven’t taken enough of the medicine yet? From the 1940s to the 1980s when taxes were high on huge incomes, we created the world’s most thriving middle class (there was really no middle class before the Great Depression and WWII) and lots of millionaires as well. After Reagan’s slashing taxes by 60% for the rich, we’ve been seeing the middle class shrink, and the shrinkage is accelerating. How low do taxes need to go for the rich before trickle-down finally begins to trickle.

For the last 30 years, it all seems to have stayed at the top. Should we only tax the poor, and give all the revenues produced directly to the rich? Would that be enough to get trickle down to start trickling?

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28 Answers

mrentropy's avatar

I could be wrong, but it seems to me that even if the wealthy used that lovely tax money to create jobs, they’d be created in India and China and probably other places that aren’t in the U.S.

So, if it were me, I would only give money to business’ that were owned in the US and operated solely in the US.

ragingloli's avatar

The only thing that will trickle down is the praetorians’ blood from their throats once the next revolution of the proletariat happens.
Money is only spent by people who either need to spend it or want to spend it to improve themselves.
The poor spend because they have to. The middle class spends because they want to grow. Rich people do not spend because they are already at the top. Most of their money rots away on their bank accounts. How many cars does a rich man buy? How many food does he consume? How many people does he employ? The fact is that a praetorian can and will only spend a limited amount of his money on these things, and then mostly on high price products, which means the money goes only to a small group of people. And when he employs someone, he will employ someone in a low wage country, so the money goes across the border.

john65pennington's avatar

For many years, the middle class and their taxes, have been the backbone of America. but, it appears the middle class is fading. since the poor will not be able to sustain the economy of America, then who will take over? there is only one class left and that’s the rich.

Is this such a good idea?

CMaz's avatar

There is a middle to everything.

tranquilsea's avatar

Anytime you divide society into the very wealthy and the very poor you breed contempt which often leads to violence.

So to your question yes you need a middle class.

Rufus_T_Firefly's avatar

Having a middle class is infinitely preferable to NOT having a middle class. It reduces the gap between the ‘haves’ and the ‘have-nots’. Of course, it would also be preferable to NOT have a lower class or a social stratum of any kind. I believe that the playing field is currently too one-sided for that to ever occur and personal greed, status and ego are too powerful to allow significant social change in our lifetimes. My alternate preference would be that everyone would share several key, yet common ideals and a more equal standard of living.

marinelife's avatar

I think that taxes for wealthier Americans need to be higher and have fewer loopholes.

A middle class is vital to this country’s well-being.

CaptainHarley's avatar

It seems to me that, over the last few years at least, there has been a concerted attempt to do away with the middle class.

ETpro's avatar

mrentropy Right on. As a small business owner who would love to be able to employ more Americans, I am all for that.

Thanks to all respondents. I certainly feel that the current system is killing th goose that laid the golden eggs. Of course, the top 1% are mostly multinationals with investments largely outside the US and no need to stay here. Once the goose is totally dead, they move on and leave the $13 trillion National Debt that welfare for the rich ran up for the poor they leave behind to figure out how to pay. What’s not to love about that—if you’re in the top 1%?

wundayatta's avatar

It has been the case for a couple of decades now that the disparity between the richest and the poorest has been rapidly increasing—to historic highs.

As to the other statistics—none of them that I saw offered any comparisons to other years. Preferably multiple years, so on their own, it’s hard to say what they mean. I will point out that we are in a recession, so one would expect the job situation and the wealth situation to be not good. Is it any worse than it would have been without the recession? Can’t tell.

There are a lot of statistics about savings and bankruptcies (albeit with no comparisons). We expect more bankruptcies during a recession. And the US savings rate was always low; lower than all the developed nations, I think. We are a nation that lives on debt—which is why we are in a recession now.

Also, no one has offered their definition of the middle class. That’s pretty important when saying it is declining.

Do we need a middle class? For who? For what?

I would argue that we need employment. Employment puts money in people’s pockets and then they spend it (if there is enough to feel safe to spend it), and that’s what drives the economy. Employment helps those in the middle and working classes more than the upper classes (they don’t need jobs—they own the jobs). We need employment and we need well-paying jobs.

As to the outsourcing of jobs—nothing to be done about it. What we need to focus on is training people for good jobs that can not be outsourced. In fact, service sector jobs can not be outsourced. But that raises the immigration issue. To which I say that I defy anyone to show me how Americans are displaced by immigrants. Most of the jobs immigrants take are jobs Americans refuse to do. The US government makes companies prove there is no American who can do a job before they will allow an immigrant to be hired.

Other jobs that can’t be outsourced are creative jobs that are culturally specific. America creates a lot of media that the rest of the world consumes. The education sector can’t be outsourced. Social services can’t be outsourced. Construction can’t be outsourced. There are a lot of things that can’t go overseas. Try building that highway to nowhere in China and then installing it here.

The outsourcing issue is just one of training. We need to develop an education system that can prepare more people for intellectual work. That, in itself, will create more jobs. We will be pulling ourselves up ourselves, which is the way it should be. People will adjust. The economy will adjust.

If you don’t like the disparity between rich and poor, then don’t support Republicans, or any tax-cutting person who cuts the taxes on the rich. Those taxes need to be raise, not cut. One little problem, though—the rich, even if they pay a large portion of their large incomes, still don’t make much of a dent compared to the amount that a small change in the taxes of the lowest incomes.

mammal's avatar

Actually folks this is a good thing, personally i think they are deeply superfluous, they seem to take up a lot of resources per capita and don’t really work as i understand the meaning of the word, of course they will tell you that’s all they do, and it’s everyone else that doesn’t work, they tend to have strange attitudes towards minorities, are generally uptight, bigoted to the bone, covet each others wives and get kids from the lower social stratas to do all the fighting for them. Yet they take solace in how wholesome, decent and educated they are, cos they read a newspaper now and again. Usually one that reinforces each and everyone of their carefully cultivated prejudices. They are generally speaking, false, duplicitous, fraudulent and phony, although usually fairly polite, even through gritted teeth.

Their contribution to Art, Literature, Humanities and culture in general is negligible and their children get more horrific, more work shy, more etiolated, nihilistic and materialist with each subsequent generation. So a big thumbs up from me if the stats are correct, maybe i’ll sleep a little easier tonight, best news i’ve heard all year :)

Dr_Dredd's avatar

So we don’t need doctors, lawyers, accountants, etc? Because those usually make up the middle class.

ETpro's avatar

@wundayatta I am disappointed in you. I think we all can agree that if the trend is that wealth is flowing rapidly to the top 1% and we let that trend keep running, you are going to need a pretty bizarre definition of middle class to have one. If you define middle-class as anyone making over $2 a day, Haiti has a thriving middle-class. No, they didn’t define middle class. They didn’t define any of the other words they used, either. If you are really unfamiliar with the word, what’s wrong with using a dictionary to look up middle class.

Actually the second article does show charts that track wealth disparity from the late 1800s to today. What they show are two periods of enormous aggregation of wealth at the top. One peaked right before the Great Depression, with the top 1% owing ⅓rd of all America’s wealth. The depression leveled things out, and good tax policy kept it leveled (mind you the top 1% still had 20% of the wealth, they were hardly poor) and then with Reagan’s voodoo economics the whole process began again, and this economy collapsed when the top 1% again held ⅓rd of all the wealth. But this time we threw $2 trillion in borrowing at the problem and headed off a second depression, so there was no correction.

@mammal You are quite right, Republicans presided over both the pre0depression transfer of wealth to the rich and the one going on today..While I believe we need more than one viable party, as long as they remain the Greedy Oligarchy Party I believe we best not let them get their greedy hands back on the wheels of power. They seem not to realize who feeds the goose that lays the golden eggs.

CaptainHarley's avatar

@mammal

So those of us on here who are middle class are superflous?

jerv's avatar

@ChazMaz Not really. If you aren’t a Socialist or a raving Teabagging lunatic, you are wishy-washy and weak. If you aren’t a millionaire then you are living paycheck to paycheck. There used to be a middle, but it seems to be fading from a reality to a theory, and that is pretty much the point of the question as I read it.

The part I don’t get is that most of the people who support the current trickle-up system are people who are being hurt by it and, more often that not, are utterly incapable of understanding the math (or any math, if my experience talking with them is the norm)

CMaz's avatar

@jerv – If everyone was rich. A middle class would develop.

There would be rich, less fortunate rich and some in the middle. Everything else is semantics.

jerv's avatar

@ChazMaz I guess it depends on how you define “middle”, and it appears that the definition is changing as we spe… type.

ETpro's avatar

@ChazMaz “Everything else is semantics?” So the 99% of Hatians who live on something around $2 a day so that 1% can hold all of that nation’s wealth is just semantics. They have a 99% middle class and 1% rich? Even in medieval times, the serfs were the middle class. Starvation was, after all, just semantics? Are you seriously suggesting that?

hiphiphopflipflapflop's avatar

I fully expect not to marry, not to have kids and I doubt I will ever own a home… something my parents accomplished (not easily, but they did it) with a good deal less “education” than I had. Having grown up in the 50’s, I’m not sure they can wrap their heads around the situation. My father will tell you its all the liberals’ fault. Doesn’t like that at all from where I’m standing…

“It’s called the American Dream because you have to be asleep to believe it.”
– George Carlin

Jabe73's avatar

American consumers wanted cheaper products so American corporations pushed for international free trade to be able to make/sell their products cheaper to American consumers by manufacturing their products in developing nations. This was the only way for many American companies to fairly compete with foreign competition. Whether anyone wants to hear this or not this is what happened. Automation is also taking away many lower skilled labor/factory type positions as well. It is a changing world and we are not going back. Combine all this with inflation and the continuing falling value of the american dollar then yes, the potential to turn the majority of the middle class to outright poor is very real. This is why I feel a higher education is so important. In the end creating more small businesses may be the best thing that could happen for our economy.

ETpro's avatar

@Jabe73 I own a small business, so I have some perspective on that. US Corporate taxes are among the highest in the world. But big, multinational corporations pay low or no taxes. Exxon-Mobil is the world’s most profitable corporation and paid no US taxes in 2009. Small businesses cannot afford the offshore tax shelters to gain that advantage. With wealth flowing so rapidly to the top 1/19th of 1%, they continue to buy up every business that makes a profit. The top 1% don’t work or earn wages. THey invest and earn capital gains. They increasingly invest offshore where returns are high and taxes low to nonexistent.

You’re right about the off-shoring of jobs, but we can’t start to fix that till we put back a progressive tax structure and give small businesses that hire Americans a break.

wundayatta's avatar

@ETpro Sociologists will tell you that the “middle class” is not all about money. Others will put very different income boundaries on the middle class. These things are important to know. The definition you provided is utterly useless.

I’m not too worried about the middle class disappearing. The middle class votes and it will vote to save itself long before the income disparities become intolerable. It is happening now, even as we speak, with legislation limiting the recklessness of the financial sector. Also, I believe some CEOs had their salaries capped by law.

The economic environment is constantly changing, and people have to be willing to do new things to find a new niche for themselves when the old niches disappear in the urban renewal programs.

jerv's avatar

@wundayatta I sincerely hope that you are correct. I have thus far been rather disappointed by people cutting their own throats by supporting the economic policies that led to the current upward flow of wealth.
Also, while salaries may be capped, bonuses are not salaries ;)

ETpro's avatar

@wundayatta Salaries can’t legally be capped by the government in most cases. The only ones that were, to my knowledge, were for firms where top managers so bungled their jobs that they had to seek Federal bailouts to avoid bankruptcy, and the caps came as a condition of the help. They expire as soon as the debt is repaid.

While taxes are part of the problem (most of the truly wealthy don’t work), CEO and top management pay is another. From 1970 to 1999, in inflation adjusted dollars, the average pay of workers form the top 100 corporations in the USA remained basically flat at about $37,500 a year.. They gained nothing against inflation. But the pay of the CEOs of those firms skyrocketed. They went from an average of $1.25 million in 1979 to $40 million in 1999. And the trend still continues. Voters can’t do much about that. Stockholders will need to realize it is in their best interest to do it.

wundayatta's avatar

I think the only way to address the increasing disparity is with tax policy. The market is driving CEO salaries up (and yes it was the Federal Bailout CEO’s I was thinking about). In fact, I was wondering if the CEO’s whose salaries were capped would bail and go somewhere else.

It’s strange how CEO salaries keep on rising despite the poor performance of the CEOs. It’s also strange how so many working class folks support Republican policies that contribute to this rising disparity. Perhaps they are more of the mind that life circumstances are a crap shoot—luck of the draw, and there’s nothing you can do to move you between classes.

That’s another thing that’s happening. Not only are wage disparities increasing, but class mobility is decreasing (except for those going in a downward fashion).

jerv's avatar

@wundayatta Remember, most of the people who support those policies can’t do the math. Once you let that simple fact sink in, things make more sense.

Of course, it’s also rather depressing and you might want to kill yourself once you realize you’re surrounded by morons, but nobody said life was easy.

ETpro's avatar

@wundayatta The boards of corporations are populated by the elite that have played the game themselves. Many are still in management or other corporations. They pick a CEO that’s a personal friend, and set compensation for their buddy. That buddy then gets on the board of a corp. they work for and sets compensation for them. It’s a mutual admiration society.

The board generally uses a study of executive compensation to set pay, but they survey the corporations with the highest paid CEOs, then set their buddy’s salary sufficiently higher. Don’t want to risk he quits and goes to one of the other firms they surveyed. So you end up with this ever upward spiral of CEO pay.

Now compare the model in Germany. While all good Republicans are taught to recoil in horror and bellow about European Socialism, the fact is the USA is the world’s largest debtor nation and Germany is the richest creditor nation. The export revenue of Germany and France alone is greater than that of China. Until 2008, Germany alone actually led China as the world’s largest exporter in revenues. The USA runs a massive export deficit. And in truth, Germany isn’t a socialist nation, they just provide more social benefits to their citizens than we do here. Socialism means the government owns the means of production and distribution of wealth. Private investors own most German corporations, just as they do here in the USA.

Anyway, in Germany, part of the board of many corporations is made up of factory workers from the factory floor. The deliberately put high school graduates on the board, people who know what the workers need and who bring a healthy dose of common sense to the board. CEOs do well there, but their salaries are sensible, and workers do well too. They get a lot more time off than US workers but are more productive and more happy.

@jerv The inability to even understand basic math is an important factor in Republican political success, and I am sure the well-educated party leaders know that. I believe that’s why Republicans are so adamant about getting rid of the Department of Education, taking down any federal standards, and letting each state government set its own educational standards.

Ron_C's avatar

@mammal the middle class builds and buys the vast majority of housing, it provides the doctors, lawyer, engineers, scientists, even clergy. It owns and operates almost all of the small businesses, it pays the lion share of taxes not only through state, federal, and local income taxes, but through sales, real estate, and transportation taxes.

The middle class provides the majority of military enlisted and officers, they are the majority of people that die in wars started by rich old guys.

The middle class is made up of all races, religions; it includes gay, and straight people.

The middle class teaches our children, works long and hard hours for what used to be decent wages. The support the arts and are artists themselves.

I don’t know where you get your information but if the middle class is lost, so is our country, we become just a big copy of Haiti.

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