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The Myth of the Middle Class Squeeze

Jude Wanniski (A Supply Side Democrat) takes the NY Times to task for an article published 28 Aug 2004 titled "Economic Squeeze Plaguing Middle-Class Families". In an open memo to the NY Times Jude writes:

"Welcome back from your August vacation, Dan. I'm sure your desk is piled high with complaints from readers about every issue under the sun, though I'm afraid I have to add one more. This has to do with an August 28 article by Timesman Timothy Egan titled, "Economic Squeeze Plaguing Middle-Class Families." I hadn't noticed it when it appeared, but Bruce Bartlett, did and wrote his syndicated column about it, with a headline: The Times has played fast and loose Now I don't disagree that in many ways middle-class living standards have decline over the last 30 years of inflations and deflations. It does often take two breadwinners per family to sustain an equivalent lifestyle. But Bruce, who was a tax official at the Treasury department in the last Reagan years and first Bush administration, is right in faulting Tim Egan's interpretation of available statistics.

I'm sure Egan and his editors believe his report was objective. The problem is that this story seems to surface in presidential election years, often on the front page of the Times, which gets its information from liberal think tanks who are putting their own spin on government statistics. When Paul Krugman was at M.I.T., he was the source of stories at the Times about the rich getting richer and the poor getting poorer, which I had to point out resulted from a conflation of "income" and "wealth," when they are quite different measures of "rich" and "poor." What happens when the Times is not careful in presenting such analysis is that the Democratic Party takes the numbers as gospel and builds policy commitments around them. Senator Kerry has been doing that, using the term "Middle-Class Squeeze" in his speeches. As Bruce puts it in his column: "...It is doubtful that John Kerry's campaign staff would have written it much differently if it had been handed the assignment."
Bottom Line, he concludes the following.
"The most egregious error in the article is the clear implication that the percentage of those defined as the "middle class" has fallen because many of those who used to be considered middle class have become poor. This is totally untrue. In fact, the ranks of the poor have fallen along with those of the middle class.

"Using the Times' characterization of any household with an income below $25,000 in 2003 as being poor, what do the data show? We see that this group fell from 33.1 percent of the population in 1980 to 29 percent in 2002. Looking at the data from the other end, we see that the percentage of those making more than $75,000 has risen from 14.9 percent of the population in 1980 to 26.1 percent in 2003.

"In other words, the ranks of the poor and middle class have shrunk for one reason only -- more of them are rich! How can it not be a good thing for society that fewer people are now making low incomes and more are making high incomes?"
Well Stated Jude!