U.S. currency is seen in a close-up photo. (Getty Images)
The American Dream: If you work hard you can marry, own a home, raise and educate your children, and decades later retire and not live in poverty. With each generation, the middle class would live a better life than their parents did because each generation’s productivity improved.
America’s gross domestic product measures our nation’s wealth production.
Middle-class wages make up a share of the nation’s total wealth. As productivity increases, so does a nation’s wealth.
When the middle class receives smaller wages than their increasing productivity, then the middle class transferred somewhere a part of its share of wealth. This wealth loss/transfer, and its resulting stress upon the middle class, can create high anxiety, even rage. They feel left behind. But, where did this wage loss go?
Middle-class wages during the decades after World War II were in proportion to worker productivity. As America’s GDP increased, middle-class wages matched their productivity increase.
But in 1980, a separation started between matching wages and increasing productivity. Middle-class wages flattened out despite middle-class productivity continuing to increase. Political thinking argued that the top of society — the “makers” — needed more money
“Trickle-down” was first advanced in the 1980s. Its promise: Cutting taxes for the very top creates a wealth effect which would trickle-down to everyone. Plus, government revenue would also increase because the tax cuts would increase America’s economic growth. A seeming win/win for all.
Sadly, reality has not worked out as promised.
There is another name for wealth transfer from one class to another: class warfare.
In Alaska, the wealth transfer takes the form of a 2013 law, Senate Bill 21, which transfers billions to Big Oil in Alaska and their executives while our middle class is losing its dividend and ability to educate its children.
You probably didn’t think about it at the time; the top 1%, the rich class, engaged in class warfare against the middle class. Rich-class incomes tripled over three decades, the 1980s, 1990s and 2000s, while the bottom 99% incomes stagnated or dropped. Lest you think this is made up: in 2006, Warren Buffett said yes, “There is class warfare, all right.” He continued: “But it’s my class, the rich class, that’s making war, and we’re winning.”
Don’t be mad at Warren. He was pointing out injustice. He was upset he paid a smaller share of his income in taxes than his secretaries and clerks. This injustice is perpetrated by the top 1% upon the vast majority of Americans.
How much wealth has been lost: nationally, $50 trillion up to 2020 and increasing yearly. A paper by Carter C Price and Kathryn Edwards for the Rand Corporation states if the equitable distribution following World War II had merely held steady, “aggregate annual income of Americans earning below the 90th percentile would have been $2.5 trillion higher in the year 2018 alone.”
America’s wealth prosperity is not equitably shared, causing America’s middle class to be paid a fraction of their actual productivity.
Nearly all the benefits of our nation’s growth were captured by those at the very top.
The middle class is justifiably stressed that America’s promise has not been kept, that they are actually left behind.
The American middle-class economic stress causes many to seek out alternative political characters in their effort to assert a fair share of a piece of America’s economic pie. Unfortunately, some politicians confuse rather than clarify.
Do you know that the actual number of U.S. government workers is about the same as it was in the 1980s? The population has increased 47.4% since 1980.
Many look to the massive national debt and demand accountability. In the late 1970s the nation’s debt held by the public was about 25% of GDP. That ratio rose to nearly 40% by the late 1980s.
Do you recall when the U.S. last had a budget surplus? It was in the years leading up to 2000. There were substantial budget surpluses “for as far as the eye can see.” The nation’s publicly held debt-to-GDP ratio dropped from mid-40% to about 30% by 2000.
The publicly held debt-to-GDP ratio rocketed to almost 100% from 2000 to 2024 and is climbing quickly.
The leap in publicly held debt-to-GDP ratio from the mid-30% to nearly 100% in 2024 was significantly caused by three major tax cuts in 2001, 2003 and 2017, where most of the economic benefit went to the top 1%. There was no trickle-down and government revenue did not increase.
Government did not receive the middle class’s lost share of its productivity; the top 1% received it. Tax cuts did not make whole the middle class; the top 1% also received those trillions.
The middle class sees ever larger 1% opulence and extravagance. The U.S. now has billionaires from the 1% in charge, who continue to go after middle-class benefits and the ability of middle-class families to educate their children.
If the middle class truly wants to restore America’s greatness, it will have to demand that it is paid its fair share of America’s prosperity. To do that, it will have to claw back the middle class’s fair share from the billionaire class. Neither government nor other Americans are its enemy.
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