A Pew Research report published three weeks ago on America’s Shrinking Middle Class presented a fundamentally misleading narrative which the press was only too eager to relay and continues to use, namely that the middle class has been seriously shrinking since the turn of the century. Christopher Rugaber at the Associated Press typified the initial press coverage, writing: "In nearly one-quarter of metro areas, middle-class adults no longer make up a majority ... That sharp shift reflects a broader erosion that occurred from 2000 through 2014."
The not particularly subtle message: "It all started with George W. Bush, and it hasn't let up since then." This post will disprove and thus discredit that notion.
Pew conveniently, and likely deliberately, ignored the fact that median real (inflation-adjusted) household income was slightly higher in 2007 than in 2001, the appropriate beginning point for evaluating Bush 43. All of the income declines — and then some — and most of the fall of middle-class families into lower incomes, occurred from 2007 to 2014, the most recently available year for such data.
Pew's determination to have readers concentrate on the 2000 and 2014 data points is best seen in the following graphic showing the changes in the percentage components of the lower, middle and upper income strata in Goldsboro, North Carolina and Midland, Texas. These are the metro areas with the biggest drop and largest increase, respectively, in median household incomes during the 14-year period involved:
Pew's use of a line chart instead of bar or stacked-bar chart communicates the idea that the changes in the income-class components in the two cities involved occurred uniformly, or nearly so, during the 14-year period. This is not at all the case; but that's what Pew, in its chart choice, appears to want readers to believe.
The truth, though the following table shows only real median incomes for the two cities and doesn't identify income classes, is that the changes in income, especially from 2005 to 2007, when both cities saw meaningful increases, were clearly not linear, as Pew pretended (sources: Goldsboro; Midland):
Thanks to Pew's methodology, its dataset would be very difficult to replicate for each individual year and all metro areas between 2001 and 2013. The research group defined “middle-income” Americans "as adults whose annual household income is two-thirds to double the national median, after incomes have been adjusted for household size" Incomes were also "adjusted for the cost of living in the area." (Note that Pew's definition of "middle-income," i.e., "two-thirds to double the national median," effectively defines "middle-class," and the other two classes, downward during an era when real incomes have been falling, as has been the case since what I have called the POR [Pelosi-Obama-Reid] economy began in the Spring of 2008.)
Fortunately, it isn't necessary to replicate Pew's work for 13 additional individual years to demonstrate that the truly damaging changes to the middle class have taken place largely during the past seven. National-level Census Bureau data seen below, obtained from its 2014 Income and Poverty in the United States report (large PDF) issued last year, makes the necessary points (full chart with all individual years from 2001 to 2014 is here):
- Median household income increased 1.6 percent from 2001 to 2007. 2001 is indeed the appropriate starting point for evaluating Bush 43's economic performance, because predecessor Bill Clinton handed him both the already tanking Internet bubble economy and the U.S.'s failure to take out Osama bin Laden several times during his administration, eventually resulting in the September 11, 2001 terrorist attacks, which, among other far more tragic things, damaged the economy. While the 1.6 percent, six-year increase is unimpressive and not acceptable, it was at least positive.
- From 2007 to 2014, real median income fell by a stunning 6.6 percent; third-party research indicates that there was some recovery in 2015, but that real annual median income will more than likely still be underwater compared to 2007 when last year's data is released in a few months.
- That plunge after 2007 occurred because Democrats in Congress and presidential candidate Barack Obama essentially hijacked the economy by talking it down, threatening it with a vast array of proposed new regulations, and refusing to act to counter the $4-per-gallon gas prices which took hold in the summer of 2008 — all in the name of achieving electoral success. Then the Democrat Party's permissive home-lending policies and the corrupt, crony-driven disasters at Fannie Mae and Freddie Mac took the housing industry, and then the economy, into recession. The housing mess would have sent the economy into recession in any event, but the Democrats' posturing and inaction worsened it, apparently in the belief that once they gained control of both the White House and Congress, their Keynesian magic would, to their eternal credit, bring the economy roaring back.
- The trouble is that the Obama administration's Keynesian "stimulus" and the Fed's trillions of dollars in quantitative easing have failed to genuinely revive the economy. Seven years after the recession officially ended, we still have mediocre growth, a job market millions of Americans have abandoned, all-time record levels of dependency, a national debt load which has nearly doubled, and a feeling of national malaise arguably worse than that seen during the final year of Jimmy Carter's administration.
As to the middle class, it's clear, as seen above, and despite Pew's pretense, that 2001-2007 materially differed from the seven painful years which followed:
- While the middle-income strata did decline from 2001 to 2007 by 1.2 points (from 58.6 percent to 57.4 percent) half of those who left that group moved up, while the other half fell into the lower-income tier.
- By contrast, during the next seven years, the decline in the middle-income tier was twice as steep (2.4 points, from 57.4 percent to 55.0 percent), and the overwhelming majority (83 percent) of those who moved fell into the lower-income tier, while only 17 percent moved up.
- Over three-quarters of the passage of American households from the middle-income to the lower-income tier (77 percent) occurred after 2007. Less than one-fourth of it (23 percent) occurred during the previous six years.
The only clue in Pew's entire report that middle-class shrinkage has been anything but a linear 14-year trend is in the following sentence found on Page 7:
Nationwide, the median income of U.S. households in 2014 stood at 8% less than in 1999, a reminder that the economy has yet to fully recover from the effects of the Great Recession of 2007-09.
The inclusion of this sentence may be to be an inadvertent slip-up, because it should lead anyone who reads it to wonder what happened to this stat before and after the "Great Recession." But apparently it didn't get the attention of any establishment press reporters, who have followed Pew's singular since-2000 focus without questioning its accuracy or relevance.
Pew's report is fundamentally misleading and deliberately misdirecting. It chose to look at the the past 14 years without any reference to the key event — the transition from a modestly boosted supply-side economy to a disastrously held-back Keynesian economy in 2008 — which has primarily driven the decline in the middle class.
Pew's treatment of its topic echoes disgraceful reporting seen last year at the Associated Press when the Census Bureau released its 2014 Income and Poverty in the United States report.
AP reporter Jesse Holland focused on how the nation's poverty rate was "just about the same" in 2014 as it was in 2013, He ignored the poverty rate's steep 2.5-point rise to 15 percent during the early years of Barack Obama's presidency, that rate's relative flatness during the Bush 43 administration, and the nation's previous history of seeing the poverty rate come down during recoveries from steep recessions — history which tragically has not repeated itself during the past seven years.
Holland also predictably found an alleged expert at a liberal policy institute who claimed that the nation's poverty and stagnant income problems go back to the turn of the century. Sorry, folks. Almost all of the poverty increase and, as seen above, more than all of the overall income declines, have occurred since 2007 — and it's utterly deceptive to pretend otherwise.
Let's be clear here: Enough members of the business press know what has really happened to household incomes and about the growth in poverty during the past seven years. With rare exceptions, they are using reports such as the one just issued by Pew to deliberately avoid relaying those truths to the American people.
Cross-posted at BizzyBlog.com.