What Happened to the Middle Class?

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It's a bad time for millions of Americans. No surprise, then, that a survey by the Pew Research Center last week showed that 85% of self-described "middle-class" Americans say it's harder to maintain a middle-class lifestyle today than it was a decade ago. Only 9% said it was less difficult.

But here's what is surprising -- or, at least, telling. Pew asked respondents "How much do you blame (each) for the difficulties the middle class has faced in the past 10 years?" They answered:

Source: Pew Research Center. Graphic recreated.

They blamed everyone -- except themselves. How fair is this?

Step back for a second. Why middle-class finances have deteriorated is one of the most complicated subjects out there. Whenever someone points the blame at one reason or one person, stop listening. They've got it wrong. There could be thousands of reasons, most of which we don't understand. Part of the problem owes to globalization. Some of the blame lies with health care costs, changes in family structures, educational attainment... the list goes on and on.

But one factor that doesn't get enough attention is the role perceptions alone have played in the decline of the middle class.

A group of Fools and I met a business executive named Andy last year. We asked him what concerned him about America. He responded:

What concerns me most is the perception that people share that it is so terrible right now. I think life in America has been tough since the time of the Colonists all through World War 2 and all the way through today. The middle class has gotten it all twisted. Maybe it's because of the credit cards and the candy bars that people are being fed, but the reality is, I think we have the same amount of discretionary income, and the ability to guide our own future. But our values have radically shifted.

Now, discretionary incomes for millions of Americans have declined in recent years. But he makes a valid point when the dates are stretched out further.

Take measures of subjective well-being, e.g., surveys that ask, "How happy are you with life?" Most show that the percentage of Americans very satisfied with life peaked around the 1950s. Median household income back then was $31,500, adjusted for inflation. Today it's a hair over $50,000 per household. So we're richer. An average American household in 1950 spent 30% of its budget on food. Today, that's down to 13%. The shares going toward shelter and apparel have dropped sharply in the last half-century, too. So we have more disposable income. The average new American home in 1975 was 1,500 square feet. Today, it's 2,169 square feet. So we're also living in bigger, nicer homes. And all of this has happened decades after reported happiness peaked.

You don't have to take this back quite so far: In 1990, the average American family spent 5% of its budget on entertainment, while in 2010, 5.2% of spending was devoted to having fun. Or, if you want to take this back a century or so, consider this quote from Matt Ridley's book The Rational Optimist: "Today, of Americans officially designated as 'poor,' 99 per cent have electricity, running water, flush toilets, and a refrigerator; 95 per cent have a television, 88 per cent a telephone, 71 per cent a car and 70 per cent air conditioning. Cornelius Vanderbilt had none of these."

So why do so many middle-class Americans feel cheated? It's not so much that they've gotten poorer, but that a few have gotten so much richer. 

According to author Tim Noah, "From 1980 to 2005, 80% of the total increase in Americans' net income went to the top 1%." Nobel-winning economist Joseph Stiglitz points out another mindblower:

The upper 1 percent of Americans are now taking in nearly a quarter of the nation's income every year. In terms of wealth rather than income, the top 1 percent control 40 percent. Their lot in life has improved considerably. Twenty-five years ago, the corresponding figures were 12 percent and 33 percent.

If you're a member of the middle class watching this happen, you feel worse off. It doesn't matter that you're better off in absolute terms. When you go from a minivan to a minivan with an extra cupholder, while the corporate exec goes from a Lincoln Town Car to a fleet of Bentleys and a private jet, you feel like you've slipped behind. We don't feel richer, because the goal posts of what counts as "rich" have moved dramatically.

There's actually a theory that says this explains the consumer debt boom over the last few decades. It's the "keeping up with the Jonses" effect, where the aspirations of the middle class are inflated by the legitimate wealth of the rich. "Trickle-down economics may be a chimera, but trickle-down behaviorism is very real," writes Stiglitz.

Here's a good example of how powerful this is. Last week, Nike (NYSE: NKE  ) said the new LeBron James shoe could retail for a whopping $315. Many were shocked at the price, but others went further. Marc H. Morial, CEO of National Urban League, called on Nike to drop the shoe altogether. "To release such an outrageously overpriced product while the nation is struggling to overcome an unemployment crisis is insensitive at best," he said. "It represents twisted priorities and confused values."

There's an easy solution for those who can't afford $315 sneakers: Don't buy them. But Morial's call implies that many consumers won't be able to fight the urge.

Here's why that's important: We know that the consumer debt used to feed those urges has played a big role in the deterioration of middle-class finances in recent years. Brookings economist Karen Dynan has shown that the households that levered up with the most debt last decade have had to cut their spending by the most today. A Federal Reserve study showed that the regions that accumulated the most debt last decade saw some of the largest declines in employment over the past few years. Congress, CEOs, or the Bush administration didn't force those consumers into debt. They chose it.

To the extent that shifting values have spawned the rise in debt, which has in turn contributed to the deterioration of middle-class finances, there's no one to blame but yourself.

Check back every Tuesday and Friday for Morgan Housel's columns on finance and economics.

Fool contributor Morgan Housel doesn't own shares in any of the companies mentioned in this article. Follow him on Twitter @TMFHousel. Motley Fool newsletter services have recommended buying shares of NIKE. Motley Fool newsletter services have recommended creating a diagonal call position in Nike. The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.

Read/Post Comments (154) | Recommend This Article (242)

Comments from our Foolish Readers

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  • Report this Comment On August 28, 2012, at 2:46 PM, Golden009 wrote:

    That's an interesting and refreshing take on Middle Class fortunes. At some point you have to take responsibility for your own actions.

  • Report this Comment On August 28, 2012, at 3:42 PM, esbita wrote:

    "The average new American home in 1975 was 1,500 square feet. Today, it's 2,169 square feet. So we're also living in bigger, nicer homes. And all of this has happened decades after reported happiness peaked."

    Let's talk about how much it costs now to live in an "average" house in a reasonably safe area, in an area that still has jobs.

    I live in a split level built in the early 1970's, about the size mentioned in the quote above. No granite countertops or big master baths here. The 3rd bedroom is the size of other people's walk-in closets. The folks who first moved into my subdivision were cops, teachers, tradesmen. A few are still there and are nice neighbors.

    To buy in this neighborhood NOW requires the sort of salaries garnered by a masters degree in a marketable field. In one corner of the subdivision are people renting from those who bought at the peak of the market and couldn't sell. Some of THESE charming people were hauled off by the cops for robbing the convenience store.

    The school district we are in is on the low side of middling (hooray re-districting).

    This is not the neighborhood where "The Joneses" live.

    Going a notch below our neighborhood lands you in the cheerful realm of car thefts and DEA raids.

    We may, *may* be able to afford to upgrade when we have kids and they are old enough for school. Your postman or your HVAC tech bought into my neighborhood 30 years ago. There's no way in Hades they could do so now.

    The homes in good school districts are usually not in the 1500 sqft range. So consider the cost of the education required to buy the *previous* generation's average house, much less the cost of a neighborhood in a school district that will equip your kids with the tooks to pursue useful skills... sneakers are a red herring.

  • Report this Comment On August 28, 2012, at 3:58 PM, atkinskd wrote:

    A stinging take on what is actually going on. Yes, we are ultimately responsible for our actions. But as esbita mentioned this behavior is so rampant that trying to find a nice safe nieghborhood will cost a fortune. My townhouse in a quiet little corner of colorado's suburbia is $ forclosure. At it's peak, it sold for $245k.

    Ultimately the demise of the middle class is an over willingness to pay 'Stupid Tax' on EVERYTHING to the point that a budget is comprised of parasitics (house, car, student loan, credit cards) etc. Not to mention the social climate change - I myself have a $1k/month legal habit post divorce. Legal fees, which have become all to common are not in the normal and customary budget numbers.

  • Report this Comment On August 28, 2012, at 4:05 PM, hbofbyu wrote:

    It doesn't really matter how much our wealth increases once past a certain level. People don't yearn to be rich; just more rich than their neighbor. In religion they call that a sin.

  • Report this Comment On August 28, 2012, at 4:06 PM, Johny205 wrote:

    esbita, "your HVAC tech bought into my neighborhood 30 years ago". I'm a construction worker and most of the people I know that own their own construction company, consisting only of a 3 or 4 man workforce make above $100,000. The plumbers, electricians, and HVAC owners I know make like $200,000 a year and those guys normally aren't even doing the work themselves, they just bid the work and send a couple guys to do it. At $80 per hour, per guy, that adds up to be real money when your making $40 per worker, per hour, especialy if your working yourself making an additional $80 per hour. A 3 man company working 40 hours a week = $160 X 40 = $6,400 a week for the owner minus overhead other than materials because that is bid into the job.

  • Report this Comment On August 28, 2012, at 4:16 PM, dtaylor903 wrote:

    I blame our politicians. They have done a great job at ocnvincing us that somehow we've been victimized by the other party and aren't getting our fair share. Forget living within our means. That just seems so old fashioned when our government is borrowing trillions and made it so easy for anyone to borrow way beyond what they can afford. How are we ever going to put things in the proper perspective?

  • Report this Comment On August 28, 2012, at 4:59 PM, mdk0611 wrote:

    Real estate proces/issues vary greatly by geographic area. What might be true in one area is not somewhere else. Esbita, you sound like you got caught up in the Southwest (Nevada, Arizona, Cali) bubble.

    Morgan's point on leverage and out of control spending is on the mark. The mania for the latest electronic devices jumps out at you. If you have balances on your credit card do you really have to be standing on line at the Apple store for their latest product? Particularly if you still have a perfectly functional predecesor only one generation older.

    A major difference between the consumerism now and when I was a kid is that back then (50's & 60's) a lot of people saved until they could pay for something. Now they put it on plastic and hope they can pay it off. And I can't recall a single kid who had plastic before they were 21.

  • Report this Comment On August 28, 2012, at 5:30 PM, Queenofducks wrote:

    So far no one has mentioned the lack of longevity with modern purchases as a factor. My parents generation was able to pass down refrigerators, cars, washing machines, dryers etc for 40 plus years because they were fairly simple to fix. Now when something breaks after the 10 year planned lifetime you don't have much choice except to buy new. If you bought a used 5 year old stove, you might get another 5 years out of it if you're lucky. We're not all that "greedy", but in recent times our choices are more limited. PS, I'm still using Mom's harvest gold blender from 1970.

  • Report this Comment On August 28, 2012, at 5:32 PM, bbddll wrote:

    I forget which rich wise man said this; "its not what you earn, its what you spend".

    I find this to be true among my co-workers........

    There are many other external factors, but to a large extent, you can control your spending....

  • Report this Comment On August 28, 2012, at 5:34 PM, phillyarchitect wrote:

    Recommend reading The Betrayal of the American Dream. The middle class is indeed disappearing. Causes: jobs have gone overseas, or south of the border; home prices increased dramatically when women entered the work force making two careers mandatory not optional; higher education costs through the roof; tax system broken; obsession with deficit and tax cutting results in failure to invest in infrastructure; and a dysfunctional legislature and you have a toxic brew.

    The middle class is indeed disappearing and it's not just in our heads.

  • Report this Comment On August 28, 2012, at 5:34 PM, iamtheschmitzer wrote:

    I read articles like these, and hear "the largest part of our economy is consumer spending". I think the two are the same.

    When we consumers spend money, who do you think is making money? It's generally not middle class profiting from it.

    As long as we work for the wealthy, and spend to the wealthy, this can only get worse.

    Way back when, middle classers had a more entrepreneurial spirit, and they were getting their cut. Remember Mom and Pop shops. Gone!

    Even better, make a business that sells to corporations, have them pay you. Or sell your business to the 1%. That will reverse some of the flow.

    I think there has never been a better opportunity to do this (especially for technology companies), but it takes education, a little courage, and lots of time.

    The only people who can change this is us. Blame yourself, then join me at 5:30 AM working on my biz. You can do it too.

  • Report this Comment On August 28, 2012, at 5:38 PM, f4ftrjoc wrote:

    The real devision began after WWII when educa-tion was affored to the GI's after the war. This was the beginning of the expansion of new op-portunities and innovation. I remember back in the early 80's playing golf with two 30 something guys: One was a Fireman the other was a School Teacher. It was their desire to live and spend their income and not save for a rainy day as did their parents; as they were going to collect re-tirement pay that their Union was getting them.

    Well, you can draw your own completion to this!

  • Report this Comment On August 28, 2012, at 5:39 PM, Seanickson wrote:

    Things have gotten better over time and will likely consider to do so. We have lost some ground over the past few years but this will be reversible. Employers have had great leverage over the past few years, but high profit margins will revert and wages will grab a bigger slice of the pie. Americans will live even better in the future.

  • Report this Comment On August 28, 2012, at 5:42 PM, astuber9 wrote:

    This is the single issue that concerns me the most about the future of America. Even after the credit crunch and big recession unemployed people still will not take the jobs or do new training for the jobs that are available. Life is hard as esbita pointed out, I think we can all come up with our own financial difficulties or budget restraints that make life harder than we would like. At the end of the day you have to live within your means regardless of what your income is.

  • Report this Comment On August 28, 2012, at 5:45 PM, grusilag wrote:

    I think the article already provides at least one answer to the question posed (why is the middle class less happy) but because it conflates happiness with richness the point seems to get lost.

    If, for example, in 1950 I work and produce $100 worth of value and get to keep $50 of it for myself, while in the year 2010 I work and produce $200 of value and get to keep $75 of it for myself I will feel less happy than I did before because more is being taken away from me.

    This isn't rocket science. Society is MUCH richer today than it was in 1950. That richness can be generally attributable to advances in technology which make each and every one of us more productive. Yet the increased productivity is being apportioned to fewer and fewer people. There is a net transfer of wealth from the many to the few.

    I hope no one is under the impression that less than 1% of the population creates more than 40% of society's wealth and that magically in another 10 years, if the current trend continues, that an even smaller percentage of people will create an even larger percentage of wealth - the only way this occurs is because there is a transfer of wealth from the many (i.e. middle class) to the few.

    Unless you conflate happiness with absolute wealth, under these circumstances why is it surprising that the middle class are less happy than before?

  • Report this Comment On August 28, 2012, at 5:49 PM, ledgeuno wrote:

    There are a couple of points you need to consider as part of this discussion. If you are looking at household incomes, there is the fact that there are far more 2-income households than there used to be. In some cases by choice, in others out of necessity. So even though incomes may have increased, people are having to work harder.

    Also, the article you cite refers to "self-described" middle class individuals. This begs the question of who considers themselves to be middle class, and what their actual incomes are. It's no coincidence that both major political parties are consistently catering to the middle class, because that's who most Americans consider themselves to be.

    It is not difficult to see where the perceptions you describe come from. We live in a society where what people own and how they present themselves are closely linked to their sense of self-worth. To a large extent this is a values problem. Sure, individuals bear some responsibility for that, but in part this is a product of a larger system where people are bombarded by advertising in nearly every facet of their lives.

  • Report this Comment On August 28, 2012, at 5:52 PM, cmfhousel wrote:

    <<If you are looking at household incomes, there is the fact that there are far more 2-income households than there used to be.>>

    Note that this was implied in the article: "changes in family structures."

  • Report this Comment On August 28, 2012, at 6:04 PM, adjangop wrote:

    How can you completely ignore any impact on the decline of middle class incomes of the criminal behavior evidenced in recent news stories within the financial services industry?

    It makes me wonder whether I should continue to place my trust in TMF when you don't even MENTION unscrupulous behavior as a possible cause. I always thought TMF called a spade a spade, but perhaps I was wrong.

    I do believe that spending choices can be made poorly by consumers and so on, but let's remember what industry has still made money in the toughest times since 1929, and who is holding hands and sharing rosters- politicians and the financial services industry.

  • Report this Comment On August 28, 2012, at 6:07 PM, Palawaycj wrote:

    Everybody is a little bit right aren't they, there are plenty of perspectives. But I don' t think it's about happiness or blame, the middle class is shrinking and our country worked batter when it was bigger and stronger. More folks to buy all that stuff which means more have to build it, import it, sell it, etc.

    Nobody talks much about inflation. If you think its not happening because the CPI Index isn't moving, you don't understand the impact of the changes made in in the early 80's. Compare the price of oil then and now, or maybe gold. Seller's of commodities tell us what they think our dollar is worth. War doesn't come cheap and we've been at it for over 10 years. inflation takes its toll in insidious ways which don't hit corporate barons in the same way it does rank and file.

    I don't think government spending is the answer but I also don't think the answer is that middle class people spend too much or blame others when they should be blaming themselves.

  • Report this Comment On August 28, 2012, at 6:07 PM, cmfhousel wrote:


    1. The article makes it clear that many, many variables are involved. I didn't rule anything out.

    2. You write: "but let's remember what industry has still made money in the toughest times since 1929."

    FWIW, the financial sector lost hundreds of billions of dollars in 2008/2009.

    Thanks for reading,


  • Report this Comment On August 28, 2012, at 6:09 PM, new69star wrote:

    You get an A+ for the piece. You 'hit the nail on the head.' How refreshing to hear the truth! Everyone has over-consumed. No one can say 'no' and deny themselves of something they want--it's easier to put it on plastic and get instant gratification. Keep up the great work!

  • Report this Comment On August 28, 2012, at 6:12 PM, czbill12 wrote:

    esbita and others make valid points. Ergo, I just got off the phone trying to refinance a mortgage. House dropped in value 22% since purchase. Decent neighborhood, but fringes of decline--esp with rentals, and the occasional foreclosure. I don't buy into a lot of the original points in the article either. In 1999, my income alone was appr 3/4 of what both my wife and I make--TODAY. Not to mention a nice loss of a 401K b/c yes, I could have managed it better, but also b/c of corp greed. That CEO is now in jail, unlike many others out there today.

    So, net--while our income has climbed the last 2 yrs, we are still fighting to get back to where we were, with less net wealth, as well as an underwater mortgage. Not to mention our college grad is doing better bartending than any other job out there in his strata right now.

    Methinks there are a lot more items in play, esp. with the decline in net worth across all middle class strata--including us.

  • Report this Comment On August 28, 2012, at 6:12 PM, hank321 wrote:

    The Premises of the Pew study are entirely skewed, and for clearly partisan reasons. Even with the recession, people are better off today than 50 years ago.

    Food and shelter today cost a fraction of the average percent of annual income that they did 50 years ago,....yet people think they are worse off.

    The preception is crazy wrong. But people have been misled into believing they are worse off now.

    And every politician knows that people want to BLAME someone for their problems, rather than accept responsibility themselves.

  • Report this Comment On August 28, 2012, at 6:13 PM, abshelby wrote:

    grusilag said it all. Most of the previous comments seem to indicate that "happiness" is not a relative condition. When one compares our condition to the stone age, we look even better off today. Why stop at the 1950-60 decade? History has clearly shown that concentration of wealth is a condition that will not sustain itself for long. I think we have some serious thinking to do about what a future with limited numbers of jobs with adequate pay looks like. I would like to hear some creative suggestions!

  • Report this Comment On August 28, 2012, at 6:21 PM, RodCarlson100 wrote:

    Since the late 1970s, the share of total national income to the middle class has shrunk as the infamous top 1% income group has gained (from 9% to 25%). This peak is similar to 1928.

    The middle class can no longer afford to spend enough to keep the economy growing at a healthy pace.

  • Report this Comment On August 28, 2012, at 6:26 PM, TMFDarwood11 wrote:

    " we have more disposable income."

    The issue is not and never has been disposable income. It's been what we do with it, and our expectations for the result, each and every year. Spending every nickel we earn means we are on a treadmill in life, in which we have to work, and earn, such an amount each and every year in order to sustain that life style.

    The real problem facing us is how to achieve that lifestyle and if incomes don't keep up with our lifestyle expectations, that may mean borrowing.

    My first accountant called this "mortgaging our future." Which is to day, living large today so we can work for decades to service our debts.

    The statistic missing in this article is the amount spent by the middle class family servicing their debt. That's a significant number and not simply in absolute terms. When we borrow, that's an obligation to pay back the principal plus interest. That interest is a wealth transfer.

    I'd suggest that one way to visualize how the wealthy get wealthier is to play a mental exercise. Add up the amount of interest and late fees paid each year on a home mortgage, credit cards and any and all other revolving debt. Then assume that I'm handing that money to someone else in the top 5%.

    In my exercise, I conclude that I'm giving that wealth to someone and making them richer. They work in finance, in banks, etc.

    Nerdwallet reported that the average credit card debt per indebted household was $14,517 in 2012. In 2012 the national average for new credit cards is 14.92%. So a little arithmetic tells me that the average household probably pays about $2,165 annually just in credit card interest, and possibly more.

    Add to this the annual interest paid on auto loans and homes. A $20,000, 60 month car loan can cost $366 a year in interest. The difference in interest paid on a home costing $300K instead of $200K can be $2,495 annually.

    All of this is a willing wealth transference from the household to someone else.

    When the middle class willingly makes these purchases and signs the loan papers, it willingly makes decisions about its financial future.

    I'm not even considering the costs of higher auto insurance on a new and more expensive car, or the utilities and real estate taxes paid on the larger home.

    Here's the bottom line: If one decides to live "debt free" its very possible to avoid spending about $420 a month, and that's just in interest payments. However, we instead choose to hand that money each month over to others.

    Multiply that times millions of middle class households, and that's one possible, and very unpopular explanation of how the rich get richer.

  • Report this Comment On August 28, 2012, at 6:28 PM, tkell31 wrote:

    It's the human predicament, people are rarely happy with what they have. Of course struggling to have more also gives rise to innovation. Competition is what makes life so great, but paradoxically so frustrating for so many. Incomes may be lower now, but how many people would look around at their multiple big screen TVs, cars, phones, computers etc and trade places with what their parents had?

  • Report this Comment On August 28, 2012, at 6:28 PM, TMFDarwood11 wrote:

    /\--- change the sentence to read:

    My first accountant called this "mortgaging our future." Which is to say, living large today so we can work for decades to service our debts.

  • Report this Comment On August 28, 2012, at 6:30 PM, TMFDarwood11 wrote:


    I agree but I'd add this. How many people would look around at the satisfaction of their parents, who had very little modern technology or the baubles of success, and say "I'd rather be happy?"

  • Report this Comment On August 28, 2012, at 6:33 PM, SuperCharge wrote:

    Stagnant wages, normal infIation, and the skyrocketing cost healthcare.

    "From August 2000 to August 2010, health care inflation increased by 48%, while the Consumer Price Index rose by 26% across the same period, according to Bureau of Labor Statistics data."

  • Report this Comment On August 28, 2012, at 6:34 PM, StockGoddess wrote:

    It used to be you'd work for some factory for 30 years and in return they'd give you a comfy pension and health care. Health care didn't cost much, and a kid could fip burgers and work his way through college.

    The double income is a necessity nowadays because

    1) we can't rely on "dad's" pension to feed us in our golden years. We both work just so we can retire someday (irony, yes)

    2) Health care costs have skyrocketed to where it would cost $18,000 a year to insure my family of 4, more than many jobs pay (looked up my COBRA) and

    3) College, a near-necessity in today's world, has also skyrocketed in cost to where burger-flipping won't cover it anymore (in-state schools run $25,000 per year per kid, room, board, tuition - and we have two...)

    So, yes - we could live on one income. But could we retire securely, pay for health insurance and send two kids to college on one income? Not so much.


  • Report this Comment On August 28, 2012, at 6:36 PM, 10562ny wrote:

    Hmmm. Paid over $4.00 a gallon for heating oil last winter; am paying over $5000 per year for medical insurance for wife. Property taxes hit 25k this past year. When we first moved to our house in 1996 the taxes were 8K.

    Credit card my faults? probably. Taking out home equity line my fault? yes.

    Considering the above I am still happy, but we want to be happier so we are looking for a new house with smaller sq footage, smaller oil tank and reasonable taxes.

  • Report this Comment On August 28, 2012, at 6:47 PM, HeyPacketMan wrote:

    I grew up in a ghetto. I remember a day in 1962 where our family literally ran out of food and my brother and I ate the last of the corn meal while my parents looked on. I can still remember my mother's tears and wondering why they wouldn't eat with us or tell us what was wrong. We had no TV or phone in those days and I'm willing to bet that the washtub and stove came with the house.

    In high school I had a special teacher who took interest in me. He got me interested in earning, saving and investing. I learned the rule of 73 in tenth grade in an inner city school. How weird is that?

    I mowed yards, worked odd jobs, etc. until I became 16 and could work a w2 job. I saved every dime of my earnings. My teacher gave me a copy of a financial magazine that rated mutual funds. I eventually had enough for an initial investment.

    After moving out on my own, I worked at a factory that paid for night classes. I discovered Fidelity Magellan at what turned out to be a very good time. It's amazing what compounded interest and renting a share of Peter Lynch's brain can do.

    After 9 years of part time college I got an engineering degree and started making real money. All the while, we continued to invest.

    This is how I got out of poverty. This is why I don't have much sympathy for others in poverty that won't work hard and sacrifice to get out. They have all sorts of benefits I didn't such as Roth IRA's and earned income credits.

    Contrary to what you hear in the political ads, a person of modest means pays an extremely low tax rate on long term capital investments (5%) even if they're somebody's secretary. That's assuming they pay taxes at all.

    I don't buy this bunk that the poor and middle class can't save and invest in today's America. Don't tell me you can't go to a community college or university and get an education in something that pays better. Our government should be encouraging that instead of peddling more government dependency.

    Imagine what putting 5% of your meager wages in a Roth IRA starting at age 20 would do by the time you reach retirement age. A helluva bit more than relying on Social Security which may or may not be there in 50 years.. If you don't feel competent to choose stocks for the investment account, just buy into a S&P 500 index fund and dollar cost average from your paycheck.

  • Report this Comment On August 28, 2012, at 6:54 PM, RodCarlson100 wrote:

    One more comment: Universal health care in developed countries costs less and results in longer lives compared to the US, so why is anyone against it?

  • Report this Comment On August 28, 2012, at 6:55 PM, SuperCharge wrote:

    Special interest groups and the power of money to influence law.

    "... Money does buy access in Washington, and access increases influence that often results in benefiting the few at the expense of the many." ~ John McCain

  • Report this Comment On August 28, 2012, at 7:00 PM, DrJCA1 wrote:

    To blame anyone else but yourself is the normal for most Americans who are now in trouble. No one forces anyone to buy stuff you don't actually need. No one forces you to buy a 50K car or an overpriced house. No one forces you to get your kids every new piece of expensive junk that's out there. If you don't have the sense, maturity, and will power to save for bad times while you ar working, then you get what you subconsciously wished for. I know folks who worked for 30 or 40 years and did not save a dime. Now they are crying about how the rich people or the government have done them wrong. Baloney. I am willing to bet that if we looked closely at most middle class families, we would find them to have plenty of "toys" but no savings or investments. My parents taught me well, so I am quite comfortable after working 53 years. I take care of myself and my family when necessary. I will NOT be forced into paying for other people's problems.

  • Report this Comment On August 28, 2012, at 7:25 PM, dontgopoor wrote:

    It's interesting to see the many comments by people who have used hard work to get from a not so fortunate position in life into a good position. I too share a similar story.

    The author touches a little upon how marketing leads consumers to buy things they don't need. This is an important lesson - learning how not to go poor and miserable being sold happiness is a skill that takes a little education. But that education goes a long way. And it's not hard to get. Just a little reading on the subject.

    If you've been fortunate to have learned on your own or been taught by a teacher or friend, pass the lesson on. I have and still try to do that.

  • Report this Comment On August 28, 2012, at 7:40 PM, interd0g wrote:

    No one here seems to take into account that much of industrial production has moved overseas during the period you are looking at.

  • Report this Comment On August 28, 2012, at 7:48 PM, LairdGeordi wrote:

    Nonsense! As a fiscally responsible person with no consumer debt, and 10 times more assets than mortgage debt, I can say unequivocably, my discretionaly income has declined over the past decade.

    This generalization that the decline of the middle class is nothing more than whining is absurd. While there are many reasons for the decline of the middle class, the 2008 economic crash is first and foremost.

    As the ongoing recession was caused exclusively by corporate greed, and ineffectual government, this analyis does nothing but blame the victims.

    Of course, that's a whole easier to do than actually addressing the political and corporate issues.

  • Report this Comment On August 28, 2012, at 7:59 PM, TMFMorgan wrote:


    <<This generalization that the decline of the middle class is nothing more than whining is absurd. >>

    Yes, that is absurd. And as I explicitly state, there are an untold number of variables involved in the decline of middle class finances. I don't know how I could have made that clearer (paragraph starting with "step back for a second ...")


  • Report this Comment On August 28, 2012, at 8:08 PM, Ostrowsr wrote:

    So super rich and middle class are doing fine and morals have declined. And the poor work 3 jobs for $7.50 an hour just to survive, that is, until their health fails and then we load up the prisons and the poor apartment buildings that are like prisons. Then we hire more cops to watch over these "criminals". We've become a nation of sadness with declining religious faith. Too bad these financial sites have blinders on concerning the real state of affairs in this country. The politicians are now controlled by a guy who takes pledges from them not to raise taxes or corporate dollars will destroy their careers.

  • Report this Comment On August 28, 2012, at 8:13 PM, amyeagle wrote:

    Think about college.... I went to Hunter College in

    New York for $10 a semester in 1954 (adjusted for inflation?..I don't know). I went half time to the University of Michigan in the sixties...tuition = $200 for 2 courses (adjusted for inflation, maybe $2000?)

    Think about the middle class sending their kids to college, the sine qua non of getting into the middle class.....think about tuition debt

    think about unemployment....

    Think about surviving w/o health insurance...

  • Report this Comment On August 28, 2012, at 8:18 PM, SUSPET44 wrote:

    "The upper 1 percent of Americans are now taking in nearly a quarter of the nation's income every year. In terms of wealth rather than income, the top 1 percent control 40 percent. Their lot in life has improved considerably. Twenty-five years ago, the corresponding figures were 12 percent and 33 percent."

    I think this is a good explanation why the middle class is feeling they are worse of than their parents. The middle class has been deprived of opportunities to make real progress in their career if at all they can manage to find a job with a promising career. Unless you are a professional, it is very difficult to have a stable career; every time the middle class worker gets laid off, there is too much struggle, he or she has to go through before finding a decent job.

    The corporations who send jobs offshore, have practically cut the middle class at its roots.

  • Report this Comment On August 28, 2012, at 8:43 PM, Tiingall wrote:

    I fully agree with LairdGeordi.

    And it's the debilitating consequences of this greed and incompetence which is making people feel less like trying and more like giving up. Why strive when there is so much corporate and political graft and corruption waiting to swallow our efforts.

    I was fortunate, by age 13, I was taking after school jobs to earn a few dollars. I delivered medicine, pumped petrol and had vacation jobs all through university. I took a low paid job that gave me free board and lodging. I saved and just last year I bought a house, with cash. I don't have any debt.

    But I can tell you that making ends meet now is far more difficult than it was ten years ago. Perhaps I'm suffering the broad economic consequences of those who did it all on credit. But I think there is another reason.

    The people society sieved out through the educatiuon process to be the brightest and smartest have betrayed us. Through our taxes and sacrifices, we paid for their education and we assigned them the largest lumps of salary to reward them for doing the important jobs - including responsibly growing our savings and pension funds.

    We were told we could trust them. Our politicians assured us there are checks and balances to control any excess. The financial professionals - accountants and auditors - told us they are there to ensure all it done correctly.

    The sad reality is they all stuck their snouts in the trough and betrayed the trust we gave them. They ignored the high salaries we already gave them, and any sense of duty to those of us who trusted them with our savings; they wanted more. They created scam loans, convaluted investment strategies and all manner of skimming exercises that allowed them to steal our savings, investments and pensions.

    Our elected representatives did not protect us, nor did the accountants and auditors. We pay all their salaries - either through taxes or the money they take from the interest our savings and pension funds earn - but it seems they sided with the theives, not with us.

    The connection between power and responsibility in the financial world has been severed; for the benefit of those we have entrusted with the power.

    If we go to the bank and borrow depositors' funds to invest in a business, we have to pay it back. If we don't we lose our home, car etc. Fair enough, the other depositors deserve to get their money back if we make bad decisions; we take responsibility for our actions.

    But if the bank executives, management, loan officers, directors, investment strategists - and the accountants, auditors, lawyers and other who protect them - take depositors funds from the safe and create a scam loan system so they can claim great bonuses, commissions etc, and the scam predictable goes legs up, they don't pay back a cent of our depositor savings or pension money. They walk away with a good lump of our savings and say bad luck to us about the rest they vaporised.

    We've seen in recent weeks HSBC in the USA fined for money laundering. We've seen banks in the UK fined for price fixing. Who pays those fines? Not the decision makers in those institutions. We do. We pay it as lower interest on our deposited funds, higher fees, lower services and ultimately, smaller retirement pensions.

    As mentioned by a previous writer, billions - of our middle class savings, pensions and investments - were vaporised in 2008/9 by these people.

    When the middle class sees the connection between power and responsibility applied to the big decisions makers, like it always applies to us, then I think we'll see more equitable and honest decision making in the corporate and political world, and we'll see our working and retirement lives improve.

    And we'll see fewer middle class people reporting that its the political and corporate leaders - who's salaries we pay - who are the cause of our problems.

    Until the personal consequences for decision making applies to those people - like it already applies to us - then, we'll continue to be the victims of the psychopaths (see Prof Adrian Raine), parasites and criminals who seem to have accumulated in large numbers in the banking and finance sectors to feed on us.

  • Report this Comment On August 28, 2012, at 8:45 PM, marei wrote:

    We elect the politicians. We promote the celebrities. We advocate the lifestyle. Our "cult of selfishness" has brought us to this state. The only way to change our lives begins with our taking responsibility for our actions. Sometimes the hardest look you can take is the one in the mirror, but that is the look that we must take to truly move forward.--Tom Reilly

  • Report this Comment On August 28, 2012, at 9:00 PM, TMFBlacknGold wrote:


    I remember reading a study that showed people overwhelmingly would rather make $70,000 if their neighbors were making $60,000 than bring home $80,000 if their neighbors made $90,000.

    That's pretty astonishing. Try digging that up and mentioning it in a future article. =)

    That basically sums up how our values have shifted.


  • Report this Comment On August 28, 2012, at 9:01 PM, garyc27 wrote:


    Nice article however, PEW is not known for their honesty or centrist view. While it's nice to paint the picture of prosperity, the bottom line is that there are 23 million people unemployed.

    Failure by our rulers has led to increased cost of fuel, food, and clothing--none of which is included in CPI calculations. PEW doesn't consider the ever rising costs of property taxes, local, state, and federal fees on water, sewarage, cable tv, traditional wire line telephony, and cellular service.

    I can only conclude that this article is pure spin and is not based on one iota of reality.

  • Report this Comment On August 28, 2012, at 9:11 PM, TMFBlacknGold wrote:


    Unemployment rate in Spain is exactly twice that of U.S. #perspective

  • Report this Comment On August 28, 2012, at 9:15 PM, cmfhousel wrote:

    <<Failure by our rulers has led to increased cost of fuel, food, and clothing--none of which is included in CPI calculations>>

    Yes, they are.

  • Report this Comment On August 28, 2012, at 9:17 PM, cmfhousel wrote:

    <<,PEW doesn't consider the ever rising costs of property taxes, local, state, and federal fees on water, sewarage, cable tv, traditional wire line telephony, and cellular service>>

    Consider where? This was a survey they conducted asking people how they felt about their finances. They weren't undertaking a reconstruction of inflation measures.

  • Report this Comment On August 28, 2012, at 9:34 PM, ponyboy1 wrote:

    Great article, and many various opinions as to the demise of the MC. It's been posited that real wages have gone up marginally since the 80's.. for the Hoi-poloi, while the 1% have done quite well. At 69 are my observations.

    1) The "Keeping up with the Jonses" has been an affliction for far too long. Superficial...a waste of time and $$$.

    2) Attitudes..we have far too many who feel that the world revolves around them. I would say that most have never really worked - meaning hard physical work. They lack humility.

    3) Lemmings - they need the biggest, newest, fastest, trendiest. The marketing specialists know how to manipulate them.

    I could go on...but in most cases, they are their own worst enemies.Far too many kept riding the refinancing / cash-out trap pre meltdown and had plastic maxed out....and like the money through their fingers, so went their jobs. Poof ! Gone...

  • Report this Comment On August 28, 2012, at 9:50 PM, devoish wrote:

    "1. The article makes it clear that many, many variables are involved. I didn't rule anything out." - Morgan in response to someone.

    Not ruling anything out kind of detracts from the article.

    You did say "Whenever someone points the blame at one reason or one person, stop listening. They've got it wrong." and I agree. This answer deserves to be equally chastised for having not read the part about "many many variables".

    "You get an A+ for the piece. You 'hit the nail on the head.' How refreshing to hear the truth! Everyone has over-consumed. No one can say 'no' and deny themselves of something they want--it's easier to put it on plastic and get instant gratification. Keep up the great work!" - new51star

    Seriously, what is the point that you want to make?

    A- Economics doesn't have much usefulness?

    B- money doesn't buy happiness?

    C- People don't understand how much better they have it because average household income has gone from 30k - 50k?

    D- you don't get it because people have lost any sense of security even with higher incomes, because of increased risk through defined payment vs defined benefit among many other things?

    E- you don't get it because that increase in income takes a family 100 hours to earn now instead of 35 then, and then has to pay some of that into the 401k?

    These are fluff pieces that you are rushing out too quickly with too little thought. As your "editor" I would suggest answering the question you posed in the title.

    You observed some facts;

    1) People say they are are unhappy.

    2) familys have more income

    3) half the people blamed themselves despite your statement that they blame everybody but themselves

    You seem to think they misunderstand their situations and are better off than they think they are.

    How about giving us your top ten reasons why people are unhappy, in order.

    It is ok to look outside the economic box. Look for things like air and water quality, food quality, free time, security, loss of religious faith, fear of religious oppression, etc. Maybe they have lost something income does not measure.

    You posed the question, please simplify your answers for us.

    Sorry about my disappointment, but i do not think that economics is equipped to answer your question.

    best wishes,


  • Report this Comment On August 28, 2012, at 9:59 PM, DividendsBoom wrote:

    That is right vs left in a nutshell.

    Right says don't buy the shoeS if you can't afford it.

    Left says how dare they make me go into debt to buy those shoes.

  • Report this Comment On August 28, 2012, at 10:05 PM, clydejazz wrote:

    Morgan, you say there could be thousands of reasons, some of which we don't understand...

    The crash of 2008 dwarfs all of those other possible "thousands of reasons."

    "Thousands" of middle class folks got kicked into poverty because of fraud in the financial sector. Some who are young enough will make it back into the middle class. Many won't. The crony capitalists of Wall St. and Washington caused this recession, but protected each other from the consequences. Many average people, who didn't share in the inflated salaries and commissions of the real estate bubble, found themselves bailing out the bankers, and then losing their jobs and homes.

  • Report this Comment On August 28, 2012, at 10:06 PM, travelpm wrote:

    There is one thing no one has mentioned that is hugely different now then it was in the 1950's and that is the role of advertising. In the 1950's in was in a newspaper you read once a day, and on TV that you watch 2 hours a night. Maybe you listened to the radio for an hour or so. Not so anymore. It comes at you in email, text messages, all over the internet, on Facebook, on this page further down, on TV, radio, streaming movies. American's are being marketed to 24 hours a day everywhere they look and it is working. Once upon a time I had to drive 10 miles to get to a store to make planned purchases, I had to take cash I saved up or a check with money in my bank account. Now I can make a purchase of just about anything day or night at the slightest impulse, and I am barraged with % off deals and shop now and save, and today only don't miss out. You feel poor because no matter how much you spend, apparently there is more you have yet to buy and it is screaming at you from every corner of your life all day long. The 1% is getting rich from this. We are investing in companies that do this the best and helping to perpetuate that. And many of these things we spend money on do not generate much in the way of American jobs. Now politics is coming at us at the same speed so people have little time to be thoughful about what is really going on. It is all served up to you in convincing ways that make the truth hard to distinguish from the twisted lies. We are now in a catch-22. If we break out of this as a group and change our free spending ways, we impact the economy and our stock holdings will all drop. Truly only we can change it ourselves, but there are huge enterprises at work trying to make sure we never do.

  • Report this Comment On August 28, 2012, at 10:07 PM, ponyboy1 wrote:

    Yes, Tiingall above is calling it as it went down. Entitled "Masters of the Universe" and as Lloyd Blankfein ( Goldmans CEO) had the gall, and irreverance to say.." we're doing Gods work". Another quote from the investigation that was done post meltdown, a big bank CDO trader (who knew about the crap Mtges.) while discussing what was actually going on with a cohort said " I'll be gone, and you'll be gone" In other words...screw everybody else, I've got mine.

    The game is rigged and it is a house of cards. Acquiessence and submission will not change the flawed system as it is now. The common man has to rise up...and demand a total reorganization of the financial system, one that assure fiduciary responsibility and and real penalties for transgressors in positions of trust.

  • Report this Comment On August 28, 2012, at 10:20 PM, ponyboy1 wrote:

    OK've got a fair grasp of reality. You are spot on about the advertising ..and if you read my 2 previous comments please, we are in agreement.

  • Report this Comment On August 28, 2012, at 10:21 PM, devoish wrote:

    And I guess I focused to much on the connection you made between happiness and income, and not the connection between income, blame and maintaining a middle class lifestyle.

    "Take measures of subjective well-being, e.g., surveys that ask, "How happy are you with life?" Most show that the percentage of Americans very satisfied with life peaked around the 1950s. Median household income back then was $31,500, adjusted for inflation. Today it's a hair over $50,000 per household. So we're richer"

    And taking the thought a little further, a "middle class lifestyle" is not an income level.

    A middle class lifestyle in 1970 was a house, a car, a phone, a tv, 3-4 weeks paid vacation, healthcare, defined benefits, cheap college for kids,

    Today a middle class lifestyle is a tv bill, not a one-time payment, a $100 phone bill, a pc and internet bill, a house, soccer for the kids, unaffordable college, etc.

    To the posters who point out the middle class is acquiring debt, that is just evidence that the middle class lifestyle really is harder to maintain than in 1950 or 1970 especially if you consider that the "household" now works 100 hours per week instead of 35. Nobody would borrow money if they were paid enough to maintain that middle class lifestyle without borrowing.

    best wishes,


  • Report this Comment On August 28, 2012, at 10:52 PM, amt77 wrote:

    I will never ever believe that we only spend 13% on food. Maybe if you eat only junk food. Does $31,500, adjusted for inflation, take into account that the employee had NO cost for his health insurance? That now rather than a pension he has a 401k with NO employer contribution? Neither my husband or I have had an employer contribution since 2001.

    None of this adds up to me at all.

    I have no problem taking responsibility for myself, but there is SO much about the financialization of our economy that devalues labor - when labor may be all some have to offer...

  • Report this Comment On August 28, 2012, at 10:57 PM, ceallachqn wrote:

    Wow, interesting article. I can agree with some of it because I have watched a few of my own family members waste money. They bought lots of toys, refinanced to pay for things, wound up bankrupt...the whole nine yards. And then there is our family. No credit card debt. Live frugally. Drive cars into the ground and most have been used hand-me-downs that worked just fine. Husband retires from the Navy after 24 years and cannot find a job. The only reason we are surviving is because we saved. However, we have a kid to put through college and a retirement we thought we were saving for...not sure what will happen with that. We don't have to compare ourselves to the so-called "rich". We can compare ourselves to our financial situation 5 years ago and see the issues. Oh, and by the way, the grocery store just upped the cost of the food by 20%.

  • Report this Comment On August 28, 2012, at 11:00 PM, A2Matty wrote:

    Great article Morgan.

    I too think that seeing additional info on the "changing family dynamic" would have been of interest (as I pay excessively more in daycare than for my mortgage - as I'm sure many here may - and my mother didn't even know what daycare was while raising us). Two parents working, multiple cars, college tuition...all of these have had a profound effect on our family lives and our productivity.

    I run in some wildly mixed circles. I have clients with net worths as high as $300 Million, others going bankrupt. I have friends who are millionaires and guessed it, going bankrupt. When I speak to those who are failing to make or save money, they blame the government and basically everyone else for their issues. When I'm with the wealthier ones, and they are of all political stripes, one thing seems consistent they are asking what they or we can do to make any situation better. They take ownership of everything. They blame no one for their failures, and give credit to everyone else for their success. One of them pointed me to the book "QBQ" the question behind the question - definitely worth a read (quick read) and sums up the differences in these attitudes.

    Coincidentally, the wealthiest of my clients was born in a mudd hut in India. Hard to say there's no chance for upward mobility.

    I've had my ups and downs like everyone, but one thing never changed, my work ethic. I was a farm boy.

    I used to fake being rich and I went broke. Now I fake being poor...I won't call myself rich - yet - but I'm getting there.

    Keep up the good work.

    Fool On!

  • Report this Comment On August 28, 2012, at 11:00 PM, JadedFoolalex wrote:

    Try to rid yourself of as much as possible. Living simply is far easier and much more satisfying than trying to keep up with everyone else!

    Need proof? Weren't we all happier as kids, and really, how many bills and stuff did we have have back then? None! So, we were happy! Of course, work at something you love, make enough to have a place to live, food in the stomach, clothes on the back and the rest will take care of itself!

    Unless you want the alternative which means a world-wide depression and massive deflation where everyone loses everything so that we have to start over. Frankly, I don't think many people would survive such an event!

  • Report this Comment On August 28, 2012, at 11:16 PM, Etonian8 wrote:

    It's a very interesting take and to me right on the nail. It is not so much that others may be partially responsible. But it takes 2 hands to clap. Until people can own up to their part and their responsibility, and to say that they can make a difference to make it right, we will continue to head down the wrong path, economically and morally.

    If it's always not me but the other guy, we will never get better

  • Report this Comment On August 28, 2012, at 11:20 PM, maiday2000 wrote:

    It's funny in an article telling people to look in the mirror that most of the posters are still looking for scapegoats.

    When I joined the MF back in 2001 the members were aspirational. When did the MF get populated with so many victims?

    It wasn't bankers who created the housing bubble - American citizens did.

    It wasn't a particular administration who let the "greedy" bankers off the hook, it was the people who elected them.

    It wasn't the wealthy industrialists who "took" everyone's money and ran the mom and pop shops out of business, it was us, the consumers voting with our dollars.

    And remember this - the government couldn't create the debt if it wasn't for all of the citizens who keep clamoring for more help and more entitlements.

    Take responsibility - do something yourself for once.

  • Report this Comment On August 28, 2012, at 11:20 PM, Terrones wrote:

    The purchasing power of the middle class has indeed being declining during the last three decades. That fact has been known for sometime and we have read it in magazines (and scholarly journals), and heard it on TV from conservative to liberal economists. For instance Joseph Stiglitz (Nobel Laureate in economics) has spoken and written extensively about it and on the other side of the spectrum, economist Marc Faber has basically said the same thing. So, blaming the decline of middle-class wages on them is inaccurate. Specially when we know that the "flow" of money has been going from the bottom to the top (no trickle down). This by the way is the reason why income and wealth inequality hadn't been this severe since before the Great Depression.

  • Report this Comment On August 28, 2012, at 11:25 PM, stevef5566 wrote:

    When your company fires a third of it's workers and requires the rest to work mandatory unpaid overtime and then pays its executives huge bonuses because they're such clever managers, it's easy to become cynical about this year's version of the capitalist system.

  • Report this Comment On August 28, 2012, at 11:33 PM, DavidStHubbins wrote:

    devoish / Steven hit it dead center!

    It's not really about the money, its about SAME quality of life.

    My dad worked as a supervisor in the 70s/80s/90s/00s, we had an "average" Chicago-area suburban home, two cars, and he saved enough to pay for 2 college educations (1980s/1990s). We were able to play sports in Jr. High and High School. My parents were also able to save enough to modestly retire at the government decided age of mid-60's.

    Try that today. One worker per household (supervisor type job), "average" suburban house, two "average" cars, sports in Jr high and High school (can you say sports equipment and fees?), 2 college educations (pay in full, NO loans), save up for modest retirement at the mid 60yr old point. Yeah, RIGHT!

    Same standard of living....But, there is NO WAY you can get there with the same type of one-earner job in todays situation...

  • Report this Comment On August 28, 2012, at 11:37 PM, dpwright53 wrote:

    I agree with AMT77 in that, I'll take responsibility, however, companies used to have retirements, the divide between CEO's pay and the workers pay wasn't so great by comparison, and we used to have a better hospitalization package which has been gradually whittled on throughout they years.

    So in the end add on a college education for our children and we have to save way more to make ends meet.

  • Report this Comment On August 28, 2012, at 11:47 PM, zgriner wrote:

    Why does the Urban League care what a corporation sells? Because it knows that its constituency will line right up to buy them.

    Yes, we are our own worst enemy. We have become stupider, financially. We believe the ads that tell us that we DESERVE to get everything want just because we exist.

    The words "I need" substitute for "I want", when it's the wants that people think they need. How many TVs do we need? How large do they have to be? How often do we have to replace them? The same question can be asked about computers, game consoles, GPSes, smartphones, DVD players, etc. The cycles get shorter and shorter. We are spending more and more on the latest technology that we don't need.

    Sheeple have stopped doing anything about their costs. The "Just Do It" mentality has permeated the buying behavior. Sheeple complained about bank fees, but that didn't stop the banks from raking in billions. Sheeple still complain, but they are too lazy to change banks. They don't want to suffer a temporary inconvenience for a long term gain. I am amazed that Bank of America still has a profitable consumer banking business when there are credit unions and online banks that treat people better.

    People don't know how to stop spending and save money. I was involved a few years back in debunking the mortgage payment software that used a HELOC to prepay the mortgage. I was amazed at the number of obviously higher-income people that swore that this software was helping them save money to prepay their mortgage, but couldn't save 2 extra nickels before. It seems that until that software told them not to spend the money, they couldn't stop spending. It just oozed out of their wallet.

  • Report this Comment On August 28, 2012, at 11:50 PM, owup74 wrote:

    The article did make a really good point that it was self-inflicted Dumb@#$ on the average Joe and Jane's part. But it does leave some other causes out like why when America has become a "Cheap" country for manufacturing its not moving as many companies to the US as could have been. Everyone has their fair share of blame from the consumers who don't know how to budget their money wisely and use credit cards (like I did in my young and stupid 20's). I remember when I first jointed the Army they had what was called the DPP card (Delayed Purchasing Program) which earned the nickname of Dumb Privates Protection because a lot of them were to stupid to save and budget for their purchases and not pay off their balance in a timely matter. Part of the blame can go to the big companies who were greedy for profits and moved to China though now are regretting it with cost of logistics and labor there going up and now looking at moving back but remember at the same time they are consumers like everyone else and are looking for the best deal to make their products and if they don't feel they are getting a good deal in the US they will like most people if we don't feel we are getting a good deal at a store will shop else where which is exactly what they did because our labor unions though were good for their time became to greedy. Next one up to get the blame is our politicians who don't seam to get it that we are one of the highest taxed countries for corporate taxes (35%) when they can go to other countries and pay only 10% or less and between Bushes Patriot acts and other executive orders where the government can seize your businesses or property with no reason and Obama's FATCA and other unconstitutional executive orders taking away freedoms in the US have most of those companies or people with money are taking it and leaving the country and those overseas who were thinking of moving to the US bringing jobs with them have re-considered and have chosen other countries. If the middle class and economy is to recover then we need to shrink government, reduce taxes, eliminate all of the unconstitutional executive orders signed under both Bush and Obama and most of all get the government out of peoples lives then the economy and Middle class will flourish.

  • Report this Comment On August 28, 2012, at 11:52 PM, Epiphany11 wrote:

    Wow, truly spoken like one of the 1% - someone born with lips attached to the gravy train and that smug sense of entitlement.

    I can tell you for certain that the American Middle Class has taken a HUGE hit - from the fake "trade agreements," whose real purpose is to undermine decent wages and ship jobs to overpopulated, low-wage countries where workers and the environment are abused - once again enriching the 1% at the expense of the Middle Class. And what about the incredibly corrupt financial system that actually rewards the criminal behavior that has gutted pensions funds and individuals,with impunity, while the Middle Class continues to struggle?

    Granted, Americans in general need to give up the oversized SUVs that suck up gas money, the energy-sucking Mcmansions, etc., but that doesn't account for the enormous outflow of jobs, leaving middle class incomes even more degraded.

    Now let's talk about the disparity in tax payments by people from your ilk - like nitwitt-Mitt, one of the biggest proponents of offshoring American jobs, who pays a mere fraction of what people like me pay to the government till, so that my government can continue to embarrass me on the world stage with its hypocritical and obvious pandering to corporate piggishness, squandering our entire GNP on utterly useless invasions of other countries that produce nothing, leave our educational systems bankrupt, with no money for health care, and generally produce even greater anger toward our country by the rest of the world?

    I remain completely appalled at the corruption in our government and the selling out of our nation and its environment by the selfish, the greedy and the morally bankrupt.

  • Report this Comment On August 29, 2012, at 12:21 AM, lunchinkorea wrote:


    I'm not so sure. Yes, we need to take responsibility, but in the 1950's, people got married young and the wife dedicated herself to taking care of the home. Any man could do most minor repairs on the family car or house (and probably had time to do it), and nobody worried about pensions.

    I work way more than 40 hours/week to maintain my income. I get home exhausted and if I don't want to make supper I have to buy it -- or compromise by making it but using products that don't take hours to prepare. If my car has a problem, it would need to be connected to a computer to fix it so although I can do basic maintenance, even a tuneup really requires a professional. Although I try to get out and exercise, the city isn't really a great place to do it so a lot of people I know go to a gym.

    And while my parents didn't worry about retirement -- of course, we're all safe, right? we've got government plans and employer plans, don't we? -- I'm scared stiff about my retirement. And all this needs to be done in less time because while my parents (who were post 1950's, btw) started working at under 20, every spare cent I had went to university until I was around 30 so I they've got 12 years on my in terms of income I can save (if you happen to find a decent job. We were a booming economy then. People got jobs as soon as -- or before -- they were eligible). On top of that, banks used to GIVE you money to keep your money with them. Now you have to pay them!

    Yes. Perception is certainly part of the problem, as is 'keeping up with the Joneses' especially if the Joneses happen to be on TV/internet, as are other factors that we can control but even with the extra income, the average person in the work force is at a big disadvantage to the average person 60 years ago.

  • Report this Comment On August 29, 2012, at 1:40 AM, Chontichajim wrote:

    We are better off mostly due to recognizing the value of property. When prices got outrageous we stayed in our Condo rather than chase the herd to bigger homes. When the prices crashed we were able to buy without selling the Condo. The house is less than half what it was 5 years ago and rental income helps. People chase every high priced item (stocks, shoes, housing...) and think it is a declining standard of living. It is not that, just never buy at a bad price, and take profit every now and then (stocks that is).

  • Report this Comment On August 29, 2012, at 1:49 AM, enginear wrote:


    Good article, good comments. I have a few too:

    1- Globalization IS (as MH said) very big in this whole problem. America and the west in general need to realize we can't keep all the cookies to ourselves forever. China's getting some now, India is about to start getting more, and Africa is over the horizon. This is huge, and few people see it for what it is. Plan for it.

    2- Travelpm made a really good point: we are marketed to ALL the time now, and one successful scheme is to make people feel they are not well off because... (fill in the blank). They're good at getting you to feel that way too. A follow on is that we all invest in companies that do this better than other ones, and companies that pare their workforce down to minimal, and companies that compete better by providing less in terms of retirement benefits, and... so on. We fools are the ones encouraging this activity (even as some complain about it).

    3- We can all be better at not succumbing to the marketing, but many products are 'priced' differently than they were 50 years ago. We pay a monthly fee for television service, telvision content, several types of telephone and or internet service, we lease cars or buy them with 5 year (or even longer) loans. Monthly charges spread the pain, but they also keep lots of people reaching into your pocket each month, and make it more problematic (in my mind) to establish your net worth.

    4- As for education. It has gotten more expensive, but if you go to a state school, live at home, flip the burgers for spending money and some of the fees, you could probably graduate with a reasonable debt (perhaps 1 years salary for a college educated person, especially if you took classes in a high paid field). Many want to go out of state to 'good' schools, and come out making big bucks without any debt. Its fun to live away from home, and not work while studying (partying?) but let's be reasonable... make some decent choices.

    5- Those overeducated kids that go straight into business are what made the mess. The MBA machine was greased up and producing when the banks came up with CDO's and credit swaps and all those new and exciting financial products that put us where we are today. Where was the old guard? On the golf course no doubt.

    There ARE lots of reasons, but one is standing right there in the mirror... as Pogo Possum (anyone remember him?) once said, "we has met the enemy, and he is us".

    It's good to understand causation, but lets not beat a dead horse for too long. Fix things; start at home, and then invest well.

  • Report this Comment On August 29, 2012, at 5:22 AM, caveminh wrote:

    Yes, I totally agree. Morgan really hit the nail on the head. It's all our fault that we are struggling financially. It was *me* who decided to have the economy tank in 2008. And it was *my* idea to have Silicon Valley executives send hundreds of thousands of jobs to low-wage countries (while paying themselves $30 million bonuses). And it was all *my* idea to allow corporations to pay zero tax on their record profits from abroad, while I also decided to push 40 million Americans onto food stamps. I/we average Americans did this to ourselves!


    Our corporate executives and their puppet gov't leaders are trying to turn the USA into a 3rd-world country. They'd like to lower our wages to the point that we are making the same wages as folks in China and India. And, well this is really just the fault of the average people like you and me.

    It's kind of like when a pretty young girl goes out to a bar wearing fishnet stockings and a sexy blouse and then gets violated in the parking lot by a gang of greasy rednecks. It was her *own* fault for wearing those sexy clothes in the first place! She shouldn't been doin' that! Her fault!

    Anyone else starting to get the feeling that the Motley Fool is turning into a right-wing propaganda machine? I might have to start canceling my subscriptions to their expensive (and underperforming) newsletters. Anyone care to join me in a boycott?! Viva La Revolucion!

  • Report this Comment On August 29, 2012, at 5:52 AM, TempoAllegro wrote:

    Morgan, thank you for this thought-provoking article. Every time I read one of your articles, I never fail to come away looking at an economic point in a different light.

    Some posters seem to take "just a little" offense to the suggestion that they themselves may be to blame for the mess they are in.

    Of course, on one level, you must ultimately blame (or thank) yourself for your choices and take responsibility, or else you will be walking a long road to mediocrity. It won't, however, be a lonely walk.

    I would view the self as more of a solution to improving both the personal and societal situation, rather than waste too much time figuring out how much blame to assign to yourself or others for current woes. Who else but you can carry your viewpoints and values forward into a viable future? So laying blame for the scariness of this economic malaise is not only an exercise in uselessness, it also keeps one thinking about negatives. Yet only hard work and optimism, along with a healthy dose of honest responsibility will get you into a better life, here or anywhere else.

    Yeah, toys don't make you happy. I am not even sure that financial security makes you so especially happy - after all, the USA did survive the great depression and if need be, we could do so again. What I believe really makes one happy is freedom. To the extent that our choices seem to have been reduced in the last number of years, that is probably the extent to which we are less happy than before. Therefore we should not make our choices any less restricted than before by taking on debt for show, or because we gotta have it right now.

  • Report this Comment On August 29, 2012, at 6:25 AM, skypilot2005 wrote:

    It’s all about choices no matter what you family income is or was growing up.

    As a child, did you stay out of serious trouble and study in school?

    After high school, did you learn a trade or attend college at least part time?

    If you had a good job after school, did you make contingency plans in case it was eliminated?

    Did you think about how you were going to have enough money to retire eventually?

    You make choices every day regarding how you spend your disposable income.

    The middle class collectively, has no one but themselves to blame for their demise. It is a result

    of the choices they have made, collectively.

    Even if you blame Politicians; the middle class elected them.

    How about corporations? The middle class buys their products.

    I say, middle class take control of your future and stop complaining. It’s the only way to improve

    your standard of living.


  • Report this Comment On August 29, 2012, at 7:31 AM, AyeMu wrote:

    Is it absurd to have a 70 million high school football stadium in Texas... not if we can get an even better one here in my own community. Expectations are way growing way ahead of reality and relevance in most every respect and aspect of the United States of America..

  • Report this Comment On August 29, 2012, at 7:39 AM, cmfhousel wrote:

    Thanks for the comments everyone.

    Just to clarify again, this article doesn't state that the decline is all due to personal choices. It states unequivocally that there are many, many variables involved, one of which is the change in expectations over the last half-century. To those writing that politics, corporations, etc. played a role, I agree.


  • Report this Comment On August 29, 2012, at 7:44 AM, cmfhousel wrote:

    <<Anyone else starting to get the feeling that the Motley Fool is turning into a right-wing propaganda machine?>>

    That's a first for me. I'm usually accused of being a radical socialist of some sort.

  • Report this Comment On August 29, 2012, at 7:52 AM, rtichy wrote:

    There has to be something relevant about the ratio between the earnings and revenues of, say, the S&P 500 and total GDP of the country, right?

    I mean, if a company like Stonemor is buying up cemeteries, funeral homes and cremation businesses and aggregating them into one corporation, then more people are becoming employees, and there are fewer business owners. (Yes, there is stock in that particular corporation, which anyone can own, but so can institutions. And you can look at the Yahoo Finance breakdown of institutional ownership for any corporation.)

    Because employees spend their wages, but business owners make hard decisions about when to spend, how much to spend and when to forgo spending to invest in the future. At least they do it more often.

    Also, very few people mentioned that although Roth IRAs, IRAs, Health Savings Accounts, Education IRAs, and the like all exist, they are so much more cumbersome to create and manage than just being allowed to save the money "normally". (That's not anti-business regulation, that's regulation that creates businesses on peoples' backs.)

  • Report this Comment On August 29, 2012, at 7:52 AM, JimmyZangwow wrote:

    Middle class could have it all by having realistic expectations, but they don't. That's the biggest part of the problem. If you are truly a financially conservative person, and don't sink your money into possessions well before you earn the money to pay for them, you are the exception to whom the following does not apply.

    Here's where the money went:

    Socially-mandated kitchen and bathroom upgrades (everyone needs a kitchen glistening with quartz or granite, stainless steel appliances, and an all travertine-tile floor to ceiling shower).

    We all deserve a vacation in Bora Bora (or insert your dream destination), and pieces of plastic in our wallets and purses say we can have it, every year.

    Each member of the typical middle class family "needing " all of these: iPods, iMacs, MacBooks, iPhones, and iPads (or their non-Apple equivalents, but Apple started it all). Two of the five listed items are frivolities if you own the other three.

    9/11 changed something fundamental in many Americans, the middle class is no exception. Now we tax ourselves to fight protracted wars that will "end" the slightest risk of terrorist attacks.

    Through federal and state agencies we provide significant financial benefits to both those who really need them (which is good) and many who really don't (fostering lifelong poor financial habits).

    Pay of the uber-class (CEOs and pre-CEOs) is the first example of warp-drive propulsion of a physical object (transfer of corporate dollars earned to one guy or gal). It's not just a job, it is materialist deification. Who pays? The consumer.

    Graft and corruption which never really take a break. Insider (The House) beats the Lil Guy and Lil Gal investor > 95% of time.

  • Report this Comment On August 29, 2012, at 8:35 AM, TMFDarwood11 wrote:

    Wow, Morgan, you really hit the hot button with this one.

    The range of comments is interesting. I wonder if the positions stated track the finding of the Pew study re: "Middle-class people themselves?"

  • Report this Comment On August 29, 2012, at 9:12 AM, agsimon wrote:

    This is the most distorted Fool article I have read. If we want to write about accountability, let's talk about Moodys and S&P giving triple A ratings to bundled mortgage securities containing mortgages given to people who had no credit standing and then de-rating the U.S. credit for failing to raise the debt ceiling.

    Then we can start talking about a congress that gives tax breaks to those whose incomes skyrocketed in the last 30 years while the middle class [by this author's numbers] increased by, maybe, 60% in fifty years.

    Yeah. Its their fault.

  • Report this Comment On August 29, 2012, at 9:13 AM, RavenManiac1968 wrote:

    The problem is with corporate greed. The 2012 US Census lists the mean 2 earner US household income as $96,766. If you have highschool diploma then the avg houshold income is $51k. If you have a BS then the avg houshold income is $94k. So good for the college graduates, they are more skilled/educated and should make more money.

    Take note that is a household income, meaning husband makes $47k and wife make $47k per year.

    Corporate officers with compensation packages ten times this amount sounds excessive doesn't it. But that would only be $474,000 per year and that's chump change these days for big time corporate executives.

    Corporate officers need to tighten up their own compensation packages and start paying their employees (the folks that do the work) getter wages.

  • Report this Comment On August 29, 2012, at 10:02 AM, johngp2 wrote:

    The tax code has moved billions from the middle class to the rich. The more you made the more you got. Does paying 15% on an income of 26 million make sense? There is a slow down in investment because the middle class is 70% of the demand and they will not and can not spend. Further, the rich want more tax code breaks and want the middle class to reduce the deficit.

  • Report this Comment On August 29, 2012, at 10:10 AM, whsw wrote:

    Thank you, thank you. Please make this piece available to all who are able to read. Just about every thing we do is dependent on our personal decisions. This is part of what America so great.

    From one who is an immigrant to the US and one who has had the opportunity to live in many different countries, I have found that the true freedom in America is our ability to make choices that affect our lives.

  • Report this Comment On August 29, 2012, at 10:28 AM, TC118 wrote:

    I think what makes things so much harder than the 1950's is the uncertainty of all the economic variables. Even if you do everything right according to the financial planners, you can still end up in a tight situation. Nowadays I can lose my job twice in a row for economic, not performance, reasons, not to mention the fact that I have been at companies that have been spun off and merged as well. The same can happen to my husband. The renters of my other 2 houses (that I rent out at substantial losses) can move out at any moment and it becomes more expensive to go after them legally than to just find another renter.

    I would gladly just give up my houses (had to move away to stay employed), but I can't sell them (have tried multiple times at ever lower prices) and don't think that foreclosure is the right thing to do. I have managed to save up a year's worth of college for my 2 middle schoolers, have a good start on retirement, and have an emergency fund. I just don't know what next month will bring. Sure would be nice to know that my job or my husband's job could be secure for 20 or 30 years, so that I could plan in an environment of relative stability or certainty.

  • Report this Comment On August 29, 2012, at 10:56 AM, starfish36 wrote:

    the loss to the middle class is real and cannot be corrected without a new mindset emphasizing education and shared sacrifice, with a focus on reducing the deplorable and growing income gap in the USA, which is the world's largest. the top one per cent, who benefit far more from this economy than others take and control far too much. Meanwhile, many in the middle class have no job or at least less income than they need. They are falling further and further behind, thereby negating one of the things that made this country unique, upward mobility resulting from work ethics and an unwritten but well understood social contract between the government and the upper class to make sure that the common man has a fair deal before pocketing unnecessary wealth or piling on regressive taxation.

  • Report this Comment On August 29, 2012, at 10:57 AM, ilong wrote:

    There are plenty of middle class americans who are doing the right thing but have been harmed by wall street. They have siphoned from our 401k, selling their bad stocks on the day the funds have to make purchases. They have brought down perfectly good institutions that were in our 401ks and retirees investments accounts and wiped out significant savings. They walked away with all their money or moved to other jobs quickly. Our jobs have gone overseas, every job that was lost should have been given stock in the company to benefit from the savings and additional revenues the company will earn from firing them. I could go on and on, but the bottom line is they have more options than we do. The most we can do is constantly try to fix the damage them inflict on us and it seems to be more and more. You can blame citizens for buying houses they lost, but don't forget about the incredible fraud inflicted on them. They signed documents for 30 year loans and inside were documents for adjustable rate loans and the 30 years were thrown out after the signing. There was incredible fraud from the banks that were making these CDSs and selling bad mortgages to fill their pockets, this had a direct effect on businesses that lost payrolls in the banks that went down, our retirements were in these bank stocks,etc. It ruined peoples lives. I have done the diligent thing for years to see it set back and diminished for no good reason - just for fraud and they did not pay. It's not good enough to say we should be happy with what we have - we had alot more and it was downright stolen from us. That is what we are mad about. They cheat on their taxes - these hedge funds that do not count their money as income but investments. Geez they are taking that investment cash to the grocery store and buying food like the rest of us do with our taxable ordinary income, but they get to call it something else and pay only 15% on it. It's a constant lie and cheat on our backs. This is why we are "whining" as you call it. You are asking us to sit back and take it and like it.

  • Report this Comment On August 29, 2012, at 11:59 AM, EBerg13 wrote:

    We have shifted from a producing country to a consuming country. Businesses are ecstatic that we buy those overpriced shoes and super-expensive cell phones. As one who has zero debt other than a car loan, but who was laid off at 64 and so retired at 66 50K lighter than my IRA would have been at 66, I spend very little.

    If the wealth in this country flows upward, as it is doing, and people are insecure about their futures, they will not consume and the economy will contract, which is exactly what is happening.

  • Report this Comment On August 29, 2012, at 12:21 PM, bugsy98 wrote:

    there is all persuasive media constantly bombarding people with the notion you are nobody until you buy these shoes...we are constantly shown products which we can't afford and offered credit to buy them... the corporations pay people six figure salaries to entice children to cry for crap nobody needs... your right we should not consume so much but this whole system is dependent on consumers. if consumers don't have money to spend, the machine slows down...

  • Report this Comment On August 29, 2012, at 12:45 PM, jm7700229 wrote:

    This generated a lot of comment, but an important point was missed. By every material measure, a few of which were mentioned in the article, the middle class has gotten better off over the last 30 years. We think we are worse off because the media are telling us we are, based on a faulty use of the CPI as a surrogate for inflation, then compounding the error by using it to deflate incomes. In fact, although there are no estimates that are widely accepted as scientifically accurate, it's fair to guess that real incomes are up about 30% since 1980. If you don't like that number, ask yourself how many 25 year-olds were buying cars like the modern BMWs, MBs and Escapades in 1980. I volunteer in an education program with kids in 3rd to 6th grade in a decidedly blue collar, working class area of the city. I'm astonished by the percentage of them with smart phones -- ask a question and half or more of them whip out their smart phones to Google the question. When I built my first house, I was the first house in the subdivision with central air and electric garage door opener. You can't even find a house now that don't have them. I can go on and on, but it's a fraud to say that middle income people are not lots better off as a group than they were 30 years ago.

    As far as feeling poorer because someone else is getting more than me -- well, that isn't happening to me. If it weren't for our President's class warfare initiative, I doubt it would bother many other people either.

    It would be nice if the truth could b told, but that wouldn't benefit the Democrat party's victim agenda, and the overwhelming majority of journalists vote DeOcrat.

  • Report this Comment On August 29, 2012, at 12:49 PM, playtothebeat wrote:

    If you ask a person whether he/she is happy making $70,000/year, he will say yes.

    If you ask a person whether he is happy making $70,000/year when his friends are making $75,000, he will say no.

    That's the problem. That's another part of the Joneses effect. People today can't be happy because there is someone else who is always better off then them. Take a step back and realize that all of us are better off than many people out there, and frankly better off than our parents were (we have far more luxuries, information is much more available, etc).

  • Report this Comment On August 29, 2012, at 2:47 PM, JohnCLeven wrote:

    Yes, corruption in the government/banking is a contributing factor, BUT…

    Globalization is capitalism at its best (and worst). Americans are OVERPAID compared to Chinese and Indian workers with similar skill sets. The market is correcting this imbalance. It is hypocritical to call yourself a capitalist while also opposing outsourcing. Noone is guaranteed a career for any length of time. I believe that the lack of preparation for this correction, as well as the horrible spending/saving habits of most Americans, is what is really crushing the middle class.

    Capitalism caters to ownership. Period. If you are a middle class wage-worker you are a commodity. Period.

    There are two ways to succeed in capitalism. 1) Own profitable businesses or assets or 2) Be a super highly skilled wage worker who is so valuable, and hard to replace by the business that owns their labor, that you can leverage a high salary.

    Most of the middle class is not in one of those two previous categories. Globalization is now crushing them bc they can’t compete with foreigners who can do their job, just as well as they can, but demanding only a fraction of the wage. To make a bad situation worse, instead of realizing this and making changes to protect themselves, the middle class burns away their disposable income on liabilities like cars, iphones, handbags, and houses (to live in not sell) with their cash instead of assets like stocks, businesses, real estate (to rent or re-sell for income.)

    Again, there are many factors in this middle class decline, but the main factor, in my opinion, is a good old correction in the global job market. The market is a double edged sword. It was wonderful to the U.S. for the past 150 years, and now it’s swinging back the other way.

    The best we can do is accept it, and try to make smart decisions as a result. Good luck to all.

  • Report this Comment On August 29, 2012, at 3:05 PM, PoundMutt wrote:

    How bad would the economy be if EVERYONE simplified their lives and stopped buying what they wanted and only bought what they TRUELY needed?

    How many would be unemployed - 50 million, 100 million?

  • Report this Comment On August 29, 2012, at 3:19 PM, esbita wrote:

    Replies/counterarguments to those commenting on my post:

    1) I'm a midwest native, got laid off in 2009, moved to the east coast (because while I love the place I grew up, there's no jobs). Culture shock and price shock are a cast iron...mother dog.

    2) I'm not referring to tradesmen in my neighborhood who have their own businesses; I'm talking about tradesmen who work for others and drive a company truck...they do ok but don't live high on the hog either.

    3) Even if you choose a conservative path on your finances, you are still "competing" against all the idiots stretching to their very limit to buy that house. Had I stayed in my low cost of living region of origin, I would have bought a house little different than the one I live in now. The yard would be bigger and I'd have more wiggle room in the budget...and maybe a 15 year mortgage.

    4) Education costs- some time when you are bored, look up what your state university's cost of attendance was in earlier decades. Look up what minimum wage was during those same years. Plot how many work-hours at min wage it took to pay college tution and dorm costs "back in the day" vs. now (min wage is because that's all the vast majority of "kids" can get in a college town). It is not a positive trend. In this sense it was easier for my mother to work her way through a *private* college than it would have been for me to work my way through a public university. Others have alluded to this as well. Mercifully I didn't have student loans to contend with.

    5) I don't give a rat's rear end if my neighbor has a bigger TV or a flashier car (or a bigger ring which wouldn't look good on my hand anyway). I've been to some really dirt-poor places in the world and that shapes your perspective. I worry more about affording children and saving enough money before age discrimination catches up to me. </rant>

  • Report this Comment On August 29, 2012, at 3:56 PM, KCinAustria wrote:

    I rarely say, "I can't afford that." But I routinely say, "I choose not to afford that."

  • Report this Comment On August 29, 2012, at 5:25 PM, NOTvuffett wrote:

    Morgan, maybe you should be writing articles for 'Sociology Today' instead of Motley Fool.

  • Report this Comment On August 29, 2012, at 6:16 PM, Borbality wrote:

    lots of comments and I missed out, but obviously expectations are an issue as well as consumer debt. you might have a bunch of stuff, but you aren't necessarily happier for it if you're 60-something with a big mortgage and credit card debt.

    And guess who profits from all the debt?

  • Report this Comment On August 30, 2012, at 6:28 AM, kyleleeh wrote:

    <<To the posters who point out the middle class is acquiring debt, that is just evidence that the middle class lifestyle really is harder to maintain than in 1950 or 1970 especially if you consider that the "household" now works 100 hours per week instead of 35. Nobody would borrow money if they were paid enough to maintain that middle class lifestyle without borrowing.>>

    I think that's a good point,but for the wrong reason. The middle class has become much wealthier in the last few decades but their standards for defining “middle” has grown exponentially faster. I can think of no better example of this than a scene from “Back To The Future” when Marty is back in the 50s watching the TV that the family just got, and the boy asks him if he has a TV at home. Marty says “Yeah, we have two of them” the boy’s mother then says “he’s just joking with you, nobody owns two TVs”. That Sums up what happened to the middle class in the last few decades…what was considered middle class in the 50s would be poverty today. The problem is that our wages have not kept up with our expectations…or at least the expectations shoved on us by the media. I wonder how well off people would feel if they just stopped watching shows like “Keeping Up With The Kardashians”

  • Report this Comment On August 30, 2012, at 8:45 AM, daveandrae wrote:

    "The middle class has become much wealthier in the last few decades but their standards for defining “middle” has grown exponentially faster. I can think of no better example of this than a scene from “Back To The Future” when Marty is back in the 50s watching the TV that the family just got, and the boy asks him if he has a TV at home. Marty says “Yeah, we have two of them” the boy’s mother then says “he’s just joking with you, nobody owns two TVs”. That Sums up what happened to the middle class in the last few decades"


    At one time during the housing boom my best friend had NINE tv's in his home. I know, because i counted every single one of them.

    Guess what?

    Two years ago he filed for bankruptcy. Two weeks ago, he asked me, the owner of one, single, television set ( I finally get rid of my old one after 14 years of service ) if I would lend him 15,000 dollars.

    Obviously, I said No.

    Nuff said.

  • Report this Comment On August 30, 2012, at 10:21 AM, FrugalTwo wrote:

    Thought provoking and many good comments.

    I am educated, have a good second career in a unique industry, saved throughout my first career and retired young and debt free so I could do exactly what I wanted to do. I feel like I charted my own course.

    But for some reason I still feel manipulated.

  • Report this Comment On August 30, 2012, at 12:29 PM, mj2boogie wrote:

    An excellent, thought-provoking article. I reduce most of it down to personal responsibility.

    I grew up in a home with two parents, lower-middle class (my Mom used to say that she thought we were in the middle class, because she sensed accomplishment in that), with 6 siblings and a grandmother who lived with us part of the time, in a 3 bedroom then 4 bedroom house. We weren't poor, and we had enough to eat, good shoes, and inexpensive clothes. We never ate out except a few summer vacations, and we got up and walked out of restaurants that my parents deemed were too expensive for us to eat at. My parents always had a used car, till later in my Mom's life, and when I went fishing with my Dad, he used a hand line to fish with. We conserved everything, and didn't waste food or energy. I stll run the faucet at a trickle so as to not waste water (which my sons make light fun of), and conserve on pretty much everything. I am my father's son, frugal and self-reliant. I put myself through school after 5 years in the military, with a family and two small children. I worked nights in a wharehouse, and we saved our money.

    Today I am retired (since 57), have more money than I ever thought would be possible, and am building a new retirement home that costs almost 100 times the home we lived in when I was born.

    I consider myself lucky, though I have certainly had my share of lumps and bumps along the way. But I think it is my personal decisions and being willing to take responsibility for my own actions, along with a little luck, that have gotten me to where I am.

    I find it amazing that so many are willing to blame everyone else for their position, status, and economic well being. Of course there are changes I would make - I think the leaders of business and industry take too large a slice of the pie, though I am a capitalist through and through. I think sports figures an movie stars make too much also, but like the CEOs and other leaders of business, they are apparently worth it in our society, and you can't blame them - they have risen to the peaks of their professions.

    Sorry this is so long, it just sort of poured out...


  • Report this Comment On August 30, 2012, at 12:51 PM, slpmn wrote:

    The discontent of the middle class goes way beyond a "keeping up with the Jones'" effect. It's about what "middle class" means and the distribution of wealth in this country and how that has changed.

    It doesn't matter that a middle class household of today has more than a wealthy household of 1950. That is to be expected. It is why we worship economic growth in this country. We are supposed to be better off now than 60 years ago.

    The discontent comes from a suspicion that, while we are indeed richer and have more stuff here in the middle compared with 60 years ago, the wealth of those in the upper class has grown far, far more during the period. And over the last decade, that growth has accelerated to the point that essentially all the gains in wealth are accruing to a minority at the top.

    So you have a middle class looking around and wondering what happened to "their share" of the nation's riches. GDP grows. Corporate profits and piles of cash grow. Median incomes stagnate. Raises are a thing of the past. Unemployment is high. All while those at the very top continue to get richer.

    You can call it class envy or jealousy if you want. I think it's something deeper, which is, in the U.S. the middle class is supposed to be running the show, and when they see their own situations stagnating while that of the elite continues to improve, they get a little upset it.

  • Report this Comment On August 30, 2012, at 12:56 PM, cmfhousel wrote:

    Just wanted to add that a lot of these comments are some of the most thoughtful I've ever seen. Thanks everyone for chiming in.

  • Report this Comment On August 30, 2012, at 3:45 PM, rdwicker wrote:

    there are a lack of meaningful JOBS in our nation. all our industry seems to be gone - yet, i no longer see many of our poor trying. it's seems like many just threw in the towel.

    is the belief in our system of free enterprise gone? the idea that you can work hard somewhere and keep a clean slate, receive raises, stay employed, and live happily ever after disappeared with the industry.

    I say - go start your own business! there are so many niches yet untapped.

    work the system.

    innovation is what makes our nation great and the tax laws are written, and have been from the get go to support the self employed.

    we need hard nosed leaders that LEAD. Oh, and that are not trying to make politics a profession.

  • Report this Comment On August 30, 2012, at 4:04 PM, kyleleeh wrote:

    <<It doesn't matter that a middle class household of today has more than a wealthy household of 1950. That is to be expected. It is why we worship economic growth in this country. We are supposed to be better off now than 60 years ago.

    The discontent comes from a suspicion that, while we are indeed richer and have more stuff here in the middle compared with 60 years ago, the wealth of those in the upper class has grown far, far more during the period. And over the last decade, that growth has accelerated to the point that essentially all the gains in wealth are accruing to a minority at the top.>>

    I completely agree with you that that is why people are upset, and have even been upset myself about it. But just as you pointed out increased material wealth for all is something that’s supposed to happen in a capitalist society…so are unequal outcomes.

  • Report this Comment On August 30, 2012, at 5:20 PM, wolfman225 wrote:

    What happened to the Middle Class is that they/we got spoiled. In the economic boom times that followed the end of the 2nd World War the middle class grew exponentially, thanks to productivity gains and the introductions of various "new & improved" products.

    What also happened was the growth of consumerism. Where before "luxuries" were thought only within the province of the rich, the price reductions made possible by new mass production techniques made it possible for many to pursue "the good life", resulting in a great increase in the overall standard of living.

    Unfortunately, it also resulted in the beginnings of the phenomenon of "keeping up with the Jones's", the intimation that you weren't a success if you didn't have the latest and greatest, during which we lost the hard-won wisdom of our parents and grandparents that spoke of "making do", "living within (or below) your means" and "saving for a rainy day".

    We've seen the result over the past couple generations. As others have posted, satisfaction with life is subjective and increasingly dependent on the lifestyle enjoyed by others. If you make $100K and your neighbor $75, you feel fine. If you make $200K but your neighbor $500K, not so much. The so-called "middle class" would find that they are much more satisfied with life if they quit focusing on what everyone else has, and what they believe they "deserve" but don't have.

  • Report this Comment On August 31, 2012, at 11:15 AM, ronmuns wrote:

    Productivity in American has engineered middle class jobs out of the system. We don't need so many people with decision/management skills. Our computer systems enforce policies, procedures, and assist with decision making. Our success is shrinking the middle class. The question is "what are we going to do about it?"

  • Report this Comment On August 31, 2012, at 11:28 AM, cz18656 wrote:

    as a European, having lived in the USA in the sixties, I can only regret that the social tissue has fallen apart, everything becoming more individualistic.

    The middle class is worse off because there is not enough well spent public money for education, health care, public transport, highway maintenance, police and so on. So even if they have some more amenities ( computer, airco eg) they feel less secure about health costs, kids education, pensions etc.

    Things I never had to worry in Belgium because the 'ugly government' provided for it!

    Of course, I earn more than $ 250,000, so my tax bracket is 55 %.. I still have a large home, 5 kids thru college, drive a BMW, have 3 trips abroad very year: do I really need more?

    Good luck, for the "successfull Americans, with > 20% poor people around.

  • Report this Comment On August 31, 2012, at 11:29 AM, NoOracleHere wrote:

    "From 1980 to 2005, 80% of the total increase in Americans' net income went to the top 1%." , and apparently the author doesn't see a problem with this. The issue today is not so much that middle class incomes are so poor, but that so many people are unemployed. By any objective measure our unemployment is too high. The structural defect that 80% of the income increase went to 1% of the people is a cause of this. Companies will not hire just because they have a few more billions in their bank accounts. Hiring will return only when there are customers in the stores with money in their pockets.

  • Report this Comment On August 31, 2012, at 11:57 AM, steinrf wrote:

    It is very convenient to blame middle class people themselves for their problems as it absolves others of any responsibility. However, there is a study out recently that shows how during each of the last several recessions the number of well paying middle class jobs has decreased and been replaced by low paying jobs. It is all very well to talk about averages, but they are skewed by the few very wealthy outliers. It is much more relevant to talk about median values, the number where half have more and half less. We all know that manufacturing jobs have been moved elsewhere, where wages are lower. What is left is hands on jobs like cashiers, bank tellers, waiters which do not provide as good an income. We are becoming a very polarized society and the danger of that should be recognized.

  • Report this Comment On August 31, 2012, at 12:00 PM, ldbiker wrote:

    When I graduated from high school in 1965 a guy with a general education could go to 2 GM plants, a Chrysler foundry, a Ford distribution center, International Harvestser or a Western Electric plant and get a union job with good wages, health benefits and a pension. Not all of these jobs for the unskilled dor low skilled are gone due to outsourcing or global competition. Many are gone because of conscious decisions to bust unions by relocation or because a private equity firm fires all the union workers.

    Many of these classmates have sons/daughters who work at barely above minimum wage with no benefits. At my last reunion I remember one guy who was eligible to retire a decade ago but still works to pay the health insurance for his grandkids.

  • Report this Comment On August 31, 2012, at 12:03 PM, RandyFisburn wrote:

    Morgan House choose to cherry pick the stats to support the notion the middle class is better off. Why lump apparel & housing together as a comparison when separately, it shows that housing expense actually went up from 23% to 27%. The research actually shows that everything went up except for food & apparel. And we know that food prices came down due to mass production of poorer quality processed food. Prices of apparel and many other household goods came down significantly due to shifting of all manufacturing to China.

    In 1950, household only need one income earner. Today, household need at least two income earner to stay afloat. It'll be interesting to see the stat on savings rate. I bet we're able to save more before than now.

    saying that "Today, of Americans officially designated as 'poor,' 99 per cent have electricity, running water, flush toilets, and a refrigerator; 95 per cent have a television, 88 per cent a telephone, 71 per cent a car and 70 per cent air conditioning. Cornelius Vanderbilt had none of these." .. well, he's comparing today with 1900, not 1950.

    There's always improvement in level of convenience and comfort throughout history, and to say that we should be thankful because we're better off having an indoor toilet today compared to 100 years ago is simply disingenuous.

  • Report this Comment On August 31, 2012, at 12:48 PM, PsyberTramp wrote:

    I think it's funny that these guys ask ppl to respect the "Fool's Rules"! Ok. So, I'll keep it clean. Americans are world-renowned wussies when it comes to the full expression of Anglo Saxonisms;-) But that's a different rant.

    I just want you to know that I was bent over by Wall Street and Big Bidniss in the Internet Bubble. I lost everything I made in the 90's helping to _build_ the freakin' Internet. I am not a forgiving person. I learned my lessons and now I'm working on gettin' it back, penny by penny sometimes.

    What Wall Street did to me and many other private "investors" (read "suckers") was fraud. There's no other way of looking at it. If I did any of what was done to me and the other Wall Street outsiders, I would be in jail, but there are lots of Wall Street insiders that are running around doing the same ol' stuff.

    Wall Street, I'm workin' against ya. Someday, you gonna pay de piper.

  • Report this Comment On August 31, 2012, at 12:59 PM, tredadda wrote:

    In my opinion one of the biggest causes of the decline of the middle class is the education problem. In 1950 a bachelors degree meant something. Now it is the new high school diploma. Not only that, but in 1950 a degree was far more affordable than it is now. So students now are getting a degree while accruing $50,000+ in debt (if they are lucky) only to find out those degrees don't normally yield high paying jobs. This forces many to go back to school to earn a masters which also means tens of thousands more in debt. This is debt that they can't just write off meaning they have to pay for it and with lower paying jobs. They still have increasing expenses and with less money to pay for it many are forced to leverage their expenses and pay on credit which in turn expands on the issue. Not saying most are innocent on their expenses, but things are getting harder and harder to get by.

  • Report this Comment On August 31, 2012, at 1:18 PM, bigjit wrote:

    I do fit into that middle class status. However I spent within my means. I once had to attend a training class on how to supervise multi-generation staff. The biggest thing was to understand what time period the staff grew up in determined how they behaved now. In 1950 we had a regional/local economy. If you needed a loan you went to the locally owned bank and had to convence them what and why you needed the loan. They told YOU if you could repay it. Now you talk to a broker who does not care if you can repay it and will loan you more than you need from a lending institution you never heard of. I remember my dad buying a car and telling the salesman "I can afford this much a month". They found a car in that price range. Now for a few more gadgets and 24 extra payments this is your car. My dad had one credit card with a $500 limit that he was turned down for the first time he applied. I did a credit check a while back and found I had $200,000 dollars in available credit. For lines of credit I did not know I had. I still credit offers in the mail Two things I found interesting during this class. One was gifts. When I was growing up you received gifts twice a year. Christmas and birthdays. Now gifts are given for any to no reason. Also there were fewer types of gifts/toys and most were not expensive. I looked in my grandson's room and estimated $5000 worth of electronic toys alone. The second is this big group of middle class from the 50, 60 and 70's is slowly leaving us. They are not being replaced with the next generation in the same numbers. I am sure there are a number of reasons to explain this. There are more people of that age group now reitiring. public assistance began in the 1960's preventing some from seeking to better themselves. There was less government involvement in our lives and the economy. Our economy has shifted from a regional to global. Now we are competing against the world level and not county or state level.

  • Report this Comment On August 31, 2012, at 1:54 PM, alohadrj wrote:

    When reading article and all the comments is is astounding to see the blame game for problems on everything except ourselves, I cannot help but think about reading The Millionaire Next Door, my guide for accumulating wealth.

    As in most of America, the majority of garages in nearly all neighborhoods here in Hawaii are so full of "useless possessionsf" that people have to park their car in the driveway or on the street.

    Changing to a more simple life, living within our means, and not blaming someone else for our lot in life is the real secret to happiness.

  • Report this Comment On August 31, 2012, at 2:09 PM, donbcms wrote:

    In 2003 when I retired I thought I had a "NEST EGG" ?? (Bank Stock; BAC @ $80.,etc. + House, No Mortgage @ $250,000.; S/S + Gov't Pension?) Can,t sell House for even what I paid for it?? We know about where Bank stock went?? (even HCBK??) I'm too blame???

  • Report this Comment On August 31, 2012, at 2:21 PM, ibuildthings wrote:

    It takes more income to buy a home in a safe neighborhood than it did for our grandparents and parents. Schools have seriously declined, as have many of the students and pareents' behaviors. And the schools' problems aren't solvable with merely more money, because until this recession, their expenditures were continually on the rise, while performance not.

    So ... what is "rich", where a "progressive tax" might be a "fair" burden? When RESPONSIBLE people can afford to live a relatively worrry-free lifestyle. An arbitrary definition follows: When you can afford to

    1) Live in a low-crime area

    2) Have as many children as you please without depending on social services subsidies

    3) Neighborhood schools with an average SAT score that is above some "good" number ... OR afford private school

    4) Save 10% for retirement

    5) Drive cars less than 5 years old

    6) Mom stays home IF SHE WANTS (I add that because sans financial worries, mom at home seems to make the kids happier around these parts).

    When I started my career, I thought that I would quickly make it to this income level. Society changed the rules. Housing skyrocketed, schools got worse, and nobody seems to notice the general diminished quality of adult behavior. So to afford those 5 things listed above, it costs much more, and maybe even then you don't find what you are looking for.

    The fix isn't easy as voting in "the other party". Promises to fix things are just promises, even if they intend to keep them. And politicians are mostly lawyers, who are trained to win arguments, not solve real problems.

    Our social values need re-examination at the personal level AND the societal level. Why can't the teacher keep order in the classroom without being sued? Why can't the parents be required to help the kids with homework, or pay for the repeat year in school? Why do children with $200 jeans and smart phones get free lunches, then ignore lessons and expect someone to hire them at "family wage" 10 years later? There aren't enough rich in the world to pay for all the people who think they are owed a living.

    And the middle class who still retain high standards? It costs more and more to provide the same quality of life (see list above) for your family, and once they run out of rich people to tax, the target is on your back. Bear in mind that if you tax the rich at the pre-Bush rates, it will make a 7% change in the deficits, assuming the government doesn't come up with more ways to spend money.

  • Report this Comment On August 31, 2012, at 2:39 PM, ibuildthings wrote:

    Someone posted a note on the increasing cost and diminished value of a bachelors' degree. Colleges have been raising tuition at 4 x the inflation rate for a couple of generations now. Once they realized that people would pay anything for a college education, they didn't need to care about costs. So rather than keep costs down, they "help" you to financial aid and loan packages. They get paid immediately, and transfer the repayment risk to the banks and the government.

  • Report this Comment On August 31, 2012, at 2:42 PM, ibuildthings wrote:

    "One more comment: Universal health care in developed countries costs less and results in longer lives compared to the US, so why is anyone against it?"


    Universal care is always touted to be wonderful somewhere else. Sometimes it is. But I work with people from all over the world. In the cases where we have discussed it, the grass isn't greener. There are always problems when people are spending other peoples' money.

    The rub is, I WANT universal care. But I see how well we manages universal k-12 education here. It is a disaster. Before I am willing to trust you with my life, show me you can be trusted with my kids educations.

  • Report this Comment On August 31, 2012, at 3:15 PM, pehenia wrote:

    Okay, so we have "more disposable income". But what is it spent on?

    I bet a larger percentage is spent on car and fuel - a luxury that is not optional for many people because America was designed around it. I bet those two alone have increase over 400% since the 1950's. More is spent on healthcare, more is put into our retirement funds.

    As someone else mentioned above, we work WAY more now to get those elevated income levels. I think, if you took into account everything a person takes into account when the tally up their household budget, you'll find a MUCH smaller percentage of truly "disposable" income.

    Also, you brought up income levels, but had no mention of levels of wealth. With all the babyboomers getting ready to retire, I bet a lot of families lost considerable wealth from the 2008 recession, and I'd bet it's now lower than it was in the 1950's.

  • Report this Comment On August 31, 2012, at 5:07 PM, tommy2cat wrote:

    Mr. Housel,

    Someone who writes an article like this always seems to choose the wrong charts and therefore comes to the wrong conclusions. They almost always have a bias for a point of view. If you really want to see how the" Middle Class" is doing, I suggest you Google the "Business Insider website" and look for the article "Okay, Folks, Let's Put Aside Politics And Look At the Facts....(CHARTS)." The information comes from none other than Henry Blodget who has created this site. There are 63 CHARTS and commentary to show a more accurate assessment as to what has happened to the Middle Class. I hope you and your reader will take a look.

  • Report this Comment On August 31, 2012, at 5:19 PM, kyleleeh wrote:

    <<I think, if you took into account everything a person takes into account when the tally up their household budget, you'll find a MUCH smaller percentage of truly "disposable" income.>>

    That's only true if you count things like Cable, Internet, cell phones, and netflix in your budget. These things are discretionary spending that should be considered a part of disposable income.

  • Report this Comment On August 31, 2012, at 5:23 PM, kyleleeh wrote:

    <<Also, you brought up income levels, but had no mention of levels of wealth. With all the babyboomers getting ready to retire, I bet a lot of families lost considerable wealth from the 2008 recession, and I'd bet it's now lower than it was in the 1950's.>>

    The stock market has recovered from pre recession levels with dividends reinvested. If home equity is what they lost I would argue that thinking home equity is the same as wealth was a big contributer to this recession in the first place...wealth is something that you can pay the bills with.

  • Report this Comment On August 31, 2012, at 5:23 PM, cmfhousel wrote:


    Thanks for your comment. I've seen Blodget's piece. One could respond in rebuttal: "Someone who writes an article like this always seems to choose the wrong charts and therefore comes to the wrong conclusions. They almost always have a bias for a point of view."

    Now, he draws some very good points, and there is no question that growth in middle-class wealth has slowed dramatically since the 50s-60s and declined for millions over the last decade.

    But take one example -- the chart showing wages as a percentage of GDP being at an all-time low. It's a shocking and important chart, and one I've used before too. But it doesn't mean wages are at an all-time low, as some might assume. It means that the overall economy has grown faster than wages (as profits make up a larger share). Still, wages today are by and large higher than they were in the '50s.

    And much of Blodget's article is about the huge rise in debt, which is the point of this article as well.

    Thanks for reading,


  • Report this Comment On August 31, 2012, at 7:06 PM, emdtech1 wrote:

    Productivity gains benefit stockholders and concentrate wealth at the top. Jobless recoveries mean new workers are not being added. The upwardly mobile can no longer work their way up without a lot of competition and downward pressure on salaries. Eventually, without jobs, increased incomes or ability to borrow or take equity out of their homes to support their pre-recession large lifestyles the middle class shrivels and demand falters. How many cars does Warren Buffet own and drive? How many cars would the middle class as a whole buy and drive if they had decent paying jobs? A lot more cars! As stockholders we should be keeping an eye on demand which is necessary for growth.

  • Report this Comment On September 01, 2012, at 7:14 AM, Kieran53 wrote:

    What has driven this consuming keeping up with the Jones philosophy? It is corporate America and the need to meet the short term; quarterly earnings to ensure the stock price going up up. Isn't that keeping up with the Jones? Media advertising bombarding the airwaves. How much of a shows time slot is the actual show, how much is advertising? This engine of consuming at all costs is tired and broken. We need to stop living in denial. The job creators are

    not the rich, it's the middle class spending their earnings. Googled "banned TED speech on job creation" after watching it ask yourself why was banned. We have a watershed election. Do we go back to the failed policies that led us to the financial meltdown of 2008 or take a long term view and do what is needed to right the ship. People need to block out the slick ads and look at actual plans/lack of plans to deal w/ challanges our country faces. I don't want to live in a society where 10% live in a gated community with 90% looking in.No matter which side of the fence your on that is a

    Decline in everyone's quality of life.

  • Report this Comment On September 01, 2012, at 9:33 AM, dw69129 wrote:

    So the banks are innocent as the freshly fallen snow? How many credit card applications that you and your team of lawyers COMPLETELY understand do you receive every day? Even if you and your lawyers have spoken English your entire lives you can't follow the legalese, how are immigrants supposed to? Gee, maybe that's why immigration will never be curtailed in this country - ya think?

  • Report this Comment On September 01, 2012, at 11:59 AM, jlclayton wrote:

    My husband and I and our friends are typical middle class to upper middle class families. Here's an example of what I believe Morgan and others are talking about as far as people needing to look at their own actions for shared responsibility:

    A couple who are close friends have 3 children and built a brand new house outside of town 4 years ago. They don't believe that they need to save a lot for retirement or save for kid's college tuition, they will have enough. They built a 3,000 sq. ft. 2 story home with a full basement, 3 car garage, and 1400 sq. ft. separate garage, which they admit was all far larger than what they needed, but they can make the payment, so what the heck? They have no interest in finishing off the 2nd floor or ever using it, but it was "only an extra $30,000" to add and made the house look better. Even the bank told them that the cost of building was more than it would be valued at when they finished, but they wanted what they wanted and maxxed out their loan and paid the rest with all of their money from their previous home sale.

    Since that time, they have bought cars, trucks, golf carts, paid untold amounts for their hobbies, etc., yet in the winter they have to close off the basement and move their oldest daughter to the main floor, and use a wood stove instead of their furnace because they can barely afford to heat it. The daughter will be graduating high school in 2 years, but they have saved no money for college because they always said that "kids can work to get through college". Now that they realize the cost and loans their daughter will have to have, they are up in arms, and guess what? It's Obama's fault, it's the big corporations fault, we have to get those &%$# politicians out of office who are giving everyone entitlements and making it to where a kid can't get a decent job, yada, yada, yada.

    My husband and I, along with our exes, helped put 4 daughters through college, all while these friends acted as though we were doing way too much. We max out our 401k contributions and when we finally bought our dream home last year, it cost half of what the bank said we could have gotten for a loan because we are aware of what we can realistically afford. The cost to update the entire 2 floors of our 1900 sq. ft. home has been less than these friends spent on the trailer for their drag racing car.

    There are many reasons that this country is going through some rough economic times, and many people are going through hard times due to losing their jobs or losing a great deal of money in the housing bubble. But there are a great many people who simply feel as though they should get everything they want, regardless of what's going on around them, and someone else is to blame if they can't get it. The fact is that whatever economic time you are living in, if you work whatever jobs you need to in order to support yourself, spend wisely, and save as much as possible, you will do well.

  • Report this Comment On September 02, 2012, at 2:51 AM, dunnydame wrote:

    Wow - what a great collection of comments of every stripe about Morgan's article! I'm quite impressed with the depth of understanding and intelligence displayed here. I've read them all.

    Can't add too much myself except that I definitely agree with those who said that we are subjected to unending barrages of marketing ploys to get us to spend, spend, spend. And sadly, consumer spending is what makes the economic world turn round.

    My husband & I had no debt, school or otherwise, when we married, but we foolishly made up for it later on. We now repeat this mantra to our children, "You don't need a credit card, you don't need a credit card". To our granddaughters we say, "No student loans, no student loans." Let's see how it all works out for them as the time gets closer (they're high schoolers right now.)

  • Report this Comment On September 02, 2012, at 6:39 PM, wasmick wrote:

    "I fully agree with LairdGeordi."

    Ya, me too!

    Because I too believe that the economic crisis of 2007/2008 is responsible for the decline of the US middle class....even though that has been going on for decades....

  • Report this Comment On September 03, 2012, at 1:24 AM, dennyellingson69 wrote:

    Morgan does have some valid points about the middle class. Perception of one's wealth is relative to what you can do with it and to those you compare yourself to. But, it is not entirely the choices we make that hands us our monthly check. My wife and I have taught public school in Minnesota for forty-one years and we still teach. We teach primarily to help our two sons through college. Unfortunately for us, after our sixteenth year of teaching we have not had a raise in pay because there are only sixteen pay steps. Each year we drop farther back in purchasing power because of inflation. This is not just a perception, its reality. It seems in business today, if you can get someone to pay for it, it's good business...not theft. The survey indicated a good many people believe it is Congress's fault the economy blew up in 2007-08 but it started in the banks writing up loans that good business practice in the past would never have allowed. Greed has a short-sight vision problem without the morality of the consequences. There should have been many more people from the banking industry and Wall Street serving time for their lack of leadership and over-sight. Isn't leadership why we think CEO's and upper management are worth millions every year? We can not legislate morality, honesty, or leadership.

  • Report this Comment On September 03, 2012, at 11:20 AM, BrotherBob100 wrote:

    Morgan, thank you for a novel look at this problem. I appreciate your thoughts here.

  • Report this Comment On September 03, 2012, at 8:19 PM, Sunny7039 wrote:

    I really have to stop and think what I could possibly "blame myself" for.

    I have no debts. I never buy anything I couldn't pay for outright. Our modest mortgage was paid in full during the last century. I cook everything I eat. I've never had a student loan. I keep a very ample cash cushion . . . well, let's not get too specific here. I'll leave it at that.

    And what I really REALLY hate the most about the consumer society is being forced to overspend by planned obsolescence and engineered failure. I can control my impulses; I can't control the fact that a 24-month-old computer probably has to be replaced. Not to mention all the other things that go with high tech and servicing high tech, including exhorbitant monthly fees for secure Internet access and one cell phone. (BTW, the answer is no -- we don't have cable TV.)

    And I haven't even gotten to the price of oil and other commodities yet.

    Now you tell me what I did "wrong" that our family's net worth plunged by over 40%? I'm all ears.

    Doesn't it strike you as at least possible that roughly half of those classified as "middle class" really didn't do anything wrong? And thus were quite right in how they answered this survey? If you think no one lives within their modest middle class means, you must not leave Manhattan, the Bay Area, greater Seattle, or your affluent suburb very often. Try riding a city bus sometime. Open your eyes and look around.

  • Report this Comment On September 03, 2012, at 9:30 PM, cfravel wrote:

    I'm going to propose a different theory. I think that mobility of workforce is the primary reason for decline in happiness. I think the reason people remember the 1950's fondly is not because of the economic reality, but the family reality of the past. Over time, we have moved away from our families and friends, in order to go to existing jobs. In the past, people could find work and survive in their hometowns. In the small town where I grew up, I'd say less than 5% of the people who grew up there still live there. I am sure most of them would like to live there. It is consistently ranked in the top ten best places to live in the U.S. Most of them moved away because the education paths they chose led to careers that weren't possible in a small town.

    Beyond that, the biggest economic factors impacting the middle class now are the costs of education, healthcare, and taxes. Even in-state tuition is now over $20K per year for many states. A top tier bachelor's ($200k+) and master's ($150K+) would be more than the median home price for the U.S. Education costs have grown many times the rate of inflation.

    Healthcare in the U.S. is significantly more expensive than other countries due to poor lifestyle choices of the population (especially diabetes and other obesity issues), and because pharmaceutical companies depend on U.S. pricing to make returns on their drugs.

    The last issue, taxes, makes a much bigger dent in middle class incomes than it does at the other 2 ends of the spectrum.

    So, the middle class is squeezed, economically. The way to overcome that is education, which now requires debt on the order of a home loan. And, the more you make (as income as opposed to capital gains), the more taxed you're going to be, so there is a serious issue of diminishing returns for that education and extra effort.

    Thus, people are logically re-evaluating their life choices and realizing that 1) investment in education is very risky and not guaranteed to increase wages relative to debt; 2) health care is only going to increase because of aging, regulation, price increases, inflation, etc. and 3) taxes are going to have to go up at some point to keep up with deficit spending, so at any time that new master's degree could take a good 10% per year earnings hit.

    Thus, people are looking back to their days of youth and remembering being around family. They are realizing that is more important to happiness than the professional goals they set out to achieve twenty or thirty years ago. And, they are realizing that further investment in professional development is probably not worth the risk, given the path of increasing costs that is the probable future for the middle class.

  • Report this Comment On September 04, 2012, at 3:01 PM, fatmarmot wrote:

    Hmm. Vanderbilt didn't have a car? True, but he didn't need one to get to work. Excluding those living in an urban setting: try getting to your job, your kids off to school or daycare, grocery store, etc. without a car today. I have the money that afforded a house close to work (I bike), in the best school district in the state, and so on. But for most people, not an option.

    The paradigm shifted, but so did the demands of a decent life. Too many factors overlooked here, though many good points. Particular the comment about house sizes.

  • Report this Comment On September 04, 2012, at 4:44 PM, CMFStan8331 wrote:

    Even if we could all agree to stipulate that the middle class is primarily a victim of its own excesses, there's another critical issue to consider. In America in 2012, the law of the land is that money = speech. The inescapable consequence of that reality is folks at the very top have far more relative political speech than in the past, and the voice of the 99% has been greatly diminished.

    One can make a reasonable case that middle class folks should be content with the historically good creature comforts they enjoy, no matter how well the ultra-rich are doing. However, in an age of mass media, I don't see a respectable case to be made that the middle class should be happy with a situation where their political speech is spectacularly dwarfed by the political speech of those at the very top.

    Often conservative commentators (it's NOT my intention to include the author in that group) speak as though basic human nature is only a reality for the non-wealthy. That is obviously not the case. Given enough political power to exert their will, the rich will generally be unable to resist the temptation to enact policies that provide themselves with the greatest comparative benefit, even when in the long-term those same policies leave the entire society (including the rich) poorer than we would have otherwise been. For that reason, I believe any democratic society with a class income disparity that continues to increase to extreme levels and beyond over an extended period of time faces great peril.

  • Report this Comment On September 04, 2012, at 10:05 PM, jmefilet wrote:


  • Report this Comment On September 10, 2012, at 5:53 AM, thidmark wrote:

    "Anyone else starting to get the feeling that the Motley Fool is turning into a right-wing propaganda machine?"


  • Report this Comment On September 11, 2012, at 4:23 PM, Sunny7039 wrote:

    "Anyone else starting to get the feeling that the Motley Fool is turning into a right-wing propaganda machine?"

    Of course.

    All investment commentary is essentially right-wing propaganda. It has to be. These are all schemes for extracting money from people who produce and putting in the pockets of people who "manage," or "invest," or even "speculate." And these schemes blow up with startling regularity, but in the meantime, lots of people stuff their pockets and their faces, and find a way to keep the loot. A passing acquaintance with basic economic history will show you that. (In fact, don't limit this to the U.S. Pick any country you want, and put some emotional distance between you and the real story.)

    I don't live under the illusion for one moment that I've "earned" everything that I have (and that, for example, most of mankind is impoverished because they don't "work hard enough") -- and I realise this to be true in spite of the fact that I've chosen a much more frugal and disciplined way of life than most people. But do I think I'm not privileged? You have got to be kidding. I know I am. And, to be honest, have I grown used to it? Yes. I have.

  • Report this Comment On September 13, 2012, at 6:55 PM, jtkramer123 wrote:

    Amen to Morgan!! While I appreciate many of your comments and find a nugget of wisdom in almost all of them, in my experience many in the middle class EXPECT luxuries they can not afford thereby reducing their chances of accumulating wealth.

    My husband and I know we are very very lucky to have been very well educated on the dime of our parents so we started our marriage with no debt, but no assets either. Now 20 years later, we still have no debt, but we have accumulated enough wealth that we have no mortgage, no car debt and our children's colleges are nearly paid for although our oldest is only a senior in high school.

    How did we do this - we lived below our means from day one. It was not fun as we watched our friends buy bigger houses in better neighborhoods, buy furniture and and beautiful clothes. It was not fun as we watched our friends go out to dinner far more often than we did and go on fabulous vacations. It was not fun having our children mad at us and feel deprived for not having the newest shoes, phones, games.

    However, what was fun was paying off our mortgage before the age of 45, buying our first car with less than 50,000 miles on it at age 45, having our oldest come home from high school economics and tell us that he was the only one in his class whose family consistently used a budget and talked about savings goals, having our oldest enjoy the hunt of finding his first car with a $10,000 budget and watching him drive it just as proudly as his friends with new cars and car payments.

    We have friends with much debt and trepidation about the future who have never missed an annual vacation to Disney and who would never drive a 10 year old car or live in a house without a remodeled kitchen.

    I truly believe that we as a nation have to relearn our belief in delayed gratification and sacrifice. Thank you Morgan for reminding us that macroeconomic factors do impact our financial health, personal choices play a far larger role.

  • Report this Comment On September 15, 2012, at 4:12 PM, rc7533 wrote:

    Hmmm...for some reason something tells me this article presents a...rather incomplete picture.

    Let's start here;

    "Median household income back then was $31,500" (inflation adjusted)

    Alright - question. How many annual household work-hours were required to attain that $31500 vs how many household work hours are needed today for the ~51000 (as 'claimed')

    Just scratching the surface, need to do a lot of research on this one

  • Report this Comment On September 15, 2012, at 4:16 PM, rc7533 wrote:

    I think I'll start with 'Winner take all politics' Simon & Schuster. Written by J. Hacker /P. Pierson

  • Report this Comment On September 16, 2012, at 9:13 AM, JaanS wrote:

    Yes - the middle class has themselves to blame.

    Reaganomics promised "trickle down economics" and that is exactly what it delivered. The converse of trickle down is upsurge and that is exactly what has happened. The last 30+ years of Reaganomics has seen an incredible shift of wealth upwards to the wealthy.

    Alan Greenspan (nominated to head of the Federal Reserve by Reagan) held the hands off the economy theory except when it had to do with wages. Then he abandoned his hands off policy to intervene. Every time unemployment lowered, he would put the breaks on the economy in an effort to keep wages down.

    This and the "give to the rich" tax structure, more than anything else, had the effect of slowly lowering the overall wealth of the middle class, (especially the "working" middle class as opposed to the more educated professional end of the middle class).

    So yes - they ARE responsible for the current state of affairs. They voted in the people who said they would take their money and redistribute it upwards, and that is exactly what they did.

  • Report this Comment On September 16, 2012, at 10:24 PM, ibuildthings wrote:

    Reaganomics hasn't been with us for a generation now. Find someone else to blame. Reaganomics was replaced by Clintonomics and Demonomics (1993-1995), then Clintonomics and Gingrichomics (1996-2000) then 9/11 and Bushonomics and Republonomics (2001-2006) then Bush/Reid/Pelosi (2007-2008) then Obama with a supermajority (2009-2010) then Obama with a Republican House.

    All during that time, people have been arguing over economic policy. Figure it takes a year for a real change to have real effect. Cut that shorter for black swan events like market crashes and terror attacks.

    Even with the wars and $200B deficits we all vilified Bush and the Repubicans for, the economy wasn't too bad the years following 9/11 up to the time the Democrats retook Congress in 2006 elections. Did the deficits get better or worse when Reid and Pelosi were in charge of the money? Now there have been fine democratic congresses. This wasn't one of them.

    They all blamed Bush deregulation for the crash, but what Bush deregulation exactly? No specifics. Glass-Stegall was repealed in 1999 by a repub congress and dem president. That was the enabler for home-bank companies to take investment-bank risks again. Fannie Mae and Freddie Mac were cooking their books to hide liar loan losses for years. Google "new agency proposed to oversee freddie" and you will see a NY Times article dated Sept 2003 where Bush accused them of cooking their books to hide losses. He wants MORE REGULATION AND MORE OVERSIGHT, but the dems fought him. It is even slanted to give Barney Frank the last word defending their integrity and purpose.

    By the way, the big shots at Fannie, Freddie, and most of the biggest Wall Street investment banks were fat-money donors to democrats, not republicans. And they got their money's worth.

    The real insult is that Bush didn't deregulate anything that brought this about (no, I am not for total deregulation), but his speeches on deregulation are used as evidence that he and the republicans are all at fault for a crash caused when mortgages were free to anyone with a pulse, and Fannie/Freddie would pay face value to buy them and wait to be paid.

  • Report this Comment On September 16, 2012, at 10:34 PM, ibuildthings wrote:

    Update: Fannie Mae and Freddie Mac Invest in Lawmakers

    By Lindsay Renick Mayer on September 11, 2008 11:26 AM

    All Recipients of Fannie Mae and Freddie Mac Campaign Contributions, 1989-2008

    Name Office State Party Grand Total Total from PACs Total from


    #1 Dodd, Christopher J S CT D $165,400 $48,500 $116,900

    #2 Obama, Barack S IL D $126,349 $6,000 $120,349

    #3 Kerry, John S MA D $111,000 $2,000 $109,000

  • Report this Comment On September 17, 2012, at 2:13 AM, DrGoldin wrote:

    So let's see. You admit that discretionary incomes have declined (there's TONS of research about that), yet you quote some executive named "Andy" who cheerfully announces that we have the same discretionary income as in the past. Good job! Then, having just admitted that middle-class incomes have declined, you take the middle class to task for envying the outsize profits that the top 1% have enjoyed! Maybe if wages weren't taxed at higher rates than unearned income, the disparities wouldn't be quite so great (and galling).

    Seems like the only FACTS in your article bear out the original observation: that there are a lot of reasons why the middle class is falling behind, and blaming the middle class for its own decline doesn't hold much water.

  • Report this Comment On September 17, 2012, at 3:11 PM, oshuneer wrote:

    This is mostly a rationalization for a failure in national policy. The concenmtration in wealth is undeniable. So where did all this disproportionate wealth come from? Mostly from the people who didn't get to participate proportionately in the benefits of their own productivity.

    Apart from that, the cost of living has been steadily increasing, not just in absolute but also in relative terms. College educations used to be affordable for Middle Class families but are no longer so today. All of our technology, in the form of computers, smart phones and cable TV represent expenses that didn't exist for previous generations and that are nearly impossible to do without today.

    There is no denying that many Middle Class families could have made better financial decisions along the way. But to blame the most productive segment of America''s population for its own demise adds insult to injury, given the fact that the major reasons for our recent economic disasters can be found in avoidable warfare and financial bail-outs, the blame for which lies squarely with Congress and the Presidency.

  • Report this Comment On September 17, 2012, at 6:55 PM, injun2 wrote:

    It’s like buying a new Porsche, cruising along at 120 MPH, feeling pretty happy with yourself, but then a Maserati whizzes past you and all of a sudden you think your Porsche is a piece of crap.

  • Report this Comment On September 18, 2012, at 10:11 AM, jacknisen wrote:

    Anybody out there have a pair of shoes made in America? How about anything electronic? Try and buy a real nickel plated piano hinge for your kitchen cabinet project. Can't find one at Home Depot? Did you try Ace Hardware? No luck? Try the little hardware store down the streetthat has everything.... what's that you say? They turned it into a Wlamart five years ago?

    Huh, guess you should have paid a little more over the years and bought American products. It's too late now, all you have to choose from is Chinese junk. Yeah, China. Where all the jobs are...

  • Report this Comment On September 18, 2012, at 5:35 PM, DJDynamicNC wrote:

    It's not just that we feel that the wealthy are getting much wealthier while we only get slightly wealthier. It's that we recognize that the wealthy are getting much wealthier because of OUR additional hard work and productivity.

    Productivity gains have been incredible over recent decades, and the growth of wealth has been similarly incredible - but the distribution of it has drastically skewed. And we know this.

    We see union busting, and NHL lockouts and replacement referees, and big bank bailouts, and we learn that "middle class" was never anything more than a convenient illusion that the ownership class spouted in order to keep us working class folk from taking what is ours.

    But we're learning.

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