The myth of middle class stagnation

Don Boudreaux and his former student Mark J. Perry both write excellent blog articles and short essays on their own. Last week they combined their powers to write one amazing, fact-dense piece on the myth of  a middle class that has seen no developments in decades. Here's a taste to get you hooked:

Despite assertions by progressives who complain about stagnant wages, inequality and the (always) disappearing middle class, middle-class Americans have more buying power than ever before. They live longer lives and have much greater access to the services and consumer products bought by billionaires.

Do read the entire thing. It highlights the error of ignoring non-monetary forms of compensation when comparing workers' compensation, it reminds us of the difference between statistical categories and flesh and blood people,  it reveals how technology has drastically improved our standards of living and it shows the diminishing returns of wealth when middle class teenagers can afford the same iPhone a pop star uses.
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Doesn't anyone want to challenge this middle class view?

Mark Perry said it all with his recent headline:

Pew Research Calls It "Hollowing Out of the Middle Class," But 150 Americans Moved Up for Every 100 Who Moved Down Between 1971 and 2011

I've found myself hearing this same exchange again and again. Someone who considers income inequality to be a major issue will lament the "death of the middle class" and the response from free market fans will be to say it's not because people are getting poor, but because they are getting rich.

I've seen this same exchange a dozen times, but I can't say I've heard anyone on the left come back with a reply.

Don Boudreaux shared a classic post on the subject from Arnold Kling showing decreases in the number of both low and middle income households and a three-fold increase in upper income households. I believe the facts are on our side, but every time I try to find a rebuttal on Google I just come across more people agreeing with us.

Karl Marx predicted that capitalism would cause fewer and fewer people to be rich, and the former rich would join the hordes of the masses in a violent struggle against the small number of rich people. Add this to list of things he got wrong, which includes nearly everything he wrote.

Update: I managed to find one article on the HuffPo that could be said to qualify, but I don't find the argument compelling. For starters, the author wants us to ignore non-monetary forms of compensation like health care benefits, as if they aren't something the employer has to pay for. He also said he doesn't argue the middle class will disappear, as that is a contradiction of the concept of the middle.
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Obama jumps the shark

Elizabeth Warren had so much success last fall with her stump speech about interdependence as an excuse for progressive taxes that this week President Barack Obama plagiarized it. He said:

There are a lot of wealthy, successful Americans who agree with me -- because they want to give something back. They know they didn’t -- look, if you’ve been successful, you didn’t get there on your own. You didn’t get there on your own. I’m always struck by people who think, well, it must be because I was just so smart. There are a lot of smart people out there. It must be because I worked harder than everybody else. Let me tell you something -- there are a whole bunch of hardworking people out there.

If you were successful, somebody along the line gave you some help. There was a great teacher somewhere in your life. Somebody helped to create this unbelievable American system that we have that allowed you to thrive. Somebody invested in roads and bridges. If you’ve got a business -- you didn’t build that. Somebody else made that happen. The Internet didn’t get invented on its own. Government research created the Internet so that all the companies could make money off the Internet.

President Obama is attempting to use public goods to taint any hard work individuals have done that results in success. That is to say, any success the person has had that has had the slightest contact with something created by the government is now a full-fledged government creation. This misapplication of credit works the same way a virus assaults a living cell.

Mark Perry insists we also look at the way businesses have been destroyed by the government, such as the 13-year-old who went through the city to start up a hot dog stand only to be stomped by an unknown zoning issue. There's also the teen on Peaks Island, Maine who was hit with exorbitant fees to prevent him from competing with a taxi subsidized by the city.

Don Boudreaux, however, nailed this issue cold:

Government’s success at persuading taxpayers to fund the hiring of more teachers and the construction of new highways does not thereby give government (or teachers or highway workers) an open-ended claim upon the wealth of private citizens who benefit from these teachers or who use these highways.

He goes on to say that all of those government systems were built under a certain agreement, and the government has no right to come back and demand more than what was agreed upon.

Indeed, to take the president's logic seriously, we would have to see success in America as some kind of Faustian bargain, where individuals are free to sweat and toil in a wonderful market economy, but the moment anyone pulls ahead Mephistopheles draws near and takes it back.

Sometimes when I'm alone and the house is quiet I ask myself if I'd rather have president George W. Bush or Obama in office right now. While Bush has wasted oodles of taxpayer money and contributed to future deficits, I can't think of anything he ever said that was as half as outrageous as the communitarian nonsense from the O-man this week. I've never called President Obama a socialist, but I'm having a hard time interpreting what he said any other way.
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