Acton Institute Powerblog

Strong Opinions, Weak Statistics And Middle-Class Economics

Is the middle-class economically stagnant? And is “middle-class” a misnomer? Should we really be talking about the bottom of the economic pile? After all, isn’t the 1% controlling everything?

Cato Institute Senior Fellow Alan Reynolds says the government’s claim of middle-class stagnation is based on faulty statistics. In Monday’s Wall Street Journal, Reynolds quotes Sen. Elizabeth Warren (D., Mass.), speaking at an AFL-CIO conference: “Since 1980, guess how much of the growth in income the [bottom] 90% got? Nothing. None. Zero.”

Reynolds take on this?

Real personal consumption per person has tripled since 1968 and doubled since 1980, according to the BEA. Are all those shopping malls, big box stores, car dealers and restaurants catering to only the top 10%? The question answers itself.

Instead of the White House concoction, consider the Congressional Budget Office estimates of actual median household income. Measured in 2013 dollars, after-tax median income rose briskly from $46,998 in 1983 to $70,393 in 2008 but remained below that 2008 peak in 2011. The sizable increase before 2008 is partly because the average of all federal taxes paid by the middle fifth has almost been cut in half since 1981—from 19.2% that year to 17.7% in 1989, 16.5% in 2000, 13.6% in 2003 and 11.2% in 2011.

Reynolds says people, both in and outside of the government, are forming opinions based on faulty statistics. His question about shopping malls and big box stores is telling. Who among us has not spent a weekend spending money at such a place? Are we the 1%? Some of us perhaps, but surely the majority of the folks populating such places are the middle-class. If we are so stagnant, how can our economy support such places?

Read “The Mumbo-Jumbo of ‘Middle-Class Economics’” at The Wall Street Journal.

Elise Hilton

Communications Specialist at Acton Institute. M.A. in World Religions.