Who destroyed the middle class?

Nathan Lewis finds four major areas of government policy which have eroded the middle class. Money, taxes, outsourcing and crony capitalism. Tackling these are not easy but talking about them would be a great way for any Republican to establish his or her bona fides with the people and not the plutocrats.

I pass along the gold part because I know you’re all so interested

The median U.S. full-time male income was $47,715 in 2010. In 1969, it was $44,455. The 1969 numbers are of course “adjusted for inflation,” and you know that the government’s inflation adjustments are thoroughly low-balled. With slightly more honest statistics, the trend would not be flat, but instead downward over the past forty years.

Another way of looking at it is in terms of ounces of gold. After all, gold was the monetary basis of the United States for 182 years, from 1789 to 1971, so why shouldn’t we use that as a measure of how much people are really getting paid?

Our median worker, in 1969, made $8,668 nominal. But, in those days, the dollar was worth 1/35th of an ounce of gold. It works out to 248 ounces of gold. In 2010, the dollar’s value was, on average, about 1/1224th of an ounce of gold, and the full-time male worker was making only 39 ounces of gold. This figure exaggerates the situation somewhat, due to the rapid decline of the dollar vs. gold in recent years, but it describes, I would say, the economic reality of the situation.


Think of it like this: what if, in year 1, the average Mexican full-time male worker was making 8,668 pesos per year, and the peso’s value was one peso per dollar. The Mexican worker is making the monetary equivalent of $8,448. In year 40, after four decades of “easy money” and currency deterioration, the average Mexican worker is making 47,715 pesos, but the peso’s value has fallen to 35 pesos per dollar. We can see that the Mexican worker is making only $1,363, and no amount of government statistical tomfoolery or “purchasing power parity” arguments will change that fundamental fact.

The fact that you can buy an iPad in Mexico City today, while forty years ago you would have to make do with a television set based on vacuum tubes, doesn’t change the fact that the Mexican worker is making less. For some reason, we are able to see these things easily when I take the hypothetical example of a Mexican worker, but Americans are prone to states of denial when asked to consider that maybe a similar thing has been happening to them.

This is why you “can’t devalue yourself to prosperity.” “Prosperity” mostly means higher wages. But, each time you devalue the currency, wages tend to go down in real terms, even if they go up in nominal terms.

The Keynesians are quick to argue that their “easy money” policies will lead to a reduction in unemployment. Sometimes, this works (though not always). It often works because, when wages have been lowered via currency devaluation, then there is more demand for labor due to the lower price. Currency devaluation might help the unemployed, but it hurts the employed – always a much larger number – because their wages have been effectively cut

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