Classifying The Middle-Class

Reuters columnist David Rohde asks a pretty important question:  Who is the American middle class, and what does being middle-class mean?

Despite the incessant political lip service paid to the middle class, there is no official American government definition of the group. The middle class has been intensively studied but no political consensus exists over how it was created or how to strengthen it. Liberals credit government programs with helping create a thriving American middle class after World War II. They cite the G.I. bill, home mortgage interest deduction and state university system as examples. Conservatives credit unbridled, American free market capitalism with the feat. I believe it was both.

Within weeks of taking office, the Obama administration’s launched its own effort to help the group. Chaired by Vice President Joe Biden, the “Middle Class Task Force” was launched in January 2009 and includes the secretaries of labor, health and human services, education and commerce.

The closest the task force came to defining the middle class was a January 2010 report “Middle Class in America.” The study never gives an exact income level that is “middle class.” Instead, echoing academic studies on the subject, the document concludes that “middle class families are defined more by their aspirations than their income.”

The report lists typical American middle-class aspirations as “home ownership, a car, college education for their children, health and retirement security, and occasional family vacations.” Obtaining these goals is harder for middle class American families than it has been in decades, the report argues, because the cost of health care, higher education and housing have risen far faster than wages.

In academia, various definitions of the middle class are used. Economists generally use income as the determinant. Using census data, they break the American middle class into quintiles — groups of twenty percent — and declare the middle sixty percent of Americans the middle class. As I said in an earlier column, this is the definition I use. Based on 2010 census data, the middle class would be the sixty percent of Americans with household incomes from $28,636 to $79,040 a year.

The fifty percent mark is right around $43,000 a year in income, if you're wondering.  Thirty years ago that would have been a fortune.  Now?  Considering the price of cars, healthcare, and college, that's not a lot of money at all.  Even housing, as bad as the market has bombed, still finds most Americans are priced out of a mortgage (especially with what banks now want for a down payment.)   So yeah, that payroll tax cut putting $1,000 in the pockets of those making $50,000 a year?  That's a damn lot of money to the 56% of us making that or less in a year.

No wonder the GOP backed down on it.