The Middle Class is Shrinking - And That's a Good Thing

The middle-class shrunk between 1967 and 2016. And that's a good thing.

The middle-class, lower middle-class and poor made up 94% of the population in 1967. (Yes. These numbers are adjusted for inflation.) By 2016, they were only 65% of the population.

The upper middle-class and rich rose from only 6% of the population to 35%.

Nearly a third of the population (well, 29%) moved from middle-class and below to upper middle-class and above.

Class matters to class. Go to class if you want to move up in the income ladder. Knowledge workers - folks with a BA - have gained the most from advances in information technology in the last generation.

Income gains have slowed in the last generation. Between 1967 and 1981, incomes rose 27%; between 2002 and 2016, incomes rose only 8%. My theory is that by the end of the last century we had effectively broke the code on how to raise the productivity and incomes with the popularization of knowledge work but now at the dawn of this new economy we've yet to figure out how to popularize entrepreneurship to continue that trajectory.

All this suggests some simple policy recommendations. Invest even more in creating knowledge workers and entrepreneurs (investment that includes massive increases in R&D spending as well as policies like proliferating the number of incubators in communities as we did the number of libraries, schools and universities in past generations) and watch the percentage of rich continue to rise. Tax the rich and upper middle-class to both fund all those investments and to subsidize the poor so that they enjoy some of the fruits of this prosperity. So, make more people rich and the poor less poor. That seems like progress to me.

Stephen Rose's study Squeezing the Middle Class: Income trajectories from 1967 to 2016 is here.

Wealth and Power in the Attention Economy

In the attention economy, there are three classes: those who depend on others for the structuring of their attention, those who are independent, and those who structure the attention of others.

Wealth and power in this attention economy suggests control over the attention of others. You may run the company in which thousands work, able to direct the attention of the company towards a particular market or emphasis. You may control the media that directs the attention of viewers, listeners, or readers. You may write influential books or TV shows that change how people think or write sofware programs that define how they work.

Poverty in this attention economy suggests dependence on others for the structuring of attention. You may depend on a boss to tell you what tasks to think about and how to think about them. You may depend on TV programming to decide where to focus for the evening or weekend.

Who controls your attention? Whose attention do you control? The answer to those questions suggests a great deal about the resources you have command over. Because until you have control over your own attention, you can’t control much else.

They Think You're an Idiot - Prove Them Wrong

Perhaps no issue more squarely puts the neoconservatives into the camp of unAmerican than their opposition to the estate tax. Quite simply, it is not enough for them that inheritences up to $6 million are exempt from taxes. They think it is unfair for folks inheriting more than $6 million to pay taxes at all.

There can only be a few explanations for such support. One is that you think that the working stiff who is stupid enough to have been born poor or middle class should be the one paying taxes on the income he has earned so that the fellow born rich doesn't have to be taxed a dime on the money he has done nothing to earn. The other is that you think that neither the working class stiff or the rich should pay the taxes but that, instead, the next generation should pay the taxes, deferring the cost of government to the next generation in the form of debt.

There is, of course, one other explanation. The rich actually think that you are an idiot and would eagerly support tax relief for Paris Hilton and her trust fund buddies, agreeing to pay their share out of your hard-earned income.

What Even Conservatives Don't Understand About Deficits

I've heard liberals and conservatives express confusion about why supposed conservatives would support such large and sustained deficits. There is a good reason for this.

If your major constituency is the rich, there is a very good reason to sell as many bonds as you can. When the government spends more than it takes in from taxes, it has to close the gap by selling bonds - getting money today by promising to pay interest on that debt over a defined period of time. If you are rich, the backing of the United States is about as sure a means to protect your money as you can find. If you are sufficiently rich, you have an incentive to protect at least a portion of your money in very safe investments.

So, what is the downside? One is that the fastest growing portion of the government budget is interest payments. Interest payments squeeze out other expenses. The other is that the government squeezes out the private sector in investment markets. Quite simply, if the government did not sell any bonds, investors would be forced to put them money into the private sector - corporate bonds or equities.