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Another view: Economic reality bites the middle class

7:40 PM, Feb. 9, 2014  |  Comments
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A new study by the Pew Research Center reports that many Americans have begun to figure out the new economic reality. About a third of Americans who self-identified as part of the middle class in 2008 now identify themselves as part of the "lower-middle" or "lower" classes.

Much of the change occurred over the past 18 months, perhaps because the reality is now too stark to ignore. Things cost more than they used to and there's less money to pay for them. A job may have been lost, a home foreclosed upon.

There also has been increased public attention focused on income equality. When Pew did a similar survey in July 2012, 49 percent of Americans identified themselves as part of the middle class. That figure is now 44 percent.

When Americans read that the richest 1 percent of households took home 95 percent of all the income gains after the 2007-2008 recession; that the world's richest 85 people control the same amount of wealth as the poorest half of the world's 7 billion people; and that since the Great Recession, median household income has dropped $4,610 (to what it was in 1996), then reality starts to sink in.

That whole middle-class dream - a house of your own, a good job with good benefits, good schools for the kids, money in the bank for retirement - is harder to come by for millions of Americans. And those who still cling to the dream often find it takes two incomes to support it.

It's long been inexplicable, but somehow heartening, that so many Americans have identified themselves as part of the middle class. Median household income varies by state, but the national average is just over $51,000. That's the middle.

The top third earns $100,000 a year or more. The poverty level, depending on the size of the household, is anywhere from $32,000 to $19,000. But for years, people earning anywhere from $32,000 to $250,000 - almost five times median income - have called themselves middle class. It was a sign of pride, and perhaps aspiration, or even the recognition that 250K doesn't buy you the lifestyle of the rich and famous.

The Pew survey found that in 2008, 21 percent of Americans self-identified as being in the upper-middle or upper classes. Today that number is 15 percent.

That number speaks to how well the richest 10 percent - and in particular, the richest 1 percent - did after the recession. Between 2009 and 2012, the top 1 percent saw their incomes grow by 31.4 percent, accounting for 95 percent of all the post-recession income gains. The rest went to those in the 90 to 98 percent tier.

What will be crucial is how those newly acknowledged lower-middle and lower class Americans react to it. Republicans this fall will no doubt encourage them to blame President Barack Obama, but he's not the one who was in charge when Wall Street collapsed, or who tried to gut financial reform or stop the working poor from getting access to health insurance or are trying to stop an increase in the minimum wage.

These are working people, if they're lucky, people who put in 40 hours a week or more and rarely see a raise, no matter how well the company is doing. They are not Jamie Dimon, the CEO of JPMorgan Chase, was rewarded with a $9.5 million raise (to $20 million) in a year that the bank racked up $20 billion in Justice Department fines and laid off 7,500 people.

There are vast inequalities in America, both in wealth and how government treats people. More Americans are beginning to realize it. Now let's see what they do about it.

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