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- [00:03]
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This is your host, Nat Town. You're listening to An American Power Extra, a bonus episode with one of our experts designed to go deeper into the energy, military and geopolitical stories driving the news. If you're looking for more context, more history, and a better understanding of the forces shaping global events, you're in the right place. Take it away, Matt.
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Death by a thousand cuts Listen, this is a topic that I've been really passionate about for a long time, and I think it's critical to the survival of the United States. I've seen families, you know, I, I came from a poor family, but I've seen many middle class families completely destroyed. So let's just walk through what I consider to be the greatest robbery in American history. And no, it wasn't committed with guns. It was committed with policy, with trade deals and financial engineering. And it happened so slowly that most people didn't even realize they had been robbed until they were already broke. In 1971, 61% of Americans lived completely in the middle class. 61%. We had a huge, healthy, vibrant middle class. It was, it was the backbone of the country. The guy that worked at the plant, you know, had a modest three bedroom home, a pension, put his kids through College, retired at 62 with, you know, dignity and nothing to worry about health care. That was the American dream. That's literally what the American dream was, was. And it wasn't a slogan. It was a statistical reality for the majority of the people in the United States. And it could be accomplished fairly easily if you were just willing to work. If you were willing to work, you could accomplish the American dream fairly easily. Put in your time, put in your work, you were good to go. By 2023, that 61% had fallen to 51%. 10 percentage points. Now, you may think that doesn't sound too bad. That's tens of millions of Americans pushed out of the middle class. And that's not even all of it. The part, the part that really gets me is the share of total US household income held by middle class families collapsed from 62% in 1970 to 42% in 2020. That's 20 points of national income just gone. Well, gone is not the correct term. It's, it still exists. It just went somewhere else. And where do you think it went? It went up. It was transferred upward. Upper income households went from holding 27%, I believe, of the aggregate income to 50%. 27% to 50%. That's nearly double. They now take home more of the pie than the entire Middle class. That never happened before in modern American history. So what happened exactly? How did we get here? What is the autopsy? Well, the first thing they did was they broke the link between work and pay. From 1948 to 1973, productivity and wages grew together identically. Like if you worked harder, you produced more, you got paid more, you made more money. That was the deal. It was a social contract. And after 1973, that contract was shredded. Productivity kept climbing. American workers kept producing more and more, but wages stopped. They flatlined. The Economic Policy Institute found that middle, middle class incomes, if they had kept pace with overall economic growth from 1979 on, the average American middle class household would have been making $18,000 a year more by the year 2007. $18,000 a year more by the year 2007. That was nearly 20 years ago. 18 grand. That's, that's not a rounding error. That's a second income. That's the difference between getting by and getting ahead. But like I said, the money didn't disappear. It moved up. It went up to the top. From 1970 to 2018, the median income for upper income households grew 64%. 64%. Middle class, 49%, lower income, 43%. The escalator was running faster for people at the top than it was everyone else. And it wasn't because the people at the top were working any harder. That's the thing. It was because the rules changed. What's the first thing they did? The very first big thing they did? In the 1950s, a third, a third of American workers were members of a union by 2024, 6%. Now we're talking private sector. For those who want to fact check, we went from a third to 6%. And here's what the data from the American Policy Institute shows. As union density fell, the share of income going to the top 10% rose point for point. I want to say that again. As union density fell, the share of income going to the top 10% rose point for point. What that means, it was a perfect transfer of wealth. Every point of income that was lost in the middle class went straight to the upper class. Point for point. Every dollar that came out of a former union worker went to an upper class individual. Every single dollar. They destroyed the mechanism. They destroyed the unions. When you destroy the mechanism, the money doesn't get shared anymore. It's hoarded and accumulated at the top. And when the unions went, the pensions went with it. In the early 80s, about 60% of private sector workers had a defined benefit pension, 60% that is insane. A guaranteed retirement income. 60% of people had a pension. Today that's less than 15%. And look, I had a job in my past where I had a pension and it blew my mind when they told me my job came with a pension because I didn't know those things existed anymore, especially in the oil and gas industry. So they replaced pensions with 401ks, which moved all of the risk from the employer to the employee. Your company used to promise you a retirement. Now they hand you a brokerage account and say good luck, good luck, we don't want this responsibility anymore. The next thing they did was they made everything you need to be middle class unaffordable. Yes, they made everything you need to be middle class unaffordable. Housing. The median home price in 1970, adjusted for inflation was roughly equivalent to about two times your income. That doesn't sound bad, does it? Today it's over five times your income in most markets and in high end places, coastal cities, it's eight, nine, ten times your income. Housing cost eight. The middle class alive. Health care spending was about 7% of GDP. Today it's 17%. The average family health insurance premium is now over $23,000 a year. And I can attest to that because that's what I'm paying. I'm paying a little more than that actually. My Premium is over $2,000 a month. In 1999 it was under for the average American family, it was under $6,000 a year. It was under 5, $500 a month. That's a 300 plus percent increase in 25 years. Did wages go up 300%? I don't think so. Not even close. Look at the average cost of tuition. It has increased 1200%, 1200% since 1980. The normal general inflation rate over that same period of time is 280%. So it's what, five times the normal rate of inflation? College cost rose more than the rate of everything else. Significantly more. And we told an entire generation that they had to go to college. That's what they had to do that to be middle class. And then we handed them $100,000 in debt and that was the entry fee to the club that we were actively killing at the time. And listen, I don't blame people for telling kids to go to college. I think people didn't realize how fast the cost was growing. Between 2000 and 2020, the United States lost 5 million manufacturing jobs. 5 million manufacturing jobs. That was the foundation of the middle class. Middle class communities across The Midwest, the South, Appalachia. When a plant closed, it didn't just eliminate paychecks, eliminated the tax base for the schools, the customer base for all those businesses on Main street, the purpose of the entire towns, in many cases. Nafta, permanent Normal trade relations with China, the World Trade Organization. These were policy choices. They were sold to the American public as free trade as progress, as inevitable globalization. But the gains went to the shareholders and the consumers in the form of cheaper goods. And the losses are concentrated on the workers who actually made things. An unattended consequence of free trade. And what replaced those? Manufacturing jobs, service jobs, retail, hospitality, gig work, no unions, no pensions, no benefits, unpredictable hours, wages that keep pace with the cost of a single. One of the essentials to be middle class, which is housing, health care and education. And then they financialized everything. The final nail in the coffin. Starting in the 80s, the American economy shifted from making things to trading things and swapping things. The financial sector share of GDP doubled. Wall street figured out that you could extract more wealth through this sort of financial engineering, through leveraged buyouts, through stock buybacks, through derivatives, through private equity, than you could ever do by building a factory and employing people. So companies, they just stopped investing in workers and started investing in their own stock price. CEO compensation went from roughly 30 times the average worker pay to over 300 times. It's not because CEOs got 10 times smarter, because the incentive structure was redesigned to funnel money. Where? Where? Up, up to the top of that organizational. Pew Research put it very plainly. The rise in economic inequality is tied to technological change, globalization, the decline of unions, and the eroding value of, yes, the minimum wage. That's not some left wing think tank, that's not some political organization. That's one of the most respected nonpartisan research institutions in the world. Telling you this was structural, this was systemic, and worst of all, it was a choice. So when someone asks you what happened to the middle class, the answer is everything. A death by a thousand cuts, wage stagnation, union busting, trade deals, housing costs, health care costs, education costs, financialization, deregulation. Now any one of these things on its own is survivable. But together, over 50 years, they completely hollowed out the economic core of the United States. And the people who benefited from every single one of those shifts are the ones who now hold 50% of all of the national income. And that is not an economy, that is an operation of extraction. Folks, if you haven't had a chance, please check out the American Power podcast is available on Apple and Spotify anywhere you can listen to or download podcasts. In addition, you can see it on Findout Media's YouTube page. Other than that, let me know your thoughts in the comments section, and I hope all of you have a great week. Thank you.