A Middle Class Squeeze

I was jumping around sites today when I came across this chart and it stopped me dead in my tracks.

Now I’m a fairly conservative person from both a political and economic perspective but when I saw the divergence in this pictorial, I was shocked. I’ve read a lot of opinion about the relative share of prosperity in the country over the past twenty years or so and it always seemed to me that the proposition that it was being shared inequitably was a political talking point for the Democratic Party. That it might be but it would appear that their might be some solid evidence that their lament is not without merit.

I can’t imagine that a trend of this sort can for long persist without some quite serious societal problems developing. Those on the outside are not oblivious to what is occurring and are not likely to countenance it for an extended period of time. More importantly, perhaps, is that economically this would seem to be a dead end trend. The graph suggests to me that the consumer, which is the main driver of the economy, is slowly being starved. If that is indeed the case then long term prospects are not all that rosy.

If one factors in the likelihood that the middle class is not going to have access to credit as it has in the past then the trend becomes more ominous. It also helps explain how and why the credit load of the citizenry ballooned so much over the past decade or so. Shut off from participating in the growth from an income standpoint, they were forced to assume debt to consume.

It’s a sobering trend and one that can’t, in my opinion be sustained. There may be other factors at work here or maybe the chart misrepresents reality. If anyone has a different point of view, I would like to hear it.

Tom Lindmark

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