The Middle Class

In a 1992 CBS poll 75 percent of those surveyed called themselves “middle class.”

World War II

• “To American production, without which this war would have been lost.” Joseph Stalin

• American factories turned out 86,000 tanks, 2 million army trucks, 193 artillery pieces, 17 million handguns and rifles, and 41 billion rounds of ammunition. Most amazing of all, the U.S. built 300,000 planes.

• Women entered the workforce, more than 5 million between 1941 and 1945.

The Era of the Middle Class

Industrial Output

• Ford built a massive plant at Willow Run Michigan that produced 8,524 B-24 bombers.

• A Boeing plant produced a B-17 bomber every ninety minutes at its peak in 1944.

Growth of the Middle Class

• The GI Bill

• After World War II the United States was the economic engine of the world –producing 52 percent of the World’s goods.

• Levittown expansion of the nation’s housing stock

The Era of the Middle Class

• Home ownership increased from 44% in 1945 to 62% in 1960. (in 2000 it was 62%)

• For the first time in history a majority of Americans graduated from high school.

• Enrollment at Colleges and University more than tripled, from 2.6 million in 1949 to 8 million in 1969.

Focus on Civil Rights 1955-1965

• Civil Rights Movement• On December 1, 1955 Rosa Parks refuses to give up her seat and

move to the back of the bus• Sit-in at Woolworth lunch counter in Greensboro, North Carolina

(four freshman from North Carolina A&T College) February 1, 1960.• Freedom bus ride May 4, 1961• The Nation’s eyes were exposed to the treatment of Blacks in

America• In 1964 23% of voting age Blacks were registered to vote.• Voting Rights Act passed August 6, 1965.• By 1969 61% of voting age Blacks were registered to vote.

• I am not satisfied until every American enjoys his full constitutional rights.

• If a Negro baby is born, and this is also true for Puerto Rican and Mexicans in some of our cities, he has about ½ as much change to get through high school as a white baby.

• He has about 1/3 as much chance to get through college as a white student.

• He has about 1/3 as much chance to be a professional man.

• About ½ as much chance to own a house. • He has about 4 times as much chance that he

will be out of work in his life as the white baby.

• I think we can do better. I don’t want the talents of any American to go to waist.

Nixon and Ford

• End of the Great Society

• New malaise

• Jimmy Carter

• High inflation 13.5%

• high Interest rates – prime interest rate for banks reaches a high of 21.5 %

Triumph of Conservatism

• The dawn of the Era of the Wealthy Class• Tax policies • Economic Recovery Tax Act• Top personal tax rate from 70% to 50%• Capital gains rate from 28% to 20%

• Cut domestic spending $140 billion• Increase defense spending $181 billion

Laffer Curve

• 100% tax rate, why bother

• Lower rate, more economic activity, greater base to tax. If you cut taxes, you increase economic activity, producing a larger base to tax and thus more income.

wealthy

poor

middle

Benjamin Franklin

• Money is of a prolific generating nature. Money can beget money, and its offspring can beget more.

• Monopoly Effect

Tax Reform Act of 1986

• Reduced top tax rate from 50 to 28%

• The bottom rate raised from 11% to 15%

Wealth Shift

• From the middle to the top

$-

$50,000.00

$100,000.00

$150,000.00

$200,000.00

$250,000.00

$300,000.00

$350,000.00

1962 1965 1968 1971 1974 1977 1980 1983 1986 1989 1992 1995 1998 2001

Mean Net Worth

Median Net Worth

0

2

4

6

8

10

12

14

16

18

1960 1964 1968 1972 1976 1980 1984 1988 1992 1996 2000

Inco

me

Sh

are

for

To

p 1

%

0

10

20

30

40

50

60

Mar

gin

al T

ax R

ate

Income Share Marginal Tax Rate

The Top 1 Percent

B. Top 1% tax units

0%

10%

20%

30%

40%

50%

60%

70%

80%

1960

1962

1964

1966

1968

1970

1972

1974

1976

1978

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

Mar

gin

al T

ax R

ate

$0

$100,000

$200,000

$300,000

$400,000

$500,000

$600,000

$700,000

$800,000

Marginal Tax Rate Average Income

The Era of the Wealthy Class

History of Tax Cuts[structure of taxes]

Estate TaxCuts here benefits Wealthy Propose

elimination

Dividend Tax Cuts here benefits Wealthy Substantially cut

Capital Gains Tax Cuts here benefits Wealthy Substantially cut

Income Tax Cut on top rate benefits Wealthy

Medicare/Medicaid Tax Cuts here benefit Middle Class and Poor increased

Payroll Tax Cuts here benefit Middle Class and Poor increased

Excise Tax Cuts here benefit Middle Class and Poor increased

Gross Federal Debt, 1940 to 2006

-

1,000,000

2,000,000

3,000,000

4,000,000

5,000,000

6,000,000

7,000,000

8,000,000

9,000,000

10,000,000

194

0

194

2

194

4

194

6

194

8

195

0

195

2

195

4

195

6

195

8

196

0

196

2

196

4

196

6

196

8

197

0

197

2

197

4

197

6

197

8

198

0

198

2

198

4

198

6

198

8

199

0

199

2

199

4

199

6

199

8

200

0

200

2

200

4

200

6

The Triumph of Conservatism

(in millions)

Clinton Years

Measuring Inequality

0%

5%

10%

15%

20%

25%

1947 1951 1955 1959 1963 1967 1971 1975 1979 1983 1987 1991 1995 1999

Change in Family Income Inequality, 1947 to 2000Percent Change in Gini Index vs. 1968

Source: www.census.gov/hhes/income/histinc/f04.html

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

1950 1953 1956 1959 1962 1965 1968 1971 1974 1977 1980 1983 1986 1989 1992 1995 1998 2000

Mean Family Income

Median Family Income

The Era of the Middle Class

The Era of the Wealthy Class

The Rise and Fall of the Middle Class

• During the modern industrial age, the middle class grew steadily, reaching its heyday in the 1950s, when its numbers soared into the tens of millions. According to a study commissioned by the U.S. Census Bureau, middle-class people inhabited great swaths of North America, with settlements in the Great Plains, the Rocky Mountains, the Pacific Northwest, and even the nation's urban centers.

• "No one predicted the disappearance of the middle class," said Dr. Bradford Elsby, a history professor at the University of Pennsylvania. "The danger of eliminating workers' unions, which had protected the middle class from its natural predators for years, was severely underestimated. We believe that removal of the social safety net, combined with rapid political-climate changes, made life very difficult for the middle class, and eventually eradicated it altogether."