The middle class is on its way out. The income gap between wealthy and the rest of is continues to widen, as the share of middle class wealth has been contracting for most of the last three decades.
A new study conducted by economic researchers at the University of California Berkley found it recently fell to the lowest seen since 1940. To put that into perspective, remember that after WWII, the “average” American accumulated unprecedented wealth, and this was the formation of the middle class. But today, all of that is gone, at least according to the new study.
Researchers defined “middle class” as the bottom 90 percent of Americans, with wealth being all of their home equity, bond and stock holdings, pensions and other assets after subtracting the debt.
Our Miami consumer protection attorneys understand that when researchers charted all these factors collectively from 1917 to 2013, they did discover short bubbles of home prices and stock in the 1990s and 2000s. Of course, we know that didn’t end well, but it was only part of a temporary respite for most people, as there was already an ongoing increase in mortgage, credit card, student loan and other debts.
But only for the bottom 90 percent.
This is not to say these people don’t have homes or pensions, but the majority also have to contend with mortgages that are much higher, as well as sky-high credit card and student loan debt.
So who benefits?
The top 0.1 percent, according to researchers. For them, incomes have steadily continued to rise during this time, recently soaring to levels not seen since the “Roaring 20s.” This top 0.01 percent of the population now owns close to 25 percent of the nation’s wealth.
Continuing on this track, we will see more inequality of wealth and income. The “very rich” just keep getting wealthier, while the rest of us will continue to lag behind.
A recent article published in the L.A. Times indicates while the income inequality is bad, the wealth inequity is a worse problem.
Citing research from the Washington Center for Equitable Growth, the report indicates that wealth inequality amounts to a “direct threat” on American opportunity and meritocracy – or what we sometimes refer to as “The American Dream.”
When the “middle class” (bottom 90 percent) doesn’t have enough, they are unable to amass savings. So while the top 1 percent have the ability to sock away 35 percent of their income in savings, the bottom 90 percent have about zero in savings.
Is any of this possible to reverse? Maybe, but it would take strong, decisive measures and time. Following the Great Depression, America needed the New Deal and the gains of the post-war to recover. Absent some major reform, all of the gains will be lost.
The study authors cite possible actions as:
- Higher taxes on capital income
- Progressive estate taxation
While conservatives in particular shudder at these suggestions, it’s worth noting that not only were such measures taken after the Great Depression, they are largely in line with the views of most Founding Fathers. Take for example Thomas Jefferson’s hostile stance to the accumulation of great wealth, particularly through inheritance.
Without decisive action, we’re going to see a declining republic and a rising aristocracy.
If you’re battling foreclosure in Miami or the surrounding areas contact Bruce Jacobs & Associates for a confidential appointment to discuss your rights. Call (305) 358-7991. Also, don’t miss Miami Foreclosure Attorney Bruce Jacobs on 880AM/the Biz, every Wednesday from 5 p.m. to 6 p.m. on “Debt Warriors with Bruce Jacobs,” discussing foreclosure topics that matter to YOU.
All The Wealth The Middle Class Accumulated After 1940 Is Gone, Oct. 20, 2014, By Mark Gongloff, The Huffington Post
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Sen. Elizabeth Warren: Government Protected Wall Street, Not Families, Oct. 27, 2014, Miami Foreclosure Lawyer Blog