Hillary’s Talking Points: Recycled From the 1990s

I don’t think we have written about Hillary Clinton’s recent speech on the economy. She says we need economic growth, but the policies she advocates would suppress, not encourage, growth. That’s the bottom line. But a reader also pointed out a letter to the New York Times, as quoted in Cafe Hayek, that bears on Hillary’s fixation on the middle class:

Eduardo Porter opens his column today by asking “Could President Hillary Clinton restore the American middle class?” … .

Mr. Porter illegitimately presents as an established fact a proposition that is anything but. It’s true that between 1967 and 2009 the percent of American families with annual incomes between $25,000 and $75,000 (in 2009 dollars) fell from 62 to 39 – a fact that, standing alone, might be interpreted as evidence that the middle class is disappearing. Yet this fact does not stand alone, for it’s also true that the percent of families with annual incomes lower than $25,000 also fell (from 22 to 18) while the percent of families with annual incomes of $75,000 and higher rose significantly – from 16 to 43.*

So given these Census Bureau data – which are strong evidence that America’s middle class, if disappearing, is doing so by moving into the upper classes – to ask if President Hillary Clinton could restore the American middle class is to ask if she will make the bulk of today’s prosperous families poorer rather than richer.

* Remember: These income figures are all in constant (2009) inflation-adjusted dollars.

Sincerely,
Donald J. Boudreaux
Professor of Economics
and
Martha and Nelson Getchell Chair for the Study of Free Market Capitalism at the Mercatus Center
George Mason University
Fairfax, VA 22030

For me, this was deja vu all over again. In 1995, Scott and I wrote a paper for the Center of the American Experiment called “The Truth About Income Inequality.” It was meant to counter liberal talking points that were virtually interchangeable with those we are hearing today. In 1995, just as now, there was lots of talk about the disappearing middle class. This is what we wrote about the vanishing middle class in our paper:

Since the late 1980s, liberals have argued that the middle class is disappearing. They have portrayed America as a country increasingly divided between rich and poor, with fewer and fewer families in between. Statistics have been manipulated shamelessly to make this claim appear plausible. In particular, many left-of-center commentators have argued that, since 1970, the percentage of American families in the “middle class” — defined as those with incomes between $15,000 and $50,000 — has declined.

There is a kernel of truth in this contention, as the chart below shows. The percentage of families in the arbitrarily defined “middle class” did decline between 1970 and 1990, from about 63 percent of all families to about 55 percent. But this statistical “decline” of the middle class did not occur because its members were losing ground. On the contrary, all of the net statistical “decline” of the middle class was caused by its members moving into the higher income category — families with incomes in excess of $50,000 in constant 1990 dollars. That category grew from 24 percent of the population in 1970 to 32 percent in 1990.

Distribution of family income:

In other words, the middle class hasn’t declined, it has become more prosperous.

Some things have changed in the 20 years since we wrote our paper. In particular, the awful economic policies of the last 6 1/2 years have needlessly prolonged and worsened the effects of the last recession. But some things, like the Democrats’ misleading talking points, never change.