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The Cultural Contradictions That Have Crippled the Great American Middle Class

Conventional explorations of why the middle class is shrinking focus on economic issues such as the decline of unions and manufacturing, the increasing premiums paid to the highest-paid workers and the rising costs of higher education and healthcare.

All of these factors have a role, but few comment on the non-economic factors, specifically the values that underpin the accumulation of capital that is the one essential project of middle class households.

Daniel Bell’s landmark 1976 book The Cultural Contradictions of Capitalism held that“capitalism–and the culture it creates–harbors the seeds of its own downfall by creating a need among successful people for personal gratification–a need that corrodes the work ethic that led to their success in the first place.”

I would phrase this in the language of values and capital:

The primary cultural contradiction of the Great American Middle Class is the disconnect between the values needed to build capital and those of gratification via debt-based consumption.

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Honey, I Shrunk the Middle Class: Perhaps 1/3 of Households Qualify

The Pew Research Center’s recent report The American Middle Class Is Losing Ground: No longer the majority and falling behind financially made a media splash, as it reported that less than 50% of adults are members of the Great American Middle Class.

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Here’s Why Housing Must be Propped Up

The Powers That Be have gone to extraordinary lengths to prop up housing by whatever means are necessary since the collapse of the housing bubble in 2008: the Federal Reserve has pushed mortgages rates down by buying mortgage-backed securities, the federal housing agencies (FHA, VA) have issued millions of low-down payment loans, and the federal government has essentially taken over the mortgage industry, backing 90+% of all mortgage loans.

Why is the status quo so keen on propping up housing?

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Time to Trade in Your Jag, Benz, BMW for a Dented Econobox: Days of Rage Are Coming

It’s time to trade in your Jag, Mercedes, BMW (and maybe your Prius, Volvo, Lexus, etc.) before the Days of Rage start. As I’ve explained before ( As the “Prosperity” Tide Recedes, the Ugly Reality of Wealth Inequality Is Exposed), the rage of the masses who have been losing ground while the Financier Oligarchs, the New Nobility and the technocrat class reap immense gains for decades has been suppressed by the dream that they too could join the Upper Caste.

But once the realistic odds of that happening (low) sink in, the Days of Rage will begin. For those still who don’t know the facts of rising inequality, here’s what you need to know.

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Memo to the Fed and its Media Tool Hilsenrath: We’re Not Here to Enrich Your Corporate Cronies

The Federal Reserve is appalled that we’re not spending enough to further inflate the value of its corporate and banking cronies. In the Fed’s eyes, your reason for being is to channel whatever income you have to the Fed’s private-sector cronies–banks and corporations.

If you’re being “stingy” and actually conserving some of your income for savings and investment, you are Public Enemy #1 to the Fed. Your financial security is nothing compared to the need of banks and corporations to earn even more obscene profits. According to the Fed, all our problems stem from not funneling enough money to the Fed’s private-sector cronies.

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Endangered Species: The Self-Employed Middle Class

Including the professional class, perhaps 3% of the workforce is truly independent.

Being self-employed (i.e. owning your own small business that does not require employees) is an integral part of the American Dream. Many start out dreaming of a corner office in Corporate America, but as they move up the ladder, many become disillusioned by the process and the goal: do I really want to spend my life making big-shots even wealthier?

Bureaucracies (government and corporate) are safe sources of employment, but at a cost: they’re often soul-deadening.

Many dream of making a living doing something they actually care about, and that often means striking out on your own, i.e. self-employment.

This raises an interesting question: how many self-employed people in the U.S. actually earn a middle class income? Since all the government statistics have a line at $50,000, and $50,000 might support a minimal middle class lifestyle in areas with a low cost of living, let’s use $50,000 in annual income as our minimum.

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How Many Slots Are Open in the Upper Middle Class? Not As Many As You Might Think

Not only are there not that many slots in the upper middle class, the number of open slots is considerably lower.

If America is the Land of Opportunity, why are so many parents worried that their princeling/princess might not get into the “right” pre-school, i.e. the first rung on the ladder to the Ivy League-issued “ticket to the upper middle class”? The obsessive focus on getting your kids into the “right” pre-school, kindergarten and prep school to grease the path to the Ivy League suggests there aren’t as many slots open as we’re led to believe.

Let’s set aside the endless debate over what qualifies a household to be “middle class.” Most people define themselves as middle class, with little regard for their income. Let’s cut to the chase and ask: how many young people aspire to joining this ill-defined middle class? Does this mean a rising standard of living and security? Not any more.

If you want those things, you must aspire to join the upper middle class.

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The Decline of Small Business = Decline of Basic Skills

An economy where most people work for the state or a global corporation is an economy that has lost its knowledge of the key entrepreneurial building blocks.

The decline of small business has numerous long-term consequences. One is the decline of the middle class, as entrepreneurial enterprise is a key pathway to generational wealth-building and prosperity.

Another is the loss of employment opportunities. As U.S. businesses are being destroyed faster than they’re being created, there are fewer sources of employment.

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The Solution to the Declining Middle Class: Destroy Fixed Costs and Debt

The solution to the erosion of the middle class lifestyle is to destroy debt and other fixed costs and eliminate self-sabotaging discretionary consumption.

Last week I covered the structural dynamics causing the decline of the middle class. In general, the costs of untradable services (healthcare, higher education, government) and the rot of financialization have increased while wages have stagnated. The Federal Reserve’s “solution” was to make everyone who owned a house a speculator who could only keep even with rising costs by riding the asset bubbles higher and then extracting the “free money” generated by these bubbles before they popped.

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The Decline of Small Business and the Middle Class

The only way to not just survive but thrive as an entrepreneurial enterprise is to destroy fixed costs and labor overhead.

It is not coincidental that the middle class and small business are both in decline.Entrepreneurial enterprise and small business have long been stepping stones to middle class incomes and generational wealth, i.e. wealth that is passed down to future generations rather than consumed. As the headwinds to entrepreneurial enterprise and small business rise, the pathway to middle class prosperity narrows.

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How the Middle Class Lifestyle Became Unaffordable

There are four structural drivers behind the soaring costs of the middle class lifestyle.

Why have the costs of a middle class lifestyle soared while income has stagnated?Though it is tempting to finger one ideologically convenient cause or another, there are four structural causes to this long-term trend:

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The Destabilizing Truth: Only the Wealthy Can Afford a Middle Class Lifestyle

The “middle class” has atrophied into the 10% of households just below the top 10%.

The truth is painfully obvious: a middle class lifestyle is unaffordable to all but the top 20%. This reality is destabilizing to the current arrangement, i.e. debt-based consumerism a.k.a. neofeudal state-cartel capitalism, so it is actively suppressed by the officially sanctioned narrative: that middle class status is attainable by almost every household with two earners (a mere $50,000 annual household income makes one middle class) and middle class wealth is increasing.

It’s not that difficult to define a middle class lifestyle: just list what was taken for granted in the postwar era of widespread prosperity circa the 1960s, four decades ago.

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