March 30, 2012 Reading Time: 2 minutes

We hear all about the fading middle class, but the fading UPPER class? It seems like the only class doing well is the Political class.

by Devin Roundtree

It is true that the poor have gotten poorer, but so have the rich. Despite what government statistics say, incomes across the board are not at historic highs, but historic lows, and even the income of rich Amercians has fallen substantially. According to the U.S. Census Bureau, the median household income (adjusted to 2010 Dollars) topped out in 1999 at $53,252 before falling to $49,445 in 2010. The average real income of the bottom 20% of households also rose to its high in 1999 at $12,974 and stands at $11,034 as of 2010. When it comes to the wealthy, the government reports that the average real income of the top 5% of households rose to a high of $321,611 in 2006 and fell to $287,686 by 2010. Yet the government can only claim that incomes are still at high levels, despite recent declines, because they measure real income based on the highly manipulated Consumer Price Index.

After the runaway inflation of the 1970s, the Bureau of Labor Statistics began making a number of methodological changes to the CPI which included discounting price increases on goods like washing machines because of quality improvements, yet the bureau conveniently decided not to report higher prices on goods whose quality diminished. Fortunately, an economic consultant by the name of John Williams recreated the original CPI back in 2004 and publishes historic and current data via his company Shadow Government Statistics. Williams contends that the changes made to the CPI, “have depressed reported inflation, moving the concept of the CPI away from being a measure of the cost of living needed to maintain a constant standard of living.”  Once real incomes are reset to the original CPI method, which was used from the end of WWII to 1980, a starkly different picture is displayed.


As the graph points out, the real income of the bottom 20% and median households actually peaked in 1973 and fell 73% and 70% respectively by 2010. While the income of the top 5% did not do as poorly, it still fell 60% from its high in 1989 to 2010. For the poor and the middle class, the above graph serves only to put numbers where feelings already reside, but for the rich it is probably an eye opener because they had so much wealth to fall from. The past 40 years of stagnant and declining wages is an unavoidable testament to the fact that the corporate and social welfare state has not benefited the American people in the long run. From the time our republic was born until 1971, gold and silver prevented the government from growing excessively. And thus millions went from rags to riches as the middle-class exploded. However, without the safeguard of sound money, there has been no limit to how big the government can grow and consequently how small the incomes of Americans can get.


Devin Roundtree will be graduating May 2012 with a M.A. in economics from the University of Detroit Mercy.