The Middle Class Is Dying. Here's an antidote.

August 22, 2017

Most Americans believe the middle class presents roughly 50 percent of the nation. A notion that writer Charles Hugh Smith refutes. He believes that the middle class comprises only 10 percent of U.S. households. The 10 percent just below the richest 10 percent of Americans.
The remaining 80 percent, Hugh Smith explains, are lacking the essential attributes historically indicative of a middle-class lifestyle. Attributes that were once affordable on a more modest income.
So, when did the nation's middle class begin to fall from grace?
For the past 40 years, explains Pew Research Center, household net worth has risen only in the top 10 percent of the population. 90 percent of Americans have had no increase in net worth for four decades.
Concurrently, median wages have been flat. And even with a more liberal definition of middle class, households that meet that criteria have dropped by 11 percent.

Nor have the alleged stewards of American society done a thing to help. Politicians and big business have done little to preserve America's ailing middle class. Spending much of their time bickering over how to contend with the needs of the nation's poorest, and most affluent. Lending little creativity, if any attention at all, to the needs of those in between.
In fact, representatives of both parties have unabatedly touted the idea that America's burgeoning high-tech industry would replace the jobs and income lost by its long-suffering manufacturing base.
But such claims have been wrong.
For years, economists, mayors and urban planners believed that attracting high-tech was a necessity for every growing city. Accordingly, cities did everything in their power to attract venture capitalists and high-tech startups. Believing that a rising tide of high-tech businesses would lift all boats. Instead, University of Toronto professor Richard Florida postulates that high-tech development has ushered in a new phase. One that he calls "winner-take-all urbanism." Where a relatively small number of metro areas, and a small number of neighborhoods therein, capture most of the benefits.
Consequently, middle-class neighborhoods have been hollowed out.
In 1970, roughly two-thirds of Americans inhabited middle-class neighborhoods. Today, less than 40 percent do. Leaving the middle-class share of the population to shrink in a whopping 203 of 229 U.S. metro areas between 2000 and 2014.
Nor will it surprise you much to know that the areas in which the middle class has most suffered are in the super-metro areas. Those that have become major tech hubs. New York, San Francisco, Boston, Los Angeles, Houston and, of course, Washington, D.C.
Eventually, these cities will realize, as have many of the wealthy retirement havens in California and Florida, that they cannot survive without middle-class professionals. Those trained as teachers, nurses, EMTs, firefighters and police officers. Unfortunately, none of these professions can afford the cost of living in cities where the populations are increasingly split between the wealthy and the impoverished.
Nor has the middle class been urban America only victim. The nation's inner-city poor have also suffered from the misguided policies of politicians and planners.
Economists have coined a term for how these same dynamics have impacted the nation's urban poor urban. Calling such trends, "racially concentrated areas of affluence," or RCAAs.
A community becomes RCAA'd when "the residents who pack themselves into it are mostly white people whose median incomes are unprecedently higher than the city's poverty level," reports The Wall Street Journal.
Areas hit particularly hard by RCAA? Boston. San Francisco. New York. Baltimore. Chicago. And Philadelphia.
RCAA cities have seen a migration of poor urban minorities. Citizens who cannot afford life in the high-rent districts. Which brings us back to the middle class. Who have basically, like their lower-socioeconomic peers, been have increasingly been adversely impacted by the partnerships between big government and big business - much of which pays lip service to the nation's poor and downtrodden. But enacts policies that have resulted in a mass concentration of wealthy white suburbanites in large American cities. While the poor and middle class are pushed outward to the fraying fringes.
Making matters worse, the federal government has responded to this crisis in much the same fashion it has with health issues. Which is to allow the patient to become gravely ill, and only then to develop programs that serve to prolong life. Without improving its quality by one iota.
Government policy continues to create RCAA communities. And then use the increase in tax revenues to develop ever more vacuous programs for the community's impoverished inhabitants. Programs that do little to lift them out of their circumstances. That only sustain their blighted situations. Yet, serve to provide cover for the officials developing such programs. As they've now contributed to the war on poverty. Losing effort that it is.
Where's the creativity? The new approaches to solving old problems? Why do we preach preventative medicine, but do little by way of preventative economics?
President Trump has discussed a revitalization of America's cities. If he's serious, perhaps he should send his new HUD Secretary to Dublin, Ireland. Where creativity has yielded big returns.
Thirty years ago, The Docks area of Dublin was a run-down, blighted part of town. The Irish government declared it a tax-free zone. And renamed it an International Finance Center (IFC). Offering very low tax rates to companies willing to set up shop and hire locals.
Today, there are 50,000 people who work in the IFC. Representing companies from all over the world. Thousands of good paying, white and blue-collar jobs. Which, in the opinion of many, served as a precursor to the Irish property boom which took place in the early 2000s. Which raised living standards. And caused additional infrastructure to be built around the IFC.
Years later, thanks to the low taxes, U.S. companies began relocating to Dublin.
Just across the river from the IFC resides Googletown, Google's European HQ. Nearby are a myriad of other U.S. tech companies. All of which needed housing, spurring the construction of new apartment buildings and other amenities.
Today, you can walk through this area and mistake it for any technology town in the U.S. Walk too far, however, and the old rundown Docks area reappears. But that area is shrinking by the year.
Instead of incessant political warfare, why can't Republicans and Democrats emulate their more creative Irish peers. Choose five cities with core urban areas that need revitalization. St. Louis. Chicago. Detroit. Baltimore. Memphis. Convert their city centers into free ports and free-trade zones. Use hyper-low tax rates (tax free for five years?) to incentivize companies to relocate. To invest in the locals. Hire and re-train them.
Create new schools so an educated local workforce is available. Use funds available for urban renewal to clean up crime by rebuilding local police forces. Lighting. Infrastructure. Community centers. Parks.
Above all, enlist the churches, community organizations and families who want a safe, prosperous place to live and work. Clarify that this is not another vacuous government handout. But a long-term plan for economic prosperity. One that will be self-reinforcing. The central downtown areas of most major U.S. cities lie near transportation hubs, i.e. railroads, waterways, or both. Build small airports. Use transportation infrastructure to move goods. People. And expertise.
Insist that the companies which inhabit these tax-advantaged areas primarily hire local people. Enabling property renters to be converted into owners. To join America's ownership class. And eventually, by supporting their families in a positive, productive and fearless environment, to regain their pride and confidence.
Copy Ireland's ready-made template for revitalization and not only will the poor and middle-class flourish, but a new America will emerge. But we must hurry. Because amid the perpetual partisan bickering and lack of creative thought, the nation is running out of time.

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