The Destabilizing Truth: Only The Wealthy Can Afford A Middle Class Lifestyle

[thenews]

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.

In What Does It Take To Be Middle Class? (December 5, 2013), I listed 10 basic "threshold" attributes and two somewhat higher thresholds for membership in the middle class:

1. Meaningful healthcare insurance (i.e. not phantom "insurance" with deductibles that cost thousands of dollars a year that offers no non-catastrophic care at all)

2. Significant equity (25%-50%) in a home

3. Income/expenses that enable the household to save at least 6% of its income

4. Significant retirement funds: 401Ks, IRAs, etc.

5. The ability to service all debt and expenses over the medium-term if one of the primary household wage-earners lose their job

6. Reliable vehicles for each wage-earner

7. The household does not rely on government transfers to maintain its lifestyle

8. Non-paper, non-real estate assets such as family heirlooms, precious metals, tools, etc. that can be transferred to the next generation, i.e. generational wealth

9. Ability to invest in offspring (education, extracurricular clubs/training, etc.)

10. Leisure time devoted to the maintenance of physical/spiritual/mental fitness

The higher thresholds:

11. Continual accumulation of human and social capital (new skills, markets for one's services, etc.)

And the money shot:

12. Family ownership of income-producing assets such as rental properties, bonds, etc.

The key point of these thresholds is that propping up a precarious illusion of consumption and status signifiers does not qualify as middle class. To qualify as middle class, the household must actually own/control wealth that won't vanish if the investment bubble du jour pops, and won't be wiped out by a layoff, college costs or a medical emergency.

In Chris Sullin's phrase, "They should be focusing resources on the next generation and passing on Generational Wealth" as opposed to "keeping up appearances" via aspirational consumption financed with debt.

I then added up the real cost of these minimum thresholds and arrived at a minimum of $106,000 annual household income--double the median household income in the U.S. According to Census Bureau data, only the top 20% earn this level of income.

Here is a chart of the real income of the lower 90% and the top 10%, which by definition cannot be "middle class":

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