Whenever Mark Perry or Donald Boudreaux have something to say, I listen, even if the topic is outside of my wheelhouse (economics and politics). I consider them to be two of the most cogent, clear and original thinkers in economics on the planet today.
And when they put their minds together on something, as they did here, I drop everything.
They think that the mantra of a stagnating middle class is wrong, flat dead wrong. They take off after a statement that Robert Reich, labor secretary under President Clinton, said on the matter: “After three decades of flat wages during which almost all the gains of growth have gone to the very top, the middle class no longer has the buying power to keep the economy going.”
Now remember, please, just who Reich was. He was the ultimate insider, with connections going all the way to the top. At the peak of his career the media fawned over him and hung on his every word, even if it was wrong. Here’s this amazing statement from Wikipedia:
He attended Dartmouth College, graduating with an A.B.summa cum laude in 1968 and winning a Rhodes Scholarship to study Philosophy, Politics, and Economics at Oxford University. Reich subsequently earned a J.D. from Yale Law School, where he was an editor of the Yale Law Journal. At Yale, he was classmates with Bill Clinton, Hillary Clinton, and Richard Blumenthal. He first met Bill Clinton when they both were Rhodes Scholars at Oxford.
He is nobody’s fool. But fools can be wrong, as Boudreaux and Perry point out. Drs. P and B’s response to Reich’s statement? “This trope is spectacularly wrong.”
And then they proceed methodically, carefully and persuasively to dismember Reich (figuratively, of course) by pointing out that while, on an inflation-adjusted basis, real wages have remained stagnant for years, the measure of inflation itself, the CPI, is suspect.
Secondly, the wage number doesn’t include the value of fringe benefits, which now total more than 30 percent of wages.
Thirdly, wages have been held down by the vast flow of immigrants into the country over the last thirty years.
Next, life expectancy as a measure of well-being has been growing. According to Drs. B and P an American born today will live five years longer than one born in 1980.
In addition, the good doctors point out that the real cost of life’s “necessities” – food at home, automobiles, clothing, footwear, household furnishings, cost of housing and utilities – has dropped from 53% of disposable income in 1950 to 32% today.
Conclude Boudreaux and Perry:
Despite assertions by progressives [like Reich] who complain about stagnant wages, inequality and the (always) disappearing middle class, middle-class Americans have more buying power than ever before. They live longer lives and have much greater access to the services and consumer products bought by billionaires.
Isn’t that refreshing? See why I like them?