The Middle Class Continues Its Disappearing Act

In case you haven't been keeping up with the fortunes of the fortunate, the private jet business is booming. In the first quarter of this year, shipments of private jets were up 41 percent. It seems that servicing America's elite is a thriving niche. There are so many new mega-yachts that owners can't keep them staffed, says the New York Observer.

Now, back on Earth, let's look at how the rest of us are doing. Hmm. Not so well. Even for those in steady jobs, there is a creeping sense of instability, a generalized disquiet and unspoken worry that sits on one's shoulders adding drag to the day.

Packaged in this malaise is the spike in oil prices and what that will mean for gas prices and every other thing we buy, the bottoming out of the housing market, companies announcing huge layoffs, and rises in food and health insurance costs outpacing salaries and wages.

This volatility has led to a shift in how we see ourselves. "Vulnerable" is probably the best descriptor. Our thoughts turn to hunkering down rather than plans for the future.

But what makes this coming decline in economic security different from the one visited upon American families in the 1970s, for example, is that we are much less well-positioned to withstand the financial buffeting. The work of Harvard law professor Elizabeth Warren indicates there is a coming collapse of the middle class and she can prove it with a raft of scary statistics and charts.

Warren says we are moving toward a two-class rather than a three-class society, where there is a somewhat larger upper class made up of the financially comfortable and then there is the rest of America, people who are "constantly living on the edge of a cliff." These are families who might appear to earn a decent income but they enjoy none of the financial security that we normally associate with middle-class status.

Warren compares the median American family of 1970 with that of 2003. She unpacks why our savings rate has dropped to zero from a rather healthy 11 percent of take-home pay in 1970, even as the family added Mom as a breadwinner.

Typically, blame for this lands on families themselves. They're spending themselves into penury by buying designer clothes for their kids and indulging in $4 lattes, say social commentators.

Not so, Warren counters. She says that Americans are actually spending far less in inflation-adjusted dollars for things like clothes and food, including eating out, than they did in 1970. What has substantially changed, Warren reports, is the cost of big-ticket, fixed expenses. So that even though the income of the median two-parent, two-child family is higher, because both parents are employed, the family has less income available to shore itself up against a rough patch.

Housing costs for a median-sized house (which has gotten modestly bigger since 1970 by adding either a second bathroom or a third bedroom but not both) have increased 76 percent. Health insurance costs are up 74 percent. Also up sharply are taxes (due to the second income), child care and car-related expenses. Americans keep a car more than two years longer than they did 30 years ago, but they now need two cars to get to two jobs.

These big, inflexible expenses cost the median family three-fourths of its two-earner income. In 1970 they cost half of the single breadwinner's.

We now live in a country where there is no financial margin for most families to fall back on in case someone gets sick or a job is lost. Life is far riskier.

Then add on an energy crisis and you can almost hear the foundation cracking.

Sen. Bernie Sanders, I-Vermont, has received hundreds of e-mails from Americans who suddenly have found themselves in desperate financial straits. He's been reading their plaintive stories on the Senate floor. How they were middle class but are no longer.

I fear that Warren's collapse has begun.