The Squeezing Of America's Middle Class

The idea of a thriving middle class has always been at the heart of the American dream. The concept really took off in the wake of World War II, when the GI Bill started helping everyday Americans pay for college or vocational education and take out loans to buy homes.

By the 1950s, TV shows like "Leave It to Beaver" were presenting an idealized picture of middle-class life. Dad worked, Mom took care of the kids, and there wasn't much talk about how they'd pay the bills.

But today the American middle class is struggling.

"It seems as if health care, retirement security, being able to pay for kids' college, being able to hold on to and afford a home are real sources of anxiety for middle-class Americans today," Jacob Hacker, a professor of political science at Yale University, told Sunday Morning correspondent Rita Braver.

Hacker, an author of a new book that focuses on problems facing America's middle class, says the middle class is more of a symbol than a concrete definition.

"I think the symbol is people who are not rich, who have to work hard, usually both parents are working," he said. "They probably have children, that's sort of the image that we have. It's a hard-working middle-class family with kids, making $60,000 to $80,000 a year and feeling really strained economically."

Case in point: Jan and Karen Seidler of Youngstown, Ohio:

Together, the Seidlers make about $80,000 a year before taxes. It's a second marriage for both and they have four kids. Two sons are still in college, which costs the family $45,000 a year. The Seidlers pay for the boys' living expenses but both sons are taking out loans for tuition. Karen Seidler said her parents could afford to send her to college but she is having trouble paying for her children's education.

"I can't, and especially having two at the same time, it's impossible to pay for both of their tuitions and then keep up with all the other bills," she said.

Her job as a respiratory therapist at a local hospital does provide some occasional raises.

"But the 3 percent that we received in September was, between the groceries going up and our health care out-of-pocket costs [going up], we're not really getting ahead," she said.

And like many other Americans, the Seidlers recently faced a downturn in earnings. Jan Seidler now runs the Youngstown Community Improvement Corporation. But he landed his current job only last year, after losing his previous position as a sales director at a hospital. He was unemployed for seven months. They dipped into their savings and now worry what will happen if there's another emergency.

All across the country, middle class Americans are beginning to wonder whether they'll ever have the kind of economic security they thought hard work would bring them. A major reason is that the middle class share of the American Pie has shrunk in recent years.

As executive compensation skyrocketed from 2003 to 2004, the average after-tax income for the richest 1 percent of U.S. households went up almost 20 percent, while after-tax incomes for the middle fifth of the nation — the middle of the middle class — went up only 3.6 percent.

Looking back 25 years — starting in 1979 — the contrast is even greater. The top one percent saw a whopping 176 percent jump, while the middle fifth of Americans saw only a 21 percent rise. That's a big difference, but although 21 percent still seems high, Hacker says it's not high enough.

"We know that the cost of healthcare over that period has quadrupled or gotten even bigger than that," he said. "We know that the cost of housing has gone way up. We know that the cost of college tuition has gone through the roof. The fact is that being middle class means spending a lot more money than it used to. But people don't have a whole lot more money to spend then they used to."

Democrats in Congress have focused on the middle class squeeze. In the Democrats' State of the Union response, Senator Jim Webb of Virginia said the middle class is "losing its place at the table."

The middle class squeeze is a becoming a rallying cry for Democrats on the presidential campaign trail:

"And as our economy changes, let's be the generation that ensures our nation's workers are sharing in our prosperity," Sen. Barack Obama (D-Ill.) said when addressing a crowd.

"The leadership here in Washington seems to ignore the middle class and hardworking families across our country," Sen. Hilary Clinton (D-NY) said in a speech.

In fact a new study shows that in 2005, the top 10 percent of Americans collected almost half of all reported income in this country. This is their biggest share since 1928.

Nonetheless, some scholars say that middle class Americans still have plenty to cheer about.

"It's time to look and sit there and say, you know, 'Is the middle class really, really that bad off?'" said Rea Hederman, a senior policy analyst with the Heritage Foundation. "And I think, you know, some of the data with home ownership, the access to amenities such as DVD players and iPods, the consumption level, the things that the American middle class is able to afford and buy, I think indicates that maybe they're not as bad off as we think."

Hederman says that the economy is looking bright, with unemployment at 4.5 percent and 1.7 million new jobs added in 2006. But he says average Americans workers are still feeling the affects of the 2001 recession.

"Wage gains have been a little slower at improving to the middle class, but they are arriving now," Hederman said. "And so I think, you know, in a few years, I think American families will feel much better off than they do today."

A CBS News poll conducted for Sunday Morning this past week finds that almost 60 percent of Americans think that life for the middle class has gotten worse in the past ten years. Almost half of those who identified themselves as middle class are concerned about having enough money to pay for major expenses like health care, tuition, buying a home and retirement. According to the poll, only 19 percent of middle class Americans feel they are getting ahead in life.

Like many of the folks who responded to our poll, Jerry and Sherry Stanley of Rio Vista, Tex., consider themselves solidly middle class. Their pre-tax income is more than $70,000 a year. He is a police officer and she is a licensed practical nurse. There are some simple, practical items on their current shopping wish list.

"We want a new bed — mattress for our bed. Of course the refrigerator, we had that when I was in college back there," Jerry Stanley said. "We're just waiting for it to go out. We're gonna have to buy that — buy a new one of them."

If they were forced to pay a $1,000 bill right away, the Stanleys admit it would be difficult.

"Would have a little problem — we could do it, but we'd have to cut out something else," Jerry Stanley said.

Their life is all about economy. They live in the country where land is less expensive. Sherry's parents, who live nearby, can watch 12-year-old Jacob and 9-year-old Sarah after school. But there are trade offs: Jerry works in Dallas which is 60 miles away.

"The gas is outrageous. I spend probably $600-700 a month on gas," he said.

And Jerry Stanley's recent shoulder surgery took a serious bite out of their budget. They racked up close to $6,000 in medical bills. The Stanleys say they thought things would be a little easier at this point in life.

"Middle class, you know, we should be able to afford a few luxuries, not many, but you know, be able to get to do a few things, and that should be middle class," Jerry Stanley said.

So what could ease the burden on middle class families?

"Our economy has been the envy of the world," Hederman said. "You know, if we increase levels of regulation, if we increase taxes, you know we'll make it harder for American businesses to expand. We'll lower the level of investment in the economy, which will mean fewer jobs."

Hederman and many Republicans agree that health care and college costs are eroding a lot of middle class budgets. A college degree is now seen as an important ticket for entering the middle class and average tuitions are increasing about 8 percent a year. President George W. Bush has taken note of middle class anxiety:

"I know some of our citizens worry about the fact that our dynamic economy is leaving working people behind," Mr. Bush said in a speech. "The fact is that income inequality is real; it's been rising for more than 25 years."

But most Republicans vehemently disagree with those like Hacker, who wants to help the middle class by rolling back the President's tax cuts for wealthy Americans.

"Most Americans aren't in favor of the very, very top-heavy tax cuts that we've had in the last few years that have really given almost all of their benefits to those at the very top," Hacker said. "And it's certainly the case that we need to think about new ways to go forward with programs."

So the Seidlers are paying close attention to the 2008 presidential campaign.

"What will they do to the help the 'common man,' if you will?" Jan Seidler said. "There is a middle class out here, even though I think the gap is getting wider and it is more difficult to make ends meet."

And one thing everyone seems to agree on is that even if the days of "Ozzie and Harriet" are long gone, the concept of the middle class is a vital part of the American dream. But many fear it is dissipating.

"Well, vanishing is too strong a word," Hacker said. "But I think that the American middle class — the idea that if you work hard, you play by the rules, you're gonna be economically secure and you'll have the opportunity to rise above the station your parents occupied — that dream is in danger."