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The shrinking middle class, the shrinking American Dream

Why are so many people in the middle class struggling right now? Author Hedrick Smith discusses the events that hurt the middle class and what can be done to help it.

Who Stole the American Dream?

The middle class is at the forefront of this year's presidential election and for good reason.  Middle class prosperity is the greatest influence to the overall health of America's economy. Both candidates take every opportunity to address how they will strengthen the middle class now that so many of those households are struggling. But to understand how the middle class ended up in such a mess, you have to look to a long history of decline set in motion by social and political factors. Pulitzer-winning reporter Hedrick Smith explores this history in his new book, "Who Stole the American Dream?"

In the '70s, Smith says two things happened to hurt the middle class. First, wedge economics -- the wedge that split the middle class workers off from their share of American prosperity and from the profits of American companies.  Second, there was a tremendous power shift in Washington that has led to a "consistent policy tilt on behalf of corporations, on behalf of the corporate elite and the financial elite in this country."

Smith says we haven't been able to save the middle class because we've been doing a lot of things to hurt it.

"CEOs of companies thought it was their job to sustain and support the interests and balance the interests of the various stakeholders in the company, and that word 'stakeholders' is very important. It's not shareholders alone, but it's management, it's employees, it's suppliers, it's customers, it's the communities they lived in," he says. "As productivity in the American economy went up, so did the pay of the average person in America. That has not been true since 1973."

In his book, Smith discusses the shift from a pension system to the 401(k). He says it has been a disaster for middle class workers.

"You can't build a retirement system, you can't build a nest egg if you don't plunk the money away every year, but people can't do that. They can't discipline themselves. They're not smart about the market. There are people who have done well, but it's a small minority," he says. "That is one of the big thefts of the middle class dream. Hundreds of billions of dollars of annual expenditures have been taken off the company books and they've been put on the shoulders of individuals."

Smith says people need to organize in order to fix the broken systems that hurt the middle class. He says politicians have no choice but to pay attention to organized efforts and he believes there is going to be a change.

"Watch one day in particular -- August 28, 2013. That is the 50th anniversary of the The March on Washington [for Jobs and Freedom]. Right here on this program, I'm going to predict there's going to be another march on Washington," says Smith.

About the author

Tess Vigeland is the host of Marketplace Money, where she takes a deep dive into why we do what we do with our money.
Who Stole the American Dream?
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It is the uneducated $40,000 to $60,000 a year crowd that worries me the most; not the wealthy. You see, these people are running so scared that they will never find another job that pays them what they have conned their way into through "connections"...not skill, intelligence, or hard work. These people are cut-throat and will f--- over anyone who threatens their inflated earnings. I have run into so many idiots who make more then I do that seem hell bent on seeing me make $14 dollars an hour or less while they make $20 or more an hour when I'm more educated, more qualified, and more able then they are. They just "know somebody" or are "well-liked" yet stupid, lazy, and incompetent. Every job I have ever done in my life, the first person that wants me to know how many years they have been there is always the laziest and one of the highest paid. They never seem to be able to answer questions you would think they should have the answer too...they just reply all red-faced: "I've been here so and so many years!!! Oh, this company needs me because of 'what I know.' " Sooner or later, the under $14 an hour crowd is going to revolt against the $40,000 and up crowd who don't realize how good they have it.

I love the responses of the self-righteous. It's pat yourself on the back time, boys.

What a bunch of liberal nonsense. So people can't be trusted to save for their own retirement? We're talking about adults right? If anyone is to share blame, it's the bad public policy like social security that gives people the idea that they don't need to save since they've always got uncle sam watching their back.

People have been split from the share of the profits of companies? Those companies are owned by people by way of their 401k's.

What's really happened is that as the relatively smaller number of Americans have had their standard of living reduced, the standard of living for many more people around the world have had their standard of living improved. Their is a normalization of wages going on. Kind of an "equal pay for equal work" sorta thing. When the people of China emerged from the slumber of communism and re-entered the wrld labor force it brought down the price of labor relative to capital.

A lot of the post war prosperity can be attribited to the us being the last man standing. The greatest generation had destroyed our largest industrial competitors and others took themselves off line as they went socialist. The left the US to sell manufactured goods to the rest of the world.

@Smits1, You've been very fortunate to have - seemingly - had a long-time job, which has been stable, which not everyone has been so fortunate. MANY had similar jobs, and THOUGHT they were on a similar path to yours, when - suddenly - a Mitt Romney swooped in, raided their company's pension, stealing not only their job, but their future, in one fell swoop.

What SEEMS - to me, anyway - is to go back to the system which worked so well for Bill Clinton, which means slightly higher tax rates for the wealthy. Only that direction is going to help to stop the widening of the yawning gap between the Mitt Romney's of our Country, and the rest of us - the 98%.

Malarkey. If the American middle class lacks the basic discipline to save and the rudimentary knowledge to invest those savings, then shame on them. I've put away $2500 a year for 35 years (hardly an amount beyond the reach of a typical middle class family) and now have nearly $450K socked away for my upcoming retirement. The basic S&P 500 index fund I chose has compounded at just under 8.5% annually, hardly a heroic rate of return. I let my money work and paid attention to doing my job well, with no expectation that my employers (or my government!) would ever provide for me. Nothing special; just some basic discipline, a characteristic sadly lacking in millions of baby boomers.

Malarkey. If the American middle class lacks the basic discipline to save and the rudimentary knowledge to invest those savings, then shame on them. I've put away $2500 a year for 35 years (hardly an amount beyond the reach of a typical middle class family) and now have nearly $450K socked away for my upcoming retirement. The basic S&P 500 index fund I chose has compounded at just under 8.5% annually, hardly a heroic rate of return. I let my money work and paid attention to doing my job well, with no expectation that my employers (or my government!) would ever provide for me. Nothing special; just some basic discipline, a characteristic sadly lacking in millions of baby boomers.

I, Matthew Anderson, would like to take small issue with Mr. Smith. My Mother is the only African-American woman honored by the United Nations, the Netherlands, France and Germany for her work with children worldwide. She was the valedictorian of the largest Black High School in the world that saw First Lady Eleanor Roosevelt come to speak there in 1936. My father was the only African-American team member when Chuck Yeager broke the sound barrier. He was, four years later, the only Black member of the team of eleven to create the electronic computing device at Remington Rand in Minneapolis in 1951. Our family home has been recently foreclosed illegally by Wells Fargo and my attempts to correct this injustice have been met with "lawyering" opposition that utilizes arcane procedures to obfuscate my pro per attempts--and judges that are clearly in-line with the desires and dictates of the banking industry. Those "fake" forces even hired a "mole" writer to sabotage the efforts of Michael T. Pines and local activist "Harmony" Brown who have challenged their authority nationwide. Able to prove both broken chain of title and "fraud" (robo signing) our family home, legacy and the mechanism that was designated to assure support for an international children's library (Christopher and Dana Reeves and Mayor Daley of Chicago have been involved here) has been now occupied by bank maneuvered "occupants"s while I, an Illinois graduate with doctoral work at both Northwestern University and MIT, live in my car while awaiting the "Just Us" system to function for me, for the children and for fairness. It will take more than people gathering together to stop the banksters. I am Vice President of "San Diego Foreclosure Strategists Group" (619-931-9691) and San Diego media has given more attention to the rollout of "Crispy Cremes" than to foreclosure here--and my expertise at MIT was of all things political media. If the banks can so easily steal American history with impunity, the American people are lost. We are now entering a thousand years of socio/political darkness where rampant capital rules and the people's needs and wants are not even an afterthought. We African-Americans are especially sensitive to this, which is why you seldom if ever hear "God Bless America" coming from our lips. Mr. Smith, I contribute as a writer to Huffington Post and Yahoo and thus speak from your writer's perspective if but a little. For America's sake, I only wish that you were correct on this one!!! Stealing my family history is the theft of American history. Wells Fargo has done this with no legal right or legal title and will continue to do so as long as the profit motive bases their efforts. And most importantly, I am not the exception. If Syria is still controlled by an unruly oligarchy, do we actually believe that the grandaddy of modern oligarchy will be any easier to topple?

There won't be a march in August. Half the people will be busy blaming Republicans for the problems and half the people will be busy blaming the Democrats for the problems.

Half the people are the scapegoat for the other half, and vice versa.

It's the neatest arrangement ever developed by a dictatorship. Stalin and Hitler are watching enviously from Hell, crying: "Why didn't we think of this? We used a small group as a scapegoat, and when we killed off the small group, there wasn't anyone left to blame."

I am concerned about just what is the middle class. My wife and I used to consider ourselves middle class but now we feel that we are slipping and may no longer still be middle class. I don't think either candidate really knows just what the middle class consists of. Both have proposed extending the Bush era tax cuts for families with up to $250,000 a year income. Both seem to think that the middle class consists of families with incomes between $100,000 and $200,000 a year. Pardon me, but $100,000 a year is one hell of a lot of money to my wife and I. We make considerabley less and while we are not living in luxury we are getting by. The extension of the Bush era tax cuts doesn't mean a lot to us and if those making $100,000 to $200,000 a year desparately in need those tax cuts something is wrong. What is wrong is that a true middle class is disappearing and we are rapidly becoming a country with a two class system: the haves and have nots. The unwillingness of Obama to go to the trenches in ending the Bush era tax cuts has only purpetuated the economic difficulties we face. In reality, we all need to pay more in taxes and our government has to cut spending and thereby we can begin the long slow process of putting our country on sound financial ground.

Wow, if all this is true then a lot of Americans aren't aware of this and it explains a lot of things. He is right, nothing will change unless people become aware and organize to change it back to the way it should be for their own good. Otherwise the majority of people will continue to suffer while an elite minority get rich off them, and their blame for this will be misguided -- sounds just like what we've been hearing on the campaign trail being orchestrated by the Republican party.

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