9/15/2016
By Charles Payne, CEO & Principal Analyst

The economic dilemma of left-behind Americans is driving the presidential election, but could it create near-term fixes that become longer-term problems?

Much has been made about the shrinking middle class but there is more to this story. When we hear ‘shrinking middle class', we think people have fallen out of the middle class, but the fact is that most households moved into a higher income bracket during the past few decades while low-income households declined. 

Higher-Income households as a total percentage of income earners climbed from 8.1% to 26.4%, up 225% since 1967.  The problem is 41.5% of households are stuck in the middle while 32.1% have lower incomes, which is the source of resentment and anxiety. 

If you’re part of the 73.6% of households, stuck in the middle to lower brackets, you are watching the prosperity train leaving the station and you’re not on it.  

Making matters worse, incomes have only just begun to rebound recently, leaving so many folks with bitter feelings over being stuck for so long.  The basic questions as follows:

1. Is economic advancement a right?
2. How can we make steady wage growth a sustained part of the American dream?

Obviously, higher wages aren’t a right, but we know the government will continue to push business, and to use policy and the tax code to put more money into the pockets of folks.  From a higher minimum wage to paid maternity leave, workers are getting more promises, which might relieve some anxieties; it also undermines the ability of businesses to make profits and investments needed to turn the economic wheel of the nation.

The nation’s voters must be very careful not to fall into the mindset that the government should be given more power to force higher incomes.  Moreover, greenlighting the government to spend money it doesn’t have may appease the frustrations of millions. However, the higher debt at some point will crush everyone’s hopes and dreams.

Politicians must not lose faith in the notion that a rising tide lifts all boats naturally; then again, I am not sure politicians on either side of the aisle believe that anymore.

Education is the Key

Then there’s education and there is simply no way around it. Education is critical and while there are a lot of great jobs going begging in construction and welding, and the local plumber who drives a Mercedes, the world has entered the knowledge economy and it pays big time.

Asian Americans understand this, and it’s making them extraordinarily rich.

Asian-Americans have been on a mission to attain higher education, putting them well ahead of other demographics has resulted in a massive advantage in household income.

To be sure, if it was only about education, then black Americans should earn more than Hispanics, but that’s not the case.  There are other factors from individual family values to community challenges; make no mistake, the big key to economic freedom now and in the future is education.

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Charles Payne
Wall Street Strategies

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