Hillary Clinton is coming under social media fire for a clothing choice she made two months ago. The unassuming tweed jacket she had on during an April speech about income inequality didn’t make any sort of splash that day, or even that month. But now it’s all over the news, after a New York Post article about her campaign’s fashion choices valued that particular Giorgio Armani jacket at $12,495.

.@HillaryClinton wears $12,000 Armani jacket while ‘fighting’ for income equality: https://t.co/7QL3WF7kci pic.twitter.com/QQ4nEu8cW3

— BULLETT Media (@BULLETTMedia) June 7, 2016

According to the New York Post, her stylists have recently aimed for more simplistic outfits, trying not to continue Clinton’s previous trend of wearing brightly colored pantsuits. The idea, apparently, was that a more minimalist approach would draw attention away from Clinton’s clothes, and allow her words to be the focus of discussion. The goal was for people to not talk about her clothes–which is impossible. Hillary Clinton can’t afford to wear the same thing every day, like Trump or Sanders. She has to think about what she wears more than her counterparts because no matter what, it will be a subject of discussion.

This back-to-basics plan may have backfired, as Clinton went from a “Pantsuit Peggy” to an “Armani Alicia.” “Veep” fans might be reminded of Selina Meyer’s attempt to stand on a wooden crate to appear down-to-earth, only to learn that it was reinforced with steel and cost $1,200. But why do we reject expensive items like an Armani jacket? When we criticize wealthy people for making exorbitant purchases, we’re mad at them for having money. Would we prefer they hoard their money like a dragon, not turning their payment into paychecks for the people they purchase from? Is it not enough that Clinton donates hundreds millions of dollars every year? You can be mad at Clinton for any of her policy decisions or Senate votes that you disagree with, but throwing shade her way for buying a jacket is a senseless critique.

While we do know that Clinton’s campaign is spending a lot of money to dress one woman, we don’t know how much she paid for the jacket, or if she paid for it at all. Clinton might have been offered this jacket from a representative at Armani, Clinton’s buyer may have cut a wholesale deal on the jacket, or maybe Hill walked into Bergdorf Goodman, slapped 120 Benjamins on the table, and wore the damn jacket home. Regardless, the $12,000 figure is exorbitant and eye-catching, which is why that’s the number in every story about “Hillary the hypocrite.” But does wearing an expensive jacket invalidate your economic plan? Does having a pricy wardrobe mean you can’t care about bolstering the American middle class?

The answer to these questions is of course not. It isn’t hypocritical for a wealthy person wearing expensive clothes to think there should be fewer Americans living in poverty. The Bernie Sanders brag about not having money doesn’t make him any more suited to shape policy on taxes. You don’t need to be middle class to help the middle class. You have to be smart to help the middle class.

Tackling income inequality doesn’t involve slapping millionaires across the face, putting limits on their credit cards, and shutting down Giorgio Armani, Bugatti, and Sotheby’s. It involves creating a set of laws designed to raise wages across the country and end corporate tax loopholes. If the plan is solid, it doesn’t matter how you dress it up.

Sean Simon

Sean Simon is an Editorial News Senior Fellow at Law Street, and a senior at The George Washington University, studying Communications and Psychology. In his spare time, he loves exploring D.C. restaurants, solving crossword puzzles, and watching sad foreign films. Contact Sean at SSimon@LawStreetMedia.com.

The post Hillary’s $12,000 Jacket Doesn’t Mean Jacksh*t appeared first on Law Street.

The middle class has been many things to many people, but more evidence indicates that it continues to get smaller. Many view the middle class as a key component to the American identity and a driver of economic expansion over the past several decades. For politicians, it is the group they campaign on helping the most in an increasingly contentious election.

But the middle class is shrinking–according to a recent Pew Research Center report, for the first time since the 1970s the middle class does not make up the majority of people in the United States. Read on to see how the all-important cohort is changing with the times, how it developed, what is rising to fill its place, and why all of this matters to the United States going forward.

What does the Middle Class Look like Today?

The first step in evaluating the middle class is to determine who actually meets that qualification. Unfortunately, there is no universally-agreed upon definition for the middle class. To categorize Americans, experts have looked at a variety of factors including demographics, income level, wealth, what people consume, and even their personal aspirations, but no standard has been agreed upon.

The Pew Research Center study focused on income, defining the middle class as those who earn two-thirds to two times the median income in the United States. Pew then adjusts its statistics for household size, using a three-person household as the benchmark. Those that fall in the lower-income bracket have an adjusted household income of $31,000 dollars or less per year. Americans who makes more than $188,000 annually are considered upper-income. At the edges of these groups are two more distinctions, dubbed “lower-middle income” and “upper-middle income.” The lower-middle group is defined as earning between $31,000 and $42,000 per year. On the other side, the upper-middle group’s income ranges from $126,000 to $188,000 per year. Those in between that range make up the middle-class.

As the demographics of the United States have changed over the past 40 years, so has the makeup of the middle class. For one, the middle-class today is far more educated than ever before. The proportion of people with at least some college experience increased and those with a high school diploma or less plummetted. Looking at trends over the past several decades, college-educated adults are currently much more likely to be in upper-income than in the past. While college-educated adults managed to maintain their economic status, those with less education fared much worse. As Pew points out, “Among the various demographic groups examined, adults with no more than a high school diploma lost the most ground economically.”

The middle class has also gotten older, much like the country at large, with a smaller proportion of people 44 years of age and younger and a greater percentage of people 45 and older. The middle class has also diversified, with Asian, black, and Hispanic populations taking on a bigger percentage of the pie. In the same vein, foreign-born citizens’ share of the middle class has also increased. The following video looks at the difficulty in defining the middle class:

Why the Middle Matters

The definition of what the middle class is is contested, but so is whether or not the middle class even matters.

Inequality and the Middle Class

One of the most widely discussed trends in recent years is the growing wealth gap between upper-income Americans and the rest of the country. The problem is not necessarily that the rich are getting richer, but whether they are doing so disproportionately and at the expense of the economy and everyone else.

Some argue that inequality is the result of actions by the federal government, namely through decreasing tax rates for the wealthy starting during the Reagan administration. Others contend that the effects of tax decreases are not nearly enough to account for the massive disparity that exists today. While many debate the exact causes of this inequality, its effects on the middle-class are important.

Several studies show that developing a strong middle class is the ideal recipe for economic success. This is true for several reasons, which the Center for American progress outlined in a recent report. One is that a strong middle class means more access to education and subsequently better trained human capital. Second, a stronger middle class creates a larger and more stable market for demand, especially in relation to a small elite that can only consume so much. Third, a strong middle class is a hotbed for the next generation of innovators; job growth comes primarily from expanding small businesses, not large corporations. Finally, a powerful middle class demands the necessary political and social goods required to improve an economy–from infrastructure to fair regulations that may be overlooked when politicians cater only to a small elite.

The Middle Class in Politics

In light of this growing inequality, it’s important to ask: does the middle class still matter? While terminology on the campaign trail may be changing, the middle class as an issue and the middle class as a group remain at the heart of American politics. Politicians from both parties have made courting the middle class essential to their electoral success–every 2016 candidate from Bernie Sanders to Rand Paul is working for the support of this elusive group. The question then is why, given that people with higher incomes are more likely to vote than those with lower incomes and the middle class is shrinking. The real reason why the middle class seemingly gets such an out-sized share of attention may have to do with how it formed and what it means to American ideals.

Origins of the American Class System

In the United States there originally existed two main groups of people, the proverbial haves and have-nots, an entrenched elite and everyone else. Beginning in the 19th century, however, this began to change as members of the lower class began to split into two separate spheres. In one sphere was the traditional manual laborer, or the working class. In the other was a new group, which would become the middle class. While manual workers moved from the farm into the factories, the burgeoning middle class worked white-collar jobs as clerks and small business owners.

In the process, these middle-class workers became better educated and skilled, which allowed them to rely more on ability and less on social networks. Thus, they were able to develop an individual identity while the working class was not. Additionally, they no longer had to rely on large social networks to achieve significant gains, which the working class did through means such as unions and strikes. Along with severing close community ties, the developing middle class also began buying homes, experienced shifts in gender norms, and managed to provide a better education for their children. This group, along with the working class, experienced a huge boom following the end of WWII. However, like any rush, it was short-lived and beginning in the 1970s the middle class began to stagnate.

Rise of the Margins

What started as stagnation has eventually led to decline. Since 1971, the middle class has shrunk from 61 percent of the population in 1971 to 50 percent this year. This decline has been gradual with no single defining moment. The people exiting the middle class, however, had to go somewhere and coinciding with this group’s reduction is a rise in people at the margins, in the low and high-income brackets. According to the Pew Research Center study, the percentage of Americans living in the lower income bracket rose from 16 percent in 1970 to 20 percent in 2015, the higher income group rose from 4 to 9 percent. While these two groups have grown at similar rates the amount of national income going to the upper income group has increased dramatically more, from 29 percent in 1970 to 49 percent in 2015. The video below highlights the plight of the middle class:

Aside from shrinking, the middle class has lost a significant amount of its wealth. Since 2000, this group has lost 4 percent of its median income. Additionally, due in large part to the housing-related effects of the recession, the wealth of the middle class has dropped an additional 28 percent. Those among the middle class who saw the biggest losses since the 1970s were Hispanics, people with only high school diplomas, young adults, and men. However, the changes within this cohort were not bad for everyone, as the elderly, women, blacks, whites, and married couples saw their positions improve.

Social Mobility

The changes within and outside of the middle class have not been the same for everyone. The main concern, however, is not so much whether you are in the middle class now, but whether can you reach or even surpass it. In the United States there has long existed the notion that through hard work, education, and possibly luck you can move up the class ladder; this concept is known as social mobility. More exactly, social mobility is the “movement of individuals, families, or groups through a system of social hierarchy or stratification.” If a person changes positions, typically by switching jobs, but does not change their class, that’s called horizontal mobility. If the changing role also leads to a change in class, either up or down, it’s vertical mobility. While the belief in social mobility remains strong, how realistic is it in the United States today?

Unfortunately, a recent study paints a troubling picture. As the Atlantic notes, the study found that roughly one-half of parental income advantage is passed on to children. The impact actually increases as people get wealthier, growing to two-thirds. What this means is that if someone has rich parents he or she is much more likely to be financially successful as well. This effect is greater for men and married couples than women and single people. Put simply, as the middle class is shrinking, the chances of improving one’s economic status also decreases.

Conclusion

While politicians continue to focus on helping middle-class voters, the number of people who fit that description, as well as their wealth and income, continue to shrink. Exactly what is driving this decline remains a subject of debate, but most argue that it is a combination of factors. The middle-class has been a culturally and economically important group for the United States for over a century, but as it shrinks its significance may fade. Recent economic changes identified by the Pew Research Center report highlight the importance of education to the American economy and the middle class. While people with college degrees maintain their economic status, those with less education have not fared nearly as well.

While the two major parties have debated the best course of action to take in fixing the middle as it has declined since the early 1970s, it is hard to argue that the middle does not matter. Not only has it been shown to be the engine of a growing and prosperous economy but it increasingly symbolizes the nation as a whole. Perhaps it would be prudent to address the challenges facing this all-important American bedrock before it is gone.

Resources

Primary

Pew Research Center: The American Middle Class is Losing Ground

Additional

Education Action: Social Class in the United States A Brief History

The Atlantic: America is Even Less Socially Mobile Than Most Economists Thought

CNN Money: What is middle class, anyway?

Pacific Standard: The IMF Confirms That ‘Trickle Down’ Economics Is, Indeed, a Joke

Center for American Progress: Middle-Class Series

New York Times: Middle Class is Disappearing, at Least from Vocabulary of Possible 2016 Contenders

Al Jazeera America: Most Americans Don’t Vote in Elections

The Atlantic: 60 Years of American Economic History, Told in 1 Graph

Encyclopedia Britannica: Social Mobility

NPR: The Middle-Class Took Off 100 years Ago…Thanks to Henry Ford?

Encyclopedia Britannica: Social Class

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Michael Sliwinski

Michael Sliwinski (@MoneyMike4289) is a 2011 graduate of Ohio University in Athens with a Bachelor’s in History, as well as a 2014 graduate of the University of Georgia with a Master’s in International Policy. In his free time he enjoys writing, reading, and outdoor activites, particularly basketball. Contact Michael at staff@LawStreetMedia.com.

The post The Middle Class is Shrinking: Why Does it Matter? appeared first on Law Street.

The ideal portrait of a middle class household in the United States usually consists of a steady income, a sizable house, a few cars, yearly family vacations, and weekend outings. This image is rooted in the stereotypical family of the 1950s–a nuclear family residing in the suburbs. Until recently, being middle class in the United States was still reminiscent of that post-war generation of American families. But things have changed, and dramatically so. The middle class is shrinking rapidly, with more people moving down the income ladder. Read on to learn more about the status of the middle class in America and the reasons for its decline.

How to Define the Middle Class

There is no universal definition of middle class, but households that make enough money to live comfortably, take vacations, indulge in entertainment, and save for retirement and college funds can be broadly considered to fit the bill. However, the description of “middle class” can include a broad range of figures, depending on the chosen measurement.

The most common measure used to define middle class is income. The New York Times  has chosen 50 percent above the poverty level ($35,000) for a family of four as the lowest threshold and $100,000 as the highest income for a middle class family. Pew Research Center presented middle class as households ranging from those who make two-thirds ($40,667) to twice ($122,000) the median income. The U.S. Department of Commerce gives a more narrow range, from $50,800 to $122,000. Meanwhile, the U.S. Census Bureau considers middle class families to be those who fall between $20,600 and $102,000.

Other possible measurements could include occupation, education, social values, or some combination of the above. In addition, regional cost of living is often taken into account when categorizing American households. Interestingly, those who make less than $20,000 or more than $150,000 a year still sometimes consider themselves a part of the American middle class depending on where they live and the expenses they have. Essentially, the cohort is almost impossible to define, as each household has different needs. While some can manage to save for retirement on $20,000 a year, other families that may have an income over $100,000 have to pay larger medical or college bills, resulting in zero savings.

How is the American middle class changing?

The U.S. Census Bureau started to track household incomes in 1967. With some ups and downs, the overall income levels tended to increase over the earlier decades. However, starting in 2010 the American middle class has begun to shrink. As of now, 61 percent of Americans live paycheck to paycheck, 36 percent don’t contribute anything to retirement, and more than 40 percent work in low-paying jobs in the retail and service sectors.

People ages 30 to 44 are less likely to be middle class, while those who are 65 years and older are more likely to be middle or upper-middle class. As many baby boomers are working past their retirement age, and most of them receive Medicaid and Social Security benefits, households containing those who are 65 years and older are the fastest growing share of the contemporary middle class. The number of adults in middle class households decreased from 61 percent in 1970 to 51 percent in 2013. At the same time, the number of adults who now live in upper-income households has gone up from 14 percent in 1970 to 20 percent in 2013. The share of younger adults, ages 18 to 29, who live in middle class households has fallen dramatically, with more of them moving to the lower class due to staggering unemployment rates.

In addition, family status is an important factor in association with income distribution among the American population. Two-adult households are more likely to be upper-middle class due to the fact that both adults are working, thus increasing the overall family wealth. One-adult households are disproportionately lower income for precisely the same reason. The traditional vision of American middle class families–two adults and children–is now on the decline, constituting only a quarter of middle class households. Some of them surely increased their income, moving to the upper-middle class, probably due to the increased number of women in the workforce.

White Americans are more likely than black Americans and Hispanics to live in middle- to upper-income families. In 2013, half of Black households and 43 percent of Hispanic households were lower income.

Location wise, the number of middle class households has decreased in the Northeast, especially in such states as Connecticut, Massachusetts, and New Jersey.

Overall, the dynamics of the middle class in America are changing. In 1967, 53 percent of households were middle class families; in 2010 that share decreased to 43 percent, with some people moving up or down the income ladder.

Why is the American middle class changing?

The middle class in the United States is shrinking for a broad range of reasons that collectively influence the changing dynamics of middle class membership.

The Great Recession 

First and foremost, the Great Recession of 2008 resulted in lower incomes, high unemployment rates, and increased numbers of home foreclosures. It’s estimated that the median net worth (the amount by which assets exceed liabilities) was at $120,600 in 2007; after the recession this number dropped to $77,300. Due to long-term stagnation in wages, median household income has decreased from $56,080 in 1999 to $51,017 in 2012. Simply put, after 2008, many middle class families became lower-income families.

Creation of Low-Income and Part-Time Jobs 

In the aftermath of the 2008 housing market collapse, many middle-income jobs were lost. In response, low-income jobs were created, adding little wealth to American households. Employment in low-skill jobs increased 110 percent between 1980 and 2009, while available middle-skill jobs have risen only 46 percent. At the same time, more and more Americans are working part time as they cannot obtain full-time employment. In 2012, more than 2.5 million Americans were working part time, the highest number since 1993. Clearly, proliferation of low-income and part-time jobs resulted in the overall drop of middle class incomes. Watch the video below to learn more about low-paying jobs in the United States.

The Growing Income Gap

But not all middle class families moved down the income ladder. On the contrary, some households’ incomes skyrocketed instead. The gap between high-income Americans and everybody else reached its apex during the years following the Great Recession. Simply put, the wealth of upper-middle-class households has increased, while middle- and lower-class families’ incomes have declined or didn’t change at all. The upper class is earning roughly 50 percent of the overall national income and is holding 83 percent of all U.S. stocks. At the same time, lower- and middle class families hold only seven percent of the liquid financial assets, and own less than one percent of the country’s wealth.

While the number of millionaires in the United States has increased 16 percent since 2009, the number of children who live in poverty accounted for 21 percent of all children in 2010, the highest percentage in the last 20 years. The growing income gap is especially evident as the wealth of middle class families has diminished, while upper class families experienced significant boosts in their earnings. Watch the video below to learn more about income gap in the United States.

Shift of Jobs Overseas

As multinational corporations are looking to minimize expenses while maximizing  profits, they are shifting their operations overseas. This prompts significant reductions in employment opportunities inside the country as corporations are hiring less in the United States and more in the less-developed parts of the globe. The reason for this is very simple: there are fewer regulations and labor is cheaper. In addition, American companies don’t have to adhere to minimum-wage requirements or pay benefits to the overseas workers, significantly reducing their expenses. It’s estimated that from 1999 to 2008, American companies hired 2.2 million people in other countries, while scrapping 2.1 million positions inside the United States. Not only is it more expensive and difficult to conduct business in the U.S., it’s also much cheaper and more convenient to run a large company abroad.

Increasing Use of Technology in the Workplace

Not only do middle class Americans have to compete with overseas workers, but now they have to compete with computers and machinery. As the use of technology in the workplace rapidly grows, more and more middle class jobs disappear. Now, computers are doing the same jobs that humans used to do decades ago, depleting middle class employment opportunities. Essentially, technology is replacing human labor as computers can complete tasks faster, cheaper, and with more accuracy than human employees. Starting in 2010, the number of people employed as telephone operators, word processors, and typists has declined 63 percent. The share of travel agents has decreased 46 percent, while the number of bookkeepers has plunged 26 percent. In addition, such jobs as check-out cashiers, bank tellers, ticket agents, and secretaries are on the decline, as many businesses use computers instead of employing workers.

One of the recent examples of job technology taking over is “bookBots,” an innovative project at North Carolina State University. Instead of human librarians who retrieve books as students request them, robots are programmed to find requested books, now located within 18,000 metal bins, instead of traditional library shelves. Thus, many middle class jobs are already unavailable to humans due to the reduced costs associated with computerized services and ease of use for consumers. Many professions could become completely extinct due to technological advances and innovative approaches in the workplace.

Decline of Labor Unions

Besides the fact that the American economy is shifting overseas and some professions are going extinct due to the increased use of technology, fewer workers inside the United States are earning union salaries. Historically, labor unions were the most influential advocates for workers’ rights, and unionized workers were the backbone of the American middle class. Now, fewer jobs are unionized, prompting a large-scale decline in the influence and power of American labor unions. In 1983, one in five workers was part of a union; today this is true of only one in ten workers. Unionized workers’ median monthly salary is $10,000 more than that of their non-unionized counterparts. With the decline in labor unions, fewer American workers are earning middle class salaries. Watch the video below to learn more about labor unions and their importance for the middle class.

Increases in ‘Out-of-Pocket’ Expenses and Rising Debt

Middle class households are those families that, besides living comfortably, are able to save money. Many middle class Americans have to pay their college tuition without financial assistance, which is available to lower-income families only. Health insurance is another “out-of-pocket” expense that can be rather costly, as only those who have very low or no income are eligible for government assistance. In 2001, two thirds of American middle class families were able to accumulate savings; in 2010, less than 55 percent were saving money for retirement or their kids’ education.

A large portion of middle class income is going toward paying off student loans and maintaining medical coverage rendering it difficult to save for retirement or to buy a house. Some middle class households are deep in debt. In 1992, the median level of debt for middle class families was $32,200; by 2010 it increased 161 percent, reaching $84,000. The economic pressures that middle class households face today result in downward mobility and accumulation of debt.

Restored Payroll Tax Rate

In 2009, President Obama introduced a temporary measure to stimulate the economy by cutting the payroll tax, which finances Social Security and Medicaid by taking a percentage of income from both employees and employers. Before 2009, the payroll tax constituted 6.2 percent of income; after the changes, middle class Americans received a two-percentage-point break, resulting in a payroll tax of 4.2 percent instead. In 2013, the payroll tax cut expired and middle class households began to receive $84 less in their monthly paychecks, which is around $1,000 in yearly tax withholdings. As lower- and middle class families were the ones who enjoyed the two-percentage-point break the most, they are now the ones who are suffering the most.

Higher Food Prices

Food prices have increased globally and in the United States. On average, there’s been a 6.4 percent hike on most food products, while the price of some essentials such as meat, milk, and eggs is 16-22 percent higher than in previous years. Nevertheless, the income of middle class families is staying the same, constraining food shopping for many middle class households. The median income is increasing only one percent a year, making it difficult to keep up with rising food prices without moving down the income ladder.

Conclusion

The dynamics of the middle class in the United States are changing. Some of the above reasons for the middle class downturn are more serious than others, but all are collectively responsible for the decline in its traditional form. At the same time, technological advances in the workplace are inevitable and most likely  will continue to erase traditional service jobs and create new occupations, shifting the middle class around.

 Resources

Primary

Pew Research Center: America’s ‘Middle’ Holds Its Ground After the Great Recession

Additional

Sen. Bernie Sanders: The Middle Class in America is Radically Shrinking. Here Are the Stats to Prove it

The New York Times: The Shrinking American Middle Class

CBS Evening News: Food Prices Soar as Income Stands Still

CNN Money: America’s Middle Class: Poorer Than You Think

CNN Money: America’s Disappearing Middle Class

DailyNews: Can Smart Machines Take Your Job?

Forbes: The U.S. Middle Class is Turning Proletarian

Huffington Post: Four Reasons It’s So Hard For the Middle Class to Buy a House

The New York Times: Middle Class Shrinks Further as More Fall Out Instead of Climbing Up

CNN Money: What Happens if the Payroll Tax Cut Expires

Pew Research Center: Are Americans Ready For Obama’s ‘Middle Class’ Populism?

PBS Frontline: The State of America’s Middle Class in Eight Charts

TIME: A Brief History of the Middle Class

USA Today: Middle Class a Matter of Income, Attitude

Valeriya Metla

Valeriya Metla is a young professional, passionate about international relations, immigration issues, and social and criminal justice. She holds two Bachelor Degrees in regional studies and international criminal justice. Contact Valeriya at staff@LawStreetMedia.com.

The post The Changing Dynamics of the American Middle Class appeared first on Law Street.

President Obama gave his second-to-last State of the Union address last night, and it’s being lauded as a great one. He laid out a long to-do list, including addressing net neutrality, his education plan, a minimum wage hike, a tax code overhaul, and a fight against ISIS, despite the fact that he enters this year having to stand against a Republican-controlled Congress. In fact, much of the speech seemed like a challenge to a Congress made up of the very people who have consistently tried to stall Obama’s polices for the last seven years. Whether or not they decide to play nice will be up to the Republicans.

The Republican response to the speech, of course, was rather negative. The main criticism seemed to be that Obama didn’t focus enough on the middle class. Rep. Cathy McMorris Rodgers (R-WA), who actually gave the Republican response to last year’s SOTU, commented:

You know, I was disappointed. I was disappointed that I didn’t hear more from the president as far as how we were going to help those middle-class families. I thought he painted a little rosy picture of how things are, at a time when people continue to see their wages actually shrink, take-home pay shrinking. Job opportunities are not enough.

That quote from McMorris Rodgers is pretty consistent with a lot of GOP responses to Obama’s SOTU speech last night–that he doesn’t understand the middle class and do enough to help the citizens who fall into that bracket. Most Democrats are insisting that the plans that Obama laid out–particularly those to give middle class families a tax break, as well as help ease the burden of college payments, are going to be great for these segment of the country.

As I sat here trying to work my way through all of the plans, all of the political rhetoric, all of the buzzwords that got thrown around last night, I had a realization. It’s not just that Democrats and Republicans can’t seem to agree on how to help the middle class. It might be that we can’t agree on what the “middle class” is. 

It sounds silly–we all know what the middle class is, right? It must be that chunk of the population between those in poverty, and those who live in mansions. Is it blue-collar workers, or white-collar workers, or a little bit of both? Or is it more of a heritage–are we middle class because of the values that are instilled in us? I honestly don’t know anymore.

What I do know is that pretty much everyone thinks they’re middle class. In a 2012 Gallup Poll, 42 percent of respondents said they were middle class. Another 13 percent said they were upper-middle class. Then another 31 percent said they were “working class,” which makes this entire thing even less clear, given that working class is sometimes viewed as middle class. Most importantly, there were a plurality of people in every income bracket from $30,000-$100,000 who defined themselves as “middle class.”

The concept of the middle class has long been hailed as a bedrock of American society, and I’m not saying that’s a bad thing. But I think it does make it incredibly difficult to design policies for the “middle class” because when you’re talking about well over half the population, one size doesn’t even fit most. What I, as a 20-something living in Washington D.C., need, is significantly different than what a family in Iowa needs, which is different than someone about to retire in California needs, even if we all make about the same amount and identify as “middle class.”

To bring this back to last night’s speech, it’s that very definition problem that makes it easy for both the Democrats and the Republicans to point to their plans and say “look, it’s for the middle class.” For example, Obama’s statement last night:

That’s why this Congress still needs to pass a law that makes sure a woman is paid the same as a man for doing the same work. Really. It’s 2015. It’s time.

To me, that sounds like a tangible thing that would help the middle class. Given that it’s now pretty close to the norm for both men and women, even those married and/or with families, to work, ensuring that they both get fair pay seems like it would help the middle class to me. But then the Republicans see that Obama is also proposing a tax hike on the richest Americans, and will argue that that’s going to slow job growth, so paying men and women equally isn’t helpful if neither of them can find a job. It’s a messy, cyclical argument that’s more about politics than actually trying to help the middle class, no matter who we may be. And that’s a shame.

Anneliese Mahoney

Anneliese Mahoney is Managing Editor at Law Street and a Connecticut transplant to Washington D.C. She has a Bachelor’s degree in International Affairs from the George Washington University, and a passion for law, politics, and social issues. Contact Anneliese at amahoney@LawStreetMedia.com.

The post SOTU All About the Middle Class, But Who Exactly is That? appeared first on Law Street.

“UUGGHH.” That’s how Minneapolis-based street artist Eric Rieger, aka Hottea, responded to the latest indication of gentrification in New York. One-ninety Bowery has stood the test of time. The imposing six-story limestone Renaissance Revival relic has long been a cultural landmark. Built in 1899, then Germania Bank of New York City serviced its surrounding community, “Little Germany” (Kleindeutschland), once the largest German-American–then-bourgeois–enclave in the country.

In 1966, long after the bank dissolved, photographer Jay Maisel bought the abandoned edifice and converted its facilities into the largest single-family home in New York City. That was until Fall 2014, when Maisel reluctantly sold his spacious dwelling to one of the most voracious real-estate developers swallowing up NYC properties today. RFR Holdings LLC bought the property for an undisclosed price in September, valued between $35 and 70 million, with plans to flip the building, marketing it as ideal for retailing at the base with condominiums above, and offices, or even an art gallery. 

190 Bowery, courtesy of erin williamson via Flickr.

Courtesy of erin williamson via Flickr.

Should we be surprised? With the New Museum a block away, a Whole Foods Market nearby, scores of luxury apartments, boutiques, and art galleries immediately South, it was only a matter of time before 190 Bowery succumbed to SoHo, the epicenter of loft living. RFR will be responsible for the “renovation” of the building’s cultural memory, of course; developers have already issued a rendering of the facade scrubbed clean of the layers of graffiti, on which artists including Keith Haring, COST, NEKST, Shepard Fairey, and others have made their marks for the last three decades. One-ninety Bowery is “the last remaining part of ‘old New York’,” lamented Hottea. “This building is so iconic… it’s been there for years. I think it reminds a lot of people of what New York used to be, and how that’s being taken away… UUGGHH. That’s all I can say. When is it going to stop?” But such is the normal arch of the gentrification narrative, 5 Pointz being a glaring example. We should, however, be concerned with the manner in which this process is taking place.

RFR Holdings LLC was founded in 1991 by Aby Rosen and Michael Fuchs, German-born real-estate tycoons who together own 71 properties globally. Over the last year, Rosen and Fuchs have spent $250 million on Manhattan land purchases, $500 million on office building acquisitions, and nearly $150 million on retail property–a spending spree to rival that of Quicken Loans founder Dan Gilbert who now owns most the real estate in downtown Detroit. Aside from the starkly different cities in which their properties are located, Gilbert’s Rock Ventures is an American-based firm, while RFR Holdings LLC has headquarters in New York and Frankfurt. “We can buy something more expensive because we have our own capital, plus European capital that looks for longer returns,” Rosen explained in a recent New York Times interview. “We don’t have to get in and out quickly, and having this long view allows us to be more aggressive.”

Aby Rosen, courtesy of Christopher Peterson via Wikimedia.

RFR’s acquisitions represent a broad trend of foreign investment in American real estate since the late 1980s. In lieu of escrow accounts in Swiss banks and securities in the Caribbean, which have come under intense international scrutiny, foreign investors have poured their money into global real estate, which can serve as a “convenient pied-à-terre, an investment hedge against a wobbly home currency,” according to New York Magazine, “or an insurance policy—a literal refuge if things go bad.” After the U.S. housing crisis from 2007 to 2010, property values in American cities plummeted, and while the U.S. economy has been recovering, they are still relatively “low” compared to cities around the world.

The market rate for luxury apartments in Hong Kong, for instance, is between $4,100 and $5,000 per square foot; in London the same properties are valued at $3,300 to $4,100. By comparison, Manhattan properties cost half that, ranging from about $2,100 to $2,500; alas–well out of reach for even upper middle-class inhabitants, yet quite attractive for transnational ultra-rich investors. Since 2008, roughly 30 percent of condo sales in Manhattan have been to overseas addresses, or through ambiguous entities like limited-liability corporations, such as RFR Holdings LLC, which often serve as middlemen for foreign investors. Over the last decade the majority of New York property sales have gone to investors in Russia or Saudi Arabia; over the last year, however, China has spent $22 billion on New York properties–72 percent more than they spent in 2013–claiming the lion’s share of foreign investment in American real estate. “The global elite,” according to Michael Stern, owner of JDS Development Group, “is basically looking for a safe-deposit box.”

Such gentrification on the global scale should not surprise us–it is a historical trend, and the redevelopment of 190 Bowery was inevitable. But there are dangers to this phenomenon, which reach further than the displacement of middle and working class communities, and erasure of their identity and culture. There is virtually no local market for premium properties in New York City. Urban properties as investments cease to be homes. Foreign investors lack vested interest in maintaining these properties primarily because they do not live there; the American city has effectively become a place of visitors, void of close community ties and stewardship. This hollow space is lifeless. Urban properties as investments are mostly uninhabited by their affluent proprietors; they either serve as vacation homes, or remain empty retainers of wealth. Meanwhile, middle-class homes let rooms to AirBnB, and subdivide apartments as room-shares marketed at exorbitant rates on Craigslist. We are experiencing the emergence of an absentee rentier class that not only augments our urban housing crisis; this urban real-estate bubble may threaten the systemic integrity of our economy.

What needs to change? Buyers of new construction in the city often qualify for significant tax abatements–a vestige of the neoliberal initiatives of the late 1970s and early 1980s designed to increase private investment and reverse the effects of urban crisis. Moreover, entities like RFR, based in Europe with an increasing presence in New York, have capitalized on liberal transnational financial regulations. American cities must update their zoning laws, with an eye to equitable development. New York no longer needs a mainline feed of private investment to remain viable. The effects of unfettered transnational capital currents erode the fabric of urban communities. If “UUGGHH” is not a lament, it is surely an expression of our impotence.

Ryan Purcell

Ryan D. Purcell holds an MA in American History from Rutgers University where he explored the intersection between hip hop graffiti writers and art collectives on the Lower East Side. His research is based on experience working with the Newark Public Arts Project and from tagging independently throughout New Jersey and New York. Contact Ryan at staff@LawStreetMedia.com.

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