The Solution To The Declining Middle Class: Destroy Fixed Costs And Debt

The solution to the erosion of the middle class lifestyle is to destroy debt and other fixed costs and eliminate self-sabotaging discretionary consumption.

Last week I covered the structural dynamics causing the decline of the middle class. In general, the costs of untradable services (healthcare, higher education, government) and the rot of financialization have increased while wages have stagnated. The Federal Reserve's "solution" was to make everyone who owned a house a speculator who could only keep even with rising costs by riding the asset bubbles higher and then extracting the "free money" generated by these bubbles before they popped.

The Decline of Small Business and the Middle Class
The Changing Nature of Middle Class Work
How the Middle Class Lifestyle Became Unaffordable
The Destabilizing Truth: Only the Wealthy Can Afford a Middle Class Lifestyle

Let's take two representative households to understand the decline of the middle class and the solution. Let's say both households earn $81,000 annually, virtually all from wages and salaries. This puts the family at around the 70% mark of U.S. households, just within the top 30%. (For context, the 2011 median household income was $50,054.)

This income is solidly middle class: not low enough to qualify for much in the way of government subsidies but not high enough to avoid prioritizing and trade-offs.

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