Pharos-Tribune

November 28, 2013

BOHANON: The middle class in red and blue states

by Cecil Bohanon
Pharos-Tribune

---- — Recent census data indicates that although the total number of households in the United States increased between 2008 and 2011 the number reporting earned annual income of $35,000 to $100,000 actually decreased by 676,000. This is significant because it confirms the narrative of middle-class decline.

I have always thought that if middle-class decline is accompanied by a decline in households with lower income (less than $35,000) and an increase in upper-income households (more than $100,000) then hooray for middle-class decline. The national data, however, reveals an increased number of lower-income households (967,000) and an increased number of households with upper income (1,847,000). So the news is decidedly mixed.

To conservatives and libertarians the decline in the middle class is somewhat problematic — but we are not as apoplectic about the issue as progressives. To our more left-leaning friends the pulling apart of the income distribution is a disaster calling for massive government intervention. Those of us who are less than politically correct, however, say income distribution is kind of like the weather: It is of interest, but we suspect there is little that the government can do about it that is useful. Oh gee, I forgot: According to progressives we can “save the planet” from sure doom by installing windmills and solar panels everywhere — which will, they argue, also restore the middle class.

The census data is also parsed state by state. Indiana’s population has essentially been stagnant over this time frame. The data shows that the Hoosier state has lost 28,000 middle-income households. The good news, though, is that upper-income households have increased by 25,000 while lower-income household have only increased by 2,000. In my opinion this beats the national trend.

Interestingly, the red-state, mid-continental energy belt of North Dakota to Oklahoma has bucked the national trend and actually has seen a decline of 42,000 low-income households coupled with an increase of 13,000 middle-income households and an increase of 107,000 high-income households. Could it be that developing “evil” carbon energy reduces poverty and strengthens the middle class?

No state has a more clean-energy mandates than California. The state is a bastion of blue-state progressive politics with a public sector that raises revenue from a highly graduated income tax, tightly regulates business enterprise and offers the Left’s dream of government programs to help those in need.

The middle class and poor are said to need California-like policies to deliver economic “justice” — except that facts have a funny way of getting in the way of rhetoric. California’s middle-class household numbers declined by 72,000 while its upper-income households increased by 115,000 and lower-income households increased by 234,000. More rich folks, a lot more poor folks and a decline in those in the middle: Isn’t this what progressives hate?

Compare this with the biggest, reddest, most gun-toting, execution-driven, regulation-averse, low-tax, redneck state of Texas. The Lone Star state saw an increase of poor households of 57,000 along with an increase of middle-income households of 144,000 and an increase of 256,000 upper-income households. It seems the middle class thrives in a state where policies are ever so unenlightened.

Of course, state-level public policy is not the only factor that influences the growth or decline of households of particular income levels. But the anecdotal pattern is clear: The blue-state concern is less of a problem in the red states. Maybe limited government, low taxes and low-cost carbon-based-energy increase economic growth and lead to a more equitable distribution of income.

Cecil Bohanon, Ph.D., an adjunct scholar with the Indiana Policy Review Foundation, is a professor of economics at Ball State University.