Joseph Schumpeter wrote in 1942 about the “creative destruction” that arises from capitalism, entrepreneurism and innovation. The U.S. has faced the Industrial Revolution, the age of steam, steel and railways, the era of electrification and the automobile, the digital age and so on. We’re now in the AI era. In every prior case, innovation disrupted jobs and lifestyles, but our country was always propelled forward, creating more business and more value for people.
Schumpeter predicted that the rise of an “intellectual class” would lead to regulation and the decline of entrepreneurism. Mr. Sanders is proof that Schumpeter was right.
Earlier this year, the Journal editorial page told you about a study from the American Enterprise Institute’s Stephen Rose and Scott Winship that pushes back on that glum narrative. This week the Journal’s news department followed up with a front-page story highlighting that research, which demonstrates upward mobility in the U.S. is alive and kicking.
Messrs. Rose and Winship divided households into five categories—poor or near poor, lower middle class, core middle class, upper middle class and rich. Technically, the middle class has been getting smaller, but that’s only because more families have ascended the income ladder.
“We find that the ‘core’ middle class has shrunk—but so too has the share of Americans with income too low to reach the middle class,” the authors conclude. “The shrinking core middle class is due to a booming upper-middle class. Only the relatively worse-off parts of the middle class have shrunk—and by less than the upper-middle class has grown.”
In 1979 the upper middle class was 10% of all families. By 2024 it was 31%. Over the same period, the share of families with income below the core middle class declined from 54% to 35%. “Family incomes rose significantly across the entire income distribution, pushing more families into higher income categories,” the study found. Other studies show similar patterns. Yes, the rich have gotten richer over the decades, but so have the nonrich. “Everybody is doing better,” Richard Fry of the Pew Research Center told the Journal.
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Attempts to blame the decline in U.S. manufacturing on China or the North American Free Trade Agreement gets the order wrong. Manufacturing jobs as a share of all jobs began their rapid and steady decline in the 1950s, some four decades before Nafta took effect and five decades before China joined the World Trade Organization in the early 2000s. Factory jobs decreased due to technology advancements and productivity gains—it takes fewer workers than before to produce more goods—not because of misguided free-trade arrangements. Ending those arrangements won’t bring back manufacturing jobs, which have continued to decline despite the sweeping new tariffs Mr. Trump imposed last year.
Blaming low-skill foreign labor for phantom middle-class wage stagnation also doesn’t pass scrutiny. During Mr. Trump’s first term, legal and illegal immigration were increasing before the pandemic. Yet wages were rising, fastest for less-skilled workers, while unemployment and poverty rates dropped to historic lows. According to the economist Michael Strain, U.S. wages have increased by roughly a third over the past three decades, a period that includes large-scale immigration as well as free-trade agreements with Mexico, Canada, Europe, Asia and other partners. “A 34 percent increase in purchasing power over the last 30 years is not reasonably described as stagnant growth,” Mr. Strain notes.
Crémieux tweets: (HT Scott Lincicome)
About 10% of America’s life expectancy shortfall is due to motor vehicle accidents—fixed by Waymo and Tesla. About 18% is overdoses—that’s fading now.
And the lion’s share of the rest is obesity-related.
The Editorial Board of the Washington Post decries the backward logic of pharmaceutical tariffs. A slice:
Meanwhile, the administration’s tariff strategy invites cronyism. Many larger pharmaceutical companies have already entered deals with the administration, though the details often remain hidden from the public. Some might be able to afford discounts on their drugs — and would be happy to offer them if they can get special treatment for other products facing reviews by the Food and Drug Administration.
The Trump administration has prioritized quantity over quality in its mass deportation campaign, diverting attention from apprehending hardened criminals to removing people who positively contribute to American society. The case of Annie Ramos is worth looking at closely because it shows the human cost of this misguided approach.
Last week, Ramos, a 22-year-old biochemistry student, arrived at Fort Polk in Louisiana with her husband Matthew Blank, a 23-year-old Army staff sergeant. They came with her Honduran passport and birth certificate to get a military ID and activate her spousal benefits. Instead, she was arrested and is now being held at an Immigration and Customs Enforcement lockup.
Ramos was brought to the United States as an infant, and she did her best to follow the rules as she grew older. Yet she was detained over a 2005 deportation order that was issued in absentia when she was 22-months old.
Ramos applied for the Deferred Action for Childhood Arrivals program in 2020, but her application was never processed. She may have arrived here illegally, but clearly she has lived her life in a way that benefits the country. Ramos teaches Sunday school at her church and was months from getting her degree.
GMU Econ alum Nikolai Wenzel draws ten lessons from the works of Adam Smith. Here’s Nikolai’s conclusion:
Tyranny is the midwife of poverty; liberty, of prosperity.
Bob Graboyes is understandably not favorably impressed by Elizabeth Warren’s proposed tax on wealth.
