SAY FAREWELL TO THE MIDDLE CLASS
In the US in 1982, the top of the first Forbes 400 list was Daniel Ludwig with nominal $2 billion. That was 85,000 times the then-median nominal family income of $23,430.
In 2023, the top of the Forbes 400 was Elon Musk with nominal $251 billion. That was 2,500,000 times the now-median nominal family income of $98,705.
This past two weeks, I have (finally - my doctor is so proud of me) taken up going for a walk in the neighborhood. Since I am unable to motivate myself most of the time, I took the opportunity to invite myself along while my neighbor walks Hailey, his very energetic rescued pitbull (she’s a sweetie). Hailey is a believer in long walks so we cover quite a bit of territory. She’s also easily bored by repeats, so it’s a different route - or at least a modification of an old one - every day.
Walking in a neighborhood is a good way to get an education, far more deep and complete than one would get driving the same route.
I have long been interested as a historian in how, if you understand the architecture, you can demonstrate and explain the social history. How people lived, where they lived, is a good way of coming to understand what they did and why they did it.
Our neighborhood is Encino Park, California, in the western end of the San Fernando Valley. You can see it on Google Earth: west of White Oak Avenue, north of Burbank Boulevard, south of the Orange Line.
According to the date stamp in the concrete sidewalk out front, the neighborhood got started in 1949. It’s an artifact of the greatest social transformation of any society in history: the creation of the modern American Middle Class through the G.I. Bill. Before World War II, 60% of Americans lived in multi-geneational homes. By 1955, 65% of Americans lived in single family homes. The homes were paid for by the G.I. Bill.
They’re not very big. The original standard home is 800 square feet. If the back porch is closed in (as mine is), it goes to 1,000 square feet, and if the single car garage is converted to a bedroom, it gets all the way up to about 1,250 square feet. There are two gedrooms - one is 10x14, the other “big” bedroom is 12x14. There’s one bathroom, about 6 x 8. A living room with a “dining corner” that is about 18x20. A kitchen about 12x12. There aren’t a lot of electrical outlets in them, because 75 years ago most Americans didn’t use a lot of electrical appliances. There’s a nice-sized back yard for kids to play in.
The neighborhood itself is designed to be kid-friendly. It is bordered on four sides by the “busy streets” of Greater Encino; inside the square, all the streets are “side streets.” Back when the Beav and his family lived here, kids could safely play in the streets. They don’t do that now, but it’s the kind of place where if I see 10 cars over the course of dawn to dusk on my street, that’s “busy.” It is the definition of a “Leave It To Beaver” neighborhood. In 1949, these houses cost a grand total of $7,500.
These small, unpretentious houses, this quiet neighborhood, were where a family got its start 75 years ago, before “moving on up.” All the neighborhoods like it, built around the same time across the United States, represent the transformation of the country. There’s a good argument to be made that they can be considered the Foundation Stone of the American Middle Class.
Over the years since the original owners took possession, and particularly in the past 10-20 years, many of the houses have been upgraded, in efforts from moderate to maximal. An example of what I mean are the houses to either side of me. The one to the south was moderately upgraded. It’s essentially the same overall size, with a wall removed between the living room and kitchen to open things up, and the garage turned into a bedroom. The house to the north was upgraded by the daughter of the original owner following his death in 2018, during the pandemic. Over two years from 2020-2022, the house was gutted, with an “open home” living space created; a brand-new modern kitchen with an “island” was installed, and the back yard was reduced in size when an additional 600 square feet were added on. It now has four bedrooms, a bit larger than the originals, a re-done garage with an electric charging station so the Official Encino Park Car - the Tesla - can get juiced up.
Shortly after we moved in here back in 2015, the house to the south was sold for $550,000. The house has been sold three times since, the last time 18 months ago; Hailey’s dad, who pays attention to this stuff, told me the last time the price was $850,000. After the house to the north was completed, it was sold in 2022 for $850,000; then it was sold six months later for $1.1 million - the doctor who bought it got transferred over the hills to Los Angeles proper, and he sold it three months later for $1.3 million. The people who bought it no longer live in it and now rent it out. The family who resides there now - two parents and three teenagers - pay rent of $5,000/month.
Hailey’s dad and I get along real well because we’re both in Duh Biz (or at least were - he hasn’t worked in a year with all the strikes that we went through, and I now write books). He and his wife bought the place across the street back in 2017, after a pair of house-flippers moved in and completely modernized it, selling it for $750,000 - a price my neighbor and his wife thought was a bargain, moving over the hill from Venice, the former home of the beatniks and hippies, where homes now sell for $2 million.
Now, take a look at the house in this picture. It’s a house that is kind of between my southern neighbor’s house and the northern neighbor’s house. Still the same size, upgraded to around 1,250 square feet with the back porch and the garage changed to rooms, and the living room/kitchen area opened up. It also has a 12x18 pool in back. It’s on one of the “busy streets” - the entry street to the neighborhood off White Oak Avenue, so there’s about 4-5 times as much traffic as I see, living around the corner a block away and another block up my street. It’s located right behind the loading dock for our post office, so there is truck traffic bringing in the mail early in the morning, and the little Pos Office vans going in and out all day. My point is, it’s not in as nice a location in the neighborhood as I am.
We walked past it yesterday and Hailey’s dad commented it had been open for inspection over last weekend and he had checked it out; his verdict was “a little more modern than ours.”
He then told me that the asking price for this upgraded 75-year old former GI Bill house is $1.5 million. I put my hand over my mouth quickly enough that I didn’t spit out those expensive teeth I got from Uncle Samuel for free thanks to the VA.
He then went on a bit about what it would take to move into that house.
A 20% down payment would leave a house payment on a 30-year loan at 8% of $13,000/month. To qualify for the loan, and have income sufficient to live there after making the house payment, one would need an annual before-tax income of $400,000.
According to the Census Bureau, $400k/year is the floor of the Top Ten Percent of families in America now. The last time I checked, $400k/year was a “Beverly Hills income,” not a “Leave It To Beaver in the SFV income.”
$400k/year to get 1,250 square feet of a 75-year old modernized GI Bill Home that originally sold for $7,500, in not the best part of a middling-nice neighborhood.
Most of the grandchildren of the people this home was originally built for couldn’t move into it today. My nephew and his partner, both educated professionals making solid six-figure annual salaries in San Diego, can’t afford to move into this house, and if they could it would be too small for the two of them, his two sons, and her daughter.
There is no more “starter home” for the American Middle Class, which was founded on a family being able to buy a home that fit their needs, on the salary they got from middle-middle class and upper working class employment.
This is what 45 years of a Republican economy has gotten us.
Elon Musk makes 2,500,000 times the salary of the average American family, and that family’s income is one-quarter of what they would need to be able to live in the house their grandfather bought.
That is what is wrong with this country.
It’s why people are pissed off, and say that the economy isn’t working, and why the less-informed will vote next year for Donald Trump so they can get smashed in the mouth again.
Yeah, this is an extreme Los Angeles story. Hah! The only difference between this story and the same story in any other major American city - where the majority of Americans now live - would be the specific sums mentioned above.
I’m sorry, I don’t have an answer to give, but this really is Another Fine Mess.
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You hit the nail on the head Tom. 45 years of Republican “trickle down” bullshit have gutted the middle class. And just like the “two Santa theory” when republicans are in power and increase the national debt exponentially by cutting taxes for the wealthy, then blame the democrats when they are in power, for social safety net program spending. Then people get angry and blame the democrats for giving their tax money away. So where am I going with this? Biden and the democrats are getting the blame for unaffordable housing. Never mind wealthy investors have been buying up real estate everywhere for their own profit, and don’t have to worry much at all about taxes thanks to those 45 years of Republican trickle down bullshit.
Excellent post. I saw a discussion of the economic points on a couple blogs, Prof. DeLong’s for example, and Sec. Reich, with a very fine critique of the movement of wealth upward and questioning some new (and dubious) research claiming the wealth concentration wasn’t so bad. However, you, TC, have put it into human terms. It’s anecdotal perhaps but it replicates to varying degrees across the country. And you lay it squarely at the feet of the GOP (and impliedly in the convergence of neo-conservatives and neo-liberals).
This is the lived experience. A union house painter in San Diego could afford, barely, a 1250 sq.ft. house in the suburbs in 1958 (yes, the houses grew between 1949 and 1958 because the post war economy, driven by a broad distribution of wealth, was growing). That house now, if in good condition, will fetch well over $700,000. What house painter can afford that on a wage that hasn’t kept pace with inflation over the last 20 years? (Notice I didn’t say union painter because the union was driven out of town-literally out to Riverside-in the Reagan years after the air traffic controllers were fired.) The middle class is a dying breed indeed.