True, those of us in the middle have been hollowed out for decades now

[theking]

How the middle class was hollowed out from 1979 to 2022, according to new federal data
A comprehensive new report released by the Congressional Budget Office (CBO) portrays a stark transformation of the American economy over the last four decades, revealing a deepening divide where the wealthiest households have dramatically expanded their economic footprint while the middle class has steadily lost ground.

According to the data, which spans from 1979 through 2022, the distribution of national income has skewed heavily toward the very top. The report reveals the top 1% of households grew their share of income before transfers and taxes from 9% in 1979 to 18% in 2022, effectively doubling their slice of the economic pie.

A hollowing out of the middle
While the top tier prospered, the rest of the economic ladder struggled to maintain its standing. The CBO found as the top 1% seized a larger portion of market income, the share going to the lowest quintile dropped from 5% to 4%. This means most of the compression occurred in the middle.

Even after accounting for the stabilizing effects of the safety net and the tax code, the middle class has seen its relative status diminish. The share of income after transfers and taxes held by the “middle three” income quintiles decreased by 6 percentage points over the 43-year period. Conversely, the share of after-tax income going to the top 1% doubled from 7% to 14%.

The disparity in growth rates is even more pronounced when looking at the ultrawealthy. While average income grew for all groups since 1979, the acceleration at the summit was unmatched. Income for the highest quintile more than doubled, and for the top 0.01% of earners, average income after taxes and transfers grew more than sevenfold.

To be sure, the amount of wealth is greater overall, with the U.S. surging in the creation of more millionaires than ever before—a development so stark that UBS nicknamed it the “everyday millionaire.” While the wealthy own a greater share of household wealth, this is coming on the back of overall growth in the economy, with a rising tide arguably lifting all boats. The wealthy may have a greater share, in other words, but it’s a greater share of a larger pie.

Kent Smetters, the Wharton School professor and faculty director of the Penn Wharton Budget Model (PWBM), recently told Fortune that he thinks the behavioral economics phenomenon that is known as the “money illusion” is at play. This is where people don’t actually believe that they have gotten richer because of, well, sticker shock. “The reality is that, in fact, we have a much higher standard of living than we had even 20 or 30 years ago,” he said. “I’m not saying there’s no problems,” but just consider the family car, for example. He recalled his family having to budget for the car breaking down multiple times a year and that just doesn’t happen due to technological improvements.