This is the true middle-class squeeze: People’s expectations about their living standards were set in the early 2000s, while their incomes and assets are stuck at levels 15 to 20 years earlier. The huge gap isn’t rapidly erased, even by a revived economy. Of course, there are large variations among families. Also, the upper middle class and rich fared much better. In 2013, the median income of the richest 10 percent was $229,600, says the SCF. Although that was 1 percent below its 2007 peak, it was 22 percent above its 1989 level.
Still, the gap applies to countless middle-class Americans. Having been roughed up, they face years of catch-up to get to where they once were. They feel poorer because they are poorer. They feel less secure because they are less secure. The crisis’s severity — and the fact that it surprised most “experts” — shocked them. The large income and wealth losses compounded their sense of vulnerability. Their stubborn caution makes forecasting the economy’s future harder.
The financial crisis and Great Recession have powerfully affected the national psyche — for the worse. We will be living with that legacy for a long time.