Although many Americans are convinced that they live in a time of economic stagnation, the evidence proves otherwise. Prosperous mobility is the norm; long-term poverty is rare; and yesterday's material luxuries are today viewed as essentials. Unfortunately, the government's official measures of poverty and prosperity have not kept up with rapid changes in technology, demographics, and social patterns.

It now appears likely that much of the 1996 presidential race will be fought on traditional, class-warfare turf. Republicans will proclaim economic growth and the importance of controlling government sprawl, and President Bill Clinton will claim the GOP is damning the poor and favoring the rich.

The first thing national statistics teach on this question is that the whole idea that the United States has separate classes is dubious. Who is "rich" and who is "poor" tends to be predominantly a question of life-stage in this country. Most people cycle through different zones of the income spectrum at different times, depending on whether they are raising children, are in college, are part of a couple with two paychecks, are retirees living on investments, whatever. Americans change jobs a lot. They move across the country. They divorce at grievously high rates. In a year when one of these things happens, the household income may tumble. But over the long haul, prosperous mobility is the norm. Only a small portion of the U.S. population is stuck in a rut of long-term poverty.

There is lots of evidence for all of this. Treasury Department data, for instance, show that 86 percent of those Americans whose income was in the bottom fifth of the country's in 1980 had moved to a higher fifth by 1988. Sixteen percent had moved all the way from the bottom to the top (this was actually more common than staying put at the bottom). Liberal economist Isabel Sawhill found in a different study that almost 40 percent of Americans who were in the lowest income fifth in 1984 were out of it just one year later. Other data from the U.S. Bureau of the Census (covering the period 1990-1992) show that only 22 percent of the people who are poor at any given moment will still be poor one year later.

Just as the existence of the poor as a large, separate group in this country is an illusion, so too is it a mistake to think of the rich as being in some way distinct. Yet this is exactly what Robert Reich, Bill Clinton, and others do when they argue that reducing capital gains taxes to internationally competitive levels would be a sop to some superwealthy elite. The truth is, more than 14 million Americans claimed capital gains on their tax returns in just the single year 1993 (the latest period for which data are available). And of these capital gains payers, three-quarters earned less than $75,000 in annual income.

The number of mutual fund accounts in the United States has exploded from 12 million in 1980 to more than 130 million today. With wealth accumulation, investing, and capital gains now being routine middle-class pursuits, attempts by politicians to divide "possessors of capital" from "sellers of labor" are increasingly untenable. With each passing decade, the language and logic of class warfare grow more musty and irrelevant.

A Last Hurrah

But 1996 promises to be a last hurrah for the class warriors. For months, Labor Secretary Robert Reich has been peddling the idea that the middle class has been slipping backward since the 1970s or 1980s--by which he justifies greater government involvement in the economy. This claim, however, runs head-on into contrary evidence.

The idea (promoted by politicians of both the left and the right) that baby boomers and generation X-ers are falling from the middle class in great bunches, even trailing behind the living standard of their parents, is, in aggregate, complete rubbish. In 1993, economists Richard Easterlin, Christine Schaeffer, and Diane Macunovich compared the economic status of young Americans with that of their parents. They carefully adjusted for differences in the number and age of family members, took inflation into account, and then calculated income available per adult equivalent. Their results show that today's young families are, on average, about two-thirds better off than their parents were at the same age. Another recent study on this subject by Urban Institute and Congressional Budget Office researchers came up with similar findings: inflation-adjusted pretax income per baby boomer was 55 percent higher in 1989 than it was for their parents thirty years earlier.

It is thus absolutely false to argue that Americans have less economic wherewithal than they used to have. Yet undeniably, many Americans--elites and rank-and-file alike--are convinced that we live in a time of stagnation rather than the reality, a time of record prosperity. Why?

Lots of reasons. One of the biggest is the revolution of rising expectations. The consumer appetites of many baby boomers and generation X-ers are outracing reality and a reasonably growing economy.

Today's average new house is twice as big as one built after World War II. There are now more registered vehicles in the United States than licensed drivers. The average American now consumes literally twice as many goods and services as back in 1950. (In fact, the poorest fifth of the U.S. population today consumes more than the typical family did in 1955.) And many important goods that the usual economic statistics do not measure, such as cleaner air and water and more leisure opportunities, have improved dramatically over the same period.

But Americans take more things for granted today and view as essentials many things that used to be considered luxuries. Because of this, even today's material abundance feels like "not enough." Rising expectations are not necessarily unhealthy, but they must be controlled. Our problem today in this area is not so much one of economics as of psychology.

Misleading Statistics

Another reason so many Americans have accepted the idea that "we aren't getting what we deserve" is because a twisted set of national statistics encourages that conclusion. Today's official measures of family income, poverty, and prosperity are a mess. The government data have simply not kept up with rapid changes in technology, demographics, and social patterns.

An example that has recently begun to sink into the national consciousness concerns the consumer price index. Used for the critical task of discounting increases in family income to account for inflation, the CPI is a fossilized construct that for years has underestimated real income growth by about 1.5 percent annually (according to the blue-ribbon Boskin Commission). This means that median weekly earnings for full-time male workers did not fall by 12 percent from 1979 to 1994, as the gloomy official numbers suggest--they actually rose by 14 percent. Women's earnings over the same period did not rise 7 percent, as published, but actually zoomed upward by 35 percent. And the number of officially poor persons is 15 million, not 38 million, under the CPI corrections proposed by the Boskin Commission's distinguished economists.

Many other problems bedevil popular interpretations of income statistics. For instance, the figures on cash earnings that are regularly trumpeted by economic declinists completely ignore the doubling since the early 1970s of worker compensation taken in the form of fringe benefits. The increase in noncash income is even sharper on the governmental side, where every year, hundreds of billions of dollars' worth of health care, food stamps, and housing transfers that did not exist in 1970 are pumped into the economy, unacknowledged in the national income statistics because they arrive in a form other than cash.

Smaller Households, Richer Families

Erroneous comparisons of demographic apples to oranges are another common mistake made by those who use weak official income figures to grind their programmatic axes. When tracing median family incomes over time, we must be sure we are looking at the same kind of household. The characteristics of the average family (configuration, number of members, average age) have changed a lot over the decades, and if we do not match equivalent households when we compare their incomes, we will be misled. Families have become considerably smaller, for instance: the average family had 12 percent fewer members in 1993 than in 1970. And a smaller family with the same income is actually richer. When we correct the income statistics for family makeup, we find that average incomes are clearly up since the early 1970s, not down.

Average Americans already perceive this truth in their own lives. When surveys ask respondents whether their own economic fortunes have improved as compared with earlier years' and earlier generations', most people reply that they are definitely better off. Mass gloominess shows up only when people are asked how their fellow citizens are doing. This perception that American incomes are falling even while most individuals feel reasonably satisfied with their own circumstances highlights the opinion-warping effects of today's negative economic drumbeat from our national media and politics.

The debate now raging on "fairness" and family incomes repeats earlier controversies. In her keynote address to the 1988 Democratic National Convention, soon-to-be Texas governor Ann Richards read a letter from a "young mother in Lorena, Texas," who mourned that her "worries go from payday to payday. . . . I pray my kids don't have a growth spurt from August to December so I don't have to buy new jeans. . . . We ponder and try to figure out how we're going to pay for college, braces, and tennis shoes." In a gush of response to the Richards speech, editorial pages and talk shows across the land buzzed about the "death of the American dream." One election cycle later, Bill Clinton rode this theme of middle-class anxiety right into the White House.

So it is worth remembering that, after the klieg lights were turned off and the conventioneers went home, an enterprising reporter tracked down that struggling family in Lorena. It turned out they had savings in the bank, lived in a house they owned, and had an annual income of $68,000 in current dollars. Granted, a $68,000 income can leave a family, at times, a little "pinched." But can someone in this situation rightfully claim that decent family life is beyond their reach? More important, has it become the responsibility of the government to make daily life free of trade-offs for such families?

Count on President Clinton, Mr. Reich, and others to make such an argument over the next ten months. Better keep a few grains of salt handy.

Karl Zinsmeister is DeWitt Wallace-Reader's Digest Fellow at the American Enterprise Institute and editor of The American Enterprise.