Galston argues the 20th century American middle-class ladder has collapsed into a two-track economy: an upper-middle-class with advanced degrees pulling away, and everyone else stagnating in real terms.
The numbers he cites: since 2000, households in the 80th to 95th percentile by income saw real wages grow 38%. The median household grew 6%. The bottom quintile lost ground when healthcare and housing are priced in.
Galston's point is not redistribution per se — it is that the political center cannot hold when the “middle” everybody talks about no longer exists as a coherent bloc.
What the Polling Says
The WSJ/NORC poll Galston cites finds that Americans who describe themselves as middle class report a sharp divergence: those with a four-year degree expect their kids to do better than they did; those without expect their kids to do worse. The expectation gap is the widest it has been in the 30 years the question has been asked.
Galston's Prescription
Not a policy list — a political observation. The party that reaches working-class voters without college degrees with a credible economic message will dominate the 2030s. Both parties, he argues, currently speak past them.
What This Means For Our Portfolios
- Consumer Discretionary — quality only. Two-track economy = two-track retailer earnings. WMT, COST win; dollar stores and mid-tier apparel lose.
- Financials overweight (16%) stays. JPM, BAC, WFC. The upper-middle-class wealth effect is real; private banking AUM keeps compounding.
- Housing — the structural short. Affordability collapse means homebuilders own the narrow premium band (TOL, LEN high end) but the entry-level thesis (DHI) is wounded.
- Political tail risk. Populist tax proposals on carried interest, 401(k) caps, and unrealized gains polled 14 points higher than a year ago. Watch Q3 Senate drafts.