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Who or what is the middle class?
Topic Started: Apr 7 2008, 09:51 AM (557 Views)
Dandandat
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Time to put something here
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Who or what is the middle class?
By John W. Schoen
Senior Producer
MSNBC
updated 10:38 a.m. ET, Wed., Oct. 17, 2007

When politicians, economists, academics and journalists try to assess the current economic status of the "American middle class," the debate often begins with a question that some concede is all but impossible to answer: Who, exactly, is middle class in America today?

One way to find out is to ask Jerry Orzechowicz, a salesman in the hospitality industry, who lives in Merrillville, Ind., population 30,000, tucked in the northwest corner of the state, about 35 miles outside Chicago.

"I'm about as middle class as you can get," he said.

Orzechowicz and his wife, who also works, earn a combined annual income of between $70,000 and $90,000 and have two kids, one of whom is still in college. They own their own home, four cars and four TVs — including a high-definition widescreen model with surround sound.

Orzechowicz says just about anyone living on $50,000 a year can enjoy a middle-class existence in his neighborhood, which is why he says he’s puzzled when he hears that it’s getting harder to maintain that lifestyle in America.

“You can have a house and pay the bills and put food on the table and save a little and take a little vacation once a year," he said. "To me, that’s maybe lower end of the middle class, but it’s better than 98 percent of the people in the world.”

Despite income of $100,000, ‘We are squeezed tight’
But many Americans who consider themselves middle class told msnbc.com they do feel financially squeezed. One of them is Kathy McClain, a wife and mother of three teenagers in Westbrook, Maine.

McClain and her husband have a combined income of $100,000 a year, which leaves about $80,000 after paying income and property taxes. They have no credit card debt,  don’t take expensive vacations, and she drives a 9-year-old car. Tuition for their oldest child, now at the state university, costs another $16,000. The family makes too much for her to qualify for work-study.

“I can tell you quite honestly that we are squeezed tight,” she said in a recent e-mail. “We live paycheck to paycheck. Yet, by all standards, we are doing well.”

The varied experiences of Americans who consider themselves middle class aren't really surprising. As economic and social forces buffet families chasing the American Dream, there’s disagreement among the experts who crunch the numbers about how just well or poorly this group is faring — or even who they are.

There is near-universal agreement that the gap in wealth between the richest American and the poorest is widening to levels not seen in nearly a century. But that doesn't tell you much about how those in the middle are faring.

Data aside, being “middle class” in America today appears to be mostly a state of mind. And there are very real sources of anxiety for those who aspire to a comfortable middle-class life in America.

Congress to the rescue?
With the campaign season gearing up, there’s a great deal of talk about the need for government to take a greater interest in this key demographic group. In theory, that's where the bulk of American voters are. So earlier this year, Congress asked its research service to come up with a definition of middle class.

The researchers started by looking at income levels. Based on 2005 Census Bureau reports, some 40 percent of the nearly 115 million households in the U.S. earned less than $36,000 a year. That represented just 12 percent of all income. The 40 percent on the next rung up the economic ladder took in between $36,000 and $91,705 — or about 37.6 percent of all income. The top 20 percent, who made $91,705 or more, collected half of all income.

But those numbers don’t adequately reflect the state of mind of those who consider themselves middle class. Surveys have shown that, while people consider $40,000 a year to be the low end of what it takes to buy a middle-class life, some people who make as much as $200,000 a year still consider themselves middle class, the researchers said.


In the end, they wrote, “There is no consensus definition of ‘middle class’; neither is there an official government definition. What constitutes the middle class is relative, subjective and not easily defined.”

For one thing, the report noted, there's little agreement on how many households above or below the midpoint should be included in the standard definition of the middle class.

Neighbor's paycheck as important as your own?
But it turns out that the size of your neighbor's paycheck may be as important as your own in determining how you view your place on the economic ladder. You may feel comfortably middle class — with two cars in the driveway and a big screen TV — until the guy across the street pulls up in his third car to install a second widescreen TV. (The researchers call this the "relative income hypothesis.")

"Being well above the bottom is a source of satisfaction," the CBO report concludes. "But when those at the upper end of the distribution fare better than (you) do, it is a source of consternation."

And with the upper end of that distribution rising further and faster than in the past, it's easier for those in the  middle to feel like they're falling behind.

Another reason for middle class "consternation" is that income tells only part of the story: the cost of maintaining a middle-class lifestyle depends heavily on where you live. A family in Wichita, Kansas, where the median price for an existing home is about $110,000, has a much better shot at a comfortable middle-class life than a family in San Francisco where — housing slump or no housing slump — the median home price is $846,800.

The link between housing costs and schools
As the biggest single line in the typical household budget, the cost of housing has played another important role in the financial squeeze reported by many families in the middle. One of the key aspirations of middle-class families is to provide their children with the good education they’ll need to maintain — or exceed — their standard of living when they enter the work force. With local schools funded largely through property taxes, living in a nice neighborhood has come to mean more than having a nice house, according to Robert Frank, a Cornell economist and author of “Falling Behind: How Rising Inequality Harms the Middle Class.” 

“You can say, 'Well, I don’t care about having a big house, I’d rather live within my budget and feel secure financially,'” he said. “If I go that route, my kids go to schools where they’ve got metal detectors, and they don’t do well in school.”

The financial security of middle-class Americans has also been strained by the rising cost of higher education, which has risen faster than overall inflation for much of the past decade.

Health care costs also have outstripped inflation; the cost of a catastrophic illness can quickly knock a middle-class household into another, better-defined economic category: poverty. And while many middle-class Americans a generation ago relied on their employers to fund their retirement, that burden has now shifted heavily to the wage-earners themselves.


The paradox behind the data

Despite these added burdens, there’s a paradox that doesn’t show up in the numbers. Though middle-class life in America isn’t what it used to be, in many ways it’s much better.

Health care may be more expensive, but modern medicine can do much more: Americans are living longer and healthier lives. Our houses, on average, are bigger (over 2,300 square feet, up 40 percent since 1980) with more cars in the driveway. Those cars are safer, last longer and  are loaded with technology and features once available exclusively to the wealthiest buyers of luxury cars — from antilock brakes to GPS navigation systems.


Modern conveniences that were unimaginable a generation ago, from wireless phones to the Internet to hundreds of channels of home entertainment, are available to most Americans. The modern global supply chain brings a cornucopia of basic, affordable products — from year-round fruit shipped from both hemispheres to cheap textiles made in low-wage, developing countries.

“A middle class person today lives better than the wealthiest individual who lived 100 years ago,” said Mark Zandi, chief economist with Moody’s Economy.com.

Americans also have more to spend. Census data show that the  median income has risen steadily, with temporary setbacks, over the past 60 years as "the real reward for an hour of work has more than tripled," according to a February speech by Federal Reserve Chairman Ben Bernanke. In 1947, median family income, in 2004 dollars, stood at just $22,500, according to the Census. By 1973, that figure had doubled, and continued to rise to $57,500 by the year 2000.

Upward march of income stalls
Those advances began to stall at the turn of the millennium, for reasons that are the subject of much speculation among economists. There’s some evidence that the decline may be caused by the lingering effects of the 2001 recession. Every major recession since World War II has been followed by a drop in median income from which it has taken between three and seven years to recover. But others suggest the lull in income growth could be the result of a more fundamental shift in the economy.

One trend that is all but universally accepted is the widening wealth disparity between those at the very top and bottom. Even as incomes in the middle have gone up, the gap between richest and poorest has gotten wider — both in America and around the world. That means that those at every level see more wealth flowing to people in income groups above them. And that could help explain why, even as everyone’s standard of living is going up, many of those in the middle feel like they’re falling behind.

Though middle class status may be largely a state of mind for many Americans, some have clearly lost ground due to specific, harsh economic circumstances that have sent them falling abruptly down the ladder. The decline of unionized labor in the past several decades has given employers more flexibility to increase productivity and adapt to rapid technological change and increased competition. But it has also devastated those workers who have been displaced from high-wage jobs and don’t have the skills they need to find a new one with comparable pay and benefits.

Now globalization poses a similar threat to the financial security of American workers whose jobs are “outsourced” to lower-wage, developing countries. Much of the credit for the current strength in the global economy goes to the elimination of trade barriers and the increased interdependence of producing and consuming countries. But if the economic benefits of that global growth flow only to a smaller and smaller group at the top, the backlash from those left behind could threaten the continued expansion of global trade, according to Zandi.

“Globalization is a fabulous thing. It raises everyone’s standard of living — it’s a net benefit to the global economy,” he said. “But there are losers. And if we don’t take care of the losers — if we don’t allow their standard of living to remain within some striking distance of the winners — then they could very well short-circuit the entire process.”


http://www.msnbc.msn.com/id/21272238/
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ds9074
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Admiral
And I thought it was just us British who are so concerned by matters of class ;)

A well known commentator in the UK recently talked about society as a caravan of travelers. They posed the question that if the back of the caravan falls ever further behind the front does there come a point where it can longer be considered a single entity.

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RTW
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ds9074
Apr 7 2008, 10:04 AM
A well known commentator in the UK recently talked about society as a caravan of travelers. They posed the question that if the back of the caravan falls ever further behind the front does there come a point where it can longer be considered a single entity.

So what do you do?

Stifle the front of the caravan? Punish them for being more fit, working harder and/or longer hours? Tell the front of the caravan to ease up?

"Hey, you guys up front already make too much money and pay too much in tax, much of which goes to help those at the back."

Why punish/stifle/reign in the one segment of society that pays an enormously disproportionate share?
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Dandandat
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Time to put something here
RTW
Apr 7 2008, 01:18 PM
ds9074
Apr 7 2008, 10:04 AM
A well known commentator in the UK recently talked about society as a caravan of travelers. They posed the question that if the back of the caravan falls ever further behind the front does there come a point where it can longer be considered a single entity.

So what do you do?

Stifle the front of the caravan? Punish them for being more fit, working harder and/or longer hours? Tell the front of the caravan to ease up?

"Hey, you guys up front already make too much money and pay too much in tax, much of which goes to help those at the back."

Why punish/stifle/reign in the one segment of society that pays an enormously disproportionate share?

Certainly not palatable, but what is the attentive to the dilemma that DS9 posed? To make doe with a society that truly is divergent? To accept a class system where upward mobility becomes too burdensome to be achieved by lower class members?

Just to be clear I don’t think we have reached that point now, but that is the imagined outcome of DS9s proposed dilemma. Lower classes who's members have fallen so far behind that they can never catch up with the upper classes of a society.

What would happen in such a society? Would the two classes mingle between each other? or would advancement in technology and easy of physical mobility create a situation where the classes can segregate each other? Where one class comes to dominate one side of a country and the other class comes to dominate the other side. Leading to the eventual acceptance of the existence of two separate countries that are dependent on each other, but where different rules and customs may apply?

Where the upper class country depends on the lower class country for labor and consumption and the lower class country depends on the upper class for the provision of work and consumables.

Depending on which country had the advantage in the relationship would lead to all sorts of outcomes.

A very interesting train of thought.

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ds9074
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RTW
 
Punish them for being more fit, working harder and/or longer hours?

Not a criticism of you RTW but statements like this do annoy me somewhat. Take for example our office cleaner. She comes in and works 12 hour days, cleans multiple offices over a sprawling site and it involves hard work - both in the cleaning and in the dragging of her cleaning trolley all round the place.

She works longer hours and, in many ways, does harder work than a lot of people in that office yet her financial reward is lower.

You have companies with non-executive directors who might be earning 10 times as much as that lady for 3 days work a week or less. To cap it off she may well be paying a higher percentage tax rate than some of those high earners.

Its people in the broad middle, not the middle class as such but the people who go out and work hard, who believe in an honest days work for an honest days pay, people who play by the rules and try and do best for their families that end up feeling resentful. Both to those who cant be bothered to work and play the welfare system and those who seem to do very little actual graft for massive rewards.
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RTW
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ds9074
Apr 7 2008, 01:12 PM
RTW
 
Punish them for being more fit, working harder and/or longer hours?
Not a criticism of you RTW but statements like this do annoy me somewhat.

It was a reference to your caravan example. How did the people at the front of your caravan example get farther ahead? Are they just faster walkers? Do they have better camels? Perhaps they move at a faster pace, take fewer breaks or start earlier and keep going longer?
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Minuet
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RTW
Apr 7 2008, 04:59 PM
ds9074
Apr 7 2008, 01:12 PM
RTW
 
Punish them for being more fit, working harder and/or longer hours?
Not a criticism of you RTW but statements like this do annoy me somewhat.

It was a reference to your caravan example. How did the people at the front of your caravan example get farther ahead? Are they just faster walkers? Do they have better camels? Perhaps they move at a faster pace, take fewer breaks or start earlier and keep going longer?

Get better breaks in life, like wealthy parents who can help with exhorbitant education costs? Or send them to a private school?
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ds9074
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RTW
Apr 7 2008, 08:59 PM
ds9074
Apr 7 2008, 01:12 PM
RTW
 
Punish them for being more fit, working harder and/or longer hours?
Not a criticism of you RTW but statements like this do annoy me somewhat.

It was a reference to your caravan example. How did the people at the front of your caravan example get farther ahead? Are they just faster walkers? Do they have better camels? Perhaps they move at a faster pace, take fewer breaks or start earlier and keep going longer?

What I dont like from what you are saying is things like "they take fewer breaks" or "they start earlier and keep going longer" in relation to those at the front 'of the caravan'. The reverse may in fact be more accurate in lots of cases. Quite a lot at the front may be living off the fact that they were lucky enough to get good schooling, good healthcare when kids and inherit some decent investments.

Its not an easy thing to improve this situation. Simply leveling everyone down leads you towards a Soviet-bloc or Zimbabwe style solution which is benefical to no-one save a small minority who supposedly represent "the people".

My personal preference is for measures which help people to make the most of their skills and talents.

The article talks of bad schools in poor districts, in part because they recieve less funding because money is raised locally. Middle class people, where they can, are moving to wealther districts in search of better schools - but what about the poorest where that option is not avaliable?

I would say run schools locally but pay for them on a much wider national basis, making education a spending priority, so that local deprivation doesnt mean poor education. Otherwise you are in danger of creating a poverty trap. Education has got to be the single best way to get people out of poverty.

I would also say spend public money on making sure there is universal health coverage and other health improvements, like decent housing for all, so that everyone has the opportunity to recieve good healthcare which is vital for them to be able to live up to their full potential. The article talks about people being reduced to poverty from a middle class lifestyle due to poor health.

So yes health and education would be my priorities for tackling this issue.
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Dandandat
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Time to put something here
Minuet
Apr 7 2008, 05:49 PM
RTW
Apr 7 2008, 04:59 PM
ds9074
Apr 7 2008, 01:12 PM
RTW
 
Punish them for being more fit, working harder and/or longer hours?
Not a criticism of you RTW but statements like this do annoy me somewhat.

It was a reference to your caravan example. How did the people at the front of your caravan example get farther ahead? Are they just faster walkers? Do they have better camels? Perhaps they move at a faster pace, take fewer breaks or start earlier and keep going longer?

Get better breaks in life, like wealthy parents who can help with exhorbitant education costs? Or send them to a private school?

This is often a sticking point for me when discussing advantage and disadvantage. I don't see each generation as a stand alone entity deserving of its own equality of opportunity. I see life in more of a familiar way. Having wealthy parents is not a "break in life"; it is presumably the culmination of a family's hard work. Pore parentage is likewise not a thing to be pitied; it just means that the family is lower on the latter of success.
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ds9074
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Dandandat
Apr 7 2008, 10:08 PM
Minuet
Apr 7 2008, 05:49 PM
RTW
Apr 7 2008, 04:59 PM
ds9074
Apr 7 2008, 01:12 PM
RTW
 
Punish them for being more fit, working harder and/or longer hours?
Not a criticism of you RTW but statements like this do annoy me somewhat.

It was a reference to your caravan example. How did the people at the front of your caravan example get farther ahead? Are they just faster walkers? Do they have better camels? Perhaps they move at a faster pace, take fewer breaks or start earlier and keep going longer?

Get better breaks in life, like wealthy parents who can help with exhorbitant education costs? Or send them to a private school?

This is often a sticking point for me when discussing advantage and disadvantage. I don't see each generation as a stand alone entity deserving of its own equality of opportunity. I see life in more of a familiar way. Having wealthy parents is not a "break in life"; it is presumably the culmination of a family's hard work. Pore parentage is likewise not a thing to be pitied; it just means that family is lower on the latter of success.

I dont necessary disagree with your analysis there Dan, but what I would say is that personally I think people should not be condemned to a life of poverty because of who their parents are. Society, in order to keep the caravan moving together if you like, should make sure those people from poor backgrounds have the opportunity to live up to their potential regardless of their circumstances at birth.
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Dandandat
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Time to put something here
ds9074
Apr 7 2008, 06:12 PM
Dandandat
Apr 7 2008, 10:08 PM
Minuet
Apr 7 2008, 05:49 PM
RTW
Apr 7 2008, 04:59 PM
ds9074
Apr 7 2008, 01:12 PM
RTW
 
Punish them for being more fit, working harder and/or longer hours?
Not a criticism of you RTW but statements like this do annoy me somewhat.

It was a reference to your caravan example. How did the people at the front of your caravan example get farther ahead? Are they just faster walkers? Do they have better camels? Perhaps they move at a faster pace, take fewer breaks or start earlier and keep going longer?

Get better breaks in life, like wealthy parents who can help with exhorbitant education costs? Or send them to a private school?

This is often a sticking point for me when discussing advantage and disadvantage. I don't see each generation as a stand alone entity deserving of its own equality of opportunity. I see life in more of a familiar way. Having wealthy parents is not a "break in life"; it is presumably the culmination of a family's hard work. Pore parentage is likewise not a thing to be pitied; it just means that family is lower on the latter of success.

I dont necessary disagree with your analysis there Dan, but what I would say is that personally I think people should not be condemned to a life of poverty because of who their parents are. Society, in order to keep the caravan moving together if you like, should make sure those people from poor backgrounds have the opportunity to live up to their potential regardless of their circumstances at birth.

Well of course that assumes your proposition is correct; that the caravan has split and that a child in poverty has no way of moving out of poverty. Thus being born in poverty means you are condemned to a life of poverty.

I do not agree that is the case in either of our countries.

There for as it stands now a child born into poverty has the opportunity to live up to their potential whether or not the more wealthy in the society help them.
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ds9074
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^^^
Its not that a child born into poverty "has no way" of moving out of poverty.

Even before the days of the large scale state intervention we have today some managed to, though not many and usually only the very brightest and best (and luckiest). Lots remained in poverty with their potential wasted.

Now we have measures, such as universal schooling and assistance with university fees which means many more people can work their way up.

What I am saying is that more can and should be done to improve what we have. Poor areas should have schools which are just as good and have the same resources as schools from wealthy areas for a start.
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Dandandat
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Time to put something here
I have two problems with what you just said;

First it's this:

Quote:
 
Its not that a child born into poverty "has no way" of moving out of poverty.


Because what you said before was:

Quote:
 
I think people should not be condemned to a life of poverty because of who their parents are


These two points don't mix; at lest for me they don't. If there is a chance to move out of poverty then you can't possibly be condemned to poverty. I know that this sounds like semantics arguing, but I think in this case the distinction needs to be made. I feel this is so because it makes a difference in my opinion on the subject; I would agree that a child should not be condemned to a life of poverty because of who their parents are. But if there is a way to move out of poverty then that child is not condemned to poverty.

They may start in poverty and it may be hard to move out of poverty. But their actions in life will dictate where they end up, their parentage will not. Their parentage only dictates where they start in life.

Couple this with the idea I put forth that life is a familiar journey and not individual to each generation and the possibilities only increase. The child himself may not ever be able to move fully out of poverty, but his actions may make it possible for following generations to move out of poverty. And that is and should be considered positive movement, even if the child himself does not break the barrier of poverty.

Then I also do not agree with this:

Quote:
 
Even before the days of the large scale state intervention we have today some managed to, though not many and usually only the very brightest and best (and luckiest). Lots remained in poverty with their potential wasted.


Basing life on the familiar time scale I do not agree that this statement is at all correct. I think most families over time have managed to move out of poverty or are on their way to move out of poverty. Some families may have relapsed over time, but they too have and will move up again (Some wealthy families have relapsed into poverty).

Take your office cleaner who works hard (maybe even harder) for less pay then every one else in the office. Perhaps when we add her total life's income and subtract her total life's expenses she never makes it out of poverty; but her children, through her hard work, have a higher platform with which to rise even higher from. In this way the woman's work is not for nothing, it's not something to be sorry for; it is just one step on the latter of success. Hopefully her children will take the next step.

In this way it doesn’t mater if the rich school's and poorer schools are interchangeable; because those who go to pore schools and make the best of it (live up to their potential) will move their family up to possibly be able to attend more rich schools.




I would also ask how you would measure whether someone has lived up to their patiently or not?
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ds9074
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^^^
I'm afraid the pace of that change is too glacial for my liking. It also makes a kind of underlying assumption that if people work hard they can achieve whatever they want without any help. I dont think thats actually true.

Also why should a kid born into a poor area have to make do with a bad school. The deserve to get an excellent education regardless of their background and if they get one then I believe they will have a much greater chance of improving their lives and the lives of further generations of their family.

On the last point whether someone has lived up to their potential is not necessarily something measurable and tangible.

Its usually only clear when someone has not been able to have the chance to live up to their potential. For example in this country we have student finance schemes which means anyone, no matter how poor, can go to the top Universities like Oxford or Cambridge if they qualify to get in. If we didnt have that scheme and people werent going there, despite qualifying, on the basis of price I think you could say they havent had the chance to live up to their potential.
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Franko
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Just as a side issue, I've noticed that many of my friends starting families are trying to exploit the tremendous credit available these days so that they can live like "middle class" or even "upper middle classers" when in fact their combined incomes don't quite justify it.

Overwhelming mortgages and car payments....wow. And on top of that, they want bi-annual trips to Hawaii, and other perks which almost rival the ablities of what would have been considered affluent upper class people just a decade or two ago.

Whew.... I fear this constant reaching for the top shelf cookie jar is going to lead to a tragic fall for some, if not many in the coming years ahead.

Not to mention the stress.
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