By James Pethokoukis

In his first State of the Union address last night, President Joe Biden reiterated his strategy to grow the US economy “from the bottom up and the middle out, not from the top down.” Reiterated, because Biden used the same line a year ago when he unveiled his American Jobs Plan. And the idea of “middle-out” economics stretches back even further, emerging as an Obama-era rebranding of Democratic redistribution-over-wealth-creation policies.

The middle-out theory goes something like this: Wealth doesn’t trickle down from the top, it flows out from the middle. The idea goes hand-in-hand with the populist myth that America’s middle class has been hollowed out and can only be revived with some combination of protective tariffs, industrial policy, and tax hikes on the rich.

But the middle class isn’t eroding; it’s evolving. In “The American Dream Is Not Dead: (But Populism Could Kill It),” my AEI colleague Michael Strain documents how the fall in the share of middle-income households since 1970 coincides with a growing share of households earning more than $100,000 in inflation-adjusted annual income.

So where has the “hollowed out” middle class gone? It’s moved up.

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