The Middle Class Is Doing Just Fine, Thank You

March 11, 2009— -- There's no doubt that the current recession is taking a heavy toll. Last month, the number of unemployed reached 12.5 million, an increase of 851,000 since December.

President Obama has said that "the middle class is struggling." Turn on the TV, and you'll hear people like cable news host Lou Dobbs say, "Our middle class may be on the verge of collapse."

Social commentator and best-selling author Barbara Ehrenreich agrees. "It used to be that you could expect to get a job after college, rise in that job, maybe switch jobs at some point and then retire with a generous pension," she said. "Now, it's a very bumpy road with many gaps in between."

In her book "Nickel and Dimed," Ehrenreich went undercover to work as a nursing home aide, a Wal-Mart associate and took on other low-wage jobs to see if she could make ends meet.

She said she struggled to pay her bills and live comfortably. If you are poor, she said, and you want to move up the income ladder, in her experience, America doesn't "offer as much upward mobility as we think it does. That's a myth."

But is she right? Can only the rich make it in America? Not everyone agrees.

"I wanted to discover for myself if the 'American Dream' is still alive," said Adam Shepard, author of "Scratch Beginnings," a book he wrote after reading Ehrenreich's book in college.

Getting Ahead With Only $25

Shepard, now 26, picked a city out of a hat -- Charleston, S.C. He went there with $25 in his pocket. How far could he get if he didn't tell anyone about his college degree?

"I arrived, and right away I figured I needed to get into a homeless shelter," Shepard said.

He lived in a shelter for two months. Then he got a job with a moving company, making $8 an hour. Soon he'd saved enough to buy a used truck. And within a few months he had an apartment. After one year, he had $5,500 and a car. How?

"I was able to do it because I made sacrifices," Shepard said.

Despite Ehrenreich's claim that income mobility is a myth, Shepard succeeded from humble beginnings.

The Rich Middle Class

ABC News went to the Imperial Sand Dunes of California to speak to a lot of middle class folks who spend big money on specially modified off-road vehicles that they use to ride on the sloping sand dunes. Many of them are moving up the income ladder and having fun doing it.

Take Nelson Juarez. When his parents came to the United States from El Salvador, they didn't speak English.

"They came over with nothing," said Juarez, 34. "We just lived day by day." At 18, "I started working at a refinery." After years of hard work, he said, he could buy all-terrain vehicles for his wife and three daughters that cost thousands.

He says he has spent more than $50,000 on his hobby. How can he afford it? "I just work a little harder, make a little extra money, and we come out and play," he said.

"Middle class people today live like rich people lived in the 1950s," said Arthur Brooks, president of the American Enterprise Institute. After you adjust for inflation, "from 1950 to 2007, the middle class family income went from $29,000 to $75,000," an increase of more than 100 percent.

All that extra money has brought middle class families a higher standard of living.

More than 76 percent of Americans own a computer today, and 85 percent have air conditioning. These are things that most consider necessities, but were much less common even a generation ago. Thirteen million Americans own boats, and 74 percent of those boats belong to households with incomes of less than $100,000.

Brooks acknowledges that with the recession continuing to worsen, many middle class families are feeling an economic squeeze. "We can't make light of that," he said. "But we have to keep this in perspective."

In the 1970s, we had gas lines, and in 1982, unemployment was at almost 11 percent -- much worse than the 8.1 percent unemployment we have now. After each recession, the economy recovered and continued to grow, once again giving Americans a shot at a better life.

People like Nelson Juarez and Adam Shepard show that the American dream is still alive.

"We have a society that rewards hard work and merit," said Brooks. "The United States has an astonishingly high level of income mobility. Half of the poor actually are not poor 10 years later. Nobody is stuck where they start out."