Consumer Psyche

Being middle class has never been carefree. Families have worked hard, saved and sacrificed, and they occasionally endured tough times. But generation by generation, the middle-class lifestyle has gotten better and better.

It did so because of the triumph of capitalism. As the great economist Joseph Schumpeter put it: "Queen Elizabeth owned silk stockings. The capitalist achievement does not typically consist of providing more silk stocking for queens but in bringing them within the reach of factory girls for steadily decreasing amounts of effort."

Innovation and trade continually drive down the real cost of goods and services and increase the productivity of each hour of work. As this capitalist engine churns onward, the scarcity that plagued mankind for millennia has given way to the abundance that's the foundation of today's vast middle class.

The capitalist system literally created the middle class, and the best way to maintain and improve our living standards lies in keeping it functioning at peak efficiency. Government largesse, no matter how high-minded or well-intended, isn't going to do much for the majority of middle-class families. They have to pay their own way – as always.

Courtesy: W. Michael Cox is former Dallas Fed chief economist and director of the William J. O'Neil Center for Global Markets and Freedom at Southern Methodist University's Cox School of Business.