"Krugman, like many of us, considers the Reagan years as the defining moment in the loss a hardy middle class."
I generally blame Raygun for almost everything, but I think the '73 OPEC embargo was. Price of gas tripled almost overnight, we went into a recession, and Mom went from, "I feel unfulfilled, so I should get a job" to "Gotta work to buy gas for Dad, so he can drive to work." Then the second one, in '79, gave us a second hit.
The 40-Year Slump
 The steady stream of Watergate revelations, President Richard Nixon’s twists and turns to fend off disclosures, the impeachment hearings, and finally an unprecedented resignation—all these riveted the nation’s attention in 1974. Hardly anyone paid attention to a story that seemed no more than a statistical oddity: That year, for the first time since the end of World War II, Americans’ wages declined.
Since 1947, Americans at all points on the economic spectrum had become a little better off with each passing year. The economy’s rising tide, as President John F. Kennedy had famously said, was lifting all boats. Productivity had risen by 97 percent in the preceding quarter-century, and median wages had risen by 95 percent. As economist John Kenneth Galbraith noted in The Affluent Society, this newly middle-class nation had become more egalitarian. The poorest fifth had seen their incomes increase by 42 percent since the end of the war, while the wealthiest fifth had seen their incomes rise by just 8 percent. Economists have dubbed the period the “Great Compression.”
This egalitarianism, of course, was severely circumscribed. African Americans had only recently won civil equality, and economic equality remained a distant dream. Women entered the workforce in record numbers during the early 1970s to find a profoundly discriminatory labor market. A new generation of workers rebelled at the regimentation of factory life, staging strikes across the Midwest to slow down and humanize the assembly line. But no one could deny that Americans in 1974 lived lives of greater comfort and security than they had a quarter-century earlier. During that time, median family income more than doubled.
Then, it all stopped. In 1974, wages fell by 2.1 percent and median household income shrunk by $1,500. To be sure, it was a year of mild recession, but the nation had experienced five previous downturns during its 25-year run of prosperity without seeing wages come down.
What no one grasped at the time was that this wasn’t a one-year anomaly, that 1974 would mark a fundamental breakpoint in American economic history. In the years since, the tide has continued to rise, but a growing number of boats have been chained to the bottom. Productivity has increased by 80 percent, but median compensation (that’s wages plus benefits) has risen by just 11 percent during that time. The middle-income jobs of the nation’s postwar boom years have disproportionately vanished. Low-wage jobs have disproportionately burgeoned. Employment has become less secure. Benefits have been cut. The dictionary definition of “layoff” has changed, from denoting a temporary severance from one’s job to denoting a permanent severance....
In the three decades following World War II, the United States experienced both high levels of growth and rising levels of equality, a combination that confounded historical precedent and the theories of conservative economists. By 1973, the share of Americans living in poverty bottomed out at 11.1 percent. It has never been that low since.
 By the early 1980s, the Treaty of Detroit had been unilaterally repealed. Three signal events—Federal Reserve Chairman Paul Volcker’s deliberately induced recession, President Ronald Reagan’s firing of striking air-traffic controllers, and General Electric CEO Jack Welch’s declaration that his company would reward its shareholders at the expense of its workers—made clear that the age of broadly shared prosperity was over.
The abrogation didn’t arrive unheralded. Beginning in 1974, inflation had begun to plague the American economy. The 1970s were framed by two “oil shocks”: the OPEC embargo of 1973 and the U.S. boycott of Iranian oil after the mullahs swept to power in 1979. During the decade, the price of a barrel of oil rose from $3 to $31. Productivity, which had been rising at nearly a 3 percent annual clip in the postwar decades, slowed to a 1 percent yearly increase during the 1970s. Europe and Japan had recovered from the devastation of World War II, and Japanese imports, chiefly autos, doubled during the late ’60s. In 1971, the U.S. experienced its first trade deficit since the late 1800s. Starting in 1976, it has run a trade deficit every year
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