Forty years from now, politicians, writers, and historians may struggle to understand how America, once the quintessential middle-class society, became as socially stratified as Europe or even Brazil. Should that dark scenario come to pass, they would do well to turn their attention first to New York City and New York State, which have been in the vanguard of middle-class decline.

It was in mid-1960s New York—under the leadership of a Barack Obama precursor, Hollywood-handsome John Lindsay—that the country’s first top-bottom political coalition emerged. In 1965, Gotham had more manufacturing jobs than any other city in the country. But the city’s political elites used eminent domain to push manufacturing aside in favor of business services; they also expanded social programs to help African-Americans and Puerto Ricans. The service sector proved rough going for the less educated, and the social programs failed. New York City responded by inflating its unionized public-sector workforce to incorporate minority workers.

Higher taxes to pay for bigger government joined higher crime to produce a massive exodus of manufacturing and middle-class jobs. Over the last 45 years, New York has led the country in outmigration. A recent study by E. J. McMahon and Robert Scardamalia of the Empire Center for Public Policy notes that since 1960, New York has lost 7.3 million residents to the rest of the country. For the last 20 years, “New York’s net population loss due to domestic migration has been the highest of any state as a percentage of population.”

New York City, meanwhile, solidified its standing as the most unequal city in America. Twenty-five percent of New York was middle-class in 1970, according to a Brookings Institution study. By 2008, that figure had dropped to 16 percent, and the numbers have only plunged further since the financial crisis, with virtually all the new jobs in the city’s hourglass economy coming at either the high end or the low. Only high-end businesses can succeed in a local economy that has the nation’s highest taxes and highest cost of living—and even those businesses, in many cases, weathered the downturn only by living off the Fed’s policy of subsidizing banks. Despite the federal largesse, more of the city’s new jobs are in the low-wage hospitality and food-services industries than in the financial sector. The middle has lost its political voice in a city dominated by the politically wired wealthy and the public-sector unions that service the poor….

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