(FORTUNE Magazine) – ''For Middle Americans, the American Dream is vanishing.'' -- Robert Reich, Harvard lecturer

MEET THE BOUXSEINS of St. Charles, Missouri, just the sort of family that Reich, a prominent author and Democratic Party intellectual, is talking about. They don't look too pressured or worried -- not with that impressive inventory of possessions spread across their front yard. But Rick Bouxsein (pronounced Book-sign) hasn't had a raise in three years. His wife, Maureen, buys $4 dresses at Goodwill Industries and bakes her own dog biscuits to save money. Their oldest son, Craig, served a tour in the U.S. Army to pay for college, but tuition is so expensive he has to live at home rent-free. Recently he became engaged. If he marries soon, will his wife move in too? This is middle-class squeeze, or a slice of it -- and it may be the most potent force shaping American life and the economy over the next decade. For others in the same boat as the Bouxseins, that squeeze takes the shape of canceled health insurance that leaves them exposed to bankruptcy, a job snatched away by a foreign competitor or extinguished in a merger, or child care so expensive it sounds like ransom. How are these people coping? Are they ready for mutiny? And if so, against whom? The Democratic contenders lining up to challenge George Bush for the White House next year count on middle-class angst as perhaps their best hope for victory. These stirrings are of critical importance to business. The middle class is by definition the nation's core. The 40 million families (60% of all U.S. families) that earn $18,000 to $64,000 a year represent 50% of the nation's population and 55% of its work force. They account for half its income, pay 40% of its federal taxes, and are still the group most marketers target for their products. If such families believe the American Dream is evaporating, they will likely change the way they raise children, invest savings, furnish homes, stock refrigerators, and do their jobs. One persistent notion is that rising prices and sputtering wages are already shoving the middle class into the economic nether world. That view was reinforced by Census Bureau data, released in late September, which showed that median family incomes dipped last year for the first time since 1982. But what's really happened in recent years is that more families' incomes have been pushed up rather than down. Adjusting for inflation, 20% of American families had incomes over $64,000 in 1990, compared with 13% two decades ago. (That group includes most FORTUNE readers, whose median household income was $83,000 in 1988.) Taking the long view, almost everyone is better off. Over the past 40 years, the median income for a family of four has climbed in constant 1991 dollars from $21,000 to $45,000. No, this traditional family configuration isn't the majority anymore. But compared with all other categories of U.S. households -- single people or groups of singles, single parents with children, elderly couples, recently marrieds, and couples who prefer collecting 18th-century porcelains to raising kids -- marrieds with children remain a hefty 26% of all households. Insofar as the ''average American family'' can still be said to exist, they are it. Even at the bottom of the ladder, incomes have jumped by several rungs since just after World War II. Though blacks overall earn only half as much as their white counterparts, Clarence Thomas's nomination to the Supreme Court is a reminder that a healthy and often ignored black middle class has emerged. The median income for black families in which both parents are present and have jobs is $42,000. Was the quality of life somehow superior four decades ago? No. The infant mortality rate has dropped by two-thirds, and three times as many college-age kids now pursue a higher education. Far more Americans travel overseas, survive strokes and cancer, and cash in on at least a decade of retirement. Houses are bigger and better equipped -- and more people own them. The little things in life -- a TV set, tennis shoes, a gallon of gas, eggs -- are often cheaper today, adjusted for inflation. Even the prices of many big things -- a new car or a year's tuition, room, and board at a respected state school -- haven't risen as fast as real family incomes (see table). True, in the 1950s we didn't worry about crack, AIDS, or smog in the Grand Canyon. But consider the evils that are no longer around. Polio afflicted over 53,000 people in 1952, the year cases peaked. Racial segregation was so widespread that even in cosmopolitan midtown Manhattan it was unusual to encounter blacks, except for occasional musicians or menial toilers. . Since the early 1970s, however, the story has gotten more complicated -- and for many, gloomier. Two types of family have been hit hardest. One is the young family whose main wage earner has not gone to college. With the number of manufacturing jobs shrinking, these high school grads often must settle for work in retailing and other services, where the average annual wage is roughly $16,000, vs. $22,000 for the factory floor. Families headed by women never have had it easy. But the leap in the divorce rate has created many more of them -- 11 million these days, twice as many as two decades ago. The median income of families without a male breadwinner is just $18,000. Where parents stick together they have continued to improve their living standards over the past 20 years. But they've done so only when both dad and mom were detailed to haul the household up income mountain. When Michael Zerr, father and husband of the family pictured on our cover, graduated from high school, he scooped up such big paychecks as a hod carrier at building sites that he skipped college. ''I wish the pay had been terrible,'' he laments. It is now. He makes $18 an hour, but the hours he works dwindle year by year as the local construction business shrivels. If his wife, Anne, hadn't gone back to work as an aide to Congresswoman Joan Kelly Horn, they would make much less than their current $45,000. Like satellite photographs from above, economic statistics are revealing, but they don't always register what human intelligence can detect on the ground -- hidden resources, complex community relationships, changing ambitions, perhaps even revolutionary rumblings. To learn more about how ordinary Americans are coping these days, I visited with several middle-income families in two locales in the U.S. heartland. In both the cost of living is precisely the national average. They are Charlotte, North Carolina (metro pop. 1.2 million), and St. Charles, Missouri (pop. 55,000), primarily a bedroom community for St. Louis. Two observations immediately struck me that you wouldn't discern from the economic data alone. One is that families do well even in tough times when their lives are richly interwoven with others in the neighborhood. The Bouxseins throw themselves so energetically into community causes that it was almost inevitable that Maureen would help a fellow Cub Scout leader, who is the wife of a stonemason, who then laid the Bouxsein patio for $300 rather than $500. Another thing the data don't tell you -- though this is no secret -- is that many women who have had to find jobs want to do so. Even comic strip heroine and classic stay-at-home Blondie Bumstead recently blossomed into a career woman by starting a catering business -- and let's face it, Dagwood's been stuck in a dead-end job for 58 years. Plenty of Blondie's real-life counterparts have the ambition and talent to catapult their middling-income families into the upper brackets. CONSIDER the Zerrs again. Michael talks of retraining to be a paramedic or perhaps a firefighter. But Anne's prospects look a lot better. ''We'll work on my career now and see about his later,'' she says. After collecting academic credits for two decades, she graduated in May from local Lindenwood College. While tending to constituent problems for a Congresswoman doesn't pay a lot, she's making contacts. After next year's election Anne might try to get into business, maybe become a lobbyist. Corporate representatives in the state capital at Jefferson City can earn $55,000 or so. What I also observed in my travels is that happy families are mostly alike (apologies to Tolstoy). They are intelligent, loving, interesting, humorous, inquisitive, and generous. Where they differ is in the ways they deal with financial pressure. Rick Bouxsein earns about $37,000 a year as a PPG field technician, installing and servicing the company's medical equipment in St. Louis-area hospitals. Maureen makes about $5,000 a year in a part-time job as Neighborhood Watch coordinator for the St. Charles City Police Department. With three sons at home, the Bouxsein household has a bustling, unpretentious energy reminiscent of 1950 sitcoms like The Life of Riley. But this is the 1990s. Both Rick and Maureen have been married before, and the two older boys are Rick's sons by his first wife. There's another contemporary twist too. After bailing out of the house, son Craig, 21, has bounced back home like a bungee jumper. Home is a 100-year-old house that the Bouxseins bought for $32,500 in 1981 and that now has a market value of $65,000 or so, they reckon. The dwelling was erected as a ''shotgun,'' so spare that a visitor could stand in the front door and fire a 12-gauge through the back door without hitting a wall. But over the years occupants have slapped on additions that have turned the house into an amiable conglomerate of four bedrooms, living room, family room, dining room, and kitchen. Somehow the plumbing was overlooked, so the five Bouxseins converge every morning on a single bathroom. In the early 1980s Rick's pay was rising at 10% a year. Their Visa card took them to Disneyland and Lake of the Ozarks, a popular Missouri resort. ''We lived Reaganesque, figuring we'd pay off the debt with next year's salary increase,'' he says. But in the mid-1980s a supervisor and a fellow worker were laid off, and his pay soon flattened. ''I was scared to death,'' says Rick. Now the Bouxseins stay close to home and cut costs where they can. Recreation is a Saturday or Sunday cruise on the Mississippi in their 16-foot runabout, at a cost of the $5 launch fee and $15 for gas. They eat out once a month at most. Entertainment is a movie on one of the VCRs and pizza ordered in. Maureen takes me shopping in her 1977 Plymouth Volare station wagon. With three sons and a troop of visitors, the Bouxseins spend a minimum of $150 a week on food. Today's trip is to Aldi, an austere discount supermarket that wouldn't look out of place in the suburbs of Moscow. No piped music, no cheerful displays, and no fruit or vegetables, except for a few anemic onions. ''I don't buy everything here, just the stuff that's as good as the premium brands or that I don't care much about,'' says Maureen. ''I buy lawn bags to throw away, so I buy cheap. And to me this 69-cent cream cheese tastes as good as 89-cent Philadelphia. We eat what's on sale.'' A side trip to Goodwill, forlorn repository of dreary discards in other places other years, is a pleasant surprise, at least as bright and attractive as the typical Kmart. Cleaned and pressed secondhand suits sell for as little as $15, and recycled dresses, including an Oscar de la Renta -- or so the label claims -- for as little as $4. ''Rick used to admire a dress, and when I told him I bought it at Goodwill, he got depressed,'' says Maureen. ''So I don't tell him anymore.'' Rick buys $30 slacks at J.C. Penney. To understand Maureen more fully, sit across the kitchen counter from her in the late afternoon. Rick is not home from work yet. Craig and his fiancee, Shelly Tebeau, are shopping for an engagement ring. In the family room the younger sons are playing a computer game, Leisure Suit Larry, the ribald adventures of a skirt chaser. Maureen doesn't protest; the game requires literacy. ''Rick Junior's reading and spelling have improved since we got the , computer,'' she observes. The $1,800 machine serves many purposes. Rick Senior improves the computer technique he needs for his job; through a modem hookup Maureen stays in touch with police headquarters and writes to her mother in Yonkers, New York. In the kitchen Maureen rattles off answers to Jeopardy questions that burst from the TV set on top of the refrigerator. (She has a bachelor's degree in biology from Mercy College in Dobbs Ferry, New York.) Teasing, she offers me a bucket of dog biscuits. ''These would cost me 99 cents at the market, and I can make them for practically nothing,'' she says. Ignoring the hostile stare of the family Dalmatian, I accept a biscuit, whole wheat mostly, and tasty enough, once I overcome the psychological block. IN THE COURSE of the day the whole neighborhood seems to pass through the Bouxsein kitchen, taking part in the easy exchange of goods and services that makes the economic squeeze more tolerable. Here comes Lucille Stuckemeyer, an 81-year-old widow seeking an explanation for a $3 medical bill. Maureen also chauffeurs Lucille around town from time to time in the Volare, which Lucille sold to the Bouxseins for $250 last year. Then enters a benefactor bearing about ten pounds of cold cuts left over from lunch at a company cafeteria; because that's a violation of company health rules, the donor asks not to be identified. Maureen gives some of the meat to Lucille, who gets by on Social Security and a small pension and is willing to take the low-risk gamble that the food is not spoiled. Maureen will distribute the rest elsewhere in the neighborhood. ''We don't do things for people with repayment in mind, but it sometimes happens that they can do something for us,'' she says. The Bouxseins expend an enormous amount of time and energy on community improvement. Rick serves on the city's charter review committee. Maureen is president-elect of the parent teachers organization. And while the neighbors stream through her kitchen, she stirs a batch of snowball cookies for tonight, when she and Rick will host an organizational meeting for a landmarks-preservation movement. Maureen is content, but she also dreams. A few years ago she sold cheesecakes. A local bakery prepared the cakes according to her recipe. ''They were a hit, but I was working 50 or 60 hours a week and just breaking even,'' she recalls. So she closed the business. Eventually Maureen would like to open a restaurant, but it would probably cost $12,000 or more to start. So the dream simmers on a back burner. The following day I ride with Rick on his rounds to service PPG medical instruments at two local hospitals. During the jolting mergers-and- acquisitions 1980s he stayed in the same job, but his employer kept changing. He started out with privately owned Electronics for Medicine in 1976, which was bought by Honeywell in 1979, which sold it to PPG in 1986. In a dozen years Rick watched several district managers fail and vanish. ''A couple of years ago I was worried about PPG,'' he says. ''Our product line was old. But the company put money into R&D. I respect that. Now we have a device called Midas for monitoring the heart during surgery. It's way ahead of the competition.'' Rick's benefits are good. The 1990 Ford Aerostar minivan in which he makes his rounds belongs to PPG. He can also use it for pleasure, reimbursing the company 9 cents a mile. (The IRS counts that as an additional $1,500 a year in taxable income to Rick.) Rick puts 6% of his salary into a savings plan, and PPG matches it with company stock, so he now has about $17,000 in the account. Unlike Maureen, Rick doesn't ponder bold career changes. ''I've got what I want,'' he says, ''a boat, a motorcycle, roof over my head, kids well fed, and great neighbors.'' His dreams are modest: ''I want to be able to retire with enough money to take my grandchildren to Disneyland.'' Rick is confident the U.S. economy can provide his children good jobs -- if they finish college. He didn't and regrets it, though he did spend two years at a Florida community college. ''I was bright,'' he says. ''I could have been an electronics engineer instead of a technician.'' But he was married and had Craig and Jason, and was eager to go to work. Now he worries that Craig, only a freshman at the University of Missouri, will follow his example and decide that graduation is too far off. ''He bought Shelly a $1,500 engagement ring on credit at 18% interest a year,'' says Rick, shaking his head. ''If Craig quits school, he'll lose his opportunity.'' IN CHARLOTTE, Ed Garber earns $32,000 a year as a computer technician for Dow Jones & Co. The family's income plunged last year when his wife, Nancy, lost her $20,000-a-year job as regional director of the American Diabetes Association; falling revenues forced a retrenchment. Now Nancy sells residential real estate for Coldwell Banker. Through the first eight months of 1991, she has netted about $10,000. The Garbers live with their teenage son and daughter in a cozy 54-year-old house about five miles from central Charlotte. They bought it for $37,500 a decade ago and figure it would now sell for $68,000. ''Hardwood floors and arches on the walls, classic details,'' says Nancy, the saleswoman. But it is cramped -- three bedrooms, one bathroom, a dining room, living room, and kitchen, all packed so tightly together that when son Eddie plays drums in his bedroom the house throbs like a small rock club. The Garbers are upbeat. Nancy is bright, gregarious, and ferociously determined to succeed in Charlotte's brisk real estate business. But until she starts bringing in big commissions, her family will live tight. Ed has taken $6,900 out of his Dow Jones retirement fund, $4,000 out of an IRA, and $1,000 out of other savings to pay for household expenses. They still eat out every couple of weeks ($35 buys roast beef for two at a place called Grady's). But summer vacation was only two long weekends in a $100-a-night condominium on the North Carolina shore this year, rather than the longer trips to Florida and Washington, D.C., of the past. The household is spare, surprisingly short of electronic gadgets for a computer technician's dwelling. The Garbers have a pair of TV sets, though only one works, and a stereo rig that Ed bought from a pawnshop for $229, but no compact disk player, VCR, or PC. ''The shoemaker's children go barefoot,'' Nancy notes good-naturedly. Nancy drives a 1990 Chevrolet Lumina (car payments of $197 a month). Ed uses a 1984 Chevy van that he bought for only $2,400 from the Dow Jones service fleet, one of those subtle fringe benefits that don't show up in the economic statistics but help to make life's path smoother. Ed and I drive to Interstate/Johnson Lane, a regional brokerage house, where his assignment is to put an additional keyboard on a computer terminal. He is proud of his work. ''When customers call the office, they know they are getting Ed and not some 800 number,'' he says. ''I like getting things to run for people. For them an electronic system seems chaotic. I know there's an order to it.'' AMID THE BOISTEROUS, high-spirited bond-trading fraternity, Ed strings wires and puzzles over circuitboards unnoticed. Does it bother him that the traders' paychecks might be ten times his? ''No,'' he says. ''They have good days and losing days. I never thought life was about being a millionaire.'' Nancy, however, would like to make acres of money. But, first, follow her through Harris-Teeter supermarket on the weekly shopping run. ''I'm not a housekeeper,'' she warns at the start (Ed does the cooking). She speeds down aisles the way some people go through bad neighborhoods, as fast as she can without running anyone over and suppressing any curiosity that might attract attention. ''This will cost about $75,'' she forecasts. ''I never look for sales.'' Her strategy must drive market researchers nuts. ''I fill my cart with the same stuff every time,'' she explains. ''Sometimes we need it and sometimes we don't.'' Nancy is slightly miffed when the cashier rings up $88.45, but shrugs off inflation as inevitable. She'll make it up on the revenue side. What she likes about the supermarket is what everyone else dreads, a long checkout line. There she can chat with neighbors about who's moving in, who's moving out, and offer her business card. Nancy, the dizzy shopper, seems a superb real estate agent, ingratiating, observant, aggressive. ''I used to say assertive,'' she recalls, ''but let's face it, it's aggressive.'' Pressure energizes her. A slogan on the wall at the Coldwell Banker office advises salespeople to MAKE DUST . . . OR EAT IT. In the cubicle directly behind Nancy sits the champion dust-kicker, Kelli Sheppe, who marks off the days on her calendar with dollar signs. Fixed to Nancy's mirror is a memo with her goal: to reach the seventh and highest level of Coldwell Banker agents, those who make over $75,000 a year. We head back home for dinner. The kitchen hasn't been updated much since the 1930s. Sitting around the table over pizza and beer, the Garbers reflect on their lives and their future. ''I thought I'd be ahead of where I am by this time,'' says Ed. He blames himself for dropping out of college in his sophomore year. Nancy, who graduated from the University of North Carolina at Charlotte, has no regrets. One of eight children, she feels she is clearly better off than her house-bound mother. ''I have some control over my life,'' she says. ''I can see myself earning in the six figures.'' She and Ed would travel outside the country, which they have never done, or buy a condo at the shore or in the mountains. The big expense in a couple of years will be tuition. Daughter Jeannie wants to go to Appalachian State University in Boone, North Carolina, at $3,600 a year. Eddie is undecided. Ed believes he can borrow the money from Dow Jones. Will the children be able to get jobs when they graduate? Says Ed: ''There's a great future for those who can see not just how computers work, but make computers really work for people.'' Nancy plugs in the electric coffee maker -- and the lights go out. When the cash flow improves, the kitchen really has to be rewired. So what are we to conclude from our examination of these families' lives? Echoing Robert Reich, MIT economist Paul Krugman maintains that for families making less than $60,000 a year, the American Dream ended in 1973. But the sounds I heard from a dozen or so families earning in the mid-$40,000s weren't those of defeat, or anger, in spite of lost jobs and frozen salaries. Most are Democrats but, somewhat surprisingly, they don't expect a lot of help from government. They don't want jobs created simply to stimulate the economy. If the Pentagon were to toss a few more contracts at McDonnell Douglas, the construction industry in St. Charles might revive and Michael Zerr would log more hours. That would be a bad idea, he says. ''Government can help me more by keeping spending under control and my taxes low,'' he says. There are a couple of problems, however, that seem beyond the ability of families or business to manage, where government ought to step in, they say. The Bouxseins and Garbers have company health insurance, and the Zerrs are covered by a union policy as long as Michael works at least 250 hours a quarter. But they all know they are just a pink slip and a medical mishap away from ruin. The backyard news is full of tales about the neighbor with cancer who can't get a job or insurance. They don't worry much about the education their own children receive, although perhaps they should (see Special Report). They are inclined to self- reliance: If your child is failing, go to the teacher and insist on help. If the entire school is failing, find an alternative you can afford. But they have an admirable concern for inner-city parents too timid, confused, or broke to follow those rules. Government should help. ''The poor in this country have a real emergency,'' says Ed Garber. Among these families, at least, presidential candidates might win more votes by appealing to a sense of fairness than to personal anxieties. What do these families have to say to business? Given a choice, they tend toward economic nationalism. They don't bash the Japanese, but they don't buy their cars either. ''We should support American workers,'' says Anne Zerr, who ( drives a 1985 Buick LeSabre. But quality also counts -- as does price. Nancy Garber's autopilot dash through the groceries is the exception. Maureen Bouxsein's diligent search of the shelves is more typical. If you want to sell to these families, Mr. Big Name Brand, you'd better prove that your 20-cent premium price is worth it. Their sense of well-being is bound up in their jobs, not just whether they will be working next quarter but whether they respect their employers' long- term vision, as well as this week's wares. Looking back, they envy the simplicity and predictability of their parents' world. But only a little. They live better. Looking ahead, they know their own children will do fine -- as long as they finish college. These middle-income families are confident. The center holds.

CHART: NOT AVAILABLE CREDIT: NO CREDIT CAPTION: THE BOUXSEINS

CHART: NOT AVAILABLE CREDIT: NO CREDIT CAPTION: THE ZERRS

CHART: NOT AVAILABLE CREDIT: UNIVERSITY OF NORTH CAROLINA, HARVARD, WARD'S AUTOMOTIVE YEARBOOK, AMERICAN PETROLEUM INSTITUTE, MOTION PICTURE ASSOC. OF AMERICA, CONVERSE, SEARS ROEBUCK, AMERICAN MEDICAL ASSOC., AMERICAN CHRONICLE, HARRIS-TEETER SUPER MARKETS CAPTION: WHO WE ARE WHAT WE OWN WHAT THINGS COST HOW WE FEEL

CHART: NOT AVAILABLE CREDIT: FORTUNE CHARTS/SOURCES: CENSUS BUREAU CAPTION: The postwar rise in most families' incomes hit a wall in the early 1970s. Plodding productivity gains are partly to blame. To keep their earnings climbing, in many homes both mom and dad have had to go to work. INCOME GROWTH SLOWED. . . . . .BUT WORKING WIVES HELPED

CHART: NOT AVAILABLE CREDIT: NO CREDIT CAPTION: THE GARBERS