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Tuesday, February 20, 2007

What about the middle class?

Posted by: Jambo / 10:07 PM

An interesting discussion about what, if anything, to do for the middle class:

There are five ways you could talk about the middle class in the current economy:

1. You could argue that the middle class faces serious economic stresses and anxieties, and government should help them deal with those things. That's kind of the position Senator Schumer has taken with his book Positively American, and with it, he's embraced some of the same policies, such as making college tuition deductible. I disagree with Schumer about his approach, but at least his solution fits his diagnosis of the problem.

2. You could argue that both the middle class and the working poor face increasing stresses, anxieties and insecurities, and there's a need for either universal programs that address that shared experience of insecurity (universal health care, wage insurance) or fundamental macroeconomic changes that would lead to a tighter labor market. That's more or less the position represented by, say, the Economic Policy Institute's "Shared Prosperity" project.

3. You could argue that the middle class is doing okay, but those below the median income – not just the poor, but those hanging on the precipice of the middle class and trying to climb up – are having a hard time of it, and we need policies that help their mobility, out of a moral obligation and out of our vision of America as a land of opportunity. This would be more or less John Edwards' "Two Americas" of 2004. (And not totally incompatible with option 2.)

4. You could argue that the middle class is doing fine, and therefore we should just keep doing what we've been doing, keep taxes and regulations low and let people "keep more of what they earn." This is Republican orthodoxy at the moment.

5. You could argue that the middle class is doing just fine, but we Democrats should throw a bunch of expensive tax credits and other benefits their way anyway because maybe they'll like us and vote for us.

The discussion started over a few articles trumpeting the fact that the middle class these days is actually doing quite well, in spite of what "pessimists" say. One of the facts they point to as proof is that "in 1979, only 12% of "prime-age households" (that is, singles or couples age 25-59) earned more than $100,000, today, 24% of such households have crossed the $100,000 line". It's not clear to me if they are talking about inflation adjusted incomes but even if they are I think they are missing (maybe intentionally) part of the problem by using the term "household". In 1979 I was 15 years old and like every kid I knew my mother didn't work. I don't think any of us even knew the concept of daycare. Our household income was my dad's. He was a career Navy officer and did pretty well. He was well short of $100k but we were comfortably middle class. Today my wife and I both work and are also comfortably middle class but with day care costs (at least before my kids started school) of around $20k a year. We are pretty much in the same social position as may family was in 1972 but now it takes two incomes to do it and a good part of the time our children are being raised by people other than us. I'm guessing the story is the same all over the country. There are several other facets to the argument and I'm not complaining (much) about my lot in life, but I think it's a mistake to pretend there haven't been some major changes in the last 30 years (for good and ill) that have a bearing on just how well off the middle class really is today.

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Excellent post, the main thing I see is that there are few jobs that actually provide a living wage for people with no or limited higher education. I believe this is because our actual productive capacity of goods has been outsourced to other countries. I remember the 60's , i came from a very working and middle class area of michigan, people werent rich but it was a good life. The jobs that supported that do not exist anymore, they are now service jobs that pay $7-12 per hour. (or even the production jobs in lumber or plywood milling only pay about that much as well as there is no salary competition other than the service or retail industry)
In addition stipulating $100k in household income means nothing as you noted in terms of inflation, but also you have to place the amount of debt the household carries. Mortgages of over $200,000, college debt and credit card debt I am sure offset the net amount of household assets as compared to 1960's or early 1972. Any current measurement of household debt published is overwhelming to read.

By Anonymous Anonymous, at 1:23 PM  

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