Change in share of total hours worked by lowest, middle and highest income occupations between 1993 and 2006
This all happened before the financial crisis that triggered the Great Recession.
We’re not alone, and we’re not the worst. It’s a pervasive trend among the established Western industrial democracies. But since we have the weakest welfare state to help soften the blow, and the deepest ideological antipathy to doing anything about it…. Well, let’s just say that this chart gives an indication of how badly screwed we are right now, since (a) the global oligarchs are in denial about the ongoing Great Recession & what needs to be done about it, and (b) this chart shows–from yet another perspective–that the problems began long before the Great Recession started.
A sweeping loss, and two years of angst and frustration after people felt so hopeful, generates a lot of interesting conversation (as well as quite a bit that isn’t interesting at all- but I’m not here to talk about that). There is discussion of how to come back; discussion about shaking up leadership at the White House or Capitol Hill; there is all the positioning palaver I have written about (although that is mostly in that uninteresting category); there is talk of the need for a new economic strategy. And on the edgiest side of things, there is talk about a primary challenge for Obama, and even a 3rd party effort. A lot of this is just blowing smoke, of course, getting people’s frustrations off their collective chests. But some currents are interesting and worth exploring.
On the 3rd party issue, the fascinating thing is that I am hearing very little of this discussion coming from my lefty friends, who the conventional wisdom would leap to assume would likely be talking about it. I think Nader actually getting enough votes in Florida to elect Bush was an experience that has definitively shut the door on 3rd party challenges for at least another generation, as it became real damn clear after that election that, yes, there would have been some differences between Bush and Gore on a few key issues. The 3rd party stuff is coming instead from a certain kind of centrist. Michael Bloomberg is the most likely candidate (and arguably the reason for a lot of the conversation). This kind of 3rd party centrist is far removed from the Ross Perot style of centrist, although like Perot, Bloomberg would be a big self-funder and would probably talk a lot about deficits. Perot was more of a populist, though, with his opposition to NAFTA and his appeal to working class white men. The chatter about 3rd party challenges now comes from what Matt Miller, one of its leading proponents, describes as “fiscally conservative, socially liberal” types. I’m not sure what exactly is meant by fiscally conservative. I consider myself one because I don’t like wasting government money on stuff like no-bid contracts, subsidies to agribusiness, and loopholes for bankers, but I’m guessing my kind of fiscal conservatism is not what Matt has in mind.
This kind of 3rd party challenge is of the high-minded “politics-is-broken” school. I’m thinking of people like Bloomberg himself of course- a corporate CEO type who is a liberal on issues like gun control and abortion rights, but doesn’t mind the anti-middle class stuff the deficit commission co-chairs are proposing. Come to think of it, Deficit Commission co-chairs Bowles and Simpson would be the kind of folks at home in this party. I’m also thinking of people from the past and present such as Paul Tsongas, Lowell Weicker, Bill Bradley, Bob Rubin, Lincoln Chafee (and his father John before him), Charlie Crist, Joe Lieberman, Olympia Snowe, Gray Davis and his successor Ahnold, Peter Orzag, Tim Geithner. I think such folks could all be very happy in a political party together.
A centrist party like that would be the ultimate test of Mark Penn’s old theory that the most important demographic group in American politics, the premier swing voters who all politicians should try to appeal to, is the “office park dad”- upper middle income suburbanites who aren’t very angry at corporations because they work in management positions at them, or are lawyers and sub-contractors for them, and whose biggest issue is caring deeply about balancing the budget. This has for at least a generation been the DC centrist version of the middle, precisely because the power brokers in DC fit with this demographic so well. Many of my friends argue that such a third party would hurt Democrats, but I’m a lot less sure about that simply because having such a party would clear the way for pretty much forcing the Democratic Party to become one that would once again unapologetically be for the middle class, which is where I think by far the biggest swing vote segment in American politics actually resides.
In my mind, being for the middle class is not exclusive of being for poor people – I am for helping everyone in the other 98%, as my friends at MoveOn would put it. But I am for having a party that is unapologetic about focusing on helping expand and build and promote the American middle class. I am for expanding poverty programs and raising the minimum wage and a strong public education system in poor neighborhoods and a path to citizenship for immigrants because I want them able to join the middle class. The greatest years in American history in terms of the living standards for most Americans were the three decades after the New Deal and World War II. In those years, the labor movement, the GI Bill, the financial stability caused by FDR’s financial regulation, the minimum wage, Social Security and the rest of expanded safety net, the building of the interstate highway: all of these things promoted steadily rising prosperity and the biggest, most stable and secure middle class in the history of the world.
My party, the political party I happily associated myself with and worked to promote before I could even vote, the Democrats, were the party that promoted the idea of a strong and secure middle class, and a hand up to the poor so more of them could join in that American dream. But right now, there is no party whose clear and abiding mission is to promote and support and fight for that American middle class. The Republicans do their faux populist anti-intellectual schtick to get working and middle class votes, but all of their policies are unapologetically on behalf of the wealthy and powerful. The Democrats are split down the middle between the Rubin economics acolytes who believe that the best way to build a good economy is to make sure the big banks are healthy, and those of us progressive populists who fight on behalf of the middle class and the poor- that other 98%.
The nice thing about Bloomberg running, and spending 200 million or whatever to do it, is that it would force Democrats to make a choice, and with Bloomberg taking up the pro-corporate space, open things up for a full throated campaign on the side of middle class workers and families. But whether Bloomberg runs or not, the Democrats don’t have much hope unless they choose the side of the middle class. The exit polls could not have been clearer that the voters we lost in 2010 were primarily those working and middle class voters who have been hammered by this recession, and they are going to keep voting against the party in power until they find someone who will start fighting heart and soul for a better life for them. This mushy sometimes-with-the-bankers, sometimes-with-the-middle-class thing isn’t working, and the real swing voters, as opposed to whatever it is the DC centrists are talking about, are the populist working class folks.
The high school I went to in Lincoln, NE, was 3 blocks from the biggest factory in town, and we were known as the gearhead school- the kids who loved cars and knew how to repair them, kids who went hunting with their dads on the weekend, kids who were going to work at a factory or construction job, or maybe join the armed forces, when they got out of school. They are now in their early 50s, most of them having worked hard their whole lives, with little saved up for retirement and a house that has droped in value. Their most fervent hope is to be able to keep working until they are 65 so they won’t be a burden on their kids, because their kids are struggling to fine economic security as well. I want a political party that unapologetically fights for those kinds of folks, that puts their economic needs at the core of their party’s agenda, and that will prioritize what they need over what the big money lobbyists in DC want. And here’s the deal: that kind of party, the party the Democrats were in their heyday in the years after the New Deal when their mission was building the middle class, would actually win a lot of elections. Is becoming that party again, unequivocally and passionately, too much to ask the Democrats for?
The politics on the deficit commission are predictable, but they are another sign of how far removed DC style centrism is from where the American public actually is. The DC establishment loves this plan, is demanding that politicians embrace it, but it is the worst kind of policy and politics, and should be rejected out of hand. Deficit commissioners should instruct the chairs and staff to come back with a plan that cuts the deficit without attacking the middle class.
You could write a deficit reduction plan, as well as a plan to shore up Social Security (the two are very different things) that would garner pretty broad support from the American people. On Social Security, a very minor adjustment- raising the cap on payroll taxes- would keep Social Security solvent through the end of this century. On the deficit itself, there are a whole set of options to dramatically reduce the deficit that garner clear majority support in the public polling on economic issues, including:
1. Increasing taxes on millionaires and billionaires.
2. Imposing a financial transactions tax on Wall Street speculation.
3. Ending a wide array of corporate tax loopholes for things like overseas investment.
4. Ending corporate agribusiness subsidies larded into the farm bill.
5. Ending loopholes and subsidies of various kinds to the big energy companies.
6. Reforming the government contracting process to end no-bid contracting, impose penalties on cost over-runs, and cut down on excessive bonuses.
7. Allowing Medicare to negotiate drug prices with the big pharmaceutical companies.
8. Having a vigorous public option to provide competition for health insurers.
Depending on the level you did them at, all of these items would bring in or save tens of billions of dollars a year, some of them hundreds of billions. There are plenty of ways to lower the deficit without screwing the middle class: people who are better budget experts than I could find plenty more if you gave them this simple and singular mission: find all the ways you can to lower the deficit without hurting the poor and middle class people who have been the ones most hurt by the economy in the last ten years. But that is clearly not what this deficit commission was looking to do. DC centrism in fact demands that you look first and foremost to targeting the middle class. The political assumption is that if you nick the defense budget a little here and there, include a few revenue increases along with the cuts, and don’t do the most obvious egregious slashes to programs for poor people, that it will be okay with lefties because, hey, they only care about the poor and won’t mind if the middle class gets hurt.
So let me clear, because goodness knows I don’t want to be seen as ungrateful: thank you, honorable co-chairs, for the defense cuts you put in- they are a good start. Thank you as well for not slashing the heart out of food stamps and Head Start and certain other poverty programs. I also am delighted that you guys listed the public option on health care as something to consider. I really am sincerely happy about all that. But in spite of those good things, I think you will find the progressive movement will fight you every step of the way on this proposal, because we do actually believe in fighting for the middle class. My friends at Third Way think progressives will happily go along: “The recommendations on Social Security fall well within the mainstream of what most progressive organizations that care about Social Security solvency think should be done to save it,” said Jim Kessler, vice president for policy at Third Way, a centrist Democratic think tank. “Everyone believes there should be increases in the retirement age, some adjustment to the cost-of-living-adjustments and some increase in revenues.” Jim and his colleagues don’t get it: this stuff about shared sacrifice that the DC centrists keep talking about is a nice theory. But the document Bowles and Simpson produced doesn’t have shared sacrifice: it takes dead aim at the things that matter the most to the working and middle class. It asks them to work longer before they retire at the demanding and sometimes physically hard jobs many people in the working class have, if they can find work at all. It asks them to pay dramatically more in health care through the elimination of the deduction for insurance. It asks of them that they make the dream of home ownership far less affordable by eliminating the mortgage deduction. It asks them to pay higher fees, on whatever brief vacations they might be able to afford, to our national heritage of the park system.
It is this same middle class who have had no net increase in their household incomes over the last decade. It is them who keep having to pay higher regressive sales and property taxes at the state and local level while having less teachers, cops, and firefighters because of budget cuts. It is them who have seen higher gas and utility and grocery prices over the last few years, and who have seen their kids’ college tuition and their health care costs soar through the roof. Since very few upper income kids go into the armed services, it is the sons and daughters of the working middle class who have gone to fight our wars over the last seven years. It is their homes that have lost their value and in far too many cases are underwater in terms of their mortgages. And it is far too many of them who have lost their job or are now being forced to work in lower wage, part time, or temp jobs.
These are the people that out of touch Washington elites who are embracing these deficit recommendations, who mostly don’t have these problems, want to make sacrifices. They aren’t asking sacrifice of higher income folks- in fact, the income tax rates are being flattened so the tax system is less progressive. They aren’t asking it of corporate execs, whose corporate tax rates will go down. They aren’t asking it of the Wall Street bankers, who once again escape a financial transactions tax. But boy are they sharing that sacrifice all the way around that American middle class.
This kind of DC centrism is a political nightmare of the first magnitude. It hurts the people who have borne the brunt of the excesses of the upper class in the last decade, and it hurts the people who are angriest at both parties- who swung against Republicans in 2006 and 2008, and swung against Democrats in 2010. When the full commission votes on this, they should send it down in flames. And if they do vote yes on it, Obama and Congressional Democrats should vigorously stand against it.
I wrote my initial post in such a hot rage over the proposal the cut Social Security and Medicare benefits that I didn’t take the time to edit my blog post (sorry about those strange sentence structures), or take the time to look at the details of the proposal. So now that I have calmly taken some time to do that, I have to admit that I was wrong: this thing is even worse than I originally thought, and I way understated the problems with it. The co-chairs and staff found every conceivable way to screw the middle class in ways big (very big) and small, but barely nicked the bankers who caused the meltdown of the economy, or the wealthy whose massive tax cuts ended the big budget surpluses as far as the eye could see coming out of the Clinton years. Look at some of the different ways middle class and poor people will be gauged by this proposal (and I am probably missing some):
1. Raises the retirement age for Social Security and Medicare to 69.
2. Cuts Social Security benefits.
3. Ends the mortgage tax deduction.
4. Ends the tax deduction for workers’ health benefits.
5. Freezes salaries for federal workers for 3 years.
6. Establishes co-pays for veterans at VA health services.
7. Raises fees to visit the national parks and the Smithsonian.
8. Merges the Small Business Administration into an agency (Commerce) that has always prioritized helping bigger businesses, and cuts their budget.
9. Eliminates the Office of Safe and Drug Free Schools.
Bowles and Simpson claim that they are being progressive by raising the Capital Gains Tax, but they make up for that by cutting corporate taxes and flattening the tax rates, so there is actually less progressivity in the tax code. They do claim some savings in defense spending and contracting, but a bare fraction of what could be saved if you got serious at all about reforming government contracting. And what they don’t do is stunning: they don’t go back to the Clinton era’s tax rates on the wealthy that actually helped balance the budget. They don’t impose a financial transactions tax on the speculative trading that did so much to crash this economy. They do nothing to create the jobs of the future that would actually spur the economic growth of the 1990s that were key in creating the budget surpluses of that era.
You know what is most bizarre: all this pain for the economically stressed working and middle class, and they still don’t actually balance the budget until 2037. This is one of the worst policy documents I have ever seen- and I lived through the George W. Bush era! The President that Erskine Bowles, Bruce Reed, and I worked for dug our way out of the big budget deficits of the Reagan/GHW Bush era and created a balanced budget and long term surpluses by doing modest budget cuts, taxes on the wealthy, and strong economic growth. Clinton did it without gouging the middle class in all the terrible ways listed above. We have a bigger hole to dig out of now because of the economic crisis of the George W. Bush era, but we can create a long term balanced budget with the same kind of formula, plus adding a financial transactions tax that would help curb dangerous financial speculation. There is absolutely no call for punishing the very people who have taken all the pain of the economic policies of the last decade. My old friends Erskine and Bruce should know better.
Another old friend of mine, Jon Cowan, writes today in Politico that this proposal is “the only game in town” for reducing the deficit. Not to put too fine a point on it, but what a crock. All we have to do is revisit the policies of the 1990s, minus the financial deregulation. The middle class has been burdened enough to pay for the excesses of Wall St and government contractors. Let’s reduce the deficit the right way: by finally asking the people who caused it- the wealthy who got huge tax increases, the big banks who caused the economic collapse, and the government contractors who rip off taxpayers- to make things right.
I have that Han-Solo-encased-in-carbonite feeling this morning. The powers that be in modern America- the insurance industry, big oil and coal companies, most of all the big Wall Street banks that control 60% of our country’s wealth- had gotten used to having everything go exactly their way in Washington. They had come to expect that they would write the laws, and then get to rewrite them if something happened to make the original law inoperative. They were used to politicians say “yes, sir” and “what hoop do you want me to jump through now, sir.” And when a new group of politicians came to town that wouldn’t say yes to every single demand, that stood up to them some of the time, they hit back hard- very hard. And they won this round.
Our elections were awash in big business money this year, and it went overwhelmingly to the Republicans. We don’t even know for sure which industries gave the most to the Republican slush fund that the Chamber of Commerce has become, or to the new ones set up by folks like Karl Rove, because they don’t have to disclose their donors. But we do that these corporate front groups played almost exclusively for the Republicans, and that the direct contributions to candidates and party committees shifted dramatically toward them as well. Given the Democratic control of both Houses and the White House, this kind of giving shift is unheard of, since usually corporations give to the party in power. But because Obama, Speaker Pelosi, and Congressional Democrats had stood up to insurers on pre-existing conditions, had stood up to the energy giants on pushing for climate change, and had stood up to Wall Street on the new Consumer Financial Protection Bureau and some other new regulations, these corporate leaders were pissed and looking for blood. The fact that the Democrats had unfortunately made major concessions to these corporate interests on things like the public option and breaking up the big banks didn’t mollify them at all: they were still loaded for bear and ready to pull the trigger.
So they funded the tea party uprising, and they funded Republican candidates, and they funded secretive groups to run attack ads. It worked, for two simple reasons. The first is that middle-class swing voters are mad at everyone in Washington. They think both parties have failed them, that neither party cares about them, and they are happy to send a message to whichever party is in power- as they have three elections in a row- that they will keep voting out those in charge until something changes to make them think that government works again. The second is that the voters most hurt by this terrible economic crisis the Bush presidency handed to us are precisely the voters most open to voting for Democrats: young people, working class women, blacks, Hispanics. Getting hammered as hard as they have been economically put them in no mood to come out to vote.
Democrats’ fate was probably sealed when the same Wall Street bankers who wrecked the economy and who we had to bail out were still giving themselves hundreds of millions in bonuses while the rest of the economy continued to tank. It was the ultimate insult, and it fed the idea that our system is only working for the fat cats but has stopped working for ordinary folks. As long as the economy stayed as bad it did, voters were not going to be convinced that Obama had brought the change he had promised.
What now? Democrats have a choice. They can cower in fear at all the corporate money that will be thrown against them, and backpedal on everything that would actually help working families get out of the bind that they are in. Or they can be determined fighters for jobs, a stronger economy, and cleaning up special interest corruption in Washington. Having rejected both parties so thoroughly in the last 3 elections, Americans will be looking in 2012 to figure out who will be truly fighting for them in the years to come.
This progressive populist message that I have been writing about in recent weeks that seriously moves the dial for Democrats in Stan Greenberg’s polling is being used by more and more candidates. Here’s three exciting examples:
1. A growing group of members of Congress are going to be on the Hill tomorrow afternoon at 1:00 PM EST doing a press conference to push a strong reform agenda on behalf of the middle class. They will be endorsing the 3-point platform- strong lobbying reform, public financing of elections, and overturning Citizens United- that MoveOn members overwhelmingly supported in their voting, that 506,832 have already endorsed with their signatures, that 14 groups have signed on to, and that 201 members of Congress and candidates have already signed up for. Confirmed speakers at the press conference include the head of the Congressional Progressive Caucus Raul Grijalva, the head of the Populist Caucus Bruce Braley, Rep. Chris Murphy, Rep. Paul Hodes, Rep. Paul Tonko, and Rep. Keith Ellison, and more are adding their names as we get closer to the event.
2. Check out this ad from Joe Sestak, attacking all the big corporate money being dumped in his race, and the motives of those spending the money.
3. Finally, check out this great new ad from Tommy Sowers. This is my favorite ad in the campaign so far. It definitely smells of country populism.
The great thing about these ads is that they go directly to the heart of what is going on this campaign cycle: because of the Citizens United decision, and because they don’t like being challenged in any way by even modest reform measures like the Wall Street reform bill, Wall Street, Big Oil, the big health insurers, and the Chamber of Commerce have been on the rampage, dumping tens of millions of dollars like it was going out of style into these campaigns, trying to buy the elections. The only way Democrats have a chance is to stand tall and call them out, to fight directly against them and the economic sins that have destroyed this country’s economy.
For those of us who can still even stomach it, the first Friday of the month—the usual day for the release of the previous month’s federal Employment Situation Summary, known informally as the jobs report—has become a fairly pathetic ritual, particularly for optimists. We hope for some proof, any proof, that a real recovery is underway. If jobs were shed across the board, but the unemployment rate trended lightly downward, we try to pretend that it wasn’t because still more people have pulled themselves out of the formal count by giving up looking for work entirely. If private sector job growth and public sector job loss cancel each other out, we put on our market fundamentalist wishful thinking caps and talk about how private sector jobs are somehow more sustainable than their public sector equivalents. And when modest job growth does occur, even when it’s below even the basic replacement rate needed to accommodate a growing workforce, well, that’s when we bring out the champagne.
We are spending $2 Billion a week in Afghanistan. If you want to see zeros, that’s $2,000,000,000.00 a week. It also means $104 Billion a year.
Meanwhile, we can’t afford to keep our education budgets in functional condition. We can’t reduce our National Debt. We can’t bring down our operating deficit. And we are spending a fortune on foreign servicing (read China) of our debt.
With the health care fight finally resolved (you notice I didn’t use the word “over”- the passage of this bill is only the first step in a long-term battle for a better health care system in America, so nothing is really over), everyone is turning their attention to the economy. As well they should.
In spite of certain establishment economists and pundits (and unfortunately a few administration officials who are politically tone deaf), saying that the recession is over and everything is back on track economically, the simple fact is that while we are no longer dangling over the precipice of another Great Depression, the economy is still broken in major ways. The official unemployment rate still hovers around 10%, and when you add in those who have given up looking for work, those who are underemployed and marginally employed but want fulltime work, the number of people needing full-time jobs is closer to 20%. Wages are still not going up, as even many of those who have jobs have had to take lower wage jobs to get by. Foreclosures are still happening at dangerously high rates, home values are not coming back anywhere near fast enough (or at all in some neighborhoods), and way too many homeowners are still dangerously close to being underwater. Business and personal bankruptcies are still way too high.
Now I know that the economy is officially “growing” again. The GDP is up, the Dow Jones is up, corporate profits are up. If you are an establishment economist, a trust fund baby, or a Wall Street financier, the economy feels like it’s just humming along. For the vast majority of Americans, the noise they are hearing is less that of a hum and more of a car wreck. That’s why voters react so poorly to Democratic politicians when they say things about how the economy is looking up.
The twin pillars to building a healthy economy are producing good jobs in big numbers, and fixing the badly broken financial system. These are not separate spheres, by the way- the two things are joined at the hip. Washington legislative policy wonks tend to divide everything into different bills they are working on, and DC coalitions follow that approach as well. But if we don’t start creating decent-paying jobs, the foreclosure problems will keep getting bigger and housing prices won’t recover. If we don’t fix the financial sector, an economy where the finance sector is focused on gambling and bubbles rather than in actual investments that will create jobs will continue dragging us down, and endangering us in the future. With so much of America’s wealth concentrated in six mega-banks, and those banks investing in little that’s creating jobs, we are not going to create real private sector job growth.
Let me point you to three fascinating things worth reading that have come out over the last few days, because I think they all point to central economic issues as we go forward. The first is an important, news-breaking piece in Politico that Elizabeth Warren came out with yesterday morning. Citing a memo from the American Bankers Association from a 2006 fight against more oversight that makes the exact opposite arguments they are making now, Warren makes the absolutely central point that special interests like the American Bankers Association are hypocrites to the core. The special interests that are making out like bandits at the expense of the rest of us don’t have any consistent philosophy except me first and only, and members of Congress and the administration should thus given their arguments the respect they deserve: which is to say virtually none.
The second is Sen. Ted Kaufman’s brilliant speech on Chris Dodd’s weak and disappointing financial reform bill. Sen. Kaufman’s essential point is that Dodd is just moving the regulatory fixes around rather than doing what really needs to be done: break up the big banks. If these financial behemoths are not cut down in size, and walls are not built between the gambling financiers and the boring old bankers who loan money to invest in small businesses, the financial system will remain in danger and jobs will be far less likely to be created. Kaufman makes the argument that if you don’t make real structural changes in the size, powers, and roles of the mega-banks, that you haven’t changed anything important re how the banking system works. He is 100% on target. If having regulators was all that was needed to clean up the banking system, we never would have landed in the mess we did in the financial collapse. You have to change the power relationships as well- banks need to be smaller, and the trading side of the banking industry should not infect the more traditional loan and investment side of the banking industry.
Finally, I want to point you to a really thoughtful new commentary in Huffington Post by Leo Hindery. His frame on the political dynamic right now is intriguing: that Republicans are in fact the disloyal opposition, so violently opposed to Obama that they have gotten into bed with the fomenters of open and potentially violent revolution; in their place as the loyal opposition are those of us progressive populists who want Obama to take on the banks and far more aggressively create more jobs. Leo’s point is that there is a growing group of people who are loyal to Obama in the sense that we very much want him to succeed, we want to help him, and certainly support him in opposition to a tea party/Glenn Beck-aligned Republican Party; but that we are in a sense in opposition as well, believing we need dramatically more progressive economic policies.
We live in a remarkable moment. We just passed a universal health care bill, something the progressive movement has been fighting for about a century or so. But we are still faced with a broken economy- a badly warped and dangerous financial sector, and a massive lack of good jobs- and we need for bolder thinking that we are getting on how to fix it. Whether or not you call us the loyal opposition, it is time for progressives to demand more- on creating jobs and fixing the banking system- in terms of fixing the economy.
Given the nature of the terrible problems George W. Bush has left us, I remain thankful every day that someone rational and intelligent like Barack Obama is our President (can you imagine McCain or Bush trying to manage all this? Oh, wait, we just had eight years of that). Thanks to Obama’s leadership and strong action, there is actually some good news to report on the economy: we’ve gone from triple red alert, every day in a panic crisis to some measure of day to day stability. That is a good thing, and Obama should get an enormous amount of credit for it. The fact that there is any good economic news at all is a huge relief after all the horrible news of the last nine months.
The question now is whether we can go from stabilizing the economy to actually improving it, and whether the improvement that does happen translates into real benefits in the economic conditions for most Americans. A Washington Post story with a very positive spin about how the economy is getting better quoted Anil Kashyap, an economist at the University of Chicago, saying this: “The feeling is that for now we’ve avoided the Great Depression. But the real economy is still in pretty bad shape.”
The good news is that President Obama’s steady leadership and aggressive intervention seems to have stabilizing the economy and returned confidence to our economic institutions. He deserves credit for that, and is getting it for the American public. But the bad news is still extremely bad; if unemployment stays incredibly high or even climbs higher, if home prices don’t start coming back, if wages don’t start climbing again, if health care costs and grocery prices stay high, if start-up businesses still are having trouble getting loans- if all of this continues for a long time to come, we are all in very deep trouble.
The American people know how deep our problems are, and will be patient for awhile. They clearly appreciate how Obama has handled things so far. But the Obama team needs to understand how important it is to deliver on tangible things that create jobs and make the economic condition of middle-class people better. Given how awful things were on January 20, the President deserves a great deal of credit for keeping our entire economic system from sliding into another Great Depression. That achievement won’t be enough to sustain him, though, if the real economy doesn’t start to get better. The President needs to be focused like a laser beam long-term economic issues that will ultimately decide the fate of his Presidency: creating jobs, increasing middle-class incomes, solving the health care crisis. If the country sees him fighting for these things, and making real progress, he will be re-elected in a landslide and set the stage for a long-term progressive majority.
The Employee Free Choice Act is key to rebuilding the American middle class – news of Senators wavering in their support for the bill revalidates a key truth about Congress: the main stumbling block to strengthening and expanding the middle class is corporate power.
The same pattern emerges every year on TheMiddleClass.org. Throughout the year, DMI uses the site to share analysis about the impact of Congressional legislation on Americans’ ability to gain – and hold onto – a middle-class standard of living. Once a year, we take a step back and look at the big picture. It often looks depressingly familiar: fiscal conservatives notwithstanding, Congress does fairly well when it comes to measures that simply involve spending more, but falls short – often far short – when powerful corporate interests clash with the wellbeing of the nation’s current and aspiring middle class.
In 2008, for example, Congress stood up for the middle-class on issues like providing more funds to higher education and passing a consumer safety bill that’s even been endorsed by the industry its regulating. Virtually all Democrats voted for these bills, and most Republicans as well. Similarly in 2007, college aid did well and majorities from both parties in the House voted for common sense contracting reforms.
But Congressional support for middle-class Americans falls off precipitously as soon as major corporate interests are at stake.
In 2007, the Peru trade bill was the skunk at the garden party, provoking 64 percent of Senate Democrats and 48 percent of House Democrats (along with nearly every Republican) to vote for multinational corporations and large investors at the expense of their middle-class constituents. Last year, it was a willingness to put banks before struggling homeowners, telecommunications companies before consumers, and those @%$& banks again before taxpayers. These weren’t the only policy disappointments of the year for middle-class Americans, but they were the main cases where significant numbers of Democrats joined nearly all Republicans in selling out the middle class.
This year, I fear Thomas Frank is right when he predicts the same fate for EFCA. Sure, Congress will approve health coverage for low-income kids (an important boost for aspiring middle-class families in its own right) but when it comes to standing up for middle-class Americans against a full-scale corporate lobbying campaign, Congress may not have the guts. That’s terrible news for the middle class.
No wonder we’re all drowning in debt. Over the past 30 years, a college degree has become increasingly necessary for anyone who hopes to earn a middle-class standard of living. Yet over the same period of time, the cost of tuition and fees at public four-year universities has increased ten times faster than the median family income for families with children. That’s a crisis of stagnating wages as well as a problem of soaring college costs. Either way, something’s got to give.
At the Drum Major Institute, we’ve been making that point for years (see, for example, former DMI Fellow Maureen Lane’s substantial body of work on higher education as a route out of poverty), but the statistics never cease to amaze me. The effort to afford higher education is the essence of the middle-class squeeze. So it makes an excellent subject for Vice President Joe Biden’s Middle-Class Task Force.
When the task force convened for its third meeting in St. Louis last week, they followed the now-familiar format. They issued a staff report that defines the problem as the administration sees it; highlights what the administration is already doing to address it; and lays out a potential future path without committing to any new policy initiatives.
The staff report captures the problem beautifully and sets precisely the right goals for the Administration. “The ability to afford a college education without being buried in debt is an important aspiration and a legitimate expectation… for any family in America…The President is committed to making sure that every student has the opportunity to earn a postsecondary credential or degree.” So far so good.
The round up of existing accomplishments includes an array of impressive first steps. The value of the maximum Pell Grant is up, and the President wants to shield funding from the vicissitudes of the annual appropriations process; the stimulus includes an expanded tax credit for college tuition; finally, the President’s budget proposes to shift student lending away from the pork-laden program to subsidize private lenders and back toward the more efficient Federal Direct Loan program.
The task force is less inspiring when it comes time to suggest next steps. Since the report states that “the Obama administration does not officially endorse all of these ideas, but the task force views them as worth of further analysis” we might expect some expansive thinking. And there are some good – if hazy – ideas in there: bolster community colleges, improve “529” college savings plans, help states cope with economic downturns without cutting college funding. The most intriguing idea involves enabling graduates to pay back their loans at a fixed percentage of their income, so people who pursue less lucrative careers aren’t crushed by debt. Still, none of this quite matches the magnitude of the problem.
The reality is, the nation’s public colleges and universities have raised tuition and shifted costs from the states onto students and their families in good economic times as well as bad. A critical part of the story about rising public college costs is tremendous public disinvestment from higher education. The policy not only undermines the middle class but harms the nation’s economic competitiveness. To reverse course, the federal government should consider how to help states renew their commitment to public colleges and universities. The middle class depends on it.
On Wednesday, The Wall Street Journal editorial page fretted about the likely (hopefully inevitable – see our analysis at TMC.org) extension and expansion of SCHIP by Congress in the coming weeks. As was true of conservative criticism of the children’s health program in late 2007 when President Bush twice vetoed the measure, the editorial page yelped that the new bill raises eligibility for the program to 300% of the federal poverty level. This means that a household of four making up to $66,150 is eligible for the program (the WSJ uses the wrong poverty measure to calculate its number). This income is, as the Journal laments, above the U.S. median household income ($50,233), revealing that:
The political purpose behind Schip has always been to capture the middle class.
But the Journal has the purpose – political or not – of SCHIP backwards. Health insurance – and health insurance for one’s children – is part of what defines a middle-class standard of living, certainly more so than whether someone makes just above or just below $50,233. As employers drop health insurance coverage, as rising premiums make private insurance unaffordable, and as increasing unemployment swells the ranks of the uninsured, increases in the maximum income threshold for SCHIP coverage make sense to preserve the middle class and, in some cases, to help expand it.
Conservatives, along with the Journal editorial page, emphasize that SCHIP is a program “targeted at low-income families”. This is both true and valuable to point out. Indeed, 8% of children from families between 200% and 399% of the federal poverty line are uninsured, while 20% of those below 100% of the poverty line are. But increasing the maximum income threshold beyond the “low-income” level demonstrates that any health care program is as much about a right (to health care) that is an important component of a middle-class standard of living as it is about making an expensive commodity available to the poor. To wit, by May of 2008, 43 states and D.C. had already made children of families at 200% of poverty or higher eligible for SCHIP.
“What will happen if we do it right,” Senator Chuck Schumer informed journalist and Atlantic Monthly editor Joshua Green, “is that there’ll be an alliance between the middle class and the poor, as opposed to the alliance between the middle class and the rich [that held for the past 28 years]. Everything we’re talking about is the work of an active, strong government, and if it works, it will wed the middle class to the Democrats for a generation.”
Schumer’s partisan political analysis is spot on: whichever party speaks most convincingly to the American middle class wins elections. And his sense that the nation’s middle class and the poor – those striving to attain a middle-class standard of living – share common interests is a point the Drum Major Institute has argued for years. But Schumer’s policy prescriptions (mostly an array of tax cuts and credits) don’t quite add up to the type of epochal class alliance he describes. The problem may lie with how the Senator defines the middle class – and in turn, contributes to a political dialogue that impacts how middle-class Americans understand their own political interests.
While the nation’s median household income is $48,000 a year, the figure is significantly higher when the elderly, young workers and recent college grads are excluded. So, according to Schumer and his advisors at the inside-the-beltway think tank Third Way, the middle class really lives in the range of $60,000 to $100,000 a year. Policies like Pell Grants, the Earned Income Tax Credit, and an increased minimum wage mean very little to this group. Instead, according to Schumer, middle-class families need an array of tax cuts: from buying a first home to affording college. “A lot of the things he’s calling for are not really radical,” insists Third Way’s Jim Kessler.
But neither are they the stuff of an alliance – electoral or otherwise – between the poor and middle class.
The problem may lie with those pesky income statistics. Simply equating “middle class” with “middle income” says little about the ways middle-class Americans actually live. The Third Way’s canonical $60,000 to $100,000 a year family may find their middle-class status precarious if they are struggling with heavy medical debts because they cannot secure health coverage for a chronically ill child. And what they – like their low-income counterparts coping with the same problem – need is more than a tax cut.
To consider policies that really unite the middle class with low-income families, it makes sense to consider their common aspirations. At its core, a middle-class standard of living means secure jobs that support a family; a safe and stable home; access to affordable health care; retirement security; time off for vacation, illness, and major life events; opportunities to save and avoid crippling debt; and the ability to provide a good education, including a college education, for one’s children. Middle-class households – increasingly squeezed by rising costs and stagnating wages even before the current economic downturn – aim to hold onto these staples while low-income households aim to attain them. And many of the same policies can do both – both strengthening the existing middle class and expanding it to include more working Americans.
Consider proposals to increase federal investment in voluntary preschool programs available to all youngsters. High quality preschool education has repeatedly been shown to benefit children’s language and cognitive skills. One study suggests that, over time, the benefits of investment in early childhood education may be as high as $12.90 for every dollar invested (others have found a lower, but still substantial payoff). Indeed, investing in preschool may be one of the most cost-effective ways to help children from low-income households get the beginning they need to succeed academically and attain a middle-class standard of living themselves as adults. But while preschool’s benefits are most pronounced for children from low-income households, many middle-class families also choose to send their 3- and 4-year-olds to private preschools. And they pay dearly for it. One recent report found that middle-income families may pay as much as 30% of their income for early education. These households would welcome the option of a free or low-cost public alternative of sufficiently high quality. Federal support for universal preschool programs is the type of policy with the potential to genuinely bring together both the current and aspiring middle class.
Thinking about the poor and middle class in terms of their common aspirations – rather than income categories that divide them – is the key to forming an enduring policy alliance between those who want to stay middle class during tough economic times and those still striving to join their ranks. At his best, such as when he aims to regulate a reckless mortgage lending industry that has devastated both low-income families striving for homeownership and their middle-class counterparts, Schumer seems to recognize this. His hoped-for alliance might be all the more enduring if he considered it explicitly.
First things first. Congress and the incoming Obama Administration are hammering out an economic recovery package with major investments in infrastructure, education, energy efficiency, health programs and aid to the states and localities (see Paul Krugman’s excellent discussion of why such assistance is particularly vital during an economic downturn). While the to-be-decided details of the plan will be critical to its success, the broad outlines look like precisely what the ailing U.S. economy desperately needs: a plan that creates jobs quickly while addressing the nation’s long-term public investment priorities and helping those hardest hit by the recession. Phew!
I know what they say: don’t count your policy victories before they’re passed. But while we work for the right kind of stimulus, we also need to think about the wider context. As we look for a path back to the economic good times we’ve also got to face the fact that, for a lot of Americans, the good times of the 21st Century so far weren’t actually that good. At the peak of the last economic cycle, during a time of high productivity and soaring corporate profits, middle-class Americans still hadn’t recovered the ground lost in the last downturn. We earned less, borrowed more to make ends meet, and were even less likely to have employer-sponsored health care. Something is deeply wrong with that picture.
What this tells us is that working people don’t have enough power in the labor market to ensure that their incomes keep pace with the rising cost of living – even during the best of times. Historically, one powerful way to build that power has been through labor unions.
Today the Right is busily working to tar unions as the cause of our economic problems. The Senate Minority Leader blames Detroit’s woes on auto workers with the nerve to negotiate for good pay and benefits. But it’s a lack of good middle-class jobs – and the bargaining power to get them – that plagues the nation.
Unions enable their members to demand jobs that are capable of sustaining a middle-class standard of living, with dignified wages, leave policies, health care, and retirement plans. Workers represented by unions earn, on average, 30% more than nonunion workers. And 79% of union members have employer-provided health insurance, compared with 50% of nonunion workers. The rates are nearly identical for employer-sponsored retirement plans. The benefits of union membership are most pronounced for people of color and for women. In areas where unions represent a high proportion of workers a particular industry, they can even help to raise industry standards across-the-board: improving wages and job quality even for workers who aren’t members. Not surprisingly, as union membership has declined over the past decades, the middle-class squeeze has intensified.
Organizing a union is supposed to be a right in the United States, but legal protection for organizing has eroded over time. A bill called The Employee Free Choice Act would restore that right, streamlining the process for employees to decide on union representation. Predictably, corporations that would rather not pay higher wages or contribute to employee health care oppose the bill fiercely. But it's a fight worth having. In times like these we need not only a bailout, but the tools to bail ourselves out. Once a stimulus plan is in place, we need the Employee Free Choice Act.
