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LATEST FROM THE AMERICA BLOG

The American Middle Class is at Risk

A thriving middle class fuels the engine of growth in a market economy and is the surest guarantee of opportunity, stability, and freedom in our democracy.

America’s unique promise and inspiration for humanity has always been, “Come to America, work hard, and you can become part of the American Middle Class, achieve a measure of economic security for your family, and offer your children a better life.”

This is not a Democratic or Republican value; it is an American value.

However, the Middle Class in 2018 is in trouble, and political rhetoric, partisanship, and ideology have obscured the facts. Consider the following:

Fact #1:  The U.S. Middle Class is shrinking and no longer constitutes a majority of our citizenry, according to a nonpartisan Pew analysis of census and Fed data.  Their analysis found increasing gaps in income between middle- and upper-income households, with upper-income households’ share of total income rising from 29% in 1970 to 49% in 2014–nearly doubling.  A recent analysis of census data by CBPP, found that income gains between 1945 and 1980 were widely shared, but in subsequent decades middle class income largely stagnated, while high income earners enjoyed rapid increases.

Fact #2:  The 2017 tax law will exacerbate — not reverse this trend.  The shift in national income from the Middle Class to the wealthy will accelerate due to enactment of the 2017 tax law that provided only modest and temporary tax cuts for middle income Americans, while giving large tax cuts to upper-income households, and large and permanent tax cuts to corporations.  The new tax law will boost after-tax incomes of households earning between $30,000 and $200,000 by 0-to-2 percent, while households earning between $200,000 and $1 million will see after-tax incomes increase by 2-to-4 percent, according to a nonpartisan Congressional Research Service (CRS) analysis.

Fact #3:  Middle Class income growth has been low.  A recent analysis in the Harvard Business Review reveals that “since the early 1970s, the hourly inflation-adjusted wages received by the typical worker have barely risen, growing only 0.2% per year….(T)hough the economy has been growing, the primary way most people benefit from that growth has almost completely stalled.” And a recent historical analysis by the nonpartisan Congressional Budget Office (CBO) shows cumulative income growth for the middle quintiles lagging far behind the highest quintile.

Fact #4:  Last year’s generous corporate tax cuts are not generating broad wage hikes or new jobs. Supporters of last year’s tax cuts point to one-time bonuses and modest wage increases as evidence that the 40% cut in the corporate tax rate (from 35% to 21%) will benefit the Middle Class.  In fairness, some companies have shared their tax cut largesse and raised their minimum wage to $15 per hour, but many have not.  The new minimum wage at Walmart, the nation’s largest private employer, is $11/hour, which leaves employees supporting a family of four below the poverty level; the bottom of the pay scale at CVS, the nation’s largest pharmacy, is $9/hour; and a recent analysis at Claremont University finds that major corporations are planning to spend more than 30 times the amount allocated for bonuses and wages on stock buy-backs.

Fact #5:  A rising stock market primarily benefits the wealthy – not the Middle Class.  Although almost half of households own stock directly or indirectly through mutual funds, trust, or pension accounts, the wealthiest 10% of American households owned 84% of all stocks as of  2016—up from 77% in 2001according to a recent paper by NYU economist Edward N. Wolff.

Fact #6:  Rising health care premiums and unstable insurance markets are wiping out anemic middle-class wage growth.  A recent Urban Institute analysis found that as a result of recent congressional and Administration actions — (i) terminating cost-sharing reduction payments, (ii) repealing the requirement to have health insurance, and (iii) the proposal to permit “junk insurance plans” that eliminate consumer protections — an additional 8.9 million Americans are likely to be uninsured or lack minimum essential coverage, and 2019 premiums are likely to rise 18% for people in the individual insurance market.

Fact #7:  Mounting student loan debt is stripping young people and families from opportunities to climb the economic ladder…

Fact #8:  The Administration and some States are turning to new and higher tolls to pay for road construction and infrastructure…

Fact #9:  Consumer protections for the Middle Class are being rolled back… 

#10:  A final point is not yet a fact, but a likelihood:  jobs will be lost and consumer prices are likely to rise as the U.S. backs away from free trade arrangements with Canada, Mexico, Europe, and Asia, and imposes new tariffs… 

ABOUT THE AMERICA BLOG

Welcome to The America Blog.com. This column is dedicated to Senator Daniel Patrick Moynihan, a great American thinker I was twice privileged to serve as General Counsel, who famously said: “Everyone is entitled to his own opinion, but not his own facts.”

Not as well known about Senator Moynihan is that he was faithfully nonpartisan. He served in Democratic and Republican Administrations and, as Senate Finance Committee Chairman, worked across the aisle to achieve a common understanding of key facts and issues and develop bipartisan solutions.

I am launching The America Blog to highlight key facts – from objective, nonpartisan sources – and to expose distraction and ideology, masquerading as facts.

America faces great challenges in 2018 – some of them constitutional and existential. Our history shows that we can overcome even the most perilous and vexing problems with pragmatism and resolve, but only if we can first agree on essential issues and facts and set aside partisanship and ideology long enough to find reasonable and effective solutions.

About the Author

Charles S. Konigsberg, an attorney, policy expert, and writer, has a unique bipartisan background serving on Democratic and Republican staffs at the Senate Finance Committee, Senate Budget Committee, and Senate Rules Committee; as Assistant OMB Director in the Clinton White House; and at the Corporation for National Service in the Bush Administration. He was Director of the Domenici-Rivlin Bipartisan Debt Reduction Task Force and is founder and publisher of FedWeb.com, a nonpartisan website on domestic and fiscal policy. He is author  of “America’s Priorities: How the U.S. Raises and Spends $3 Trillion Per Year.

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