America's high anxiety
The Democratic primaries were increasingly taken over by one issue that is now likely to dominate the presidential election. It is anxiety among the middle-class families of America. Today, they are living on the edge of a decline very different from the traditional ebb and flow of the economic cycle. A fear that has long gnawed at blue-collar workers in manufacturing now reaches white-collar workers in the service and technology sectors.
Why? The average two-income family today earns far more than did most single-income families a generation ago, so one might reasonably conclude that a second paycheck would put enough money in their pockets to make them feel financially secure. Not so. Once they have paid the mortgage, payments on two cars, taxes, health insurance, and day care, these apparently prosperous two-income families have less discretionary income today and less money to save for a rainy day than a single-income family of a generation ago. Virtually all of their higher earnings go directly to keeping their families in the middle class.
The sputtering American job machine contributes to the stagnation. Instead of the average increase of 6.5 percent in private-sector hiring over the first 26 months of the past six recoveries, we have had a decline of a little less than 1 percent. That translates into a shortfall of 8 million Americans who would have been at work if our recent economic recovery had followed the typical trajectory, according to Stephen Roach of Morgan Stanley. He points out that private-sector wage and salary disbursements are down about 1 percent, relative to levels seen at the trough of the recession, in November 2001. That compares with gains that averaged 9 percent over the 25 months of the previous six upturns. The result is that many in the middle class, those earning $65,000 and less, who make up roughly 80 percent of the people who work, feel they are falling further and further behind, no matter how hard they work. Some can still afford to send their children to college, but for many higher education for their children is simply beyond their reach. Some in the middle class receive world-class medical care, but most see their health costs soaring, with healthcare limited to HMOs or to the waiting rooms and emergency rooms of hospitals. Many see their middle-class lifestyle under threat and their very livelihoods at risk. They seem to be doing poorly in good times and bad, in boom periods and busts. Now they feel that global capitalism has brought into play a vast, new workforce ready and willing to do the jobs of American workers, at a fraction of their pay. Outsourcing has become the symbol of middle-class anxiety over the seepage of information jobs to India, and even to China, that were supposed to take the place of all those lost manufacturing jobs. Is it any wonder so many Americans today see economic opportunities dissolving, with jobs, wages, and benefits getting squeezed and squeezed again?
Millions of middle-class Americans are living from paycheck to paycheck, struggling to pay their bills, having to borrow money and go into debt. Many families are just one layoff or one medical emergency away from going into bankruptcy. A silent tidal wave of bankruptcies is now cresting across America's middle class. More people this year will end up bankrupt than will suffer a heart attack or be diagnosed with cancer or graduate from college or file for divorce.
Middle-class Americans' anxiety is mixed with a growing resentment at the widening gap between their wages and salaries and those of the wealthy and the upper reaches of management. The vast bulk of the income growth over the past decade and a half has been overwhelmingly concentrated in the upper 10 percent, the upper 5 percent, and, indeed, the upper 1 percent of America's income spectrum. The salaries of CEOs have gone from 40 times that of the average wage earner 20 years ago to over 400 times today.
Suspicions. Large, multinational corporations, meanwhile, are thriving as their profits benefit from outsourcing and cost cutting, while many educated, skilled, white-collar workers struggle to find the jobs they have been trained to do with the kind of pay they feel they deserve. And it doesn't help that this is all taking place at a time when the captains of industry, hailed as the conquering heroes of the 1990s, are seen as tainted by egregious behavior of the Enrons, Global Crossings, WorldComs, and Tycos that now dominate the financial news pages. Americans, understandably, are outraged at corporate executives who make millions while their companies decline or even fail, putting the pensions of ordinary workers at risk.
The fear and bitterness that pervade America two years out of recession are compounded by suspicions that the Bush administration is helping big business and the wealthy at the expense of those who work hard, try to save, and just want their kids to attend good and safe schools. This renders the administration vulnerable to a rising tide of populist anger--an anger that may also vent itself on the influence of Washington lobbyists on many of the major bills now wending their way through Congress that benefit their big corporate clients.
Such perceptions increase the likelihood of many Americans to see this changed economic landscape as the result of the Republican Party's support for the wealthy, especially the business community--a feeling compounded, for many, by the upper-bracket orientation of President Bush's tax cuts. They read the media, which attack Washington and Republicans in terms of health policy overly responsive to drug companies, energy policy shaped by oil companies, tax policy written to benefit the well-to-do, and environmental policy shaped by big business. A recent New York Times /CBS News poll found that 58 percent of Americans believe that Bush is more interested in protecting large corporations than ordinary people. A Washington Post /ABC News poll found that 57 percent disapprove of Bush's handling of job creation and trust Sen. John Kerry over Bush to create jobs, by 51 to 37 percent.
Then--and now. The Democrats and their pollsters sense this Republican vulnerability. That's why they're arguing that corporate power and crony capitalism have taken over an administration that simply doesn't care about the average American. This is a dramatic reversal from the 1980s, when it was the Democrats who were seen as devoting their efforts to benefit special interests, at the expense of white, middle-class voters. Then they saw Democratic programs as disguised efforts to help African-Americans, symbolized by Ronald Reagan's famous "welfare queens." President Clinton's signature on the 1996 welfare reform bill (over the angry protests of many Democrats) took this issue largely off the table. This has allowed Democrats to claim that they would put the government behind the interests not of select groups but of the 80 percent of Americans who earn $65,000 and less. So they have focused on comprehensive health insurance, increased funding for schools and colleges and job-generating public works, and on attacking those big Bush deficits.
If Kerry can find a way to connect the federal budget deficits to those at the state levels and show how cuts in the state programs that affect the lives of ordinary Americans are a direct result of President Bush's tax cuts--and if he can find a comprehensible way to capture the fear and resentment of the middle class--populist politics will catch fire. Howard Dean tried to capitalize on a different kind of anger, over the war with Iraq, but economic anxiety is much the more combustible issue.
The biggest swing group here will be women because middle-class mothers who enter the workforce to give their families an economic leg up now find they are in the workplace just so their families can mark time. As Elizabeth Warren and Amelia Warren Tyagi point out in their outstanding book, The Two-Income Trap, "This middle-class mother is trapped. She can't afford to work, and she can't afford to quit," and she finds their "family life [is] less, not more, financially secure." The pressure on the middle class, the authors point out, is driven by the search of millions of parents for a nice house on a safe street, with good schools nearby. But the soaring cost of that home has brought families to face the need for a second income, or, alternatively, to take on bigger mortgages and assume debt loads that were unthinkable a generation ago. Today, the portion of income for families with kids that is earmarked for mortgage payments is up almost 80 percent since 1980. And then there's all the other stuff--the car payments, the medical bills, and the like. No wonder so many women feel they're "in a trap." They can't leave their job, for if they do, the family stands to lose everything.
Parents may be working harder and harder, but two-income families are much more vulnerable to the risk of living without a paycheck, in a business climate that regularly closes plants and lays off workers. The Federal Reserve chairman, Alan Greenspan, noted recently that a million American workers leave their jobs each week, but the economy creates more than a million new jobs each week. Yet the odds that someone will be laid off, downsized, or otherwise left without a paycheck have more than doubled for the average family. Add to this the dramatic increase in healthcare costs, never mind the millions of families forced to take care of a sick relative who has been discharged quicker and sicker from the hospital, and you can appreciate the day-to-day, week-to-week pressures facing middle-class America. Now, instead of looking ahead to a brighter future with rising incomes, many middle-class families worry about slipping into a lower income bracket.
Middle-class Americans' anxiety is growing because their incomes have stalled while medical costs, gasoline prices, local and state taxes, and the like are increasing. Their anger is growing because they see too few winners and too many losers and blame some of this on the role of Washington. The Democrats will inevitably seize this issue as a way to trump the president's strength on the issues of national security and terrorism. The presidential election hinges on who can convince the country which issue is more important.
This story appears in the March 15, 2004 print edition of U.S. News & World Report.