Uneasy in the Middle
Fiscal policy has been no help. Over a 20-year period, government has been taking more from the middle class in taxes than it has given back in benefits. This is the underlying cause of the Democratic capture of the middle-class vote in the past election.
What to do? The rise in the minimum wage will help, as it did in the 1990s. There remain three imperatives:
1. Help workers change jobs. It should be much easier than it is now to transfer health and pension benefits.
2. Boost our national investment in education and training. We have to reduce inequality while expanding economic opportunity. We must have an education system that a much larger proportion of the middle class can afford. It has to equip Americans with the skills to make them mobile and give them greater economic security.
3. Make taxation fairer. Expand the earned income tax credit, and make the whole system more progressive. Average tax rates on the richest one-hundredth of Americans have been cut in half since 1970, while taxes on the middle class have risen. Other income for the wealthy, such as dividends and capital gains, is now taxed at lower rates than the wage income of most middle-class families.
I am not arguing that gifted managers and entrepreneurs should be taxed more. Given the changes in the global economy, there is a more competitive market for top talent, and that should properly manifest itself in higher pay. But that necessity does not warrant obvious injustice.
The alternative is dangerous as well as inequitable. The gulf between what top managers receive and what they pay workers is increasing tensions. The longer this goes on, the more our social fabric is at risk.
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