The Middle Class Connection

October 27th, 2006

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Economist Jeff Madrick takes us on in a recent article published in The Nation, and in a follow-up piece on The Huffington Post. Sadly, we haven’t been offered space in either venue to respond, so we post our answer to Jeff below:

Dear Jeff:

At Third Way, one of our passions is the middle class. We’re consumed by the questions of how they live, where they work, what they make, and the challenges they face. That is why we were disappointed by your recent articles ascribing to us a view we do not hold – namely, as you say in The Nation, that “the middle-class electorate will only be repelled this November by the pleas of some Democrats for more aggressive economic polices to aid the working and middle classes.”

We counsel just the opposite. We believe that if progressives want to build an enduring majority, they must develop economic policies that resonate with the middle class while solving the real economic challenges they face. Where we differ from other progressives is in our analysis of these challenges, the policies necessary to help average Americans build a more affluent life and the way in which we think progressives should talk about the economy to better connect with middle-class voters.

We believe Democrats have two interrelated problems when it comes to the middle class: One, the middle class does not vote for Democrats, because two, Democrats do not really understand who the middle class are and their aspirations.

Let’s start with the political problem. Voters with household incomes between $30,000 and $75,000 have not given a majority to Democrats in congressional elections for at least ten years, possibly much longer (the median household income of a voter in 2004 was about $53,000). When one considers that African-American voters of all income levels confer eight to one majorities on Democrats, the voting patterns of the middle class become far bleaker. Among white voters with household incomes between $30,000 and $75,000, congressional Republicans won by 19-points in 2004. And at $23,700 in household income, a white voter in 2004 was more likely to vote Republican than Democratic. $23,700.

We are not oblivious to the impact that culture and national security interests have on voters, particularly white voters. But this landslide margin was only slightly bigger than in 2000 (when national security was a b-list issue) and 1996 (before the culture wars were fully ignited). The bottom line is that the party of the middle class does not win the middle class, and we believe that economic issues are a major reason why.

This leads us to problem two: The middle class is substantially wealthier than Democrats think they are, and this misconception has led Democrats astray on messaging and policy.

The median household income of an American family in 2004 was $44,389. But this figure obscures rather than illuminates. It includes households headed by 22-year olds on their way up and 82-year olds who no longer work, have few liabilities, and demand completely different solutions to their problems. Among prime working age households – the 67% of the electorate headed by adults between the ages of 26 and 59 – the median income was a much more comfortable $63,300. For married prime-age couples (50% of the electorate), it was closer to $70,000. And for two-earner prime-age households (38% of the electorate), the median was just shy of $80,000.

There is an enormous difference in personal outlook between a household earning $45,000 and one earning $65,000 or $80,000. It is the difference between struggling to get by and struggling to get ahead. It is the reason why we believe the central Democratic talking points – that of drowning in debt, working three jobs and falling behind, and being squeezed – have fallen flat. To the vast middle, this doesn’t quite ring true.

On the other hand, we strongly disagree with your characterization of our position that “middle-class Americans have done just fine economically for a few decades.” We believe the middle class faces seven principal hurdles to opportunity that progressives must help them clear through public policy in order to attain the long term financial success they desire.

1. Obtaining a college degree – median male wages for high school graduates peaked in real terms in 1974. This 30-year trend will not be reversed.

2. The demise of single-employer careers – Americans switch jobs far more frequently and shouldn’t pay a penalty in terms of health care or pension benefits.

3. The time bind – more women will earn college degrees this decade than men. Women work because they want to not because they have to. We need policies to help two-earner families fulfill their career and family goals.

4. Rising health care costs – A standard family policy priced at more than $11,000 and rising is unsustainable for business and families.

5. Aging America – middle-class families must bear the burden of caring for aging parents and must save earlier for their own retirements, especially with the demise of traditional pensions.

6. Global markets for labor – a glut of low-skilled labor overseas and an influx of low-skilled labor from across our borders will place long term downward pressure on low-skill wages, while the increasing sophistication and educational levels of workers worldwide could mean that middle-class workers must also compete in a global labor market.

7. Rising wealth and income inequality – The middle class must share in the rising national and global wealth, probably by owning equities.

These problems are big enough to keep progressives busy for quite a long time, and they address both the fears and the aspirations of the vast middle class who look to the future with optimism but believe the economy should reward those who work hard.