• Repairing the middle class in 2015

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    What is curious about the present understandable preoccupation with the middle class is the assumption—both explicit and implicit—that the system is “rigged” (to use Sen. Elizabeth Warren’s favorite term) against this vast constituency of Americans. In reality, just the opposite is true. The system is rigged in favor of the middle class. That’s a natural result for a democracy in which politicians compete more for votes than for dollars.

    If you look at how the federal government spends and raises its money, the bias for the middle class and poor becomes plain. In fiscal 2014, about two-thirds of the $3.5 trillion federal budget went for “payments to individuals.” This covers 59 million Social Security recipients, more than 54 million Medicare beneficiaries (overlapping with Social Security), 68 million Medicaid recipients, 46 million food-stamp recipients—and many more.

    Meanwhile, government raises most of its taxes from the upper middle class and the wealthy. In 2011, the richest 1 percent of Americans paid 24 percent of all federal taxes (income, payroll and excise) and the richest 20 percent, including the top 1 percent, paid 69 percent of taxes, says the Congressional Budget Office.

    It is possible to argue that, reflecting the growing inequality of market incomes, taxes on the rich and affluent should be higher or that middle-class subsidies should be more generous. It’s also possible to complain that some programs aimed at helping the poor and middle class have gone awry: College student loans, now worth about $1.1 trillion and facing 11 percent delinquency, are a current popular example. These are legitimate views, as are (of course) the opposing positions. They’re the stuff of responsible debate.

    But if you accept these numbers —which I have cited many times —it is not possible to pretend that the whole superstructure of government has somehow been turned against the middle class. This is not just a distortion of reality; it is the converse of reality.

    Likewise, the financial crisis and Great Recession are typically blamed on the miscalculations and greed of financial institutions and their overlords. There is much evidence for this, but it ignores the deeper cause: an intellectual, political and social climate that legitimized lax lending policies in the name of promoting middle-class well-being. This was reinforced by a parallel conceit (which now seems foolish) that our enhanced economic understanding enabled us to enjoy prolonged expansions and brief recessions.

    What the middle class faces today is a crisis of faith. Being middle class is more than attaining some threshold income. It also involves embracing a set of beliefs that, unfortunately, have been severely shaken.

    Middle-class Americans believe in opportunity, stability, reward for effort, a brighter future and the ability to control their lives, as sociologist Herbert Gans showed in his 1988 book “Middle American Individualism.” Big government and big companies are distrusted, because they might impose their own imperatives on individuals’ personal preferences. But government is also expected to provide economic security — a contradiction that’s widely accepted.

    The individualism that Gans described endures. A 2013 poll by The Post and the Miller Center at the University of Virginia asked respondents what values define the “American Dream.” The top response (75 percent) was “to have freedom of choice in how to live one’s life,” followed closely (68 percent) by “to be rewarded for hard work.” The trouble is that these hopes seem increasingly at odds with experience.

    The great middle-class fear today is that the connection between personal aspirations and societal opportunities is breaking down. Gallup periodically asks about opportunity in the United States. In 1998, 81 percent of respondents found “plenty of opportunity” and only 17 percent judged “not much.” By late 2013, the gap was 52 percent to 43 percent. In a 2014 NBC/Wall Street Journal poll, only 21 percent of respondents believed their children would live better than they have, down from 50 percent in 1990. (All these figures come from “Is the American Dream Alive?” a report recently published by the American Enterprise Institute.)

    We overestimated our ability to control the economic environment. What we have learned is that outside events—here, the financial crisis and Great Recession—can overwhelm collective protections and discredit conventional beliefs. The economy is more random, unstable and insecure than we imagined. It is less susceptible to policy engineering. The fact that the upper classes can better shield themselves against its upsets naturally breeds resentment.

    The middle class is thinning. Belonging is a matter of self-identity, and fewer Americans buy into its defining presumptions. Whether an improved recovery begins to reverse these attitudes and restore traditional beliefs and confidence is a crucial question for 2015. But repairing the middle class won’t be easy, because it’s a matter of psychology as much as economics.

    © 2014, Washington Post Writers Group

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