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Growth and the Middle Class
First Principles: Arguing the Economy
While the connection between upbringing and environment and a person’s economic productivity can be taken too far, there is no doubt that some behaviors, achievements, and attitudes that promote economic growth come directly from a middle-class environment. Conversely, these positive orientations can be undone by extreme levels of economic inequality, as, for example, David Callahan emphasizes in The Cheating Culture, which explains how the rise in white-collar crime and ethical misconduct (for example, expense account fraud) among employees on the lower tiers of the business world has been fueled by rising economic inequality, which has broken down social norms and made cheating more rewarding.
Members of the middle class set goals and strive to achieve them. A 2010 Department of Commerce report on what it means to be middle class in America today finds, “One characteristic that stands out in the literature on the middle class is that middle-class families emphasize their expectations about the future: this means they work hard, plan ahead, and expect to save in order to attain those goals.”
Students—whether poor or middle class—who go to schools where the majority are middle class have much better outcomes. They score better on tests, graduate high school and complete college at higher rates, and have more successful careers. Researchers find that this is not only because of the direct involvement of middle-class parents who, for example, make sure teachers are good and schools have adequate resources, but also because middle-class kids have positive attitudes toward achievement and engage in productive behaviors such as regularly attending class and doing homework. And in middle-class schools, these attitudes and behaviors dominate.
People who are raised middle class are also much more likely to become entrepreneurs. A Kauffman Foundation report finds that 72 percent of entrepreneurs come from middle-class backgrounds—a vast overrepresentation given that only 44 percent of the public meet their measure of middle class. In short, a healthy middle class is a necessary precondition for the propagation of a healthy capitalism.
Crafting a Progressive Economic Argument
Because of trickle-down’s dominance, progressives are still on the defensive about the tax and social policies essential to our economic vision: progressive taxation, the minimum wage, strong unions, and family leave, to name just a few. The usual progressive argument goes: These policies do not kill jobs. But progressives need to make a stronger case and argue: These policies are essential to creating and sustaining the middle class and thus fueling future growth.
For one theory to supplant another, progressives need to be not just loud and clear about the flaws in the old theory, but to advance vigorously a compelling alternative. The reality is that during the roughly 30-year period of trickle-down’s ascendance, the economy enjoyed only relatively weak growth, followed by the most disastrous economic crisis since the Great Depression. People are beginning to question whether the constant cutting of taxes and regulations really does produce unrivaled growth. But this is not a sign of victory for progressives, merely an opportunity to push an alternative theory.
Progressives need to seize this opportunity by putting forward their own theory: that a strong middle class is the key to economic growth. Leaders in academia, government, and policy-making circles need to take up this charge. Political standard-bearers have to synthesize the message of middle-class-led growth and popularize it, just as Roosevelt did with Keynesian economics and Reagan did with trickle-down. For progressives to win arguments about the economy, Americans need to understand that a strong middle class leads to economic growth, and not the other way around.
The clearest argument against trickle-down economic theories would seem to be our recent experience with bank bail-outs.
On the theory that the bloated, over-stuffed banks were absolutely vital to our economy and had to be bailed out and saved despite their irresponsible gambling led us to handing a $trillion over to them.
Not to worry! Surely this money would trickle down to the rest of us. So did it trickle down? So did it trickle down?
Not at all! It got distributed to bank executives. Some got invested overseas and some went into commodity speculation, driving up our prices for gasoline and food.
Why did it not get invested here? Because the USA is not where the big growth potential is and it is not where the risks are low.
The US government has dis-invested its infrastructure for the last thirty years and it has encouraged its businesses to leave. Why would anyone invest in this country if its own government will not.
May 11, 2011, 9:38 AMThough the article makes a convincing argument for a vibrant middle class, it does not state specific economic policies to achieve said goal. The person, whether democrat or republican who can articulate such an economic policy will win in a landslide.
Jan 31, 2012, 7:32 PMIf progressives want to successfully connect with voters, they need to get beyond academic analyses and economic policies. They need instead to come up with a foundational explanation of how the world works - and therefore how we should address the problems we face.
In this particular case, explaining why the well-being of the middle class is important needs to be rooted in more than a bunch of statistics. It needs to be rooted in a clear understanding of how the world works.
We are living in confusing and uncertain times. For most people, this is very troubling. The appeal of conservatives and their arguments is their simplicity: "Things are messed up because of liberals & foreigners who are trying to change us. All we need to do is go back to the way things were."
Progressives need to come up with a simple framework for their ideas that provides an alternative understanding of the way things are, which can provide a foundation for their ideas as well as a rationale for voters to support them.
Here's an example of what I'm talking about:
http://quantumsenseblog.com/2012/02/20/the-job-creator-myth/
Feb 23, 2012, 4:50 PMWell-done, but with such an emphasis on the need for a prosperous middle class, you surely should define that term. Do you mean a middle class as distinguished from the working class? A middle class that excludes the working poor? Redistribution of income from the wealthy to the rest of us is one of the key pro-growth ideas, and I hope in your thinking 'rest of us' = 'middle class'.
Jan 13, 2013, 2:18 AM
For a discussion of the "goals" of progressives, see Drew Westin and "The Political Brain," and George Lakoff and "The Political Mind." Both of these books provide a "master narrative" of progressive policies.
Basically they include the general principles of: the merits of collective decision making to solve problems rather than individual action, a progressive taxation system to fund government programs, the need to help the weakest members of society, appeal to science in social policy, the teaching of civic pride, etc.
The Sage of Wake Forest
Thanks for the interesting post. The one thing lacking is the discussion on how the middle-class grew in America in the first place. If you can make a strong argument for how past progressive policies enabled the development of a large middle class in America, you'd be set. But, until then, you are at a loss for an argument that it was a free-market that allowed for the rise of the middle class, and progressive policies only serve to keep people dependent on the government, rather than learning how to save, invest and grow on their own merits.
Jan 14, 2013, 5:30 PM
Well that would be easy. Progressive policies "made the middle class."
In the gilded age, wealth was almost exclusively reserved for the top 2 or 3 percent of the population--industrialists, inherited wealth, etc. There was barely a "middle class" to speak of--mostly poor and unlanded gentry.
With the advent of the "progressive era," the the progressive income tax and other policies that redistributed some wealth and created some economic security enabled a middle class to be born and sustain itself.
The middle class became more stable and grew with the advent of unionization later on when more wealth was "negotiated" toward the middle and away from the top. This enable a large middle class to "consume more" a grow the economy.
That would be the answer to your question on "how" progressive policies created a middle class. And the reason we need more of these policies today to sustain it.
Jan 21, 2013, 11:21 AMTrickle down has two paths. One is based on progressive principles where government taxes and trickles down tax dollars through favoritism, K-Street pressure, ideology, crony capitalism, campaign contributions and entitlements. The other is free market capitalism where free individuals free from government manipulation based progressive principles build wealth through their innovation, ability to tolerate risk, education and drive by a combination of greed and deed. These individuals create wealth through a job rather than government handout. They compete on quality and cost until government pollutes their industy with crony capitalism where failure is rewarded and excellence dies. Those with a moral compass will be more motivated by deed but still victims of progressive principles. Those driven by power and materialism will favor greed and collaborate with progressives in government for special treatment. The difference is progressivism has NEVER created a vibrant middleclass because its leaders see the masses as helpless victims and themselves as an more caring, educated aristocracy more capable of manipulating their weaknesses to the politically correct path. Unionized public education is a monument to progressivism where progressive disciples described as teachers have devolved K-12 education to 25th in the World from number one in 1960. It is trickle-down progressivism that is driving the US economy, education and culture today, not free market trickle-down. You have misdiagnosed the problem because it is the solution you are advocating.
Feb 14, 2013, 8:25 AMPost a Comment
David Madland is the director of the American Worker Project at the Center for American Progress. He has written articles, books, op-eds, and commentaries on a range of economic issues, primarily focused on jobs, retirement, and public opinion.
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