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Tuesday, October 25, 2016

Government Needs To Help America’s Job Creators — Middle Class Consumers

Achieving the “American dream” isn’t feeling so dreamy these days.

The day seems distant when average Americans held to the faith that hard work would secure them employment, a lifestyle they could depend on. And that if they passed that work ethic on to their children, along with a good education, then each generation would fare better in life.

Instead we are a nation haunted by an unemployment rate stalled at more than 9 percent, with little hope on the horizon. Family balance sheets have been blown away by the real estate collapse, causing credit problems and trillions of dollars wiped out in equity. Wages have barely budged. Yet the costs of middle-class security — health care, college educations — have skyrocketed.

Meanwhile, Congress engages in brinksmanship over raising the federal debt limit, which for any rational government would be technical detail. But for our dysfunctional government it’s a contrived drama that may plunge us into a new economic crisis. Whatever deal is reached — if it is reached — will not raise a dollar of new tax revenue from the rich but will certainly entail budget cuts that hurt everybody else. And yet, oddly enough, each party in Congress argues fervently that it is standing up for middle-class America.

So how come the middle class continues to struggle?

To answer that question, we need first figure out what this nebulous thing called the middle class is. Let’s leave aside the fine sociological distinctions about white collars and blue collars and pink collars, and say this: The American middle class is vast middle tier of people who work to live, and who strive to work a little harder to get a little more in life. Middle class people may save, but they don’t accumulate enough wealth to live off. Almost every buck they get, they spend.

The latter point is important: That spending creates jobs. In fact, in our economy, middle class consumers are the real job creators. Depress their income, and you depress employment.

We’ll never get around to holding politicians truly accountable unless this fuzzy middle demographic — a massive one as a potential voting bloc — gets wise about where it came from in the first place, and how it foundered.

The great prosperity of the American middle class in the late 20th century didn’t just magically transpire. The important groundwork was laid by the federal government via investment. Consider what the creation of the federal highway system did for developers and builders who created our suburban communities and all of the businesses that followed. Or the impact of the G.I. bill on so many people who returned to the workforce after World War II.

People didn’t just sweat their way to upward mobility in the past. The federal government’s role in the creation of American middle class is undeniable and central. And our middle-class republic didn’t crash because average Americans forgot how to pull themselves up by their bootstraps and keep their noses to the grindstone.

I’m not going to pretend to have all of the answers, but I know one of the major causes in our decline has been the growing gap between the rich and the rest of us. That gap is the widest it’s been in a century, and the future isn’t looking promising. Job growth is disproportionately coming from low-wage areas like food prep and retail clerks.

The growing cleavage between the classes can be traced back as far as 1979. That’s when gains in productivity began to outpace worker incomes. That fact alone can help explain the frustration of many Middle Americans.

Some of us achieved the college degree our parents never earned, and we could afford the finer things they couldn’t. Most working Americans just soldiered on. Wage gains kept flat-lining or falling in comparison to the costs of living. The climb of upward mobility got steeper. Wage shortfalls could be made up with E-Z credit, for a while anyway. The ruins of that way of life are all around us.

Much is made of the massive federal deficit these days. I have a way we can solve that: more jobs. More jobs mean more growth and more tax revenue. Problem is, America’s job creators — the middle class consumers — are tapped out. Business owners can’t hire until they have consumers to sell to. That leaves the job of stimulating demand to the government. Time for government to lay the groundwork for our future by investing in our middle class.

That is, if we really want an America with a middle class.

(Mary Sanchez is an opinion-page columnist for The Kansas City Star. Readers may write to her at: Kansas City Star, 1729 Grand Blvd., Kansas City, Mo. 64108-1413, or via e-mail at [email protected])

(c) 2011, The Kansas City Star. Distributed by Tribune Media Services

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Copyright 2011 The National Memo
  • kurt.lorentzen

    You’re right, Mary, in many ways. Government in the 30’s and 40’s built infrastructure, electrified rural America and invested in a way that enabled production and growth, and enabled those producers (farms, businesses, etc) to hire American workers and form the basis of what we now call the middle class. But in identifying the current demise of the middle class, you’ve failed to recognize the problems. Here are some:

    Debt does not translate to prosperity – ask those folks who borrowed hundreds of thousands to buy houses they couldn’t afford.

    Government is a cost, not a revenue source – every government employee, service, building, program is ultimately paid for by production. Government is a necessary cost, but it is a cost nonetheless.

    High speed rails will do little to nothing to improve infrastructure for commerce. Other infrastructure should be maintained and upgraded as a practical necessity, not as a “jobs creation” plan. More government jobs = more cost leading to more debt.

    The rich – the truly rich – should be taxed more. Not those private, middle-class-owned businesses who’s books translate to personal income under the IRS code. Taking those meagre profits as taxes will prevent them from hiring. You can’t continue to demand more from an ever dwindling revenue source for the purpose of financing more government.

    The answer is to bring producers back to American soil, close loopholes that permit the most profitable corporations from sheltering those profits offshore. Closing loopholes for high personal income earners will help some, but not all that much. Raising the percentage on their tax bracket will do nothing as long as they can continue to shelter their income from taxable status. To put America to work, we need to create jobs that provide revenue, not that consume revenue. That means providing the financial infrastructure that makes commerce in the US a profitable endeavor. Most of the roads and power lines are working just fine.

  • ENetArch

    This was Obama’s comment during a State of the Union address, “Entrepreneurs Will Resolve the Economic Crisis”. There is a problem though, not with the statement or who made it, but in actually putting action to the vision. The American Government has been unable to assist entrepreneurs in starting new innovative companies because it can’t motivate the banks to release loans. The same banks that created the housing crisis .. so now the American Government has to sue them.