The End of the Middle Class?

By Robert L. Borosage 
Politico 
September 19, 2011

http://www.politico.com/news/stories/0911/63849.html
 
Finally, Washington has turned its attention back to jobs.

With President Barack Obama's demand that Congress pass his
American Jobs Act and his call on the supercommittee to push
hard on 10-year deficit reduction, a battle has begun that
won't be resolved until the 2012 election. If then.

But the haunting reality is that neither side of the debate
comes close to addressing the scope of our nation's economic
challenge. Washington is fighting over who has the better
sand castle - while ignoring the tidal wave that is coming
our way.

The jobs we've been shedding by the millions are solid,
middle-class positions - the kind that could support a family
and send children to college. The hard reality is that the
relatively few jobs being created are service-related -
disproportionately low-wage and low- skill. The broad middle
class - the triumph and strength of America's democracy - is
sinking. Unless we change course dramatically, we will become
even more a nation of haves and have-nots.

The current debate offers clear contrast. Right now, Obama
wants to "jolt" a flagging economy, investing in teachers and
infrastructure and cutting taxes on workers and small
businesses. Over 10 years, he'd get our books in order by
combining spending savings - largely on wars abroad and on
Medicare, Medicaid and tax hikes on the wealthy.

Republicans scorn the American Jobs Act but may sign onto
 extending the payroll tax cut. They push for rolling back
 regulation, keeping taxes low and passing corporate trade
 accords. Meanwhile, House Speaker John Boehner (R-Ohio) just
 reiterated their staunch opposition to any tax hikes on the
 wealthy and their demand that deficit reduction focus on
 cuts in Social Security, Medicare and Medicaid. The
 differences are stark - so the choice is likely to be left
 to voters in the 2012 elections.

But both sides fail to address the scope of our challenge.
 Republicans seem to believe that simply rolling back Obama's
 reforms and returning to former President George W. Bush's
 economy will set us straight. But those are the policies
 that drove us off the cliff. They weren't working for most
 Americans even when the economy was growing.

Worse, what little lift we had came from a massive housing
bubble - some $8 trillion in exaggerated housing value - that
has burst. We can't go back there and should not want to.

The president offers more extensive reforms, but he, too,
basically seems to assume that by giving the economy another
boost, we can start putting people to work and generate
sustainable growth. He still believes that the economy, as he
said in his State of the Union address, is "poised for
recovery." It's just addled by bad weather, European crisis
and the like.

The reality is far more dire. Forty-six million Americans are
 living in poverty - the highest number since we began
 keeping track. Incomes are falling; the median household
 income is down 6.4 percent since 2007.

And jobs are a calamity. We have fewer payroll jobs now than
 we did in 2000, but we've added 30 million to our population
 since then. Twenty-five million people are in need of full-
 time work. We've lost about 10 percent of middle-class jobs
 since 2000.

 And the jobs coming back are disproportionately low- wage
and low-skill. Nearly 20 percent of working adults have jobs
that do not pay enough to lift a family of four out of
poverty. Median wages for men ages 30 to 50 have declined by
nearly 30 percent since 1969. American companies are still
shipping good jobs abroad, while we borrow more than $1
billion a day from foreigners to cover our trade deficit.

This economy is not like a new car with a depleted battery,
 needing only a jolt to be humming again. It's an old jalopy
 with a spent transmission and a broken chassis. We either
 rebuild it or trade it in.

The president made this case better than anyone during the
 2008 campaign, arguing that we couldn't go back to the old
 economy. We have to build a new foundation for growth, one
 in which America makes more and sells more, invests more and
 consumes less.

The elements of a serious jobs plan seem clear. We need
 massive renovation of the economy, reviving America as a
 center not just of innovation but also production. We need
 to invest in people so Americans get the education needed
 for the next economy. Workers must be empowered to share in
 the increased profits and productivity, while we must curb
 the distorted pay packages that give corporate executives
 multimillion-dollar short-term incentives to cook the books
 - or plunder the company.

The core initiatives aren't magic - but they have to be of a
size commensurate with the challenge. We need a broad and
sustained initiative to rebuild America, to modernize
everything from aged sewers to outmoded transportation
systems. These are also just the sort of jobs that can
bolster the broader American middle class.

With the U.S. able to borrow money virtually for free and the
construction industry prostrate, there is no better
opportunity for a massive, sustained investment that will put
people to work while making us far more competitive.

We also need a strong manufacturing strategy to make things
in America. That requires a new trade policy that sets the
goal of balancing our trade and enforces the policies to meet
it.

A first step has to be challenging China to adjust its
currency and treating its exports in the same fashion it
treats ours. That should also include a major effort to
capture a lead in the green industrial revolution that will
define the markets of the future. China, Germany and other
nations have sensibly set out to dominate the markets for
renewable energy, energy- efficient appliances and transport.

The GOP wants to make Solyndra, the failed solar-power
company, a major scandal. But the scandal allowed China to
capture the solar industry with subsidies and to capture
technology - erasing any possibility for U.S. companies to
compete.

We need expanded investment in research and development,
linked to commitments to develop products here rather than
abroad. We can't continue to rely on military R&D to drive
our innovation.

Most important, we need to invest in people, rebuilding what
was long considered the best education system in the world.
Right now, we're not even doing the basics - universal
preschool, small classes in early grades, skilled and well-
rewarded teachers, comprehensive after-school programs,
affordable advanced training and college.

Instead, we're laying off teachers, cutting back advanced
studies and tutors and pricing college out of reach for more
and more students.

We also can't expect schools to educate children scarred by
poverty. Prenatal care, child nutrition, health care and
affordable housing are essential if we want children to have
a chance to learn.

All this costs real money. That means new priorities and
progressive taxes. We've got to end the presumption that we
are an indispensable nation that must police the world.
Progressive tax reforms - from hiking taxes on the wealthy to
taxing financial speculation to cracking down on tax havens -
is long overdue.

As for all the brouhaha about deficits and debt - the United
States is a rich nation. Our short-term and medium-term
deficits are generated largely by the economic collapse - and
solved largely by returning the economy to growth and putting
people to work. As we have seen from the brutal layoffs of
state workers, austerity - cuts in spending - can only make
things worse.

We do have a long-term deficit challenge - but that is
entirely generated by our broken health care system. Health
care costs have gone from 9.5 percent of personal consumption
in 1980 to 16.3 percent today. Medical bills are now a major
factor in 60 percent of all personal bankruptcies. If health
care costs aren't finally brought under control, they will
bankrupt families, businesses and state and federal
governments.

Fixing health care isn't about cutting benefits to the
Medicare recipients; that simply transfers more of the out-
of-control costs to those least able to pay them. Fixing
health care requires taking on the drug companies, the
insurance companies, the private hospitals and the perverted
system that they have created that costs twice per capita of
other industrial nations while delivering worse results.

This is the argument we need to have - and the changes we
 need to face.

Ironically, Americans get it even if Washington doesn't.
Large majorities want schools, Social Security and Medicare
protected; they want to hike taxes on the rich and invest in
areas vital to our future. They are souring on the endless
wars and want the resources and young men and women brought
home. And they want health care costs brought under control.

If Obama and the Republicans stay their course, we will have
a debate in 2012 with stark differences. Americans will
choose. And then, we will still have to summon up the energy
to rebuild our economy - or suffer far more than one lost
decade. 
______________

Robert L. Borosage is president of the Institute for
America's Future and co-director of its sister organization,
the Campaign for America's Future.

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