The American middle class is dying and neither of the major political parties in our country has a realistic plan to save it. As stock markets rally to record highs and political leaders trumpet a message of recovery, middle class wages remain stagnant and the price of essential things like college and healthcare continue to skyrocket. The middle class share of national income has declined from 53% in 1970 to 45% in 2013. The median income of the group has declined $600 in the same period. Meanwhile, the price of college is up 450% since 1982, the price of healthcare is up 250%, and all other prices have risen slightly or stayed the same. The middle class is getting squeezed and nobody is doing anything about it.
Politicians number one priority should be to grow the middle class. Democrats should take the ball of "middle class economics" and run with it. They should especially work to raise wages in the midst of the ongoing economic recovery, create good paying jobs on top of the ones already being created and reducing the price of middle class essentials like college.
The best way to raise wages in the short term is through progressive tax reform. Democrats should curtail tax expenditures that benefit the rich, like the preferred rates on capital gains and dividends, and use the revenue to reduce taxes on the poor and middle class. Rep. Chris Van Hollen, the ranking Democrat on the house budget committee, proposed something similar in January. Increases in the Child, EITC and Childcare refundable tax credits could put thousands of dollars a year back into the hands of working families. Not only would this be good politics, it would also be good for the economy, because much of that cash would be likely to be injected directly back into the economy through investment and increased consumer spending, creating thousands of jobs.
The easiest way to create good middle class jobs immediately is to increase investment in infrastructure. In 2012, the Center for American Progress estimated that $58 billion in increased federal investment in transportation infrastructure could pull in more than $70 billion in increased infrastructure investment from states and other sources, while creating more than 700,000 construction jobs, 168,000 manufacturing jobs and 150,000 other jobs. Investing in infrastructure has the added benefit of saving massive amounts of travel time and saving middle class families hundreds of dollars in traffic and travel related costs each year.
The largest barrier to the middle class besides stagnant wages is the staggering price of a college education. As was mentioned above, the price of a college education has risen 450% since 1982, far outstripping the rise of income. There is a reason that Americans are burdened with more than $1 trillion in student debt. The presidents proposal for two free years of community college is a good step towards solving this problem, but most middle class jobs these days require at least a four year degree. Congress could start by vastly increasing Pell Grants and the American Opportunity Tax Credit, two highly successful programs that help the poor and middle class afford college. Ultimately, however, the crisis in higher education will require bolder, longer term solutions. Just like the middle class situation itself, it cannot be solved overnight.
Have ideas on how Congress can help the middle class? Share them below.