October 19, 2010
This is the first piece in a series that will examine the so-called middle class in America today—an elusive group that’s dominating political rhetoric. But if no one can identify the middle class, why are government policies being designed for an illusion?
The term middle class evokes emotional images of God-fearing, hardworking Americans everywhere, and politicians have never shied away from using this to their advantage. This year is no exception: In a recent interview on PBS NewsHour, House Speaker Nancy Pelosi said: “Nothing less is at stake in this election [than] the future of the middle class.”
It sounds dramatic, but is it true? Pelosi is hardly alone in Washington when it comes to invoking the middle class to rally the masses, a majority of whom view themselves as middle class. In a speech two days ago in Columbus, Ohio, President Obama invoked the “middle class” no fewer than nine times. From Democratic Florida Senate candidate Kendrick Meek’s website tagline — “Standing Up for the Middle Class” — to Republican Delaware Senate candidate Christine O’Donnell’s “I’m You” ad, especially in politics, the middle class is everywhere.
But to most experts, the middle class is nowhere. Politicians run a risk pandering to it, because paradoxically, there is no middle class; not with regard to values, not with regard to lifestyles, and certainly not with regard to economics.
Even if we do reduce the middle class to an economic formula, which experts agree misses the mark, a workable definition of middle class is impossible to pin down. The problem can be boiled down to three basic flaws in current definitions:
1) The problem of geography.
Cost-of-living discrepancies across the country make it impossible to provide one uniform range of incomes that enables a comfortable, yet far from excessive, lifestyle in every part of the U.S. — a $100,000 income in Peoria, Ill., is not the same as that income in Manhattan. In fact, the cost of living in Peoria is more than 48 percent less than in Manhattan — you need to earn only $51,839 there to have the same standard of living. And if you’re making the full $100,000 in Peoria, you certainly find yourself in a different “class.”
With his proposal to extend “middle-class tax cuts,” President Obama implies that every family earning less than $250,000 a year qualifies as middle class. In Manhattan, this is arguably true. In Peoria, it probably isn’t — unless that family is six-people large, with no savings, or some such.
2) The problem of wealth versus income.
Virtually all measures of economic status fail to include wealth in addition to income. A retiree may have an income of $40,000, but if the house is paid off and she accumulated $1 million in dividend producing stocks over the course of her life, she can most likely rest easy. Same for a young college graduate from a well-off family who has taken a job that pays only $25,000 and whose parents are allowed to give him a total of $26,000 a year, tax free.
Even a family with a total income of $80,000 per year, but with liquid assets of $600,000, lives a vastly different existence from a family with the same income but no savings. The first family can put a down payment on a house, or maintain its lifestyle for a reasonable period of time if someone loses his or her job. It can send a child to college, and it can absorb a sudden, unexpected expense like a new roof or hefty medical bill. The second family, on the other hand, lives with an underlying stress that one big event might threaten its stability. It was the latter that Elizabeth Warren had in mind when she wrote in The Huffington Post last December: “Tens of millions of once-secure middle-class families now live paycheck to paycheck, watching as their debts pile up and worrying about whether a pink slip or a bad diagnosis will send them hurtling over an economic cliff.”
But as far as the government and politicians are concerned, these two families are identical.
3) The problem of household size.
According to the USDA’s Center for Nutrition Policy and Promotion, it costs at least $10,000 per year to raise a child (varying, of course, by geographic location).
This means that a household of five — two parents and three children — needs a minimum of $20,000 per year in after-tax income (and probably much more) to maintain the same lifestyle as a household containing one couple with no children. When those children reach college age, their costs to the family can skyrocket. More older Americans are also living with younger members of their family, adding yet another strain to some households. The result is that multi-generational households of six and households of one, both with total incomes of, say, $75,000, are placed in the same group.
Despite the impact of these three variables, the government periodically tries to pinpoint a definition of middle class that excludes them. In 2008, the Congressional Research Service suggested it may be people with incomes from $20,291 to $100,000; or if that didn’t quite work, from $20,291 to $177,000 (the report concludes, however, without settling on a definition).
In January of this year, the Middle Class Task Force released a report containing a “pure economic definition” that put the middle-income range for a two-parent family at $50,800 to $122,800 — a 142 percentage spread. Single-parent families are hovering around the poverty line at $13,200 to $44,000, yet they’re lumped in with the so-called middle class. When politicians talk about serving the middle class, they don’t really know who they are talking about, or to, and what kind of expectations these people actually have of their government. It’s more of an emotional ploy than an economic reality. “When people are talking about the middle class, they’re not talking about a statistical group, they’re talking about an ideal, and that ideal has run into new economic and family realities,” says Jacob Hacker, a political scientist at Yale and author, most recently of Winner-Take-All Politics.
If politicians acknowledged that there is no ideal middle class, and addressed disparate realities instead, America would be better off.