The End of the Middle Class

The following was originally published in Politico.

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.