Left behind: Can a new contract with America help the country’s struggling middle class?
Time might be right for nation to pull together to help middle-class wage earners thrive, experts suggest
Money, time, respect, relationships and health are vital to a fulfilling life, according to policy proposals from two Brookings Institution scholars who hope to spark conversations about what a struggling middle class — the 60% in the middle economically — needs to flourish.
“You can’t forget about the majority of the population and still have a strong economy, a strong political system and some kind of sense of community,” Isabel V. Sawhill, who cowrote “A New Contract with the Middle Class,” told the Deseret News. “We think especially that the middle class feels like they’ve been left behind. We have data that show they have not been doing as well as either the rich or the poor, after taxes and government benefits are counted.
“Their incomes aren’t growing as fast. That’s a problem for the economy. It’s a problem for our political system — it leads to populism that leads to the kind of divides we’re seeing now. And it leads to some cultural divides. It’s time to stop talking about just the rich and the poor,” said Sawhill, who collaborated with fellow Brookings scholar Richard V. Reeves on the policy proposals.
The time might be right for less polarized conversations about policies that impact middle-class households with the election of Joe Biden, who describes himself as center left, she added, noting partisans would need to “bend to the center.”
Sawhill and Reeves believe Americans across a political spectrum could agree on some policies to bolster a sagging middle class, which most people willingly claim as their economic identity. Reeves and Sawhill define middle class as between roughly $40,000 and $150,000 income for three-person households. A healthy economy overall depends on a robust middle class, they said.
“I think our contract with the middle class, though not planned this way and written long before this election, speaks to some ways we could bring the country together,” Sawhill added. She emphasized the contract is “with,” not “for” the middle class and contains elements very important to conservatives, too, like personal responsibility and the importance of work, among others. “We don’t offer a strictly left or right approach. We tried to think about what quality of life for the middle class means and then go back to fundamentals.”
They suggest improving access to health care, but emphasize making people responsible to do things to be healthier. They emphasize work — not just for income, but for self-esteem and responsibility.
To make America’s labor force more educated and competitive, the contract proposes two years of free college — but in exchange for a year of national service, which could be in the military or involve other service opportunities. In an essay for Barron’s, Sawhill said expanded national service might help “rebuild our sense of a common American identity.”
The contract calls out five key areas, which sometimes overlap. A sampling of suggestions:
Money: Wages are the primary source of money for middle-class folks, but among those ages 25-54 in the center income quintile, wages grew just 6% between 1979 and 2019, compared to 9% in the lowest quintile and 31% in the top quintile.
“In recent decades, the American middle class has experienced slow income growth, near-stagnant wage increases and declining odds of upward mobiliity,” Reeves and Sawhill wrote. “Inequality is not a feeling; it is a fact.”
The duo propose largely eliminating income tax, with a standard deduction of $100,000 for a married couple or $50,000 for someone single, to benefit most in low- and middle-income groups.
Sawhill said the idea shocks even her liberal friends.
“We’re not saying reduce taxes overall, we’re saying think a little more fundamentally about what you want to tax. Instead of taxing income from work, let’s tax consumption, which we have too much of.”
They propose taxing carbon to raise revenue and as a “free-market way to deal with climate change, instead of regulating,” she said.
And they suggest raising corporate income tax to 25%; it was 35% before tax reform under the Trump administration. But they propose letting businesses expense investment spending to encourage investing in their companies, instead of using profits primarily to buy back stock and speculate.
Time: The average middle-class working couple with children now puts in 600 hours more a year than they did in 1975, largely because more women work — which also accounts for most recent wage growth. A common lament is lack of time.
The contract proposes at least 20 days paid leave for any purpose: Care for a loved one, have a baby, go fishing. They noted some companies already provide that much in various forms, though low-wage workers are less apt to have paid leave.
Relationships: The contract emphasizes the importance of relationships — and that children benefit from family stability, which declined as marriage rates dropped. They propose making sure women can access family planning tools to have children when couples are ready, instead of drifting into parenthood. Sawhill said that also reduces abortions.
It’s “uncontroversial” that kids do best when they’re raised in stable families by two parents who planned to have and raise them together, Reeves told American Enterprise Institute’s Jim Pethokoukis, in a Q&A that also featured the institute’s director of economic policy studies, Michael R. Strain, and Sawhill.
Most American adults agree. The American Family Survey, an annual national poll by the Deseret News and Brigham Young University’s Center for the Study of Elections and Democracy, has consistently found Americans believe children thrive most in stable homes with two parents committed to them. They say marriage helps families and children financially. And economics — particularly the cost of raising a family — is a key concern, the survey said.
Health: COVID has been a “sharp reminder that health comes before health care,” according to Reeves and Sawhill. Sawhill likens it to putting fences atop cliffs instead of ambulances at the bottom.
Besides proposing Americans do more to take care of their own health, the contract would tax sugary drinks; overconsumption increases risk of health problems, including diabetes.
They also propose making mental health services affordable and readily available.
Respect: Sawhill sees many conversation around income inequality, but said relational inequality underlies many American challenges. The contract proposes that every high school student attend a naturalization ceremony to learn the stories of people born elsewhere who worked to become Americans and to see it happen.
National service — and opportunity to get to know people who are different — could increase mutual respect, the contract says. Attitudes change when people get to know others who are different. Folks in the military tend to have more friends of different races and backgrounds, for instance.
The contract calls for making national service available to others, not just the college-bound, including older Americans, former prisoners, displaced workers and veterans.
Room to disagree
American Enterprise Institute’s Strain said he appreciates the contract’s “emphasis on both the rights and obligations of American citizens,” commending pushback against the notion people are victims who can’t improve their circumstances.
But some contract proposals, like capital-income taxation, amount to an intergenerational trade-off that “would leave future middle-class households worse off by reducing capital stock and making workers less productive,” said Strain, who wrote “The American Dream Is Not Dead: (But Populism Could Kill It).”
Strain called the proposal for a $12 minimum wage another trade-off that would help the middle-class, but might reduce employment options for those with fewer skills and less experience.
While Strain said more women working raised the median wage, he’s not sure what to think about it because it’s important to consider as well what’s happened to male wages, which have often decreased or which rose more slowly.
And he said he would not support eliminating income tax on the middle class as they suggested. “In fact, we may even need to raise the tax burden on the middle class while also reducing the Medicare and Social Security they receive.”