{"article":{"id":100180,"heading":"The Next Middle Class","author":"Michael Lind","created":"2004-01-15 02:22:01","modified":"2004-01-17 11:19:51","last_modified":"Sat, 17 Jan 2004 18:19:51","article":"
(from \"Are We Still a Middle-Class Nation?\")
If we reject both a new feudalism (under which most Americans provide personal services for the rich few) and a regime of protectionism and immigration restriction (which would benefit some workers at the expense of others), then some system of redistribution will be necessary to ensure that the middle-class majority benefits from long-term productivity growth. This can take two forms: redistributing income and encouraging the widespread ownership of income-producing assets.
The most obvious way to share the gains from technological progress is to tax the owners of high-productivity industries at high levels and spend the proceeds on the rest of the population. To varying degrees in different countries--more so in Sweden, less so in the United States--this is the system that now exists.
This \"social wage\" can take different forms. Some Americans prefer that the government provide universal services such as public schools and public health care. Others prefer voucher systems that permit a degree of individual choice. The social wage can likewise be either a supplement to incomes or a subsidy for goods. The earned-income tax credit, which has bipartisan support, supplements the incomes of low-wage workers to lift them out of poverty, and provides an alternative to raising the minimum wage. But there is also bipartisan support for tax breaks for homeowners, and for other subsidies on middle-class consumption.
In their groundbreaking book The Two-Income Trap: Why Middle-Class Mothers and Fathers Are Going Broke, Elizabeth Warren, of Harvard Law School, and her daughter Amelia Warren Tyagi demonstrate that fixed costs for the typical American middle-class family--home-mortgage payments, car payments, health insurance, child care, education, and taxes--have risen more rapidly than income over the past thirty years, eating up many of the gains from having two parents in the work force. According to the authors' analysis of government data, even when a two-earner family today brings in almost twice the income of a one-earner family in the 1970s (in inflation-adjusted constant dollars), the 1970s family had more discretionary income than today's.
If middle-class income does not grow as rapidly as middle-class costs, then one option is to further subsidize the rising relative costs of labor-intensive goods and services that are necessary to a middle-class lifestyle, such as education, child care, and health care. And the government will certainly be pressured to provide such subsidies. But taxing fewer and fewer rich people to subsidize more and more middle-class people would increase incentives for the rich to avoid taxation or even to leave the country. An alternative is to increase the number of people who own income-producing assets.
\"Universal capitalism,\" the idea that everyone should own income-producing financial assets, was originally championed by Thomas Paine, in the eighteenth century, and variants of the idea have been proposed in more recent years by Louis Kelso, Mortimer Adler, Jeffrey Gates, and Bruce Ackerman. Today about half of American households, and roughly 70 percent of registered voters, own stock through pension funds and similar vehicles. But money set aside for retirement does no good during one's working life.
Proposals for government-funded savings accounts for all children that would be restricted to a few purposes, such as college education or a first-home purchase, have been made by the Washington University professor Michael Sherraden and the former IRS commissioner Fred T. Goldberg Jr. Ray Boshara, of the New America Foundation, has proposed a similar system of American Stakeholder Accounts. And last April, British Prime Minister Tony Blair announced the establishment of child trust funds in the United Kingdom.
Like retirement savings invested in the stock market, child trust funds would be earmarked for particular purposes. But it is possible to imagine a future in which middle-class Americans would receive part of the returns on their investments during their working lives (a small part at first, but more with each generation), which they would be free to save or to spend without any restrictions. Of course, a nation that confiscated private financial wealth and redistributed it among its citizens would wreck its economy and send not only capital but also capitalists fleeing across its borders. Thus any plausible program of universal capitalism must start small, by planting seeds capable of growing along with the economy over time.
For example, one can imagine a means-tested program of private, regulated investment accounts in which the government matched the contributions of low-income workers. The seed money might come from spending cuts elsewhere, or from new taxes. Alternatively, citizens could all begin receiving modest amounts of money from the sale or lease of the airwaves and other public assets. In this way, even though most new middle-class jobs would not contribute to productivity growth in the way that farm and factory labor did in the past, universal capitalism could ensure that the fourth American middle class, like its predecessors, would be able to share directly in the long-term growth of the nation's economy.
This may seem a radical change. But only in recent generations have Americans begun to receive most of their income in the form of wages. The yeoman farmer didn't rely on wages. And only in the twentieth century did the New Deal add the social wage to the market wage. In the course of the twenty-first century what may be called the \"capital wage\" could be added to these, so that middle-class Americans--not merely an affluent minority--might derive income from three sources rather than just two.
In their own ways, with methods appropriate to their own times, Thomas Jefferson, Abraham Lincoln, Franklin Roosevelt, and their allies provided the institutional frameworks that permitted successive versions of middle-class America to grow and flourish. Their success set a high standard for the leaders of today. Every presidential candidate claims to want to help middle-class Americans. The challenge, though, is not to repair the current American middle class but to create a new one.
===============
Michael Lind is the Whitehead Senior Fellow at the New America Foundation and Director of its American Strategy Project. Author of numerous books, Mr. Lind has also been an editor or staff writer for The New Yorker, Harper's Magazine, and The New Republic. From 1991-94 he was executive editor of The National Interest.
He has also been a guest lecturer at Harvard Law School. He has written for The Atlantic Monthly, Prospect, The New York Times Magazine, The Washington Post, the Los Angeles Times, The Financial Times, and other leading publications, and has appeared on Crossfire, C-SPAN, National Public Radio, and The News Hour with Jim Lehrer.\n","contact":"lind@newamerica.net","link":"http:\/\/www.theatlantic.com\/issues\/2004\/01\/lind.htm","address":"","phone":"","parent_id":0,"mime_type":"text\/plain","summary":"In their own ways, Jefferson, Lincoln, and Roosevelt, provided the institutional frameworks for middle-class growth. Now, radical ideas are necessary to prevent a return to feudalism.","numcomment":11,"fileurl":"\/uploads\/","filesize":null,"article_url":"\/news\/2004\/01\/100180.php"},"attachments":[],"comments":[{"id":100181,"heading":"If you want to limit progress","article":"and development of humanity, do this:\r\n\r\nThe most obvious way to share the gains from technological progress is to tax the owners of high-productivity industries at high levels and spend the proceeds on the rest of the population.\r\n\r\nThis restricts the development of advancing companies, and makes them subsidize less worthwhile enterprises.\r\n\r\nThat is a recipe for disaster.","author":"Slick","parent_id":100180,"mime_type":"text\/plain","created":"2004-01-15 02:39:10","modified":"2004-01-15 02:39:10","fileurl":""},{"id":100209,"heading":"limiting progress","article":" Well, that depends upon what you mean by "progress." Nuclear power plants, the replacement of mass transit systems with the private automobile after World War II, and the replacement of reading with passive television watching were all once touted as progress; few but the most hopeless neanderthals would attempt that argument today. The financial interests behind these developments were not motivated by any desire for the masses of people to make any progress, however one defines that term.\r\nThey were motivated by the desire to accumulate wealth for themselves and their offspring - wealth taken out of the pockets of those same masses.\r\n The wealthy and the corporations are taxed at much higher rates in Scandinavia than in the United States, and this has resulted in a better standard of living for the average person there than in the United States. It has not resulted in any technological decline. In fact, deindustrialization seems to be particularly dramatic in the United States, a country with strikingly low rates of taxation of the wealthy and of big business.\r\n By any humanistic standard, progress should not be measured by how many televisions exist to enable people to kill their brains watching moronic nonsense. Nor should it be measured by how many vehicles are emitting carcinogetic gasses on the highways. It should be measured in terms of how people have access to health care and education at all levels, how people are housed, whether hunger has been eradicated, whether functional illiteracy has been wiped out, whether the cultural life of the country is rich and deep and conducive to critical thinking, and by how much of the national wealth is devoted to schools, libraries, hospitals, help for the disabled, and on the job safety for workers rather than wasted on the military or spent by the rich for their own selfish amusement. On all those counts the United States fails miserably.","author":"Meyer London","parent_id":100180,"mime_type":"text\/plain","created":"2004-01-15 18:32:12","modified":"2004-01-15 18:32:12","fileurl":""},{"id":100219,"heading":"Meyer Londo","article":"Thank you, comrade. I couldn't have said it better myself. The whole world should be marxist by now, and it would have if I had my way. The USSR was a prime example of just how successful these things you mentioned made everyone's life much better. I know how you feel. Many of our comrades cried with you when communism fell. But, through useful idiots like you, marxism will one day find its way back into the hearts and minds of those too ignorant to know what's best for them.","author":"Josep Stalin","parent_id":100180,"mime_type":"text\/plain","created":"2004-01-15 19:30:08","modified":"2004-01-15 19:30:08","fileurl":""},{"id":100220,"heading":"Meyer Londo","article":"Thank you, comrade. I couldn't have said it better myself. The whole world should be marxist by now, and it would have if I had my way. The USSR was a prime example of just how successful these things you mentioned made everyone's life much better. I know how you feel. Many of our comrades cried with you when communism fell. But, through useful idiots like you, marxism will one day find its way back into the hearts and minds of those too ignorant to know what's best for them.","author":"Josep Stalin","parent_id":100180,"mime_type":"text\/plain","created":"2004-01-15 19:30:34","modified":"2004-01-15 19:30:34","fileurl":""},{"id":100227,"heading":"I see DU is back up","article":"Time to go back over there and rip those liberals a new asshole, in a stealthy sort of way.\r\n\r\n>The comment was rejected because it was too short. \r\n\r\nHey John K. or Casey or someone at LA-IMC, make yourself useful one day and get the above message fixed. Pronto!\r\n","author":".","parent_id":100180,"mime_type":"text\/plain","created":"2004-01-15 19:55:29","modified":"2004-01-15 19:55:29","fileurl":""},{"id":100232,"heading":"Missing the point","article":"Are you suggesting that Thomas Paine was a Marxist? No?! I didn't think so. \r\n\r\nWhat the author is suggesting here is that employees have some ownership in the companies they work for, thus proftis would be distrubited more fairly. In addition, increasing the number of part-owners also increases the number of people who have a vested interest in the accurate accounting and management of the company.\r\n\r\nDo you think Enron would have been the disaster it was if there were more eyes peering over their greedy little shoulders? I do. Plus, it adds more checks and balances to corporate operations without adding more federal regulation.\r\n\r\nAs a libertarian, I thought you would have been behind the exercise of econmic llberty, but it doesn't surprise me to learn that (yet again) libertarians are the most selfish hypocrites known to man.","author":"lottoris","parent_id":100180,"mime_type":"text\/plain","created":"2004-01-15 20:56:51","modified":"2004-01-15 20:56:51","fileurl":""},{"id":100237,"heading":"fresca","article":""What the author is suggesting here is that employees have some ownership in the companies they work for, thus proftis would be distrubited more fairly."\r\n\r\nJust curious.\r\nHow exactly is this accomplished?\r\nWhat investment and risks are the workers contributing to the company for this ownership?\r\n\r\nCertainly not their labor as they are already being compensated for that in the form of wages. So that's a wash.\r\n\r\nWhy then, and by what exchange will the owners of a company, who have risked their initial capitol, transfer part of their property to workers?\r\nAre you suggesting that these workers simply be handed part ownership for nothing, in addition to their agreed upon wages?","author":"fresca","parent_id":100180,"mime_type":"text\/plain","created":"2004-01-15 22:55:03","modified":"2004-03-09 22:02:00","fileurl":""},{"id":100245,"heading":"Answer","article":"I believe the author makes a point to mention employee stock options and that its a growing trend -- a more robust system is needed. \r\n\r\nHowever one very effective measure that could be initiated "over night" would to make mandatory direct employee representation on all boards of directors.\r\n\r\nIt might help if you learn a little about co-ops and other alternatives to tradtional corporate enterprises.","author":"lottoris","parent_id":100180,"mime_type":"text\/plain","created":"2004-01-16 01:16:19","modified":"2004-01-16 01:16:19","fileurl":""},{"id":100246,"heading":"fresca","article":"Thanks for the link.\r\n\r\nDon't get me wrong. I'm all for the idea of likeminded people setting up co-ops and am all for profit sharing and worker owned businesses. If that's the original and agreed upon model.\r\n\r\nBut there's always this implication around here that the traditional model is somehow wrong and it's the RIGHT of the worker to have part ownership.\r\n\r\nIt's simply not.\r\n\r\nWorkers only have a right to fair treatment and fair pay based on societal standards and agreed upon contracts. Nothing more.\r\n\r\nThamks again for the link.","author":"fresca","parent_id":100180,"mime_type":"text\/plain","created":"2004-01-16 01:39:48","modified":"2004-03-09 22:02:00","fileurl":""},{"id":100369,"heading":"fresca is an idiot","article":"","author":"nonfrescabushadmirer","parent_id":100180,"mime_type":"image\/gif","created":"2004-01-16 20:19:28","modified":"2005-08-15 02:47:46","fileurl":"\/usr\/local\/www-domains\/la.indymedia.org\/public\/uploads\/2004\/01\/2952.11963.giflkci5l.gif","image":{"original":"\/usr\/local\/www-domains\/la.indymedia.org\/public\/uploads\/2004\/01\/2952.11963.giflkci5l.gif"}},{"id":100465,"heading":"risks","article":"There is a risk inherent in working. There's also the so-called "opportunity cost" of not being able to do other work.\r\n\r\nBut, that's neither here nor there. I've been thinking about service work lately.\r\n\r\nThe model of labor relations proposed by fresca is not relevant to a growing segment of the economy. He might not realize it, but what he describes is the shadow of union collective bargaining. It works in a factory, but how many factories are in the US anymore (thanks to NAFTA).\r\n\r\nIt doesn't work in a situation where a worker produces something that involves some creativity. If the worker produces some intellectual property, he or she has some claim to the royalties that the company would otherwise earn. Typically, the worker forgoes this for a steady salary, but, this tends to cause workers to hoard their good ideas.\r\n\r\nIt also doesn't work in service sector jobs, where performance is the point of the job. In these situations, the product being produced isn't an object, but the performance between the worker and the "client". The worker can be a waiter, a cashier, a teacher, a doctor, a musician, or even a prostitute. In these performances, it's difficult to replace on worker with another. It's also difficult to measure the "value" of the worker, because the outputs are hard to measure.\r\n\r\nThese two kinds of jobs make up so much of the economy that traditional wage negotiations can't produce the best outcomes.\r\n\r\nUntil some better, fair way to compensate is invented, we'll continue to have slow technological changes, bad service, lousy schools, and corporations able to underpay service workers who have no union. Moreover, with a better way to compensate, we'll find that dull, mechanized service jobs might give way to high-value service jobs.","author":"more rational","parent_id":100180,"mime_type":"text\/plain","created":"2004-01-17 11:19:51","modified":"2004-01-17 11:19:51","fileurl":""}]}