THE BUSH ADMINISTRATION

ENDANGERS THE MIDDLE CLASS

By Thomas Fischermann

[This article originally published in: DIE ZEIT 37/2004 is translated from the German on the World Wide Web, http://zeus.zeit.de/text/2004/37/US-Mittelschicht.]

Why are there so many advertising billboards for water sprinklers along Lake Avenue? The gardens are exquisite. The lawn before every property is green and manicured. The Stars and Stripes flutter over the doors. Three cars are parked in some garage entrances. The region proclaims the prosperity of its residents: spacious single-family homes and little villas surrounded by trees and parks. Here and there one sees a veranda from the southern states, a Victorian oriel (window) or a sun deck in the style of an Italian ice cream parlor.

The Clark village in New Jersey with 15,000 souls has a little boom behind itself. As in nearly all the suburban developments of the neighborhood, home prices have almost doubled in the past four years. “You can’t get anything any more for under $250,000,” says Ron Puorro, a local banker. Can you imagine a better place to buy a piece of the American dream – at least in that version dreamt by the women and men of the US middle class? As a guarded suburb with a series of respected schools and a homogeneous population, 93 percent of the residents of Clark are white. 88 percent have at least completed high school. The median household income according to the 2000 census amounted to a respectable $65,000, almost twice the US average.

An hour’s drive from Clark, the republicans this week at their convention in New York conjured up a “robust economic recovery.” George W. Bush said the economy is “firing on all cylinders” and despite all doom prophecies “grows faster than our trading partners”. However Bush’s democratic adversary John Kerry has also found an election campaign formula for economic questions: “class struggle”. His election strategists focus on those citizens whose economic fears have increased enormously under the Bush administration: the middle class, people with household incomes between $25,000 and $100,000 a year, residents of nice quiet suburbs like Clark.

This middle class will decide the American presidential election on November 2.

DEMOCRATS ENTICE WITH SUBSIDIES AND TAX CUTS

The middle class represents the large part of the swing voters courted by Bush and Kerry. A survey of opinion researchers from Democracy Corps draws a depressing self-image of this group: “A growing majority, almost 60 percent, sees scarce jobs, stagnating incomes, reduced social benefits and rising health costs for the middle class.” Therefore Kerry proposes targeted subsidies and tax cuts for middle class families including deductions for university education and health reform. The surveys have shown a democratic advantage for weeks in the subject of economic competence. Most recently, the challenger Kerry was seven points ahead of president Bush.

The “Middle Class Squeeze” has been a popular theme for populists in several election campaigns. This time high-income persons actually have a bone to pick with the acting president. Many of them have come off badly under the Bush administration.

The massive tax cuts, the heart-piece of Bush’s economic policy, surprised many observers on account of their distribution effects. According to a report of the Congressional Budget Office, a third of these tax cuts benefit the top one percent in income distribution – households that earned $1.2 million a year. In contrast, the middle 60 percent only improved their position around two percent.

A COLLEGE EDUCATION CAN COST $100,000 TODAY

The tax cuts to the middle class were erased by increased expenditures. For example in health costs, many Americans must now pay insurance costs (on the average $9000 a year for a family) because they temporarily lost their jobs or their employers slashed the fringe benefits. A college education can cost $100,000 today. Some schools, kindergartens, pre-kindergartens and universities have increased their fees more than ten percent in the last years because the treasuries of the states are empty and grants from the states are not possible. The higher gas prices were the last blow for the middle class with their single-family homes that are expensive to heat and their gas-guzzling family sports-utility vehicles.

In Clark, the real estate broker Deborah Ratcliff has a small office on the main street. “A whole wave of houses could come on the market in the coming months”, she says. “I have been in this business for 29 years and my nose tells me: this boom is ending.” A few months ago she sold houses over night. Now concluding a sale takes months. Many pieces of real estate are now financed with “100 percent credit”: expensive mortgage credits for houses purchased entirely on credit.

“Do you know many people bought their houses here under the assumption that they would have two wage-earners in the household for years”, says Deborah Ratcliff. “What happens when one of them is suddenly unemployed? Doesn’t the other become anxious?”

Nation-wide the social descent of many families seems a real threat. Unemployment insurance and social assistance have shriveled to a minimum in the United States. Savings are quickly devoured by the costs for health care or education. The labor market is more miserable than the official unemployment rate of 5.5 percent suggests. The number of newly created jobs still lags behind the population growth. More Americans have been completely dismissed from the labor market. Good-paying jobs are very hard to find because technical rationalization or outsourcing to distant countries have caused many middle class jobs to disappear.

Matilde Martinez (name changed) is ready to fight. “I worked hard”, she said (“Write that I am over 45”). For 20 years, she paid taxes in America “and sometimes had two jobs at once. I managed this in the middle class and traveled to Europe on vacations. Should all this disappear now?” Outwardly this elegant woman who was born in the Dominican Republic and has American citizenship is not in an emergency. Her little apartment on the top floor of an apartment building is in a respectable corner of midtown New York. She pays $1000 a month in rent. “I had a good job. Thus I tell myself I can afford this apartment.” For ten years she worked in the bookkeeping department of American Express, then as a secretary of an advertising firm and as a receptionist at Sotheby’s auction house. She studied economics at a nearby college.

When the economic slack period began in 2001, Martinez had to take a job as a telephone operator at a New York employment office. At $27,000 a year, she earned less than before. She lived frugally and managed with $1300 net earnings per month until she lost this job a year ago. For lack of health insurance, Martinez has not seen her doctor for months. Her savings are used up. “The money will run out in two weeks”, she says. “Then my landlord will come and simply throw me out.” She received a photocopied note from a charitable association of her neighborhood church: “We regret that we can not take any new cases at this time.”

As in Europe, social envy only plays a subordinate role in the US. Even poor Americans tend to recognize the prosperity of others as earned. 15 percent of US citizens imagine themselves among the richest one percent of the population in the future one day in the future. However fear of their own sudden fall gnaws at the self-confidence of the middle class. Social agencies now publicize cases of homelessness and insolvency from prosperous circles. The number of bankruptcies has reached an all-time high of 1.6 million. 92 percent of the bankruptcies were middle class families as the Consumer Bankruptcy Project at Harvard discovered. A third of these families accumulated a complete annual salary in debts on different credit cards.

To some observers the complaints of the US middle class sound hypocritical. They are among the richest of the world, have larger houses, larger cars, more electrical gadgets, furniture and consumer goods than comparable sectors in Europe. The consumer researcher Juliet Schor decried “The Overspent American”. The economist Robert frank wrote a critical book on the “luxury fever”. The conservative commentator Robert J. Samuelson suggests that “squeezed middle class persons” go out to eat less often, buy economy cars and live in smaller houses with their shrinking families.

THE SLOGAN “IT”S THE ECONOMY, STUPID! IS NOT TRUE ANY MORE

Obviously no politician will take up these arguments. Renunciation is not popular. “America understands itself as a middle class society”, says Roger Kubarych, bank advisor in New York. Andreas Batista Schlesinger from Drum Major Institute for Public Policy in New York knows: “When the American dream can no longer be fulfilled for the middle class, it frustrates all those who want to move up.”

Can John Kerry and the democrats rejoice that the disappointed middle class will vote Bush out of office on November 2? Will neglecting the middle class bring victory to George W. Bush, as the economist and pro-democratic commentator Paul Krugman prophesies doom?

In the 1992 election campaign, Bill Clinton’s campaign manager hung a famous poster in the campaign headquarters: “It’s the economy, stupid!” was the message. George Bush senior actually succumbed at that time to the weak economic situation. However 2004 is an exceptional election. 41 percent of surveyed Americans admit that the war in Iraq and the battle against terror are on their hearts – clearly ahead of “economic questions” (26 percent). A large part of the rural middle class is excited about marriages of homosexual couples, removal of crosses from public buildings, the dominance of the “leftist” press and the “decadent” Hollywood culture. Bush has the better cards in these questions.

The candidates can still change the themes. The great communicator Ronald Reagan succeeded in 1980 in focusing on the economy. At the end of a TV debate with the acting president Jimmy Carter, he asked the electorate: “Are you better today than four years ago?” This question could be asked now. Many middle class persons would answer with a clear No today.