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The Democratic Strategist

Political Strategy for a Permanent Democratic Majority

Editor’s Corner

Real Optimism

By Elizabeth Warren
“It’s the economy, stupid.” Where do the famous words that propelled Bill Clinton into the White House fit in the optimism-pessimism paradigm that Kim, Solomon, and Kessler assert defines the politics of winning? Nowhere, and that’s what’s wrong with their paradigm.
Bill Clinton ran for office on a clear statement that he got it. I agree with Jacob Hacker (once again) that Clinton understood what was wrong in America, and he thought we could do better. If that were KSK’s message, then I’d be singing doo-wop backup in the chorus.
There is optimism born of realism–the “here’s the problem, and here’s how we can beat it” attitude, conveyed in the messages of “here’s what we need to unleash the potential of our young people” and “here’s how we can secure the safety of our neighborhoods.” It is the optimism that knows things are wrong and but believes that things can get better.
But something called optimism that is nothing more than trying to put a happy face on the struggles facing middle-class families in America is not optimism. Quoting average statistics of wealth that are inflated by the extraordinary gains made by those at the top is a manipulative ploy. Talking about the rise in family income without talking about the fact that the entire increase came from putting a second earner into the marketplace and that a median-earning one-earner family in America is hanging on by its fingernails to the bottom rung of the middle class is an insult. Politicians who try these sorts of good-news number scams should be called on it.
So what is the reality? Each year since Bush has occupied the White House, more people have filed for bankruptcy than have graduated from college.1 Why? Just three reasons–job losses, medical problems, and family breakups–explain 90% of those bankruptcies. Americans across the spectrum are drowning in debt, with the median family now owing a record 108% of its annual income.2 Try telling those hard-working, middle-class families that Americans are richer than ever.
I think of the people behind the data–the families fielding debt collection calls, the half of Americans who wake up at night worrying about paying their bills,3 the third of Americans who owe money they cannot pay to a doctor or hospital.4 I think about the 46.6 million Americans with no health insurance (a new record!),5 and the 21 million households that couldn’t afford to make more than a minimum monthly payment on their credit card bill.6 I think of one in four military families who are trying to serve their countries while they are tangled up in financial scams and payday loans that are running an average of 400% interest.7 I think about the 20-30% of college grads who will graduate with so much debt that experts predict their debt loads will be “very difficult to manage,”8 and the almost 20 percent of low-income high school graduates with very high math test scores for whom money is a barrier that keeps them from going on to college.9
I think we can do better. And I think that’s a message of real optimism.

A native Oklahoman, Warren graduated from the University of Houston and Rutgers Law School. She is now the Leo Gottlieb Professor of Law at Harvard Law School, where she teaches contract law, bankruptcy and commercial law. Her latest book, All Your Worth, is for people who worry about money. She posts on TPM Cafe.

1Administrative Office of the United States Courts; U.S. Census Bureau. Data calculations in Warren and Tyagi, The Two-Income Trap, Chapter 1.
2Center for American Progress, Drowning in Debt (analysis of 2004 Survey of Consumer Finance data)
3AP/Neilsen poll of 1,000 Americans December 2004, reported in “Poll: Half of Americans Worry About Debts” (December 20, 2004). The medical effects of these worries are discussed in Jean Lawrence, “Debt Can be Bad for Your Health,” WebMD (January 3, 2005); Center for American Progress/Center for Responsible Lending, “Frequency Questionnaire,” April 13-20, 2006 (33% of respondents “very worried” or “somewhat worried” about being the victim of a terrorist attack, 48% “very worried” or “somewhat worried” about “not having enough money to pay all your bills”).
4Sarah Collins, Michelle Doty, Karen Davis, Cathy Schoen, Alyssa Holmgren, and Alice Ho, The Affordability Crisis in U.S. Health Care: Findings from the Commonwealth Fund Biennial Health Insurance Survey xii (March 2004) (reporting 32% of Americans aged 18-64 with incomes above $35,000 have outstanding medical bills they cannot pay, have been contacted by collection agents on behalf of health care providers, have medical debt being paid off over time or have other signs of distress in paying medical bills).
5Rick Lyman, Census Reports Slight Increase In ’05 Incomes, New York Times, August 30, 2006.
6Cambridge Consumer Credit Index, March 7, 2005 (45% of those with credit balances were making minimum payment or no payment because they couldn’t afford more); 2004 Survey of Consumer Finance, A-30 2006 (46.2% of all household carry an unpaid credit card balance).
7Summary data at Center for Responsible Lending.
8Sandy Baum and Marie O’Malley, College on Credit, Nellie Mae, 2003.
9David Ellwood and Thomas Kane, “Who is Getting a College Education? Family Background and the Growing Gaps in Enrollment,” in S. Danziger and J. Waldfogel, eds. Securing the Future. New York: Russell Sage (2000). See also Sandy Baum and Kathleen Payea, Education Pays: The Benefits of Higher Education for Individuals and Society, 2004. The College Board, 2004.


Poles Apart?

By Ralph Whitehead, Jr.
[CORRECTION: Stephen Rose has found an important error in my originalpost. In the following passage, the assertion in the second sentence is wrong: “Granted, $44K is not the midpoint in the income distribution for prime age households. But it isn’t too far below the midpoint of the earnings distribution for prime-age white households of a particular type: those with at least two adults, neither of whom holds a four-year college degree.” The assertion holds for ALL prime-age households in this universe, but does NOT hold for white households only. Using Steve’s methodology and age range for prime-age adults, the median earnings figure for the white households only is roughly $55,000 and the median income figure for them is $61,500. The median income figure is very close to Third Way’s median income figure for prime-age households of all races and is significantly higher than $44,000. This error obviously weakens my case for the validity of the $44K figure. The post has been edited in order to omit the passage that was affected by the error.] The topic of this roundtable is well-chosen. As all of the contributors to it have agreed, the economic posture of our party is crucial, but is now at odds with both economic reality and electoral necessity. The topic is also well-timed. If November goes well, the party can begin to shift onto offense. Then, the good news might be that our economic message will be heard. But the bad news might be that it won’t be much worth hearing.
In the borderless universe of cyberspace, this debate has spread across several websites, and the roundtable is now part of a broader discussion. So this post touches on posts elsewhere, as well as the posts so far on TDS.
Third Way’s position, as it now stands, is roughly this:
Within the party, there is an incumbent definition of the middle class: households whose incomes are close to the median for all of the country’s roughly 115 million households, $44,000. But this definition should be challenged. It underestimates the affluence of the middle class. It makes its economic circumstances seem gloomier than they are. It prompts the party to hold a view of the economic standing and outlook of the middle class that is more pessimistic than the reality. The party’s expressions of this view cause the members of the middle class to wonder what economic planet the party is living on. To solve the problem, the party should adopt a different definition of the middle class, and thus a different conception of it. Using this conception, the party will offer apter descriptions of the economic life of the middle class and apter prescriptions for improving it.
FtdsLet me begin with a note on nomenclature: “Middle class” is a charged term. The country has long viewed itself as a middle-class nation, and this implies that “middle class” is synonymous with “The majority” or “The mainstream.” So a party that is out of touch with the middle class must be out of touch with the majority. In a two-party system, this is a bad place for a party to be. Because of what “middle class” implies, and because there are divergent definitions of the term (some of them have appeared in this debate)–a country that can’t agree on a definition of “class” can’t agree on a definition of “middle class”–I’ll try to use “middle class” sparingly, in favor of blandly clinical terms that are low on connotation.
To add a little perspective to this discussion, it is useful to recognize one of the effects of economic polarization. Here, I refer not to the division between the top one percent and the other 99–a division highlighted by Paul Krugman, and with good reason–but to the divisions that now exist within the 99 percent. As Democrats, we worry about this polarization, study it, talk about it, try to make sure it gets the media attention that we think it deserves, and search for ways to lessen it. Nevertheless, we don’t always get a chance to pause and note that economic polarization has been occurring for many decades now, and has advanced to a point where the distribution is now pretty divergent. It isn’t our father’s economic ladder–wide and short, hammered into shape by The Great Compression. This has consequences for our efforts to discern the shape of the playing field. For example:
To make its case for the affluence of prime-age households, Third Way mentions a particular type of household, the household with two earners, and notes its current median income of nearly $80,000. Even after we apply Professor Hacker’s point (over 10 years, $80K will average $74K) and Professor Warren’s (on the balance sheet of a two-adult household, a topline of $74K doesn’t necessarily lead to a strong bottom line), Third Way’s two-earner households are still flusher than the prime-age households whose incomes are closer to $44,000. To put it a little differently: If you have to be on an economic rollercoaster, it’s better to take its periodic plunges from a height of $74K than $44K. Thus, what we might have here–and this suggestion is made less implicitly in Stephen Rose’s post over at The American Prospect–are voters who seem to be holding a relatively good economic hand, and don’t necessarily think it has been dealt to them by the Democratic Party.
In my view, this suggestion should be viewed as a hypothesis, not an assertion, and subjected to empirical inquiry and possibly trial-and-error, not to reflexive scorn. But, even as this particular set of households is put beneath the microscope, there are a couple of other things to bear in mind at the same time:

  1. Let’s define a two-earner household as one with two adults who both work full-time and year-round, and then briefly note a bit of its history. In 1960, at roughly the midpoint of the era of the Social Contract, TV wives like June Cleaver and Wilma Flintstone weren’t doing paid work on a full-time/full-year basis, and neither were their real-life analogues. The share of prime age households who fit our definition then was just nine percent.1
    Since then, of course, the percentage of partnered women who do paid work full-time and full-year has grown. So the two-earner household makes up a larger share of prime-age households today. But this doesn’t mean that it makes up a majority of them. Its share is roughly 30 percent. This is not a majority of prime-age households, nor does it contain a majority of the prime-age adults.

  2. During those years, as it happens, another type of household has also increased its share to 30 percent. It is a household of a different kind: It has no more than one adult earner for the simple reason that it has no more than one adult. In 1960, it was 14 percent of prime-age households.

Its share of the prime-age electorate, of course, is smaller than 30 percent, just as the two-earner share is larger than 30 percent. Still, it forms the prime-age segment of the men and women who make up what has been called Unmarried America. The adults in these households are an important–and also a growing–constituency for the Democratic Party. Their median income: roughly $30K.
Thus, a 60-percent majority of prime-age households now consists of two very different household types. The income gap between them is nearly $50,000. It’s a big and economically diverse country.
Consequently, for those who will shape the economic posture of the party, the task is not only to deal with economic polarization. It is also to deal with it in light of the distribution that is marked by this polarization. This is a hard thing to do. Recognizing the nature and degree of the difficulty is one step toward making it possible for the party to do it.
Finally, on optimism and pessimism: As Third Way says, we don’t want to be seen as the party of economic gloom and doom. Also, if we want to avoid this, we have to consider the relationship between how we describe the economy and how the electorate experiences it. (Here, Teixeira’s post offers evidence and advice.) But another relationship matters, too: the relationship between diagnosis and prescription. This is because the goal shouldn’t be to express economic optimism. If it were, George W. Bush would be our model, and Herbert Hoover our ideal. The goal should be to instill optimism. Thus, I would echo the spirit of John Halpin’s post: In describing the economic experience of a particular region or particular group, and if the evidence warrants, we should feel free to diagnose like lions. This by itself won’t brand us as Doctor Gloom-and-Doom. What will do it, however, is if we diagnose like lions, but only as a prelude to prescribing like mere lambs. The worse conditions are, and the franker we are in describing them, the more pressure we put on our policy designers to come up with high-protein solutions and on our leaders to build support for them.

Ralph Whitehead, Jr., a professor of journalism at the University of Massachusetts, is completing a book on the new distribution of earnings, how it hurts the Democrats, and how they can offset the damage.

1The data on non-college two-adult households, two-earner households, and one-adult households are for a definition of prime-age households that is slightly broader than the one used by Third Way: households whose heads are ages 25 through 62. All income and household composition data cited are from the March 2005 Current Population Survey.


The Clinton ’92 Approach: Tap Economic Anxiety and Instill Hope

By John Halpin
Quantitative data and historical evidence suggest that talking up the economy and seeking to downplay “security” policies to focus on ownership and opportunity issues alone is not a wise approach for Democrats to pursue. It has not worked for Republicans over the past few years and was not the successful model utilized by President Clinton in his 1992 victory. Voters across the income spectrum expect attention to both economic security and opportunity, particularly as the decades-old social contract between individuals, business and government continues to fall apart, leaving more middle-class voters out on their own.
According to Democracy Corps’ time series data, from March 2001 to the November 2002 midterm elections, the Republican Party held anywhere from a 1- to 9-point advantage over the Democrats on the economy. From the beginning of 2003 to the present, the GOP has steadily lost support on economic issues and now suffers a 14-point deficit on the economy–a net swing of 23-points since the GOP golden years in mid-2002. More importantly, Democrats currently hold a 23-point advantage on the economy among those with $50,000-$75,000 in total family income–a range encompassing Third Way’s conception of the typical middle class family.
What happened during this time period?
President Bush (like his father before him) and his GOP allies in Congress relentlessly talked up the economy for three years running. They passed numerous tax cuts, some of which arguably helped the shareholding voters at the upper end of the middle-class income range. They attacked the building blocks of the Democratic economic security agenda as wasteful and archaic and proposed to replace it with an “ownership society” built on education, tax cuts, private accounts and greater individual responsibility. All of this to no avail. Their economic numbers tanked and Republicans resorted to running on fear about national security.
Democrats, in contrast, acknowledged the economic truth facing the middle class over this same period and challenged Bush on his economic interpretation, his tax cuts, and his attempts to privatize key social programs. The party’s numbers rose considerably on multiple fronts, from the economy and taxes to health care and Social Security. There is scant survey evidence to suggest that the Democrats should suddenly reverse course, talk up the economy and embrace economic optimism as the best path forward.
On the historical front, the Third Way authors continually cite President Clinton as evidence for their thesis of optimism and opportunity. But as Jacob points out, Clinton got elected in 1992 by telling people the truth about the economy and “putting people first.” The 1992 campaign was won on a message of change and the issues of the economy and health care–obviously not about opportunity or middle-class optimism alone.
President Clinton in his recent autobiography described the enthusiasm for his campaign in 1992 as follows:

It represented both the common touch and forward progress. In 1992, Americans were worried but still hopeful. We spoke to their fears and validated their enduring optimism. Al and I developed a good routine. At each stop, he would list all of America’s problems and say, ‘Everything that should be down is up, and everything that should be up is down.’ Then he would introduce me and I’d tell people what we intended to do to fix it.

Worries and fears combined with optimism and hope; not one set of ideas over the other.
Clinton successfully united lower-and middle-income voters with a message that wisely recognized that economic truth can be a powerful form of identification with voters. Optimism and prescriptions for the future then helped to seal the deal for his election, but they did not replace Clinton’s emotional connection with people’s economic anxieties.
In his acceptance speech after winning the ’92 contest, Clinton stated, “This victory was more than a victory of party; it was a victory for those who work hard and play by the rules, a victory for people who felt left out and left behind and want to do better.” When the Democrats are out of power at multiple levels, why would the party want to avoid those who feel “left out and left behind” to focus solely on those seeking to do better?
Successful Democratic politics in the future will require a new version of both Al Gore’s truth-telling routine and Clinton’s optimism if the party is to address genuine concerns among middle-class voters about the fraying social contract in America.


A Focus on Insecurity Is Not A Catalogue of Woes

By William A. Galston
For the most part, the authors’ response on the question of insecurity amounts to a series of non sequiturs. It is easy to agree that “a catalogue of woes is not a path forward.” But who ever said it was? Naming a problem is the first step toward solving it. Those of us who argue that we must take economic insecurity more seriously than we did in the 1990s are hard at work crafting can-do responses. For example, collapse of defined-benefit pensions need not mean the end of pension security. Instead, we need a 21st century model that reallocates responsibilities among individuals, government, and the private sector.
Nor is a focus on insecurity an “inherently pessimistic” exercise, any more than a focus on inadequate or unequal opportunity would be. Pessimism is related, not to specific problems, but to an attitude about their solutions–namely, that there are none. But those of us who focus on insecurity do so in a spirit of optimism. There is a way forward; it’s up to us to find it and rally others to it.
The authors suggest that there is a contradiction between the quest for security and the acceptance of risk. This disregards the well-established fact that at least up to a certain point, increased security facilitates risk-taking. I will be more willing to start a new profession, and perhaps fail, if I don’t think I may jeopardize my family’s health insurance in the process.
The authors invoke FDR as an exemplar of optimism and hope, as indeed he was. But much of the New Deal was designed to address the extraordinary insecurity that economic collapse had produced. Is it really necessary to list all the programs–many of which exist today–that fall under this rubric? It is unfair to write this off as the “comforting bosom of the state.” Worse than unfair; it is implicitly to accept the conservative critique of the New Deal and everything that followed from it. I suspect that voters who still fear the “road to serfdom” will be Republicans all their lives (unless, perhaps, they start paying attention to what their party is doing in their name).
The authors conclude by invoking President Clinton, for whom I was proud to work. But that begs the question I raised: Are the problems, the solutions, and the public’s sentiments in 2006 the same as they were in 1992? It’s intellectually and politically easier to respond in the affirmative. That doesn’t mean it’s the right answer.


Focusing on Security Need Not Be Pessimistic

By Jacob S. Hacker

My opponent says America is a nation in decline. Of our economy, he says we are somewhere on the list beneath Germany, heading south toward Sri Lanka. Well, don’t let anyone tell you that America is second-rate, especially somebody running for President.
Maybe he hasn’t heard that we are still the world’s largest economy. No other nation sells more outside its borders. The Germans, the British, the Japanese can’t touch the productivity of you, the American worker and the American farmer. My opponent won’t mention that. He won’t remind you that interest rates are the lowest they’ve been in 20 years, and millions of Americans have refinanced their homes. You just won’t hear that inflation, the thief of the middle class, has been locked in a maximum security prison…
Now, I know that Americans are uneasy today. There is anxious talk around our kitchen tables. But from where I stand, I see not America’s sunset but a sunrise.
The world changes for which we’ve sacrificed for a generation have finally come to pass, and with them a rare and unprecedented opportunity to pass the sweet cup of prosperity around our American table.

Sounds pretty optimistic to me. Only this was George H. W. Bush, accepting the Republican nomination in 1992. Meanwhile, Bill Clinton was feeling America’s pain: “Tonight 10 million of our fellow Americans are out of work,” he said in his acceptance speech.

Tens of millions more work harder for lower pay. The incumbent President says unemployment always goes up a little before a recovery begins, but unemployment only has to go up by one more person before a real recovery can begin. And Mr. President, you are that man.

A great passage capped with humor, but hardly devoid of gloom.
Of course, Bill Clinton went on to talk about his vision for the nation, about how he would put people first and change the country for the better and clean up government. But that’s the whole point: His message spoke to Americans’ fears and their hopes, their anxieties and their aspirations. And if there’s a single lesson in Clinton’s success–and I think there are more than one, some cautionary and some prescriptive–it’s that a winning economic strategy is rooted in an evocative narrative about why the country is not living up to its potential and how it yet can. That was certainly the story with FDR, the greatest by far of the three presidents whom Anne Kim, Adam Solomon, and Jim Kessler lionize (and the one, incidentally, that most befuddled the interesting, if preliminary, analysis by Seligman and Zullow that they cite–I guess when you’re fighting the Great Depression and World War II, optimism isn’t essential for success).
Kim, Solomon, and Kessler (as before, “KSK”) strike back hard, but I cannot tell exactly what they are striking back against. Not the notion that everything is hunky dory. They recognize that there are serious challenges and real sources of insecurity. Nor do KSK dispute the importance of linking security with opportunity, though they are certain that insecurity shouldn’t be the only subject, as if anyone in the discussion had suggested it should. (My argument, for example, was that security and opportunity are inextricably interwoven–a point that critics of public and private insurance have long disputed, as I show in The Great Risk Shift, but which those concerned about the health of the middle class should not let slip from their rhetorical and policy arsenal lightly.) Their main point seems to be that the middle class, properly defined, is richer than most of us think. But, as I noted in my last post and elaborate on in a moment, their view of the middle class is too static to capture either Americans’ real sense of insecurity (which KSK wisely don’t deny–they can read the polls, too) or Americans’ real, if often thwarted, aspirations for genuine upward mobility.
I should say right away, however, that I am grateful to KSK for talking about government and the need to restore public faith in it–a point that I emphasized in my last post. Reagan famously said that government isn’t the solution to America’s problems; government is the problem. Today, it’s fair to say that government may not be the solution to the Democrats’ problems, but that running away from government will do nothing to deal with the real problem of rebuilding the tattered public trust in the public sector, or in the Democratic Party. The dominant economic message today is that you must make it on your own, that government’s goal is mostly limited to protecting you from the illegitimate claims of others. There is no way to reverse this long-term tide without reclaiming the ideal that de Tocqueville once termed “self-interest, rightly understood”–the notion that we can achieve personal ends in concert that we cannot dream of achieving alone.
The economic standing of the middle class is constantly in flux, because our economy is constantly in flux. American incomes rise and fall–indeed, rise and fall to a far greater degree than they did a generation ago–and in those rises and those falls are stories of hopes fulfilled and dreams postponed, of expectations realized and expectations dashed. No single story will capture this complex reality. But any story that does not take seriously the legitimate fears Americans have about the increasingly ubiquitous downward trips on our economic roller coaster will fail to speak to today’s middle class.
In any case, the economic standing of the middle class can never be captured in a single statistical snapshot, because the middle class is an aspiration and ideal, not just a set of numbers in a Census table. Americans with incomes much, much lower than those that KSK hold up consider themselves solidly middle class. Indeed, those white voters with $23,700 in annual income who sat on the dividing line between the parties in 2002 probably consider themselves middle class. Which, come to think of it, is a good reason to be skeptical that the Democrats’ problems with the middle class are reflective of their failure to target their message more assiduously to families that make $63,300 a year.
What being middle class has historically meant is this: If you work hard and do right by your families, you should enjoy both basic financial security and a fair shot at the American Dream. And it is the loss of this guarantee that increasingly defines the middle class today. Middle class Americans are the new “tweeners”–too rich to receive Medicaid and too poor to know that they’ll always be protected from ruinous health costs, too rich to expect to live on Social Security alone and too poor to know that they’ll be able to put away enough in their 401(k).
The only message that these middle-class Americans have heard loud and clear, whether they’re making $20,000 or $120,000, is that they’re the ones responsible for their successes and their failures, that they are the ones who need to invest in education, take on a mortgage, ensure they have health coverage, put away enough for their retirement–and bail themselves out (now, without traditional bankruptcy protections) if things go bad. No wonder they don’t think government is there for them. It often isn’t. More important, there’s no one telling them that being middle class isn’t just about what you don’t have or what you need to do on your own. It’s about reaching a point on the economic ladder where the grip is more secure, the view more enticing, and the distance to the top shorter.
To place security at the center of Democrats’ economic agenda wouldn’t mean incessantly cataloguing the woes of the middle class, as KSK dismissively put it. It would mean identifying the gaps in the ladder of advancement and fixing them. Policy can’t be an afterthought in this vision; it has to be at the heart of the effort. Messages are one thing; leadership and action are another. And it will take leadership and action aplenty before Americans can look confidently up toward the ladder’s highest rungs, rather than worry about what lies below.


Truth and Opportunity

By Anne Kim, Adam Solomon, and Jim Kessler
Before rebutting the critique of our strategy document, we’d like to express our thanks. First, a tremendous thanks to The Democratic Strategist for creating an exciting new forum for individuals and organizations to post ideas that challenge orthodoxies to help create a new progressive majority. We especially appreciate your asking Third Way to contribute a piece to your second issue.
We’d also like to thank our critics, Elizabeth Warren, Jacob Hacker, John Halpin, Ruy Teixeira, and Bill Galston, for taking the time to read and take a sledgehammer to our piece. In all seriousness, we appreciate your comments and take them to heart. We are honored that each of you spent the time to discuss and critique our work.
And finally, we want to thank the readers who took it upon themselves to post comments on the discussion page. We were heartened that most of you had very positive things to say about our piece as well as some very interesting ideas and suggestions. We are constantly on the lookout for relevant facts and perspectives, and you can rest assured that we’ll be incorporating these ideas in our future work.
Now to our response…
We’ll begin on common ground. All of us appear to agree on three fundamental points raised in our original piece:

  1. Progressives have a problem with middle-class voters, and that problem includes our economic message;
  2. Progressives need new ideas that speak to the middle class and reflect their concerns and desires; and
  3. The overall economy isn’t headed off a cliff.

Where our critics disagree with us is on the following three points:

  1. The “truth” about the condition of the middle class;
  2. Whether security is more important to voters than opportunity or vice versa; and
  3. Whether the policies briefly outlined in our piece are sufficiently robust to support an enduring message.

We’ll concede the third point up front. Our initial piece was a political strategy document, not a policy memo. In future work by Third Way, we will lay out the policy details.
On the first two points, however, we do not cede ground.
The truth about the middle class
A recurring theme among our critics is that we deny the “truth” about the middle-class condition: that the middle class is beleaguered, fragile and, as a consequence, pessimistic. Though we disagree with these characterizations of the middle-class psyche (more on that below), we don’t deny there’s cause for anxiety.
Men’s wages are stagnant or declining, especially for the less-educated. Long-term male job tenure is down; income inequality is up. Moreover, as Galston points out, massive structural shifts are now unfolding; this is a new era of fierce global competition and rapid technological change. Two billion people have entered the world labor market since the fall of the Berlin Wall, which could potentially depress world wages–particularly at the bottom of the earnings scale–for decades to come. These are truths we accept.
Nevertheless, too many progressives zero in on a handful of negative numbers as if bad news is the whole story and the only story. When progressives warn of the growth in debt, they don’t mention how assets have grown even faster. Real median net worth has risen 35% since 1989. When progressives talk of stagnant male wages, they neglect the phenomenal rise in women’s incomes at all levels of education, which has increased in real terms by 54% since 1979. Why has the bad news about men so greatly overshadowed the good news about women?
We think the current progressive bias toward the negative distorts progressive message and policy. And unless that bias is corrected, progressives will never fully understand the middle class or be able to reach it politically.
For example, it is axiomatic among progressives that the “typical” middle-class American family makes about $44,000–that’s approximately the median income for all households in 2004. But $44,000–while “accurate”–distorts the big picture in at least two significant respects:

  • The very young and the very old drag the median down. In our original piece, we argued that policy makers and politicians should think of the “typical” middle-class income as being $63,300 (not $44,000). This higher figure is the median income for prime-age households, age 26-59, in 2004. From the perspective of a responsible strategist (an oxymoron?) it makes sense to exclude the very young and the very old in understanding the “typical” middle-class family. Young people at the start of their careers are underpaid but upwardly mobile. Their current income does not provide an accurate picture of their economic concerns and opportunities. Likewise, people at or near retirement often no longer draw a paycheck. However, since their costs are often lower (mortgages are paid, no children to support) their standard of living is stable, even with a lower income.
  • Many more people live in upper-income households than in lower-income ones. The Census Bureau divides households into quintiles, but lower income households have fewer people in them. In fact, only 14.4% of the population lives in the bottom quintile, while 25% of Americans live in the top quintile. A family with income of $45,000 ranks only in the 35th percentile among all prime-earner families, and drops to the 16th percentile among married, two-earner households. The median income for prime-age households with two adults and children is $70,420.

These facts alone should radically change the mental image that most progressives hold about the middle class, and it should change the way that progressives think about how to target the middle class effectively. Believing that the “typical” middle-class family earns $44,000 leads to a different place from where the middle class actually is, and this could in fact be one reason why some progressives think populism works. But that extra $20,000 to $30,000 likely makes a huge difference, for example, as to whether people find high gas prices annoying or oppressive–and whether they find oil companies distasteful or puppeteers.
We will never reach the middle class unless we fully understand it.
The politics of opportunity and the trap of security
The second broad set of criticisms leveled at our piece argues that security, not opportunity, is the real concern of most Americans and that security should therefore occupy center stage when progressives talk about the economy.
Again, we don’t deny that security should be an important component of the progressive message and policy agenda. In The Politics of Opportunity, on which our discussion piece was based, we in fact put economic security as one of three pillars for creating opportunity.
But we don’t think security should be the linchpin of the progressive message. If security is the central building block of an economic policy agenda and message, it’s inevitable that policy analysts and politicians will spend a lot of time cataloging all of the anxieties and catastrophes that justify that effort. Such an exercise is inherently pessimistic; and the truth about pessimistic candidates is that they lose.
In 1990, two leading psychologists at the University of Pennsylvania, Martin Seligman and Harold Zullow, conducted groundbreaking research on the effect of optimism in politics. They found that in 18 out of the 22 presidential elections from 1900 to 1984, the more optimistic candidate won. Since 1948, the only pessimist who’s won is Richard Nixon.
The second problem with a message based on insecurity is that it fails the test of leadership. A catalogue of woes is not a path forward; it is simply telling folks what they already know: a lot of them have debt and everyone worries about paying their bills (especially those involving education, health and retirement).
Americans like to aim high and want to succeed. And they want leaders who can show them the way. Presidents Clinton, Kennedy and Roosevelt challenged and inspired Americans to be greater than they were and to aim for something higher and better for themselves. They stood for confronting a changing world with hope and optimism–even if that involved taking risks. This is the reason they are the greatest politicians of the last century. They promised people more than security and the comforting bosom of the state.
Sure, as Warren points out, 800,000 people might watch the populist tirades of Lou Dobbs at night. But let’s put that in perspective: 35 million people tune in to American Idol, a show that for all its faults epitomizes the aspirational spirit of America.
In 1979, President Jimmy Carter warned Americans that, “For the first time in the history of our country a majority of our people believe that the next five years will be worse than the past five years. The productivity of American workers is actually dropping, and the willingness of Americans to save for the future has fallen below that of all other people in the Western World.”
If it sounds familiar, that’s because it is. For the last 35 years progressives have carried the same message of angst; the one exception is President Clinton, the only Democrat in recent history to win the White House. As a political strategy, this message of misery has generally failed. We see no reason why–given the relatively strong state of the economy and the actual state of the “typical” middle class family–a new, updated catalogue of woes would work today.
A politically winning message is not about where people are but where they want to go. It’s time for something new.
The way forward
Progressives have poured tremendous intellectual energy into describing the decline of the middle class when that energy would be better spent in developing new ideas for re-engaging the middle class and helping it to prosper. That is what we aim to do.
As Third Way continues its work on economic messaging and policy, we envision a new role for government–reinvigorated, ambitious and in tune with modern times. In our view, the business world and the American people are already adapting to the changing realities of the modern era. Why else are American companies still dominating the global economy, and why else are so many Americans making college an imperative for their children? They already know what it takes to succeed in today’s world.
Government policies and institutions, however, have failed to evolve in step with changing times, and these failures are a drag on America’s continued prosperity. Worse, the Republican administration and Republican Congress have moved the nation backward, to the detriment of the middle class. They’ve squandered opportunities to ready the nation for its future by wasting Clinton’s surplus on tax cuts for people who don’t need them instead of on tax cuts for middle-class people so they can send their kids to college. Their active mismanagement of government has degraded faith in government as an active force for good in people’s lives.
As Governor Tom Vilsack noted in David Broder’s recent column, Americans feel isolated from government and have the sense that they are navigating the crosscurrents of change on their own. It will take a lot to undo the damage and restore people’s faith in government.
We began our opening piece reciting the number $23,700 and noted that in 2004, this was the household income level at which a white voter was more likely to vote Republican than Democratic in congressional races. Of course, national security and cultural issues come in to play with these voters as they do to a certain degree with all voters. But this extremely low tipping point is a bright-red neon sign message to Democrats.
Middle-class voters do not find our policies at all relevant to their economic situation. They do not believe that what we offer will make an appreciably positive difference in their lives. And when an economic message and agenda have little relevancy, the other issues–abortion, gay marriage, and national security–will take primacy.
To all progressives, we ask that each of us do a better job of really understanding who the middle class is and how it lives, otherwise we will find that our message is not only tone deaf, it is just plain wrong.


Will the Real Middle Class Please Stand Up?

By Ruy Teixeira
Let me begin on a note of agreement with Kim, Solomon and Kessler (KSK): the Democrats have a very large problem with middle-class voters, particularly white middle-class voters. And crafting a potent economic message is key to reaching these voters. A better national security message and/or reassuring these voters on values issue will not be enough to enlist a critical mass of these voters in the Democratic camp.
They are also right that getting pummeled among white middle-class voters is a problem of large magnitude. As they correctly note, white middle-class (defined as those with between $30,000 and $75,000 in household income) voters are about a third (35 percent) of voters, according to the 2004 NEP exit poll. Note, however, that if we restrict our attention to “prime-age” voters (aged 25-59) or prime-age married voters in the white middle class, as they seem to urge us to do at one point in their analysis, the magnitude of the problem is reduced substantially (to 24 percent and 16 percent of the voters, respectively). Perhaps they need to decide which white middle-class voters they are really concerned with. A majority of white middle-class voters (54 percent) are either outside of the prime-age range or are not married. Does that make them not “real” white middle-class voters?
A further note: their statistics about the relatively high median incomes of prime-age households, prime-age married households and prime-age married households with two earners are obviously about all the households with such characteristics, not just those that fit their definition of middle class ($30,000-$75,000 in income). Citing these data in the context of a discussion about the middle class is therefore not strictly pertinent and actually somewhat misleading.
But these are relatively minor objections to their analysis. I am much more concerned with the following three questions about their argument.

  1. Do KSK correctly characterize the economic views of the white middle class?
  2. Do KSK correctly formulate an economic message that will resonate with these voters?
  3. Do KSK offer a set of policy prescriptions that make sense in light of the economic views of the white middle class and the economic message that is needed to reach them?

Do KSK Correctly Characterize the Economic Views of the White Middle Class?
KSK argue that the economic outlook of the white middle class is optimistic, not pessimistic. To support this claim, they cite some data showing that Americans, when it comes to their personal economic situation and future prospects, have an optimistic outlook.
I might quibble with some of the data they selected to bolster their case. But the point is nevertheless a reasonable one. In fact, I make the same point, along with my co-authors, Larry Mishel and David Kusnet, in our forthcoming Economic Policy Institute report, “Americans Discuss Economics: Bridging the Gap Between What Elites Say and What Everyday Americans Believe”. The report reviews public opinion data from the last decade and a half, including our own survey in the spring of 2006 specifically on the public’s economic views (the survey was sponsored by the Rockefeller Foundation’s Economic Resiliency Group and will henceforth be referred to as the ERG survey). These data generally support what KSK say: the public does tend to view their own economic situation optimistically.
I might also quibble that the data they cite are not really about the white middle class but rather about the public in general. But that is less of a problem than it might seem. The views of white middle-class Americans typically do not deviate much from the views of the American public as a whole, so lacking crosstabular data, using the overall survey figure is a reasonable approximation. In fact, I will use the same strategy below, citing overall survey figures when I don’t have specific figures for the white middle class.
So my quarrel is not with the claim that the white middle class harbors considerable optimism about their personal economic situation. They do tend to see themselves getting by fairly well, given the economic circumstances they have to contend with, and do believe they will be able to better their economic situation over time.
But what of the economic circumstances they do have to contend with? Here is where my quarrel lies. It seems willfully obtuse of KSK to ignore the abundant evidence that Americans are quite pessimistic about the economic circumstances they have to deal with and how these circumstances make their struggle to get ahead a great deal harder, and their progress slower, than they would like.
Consider just a few recent examples (many earlier examples may be found in my forthcoming EPI report, referenced above). In the ERG survey, we asked respondents to choose between two statements characterizing today’s economy:

  1. Most people today face increasing uncertainty about employment, with stagnant incomes, paying more for health care, taxes, and retirement, while those at the top have booming incomes and lower taxes.
  2. Our economy faces ups and downs, but most people can expect to better themselves, see rising incomes, find good jobs and provide economic security for their families. The American dream is very much alive.

By 2:1 (64-32), respondents selected the first statement about increasing uncertainty as coming closer to their views. And among white middle class respondents, these pessimistic sentiments were actually slightly stronger (68-30).
Part of what drives these pessimistic sentiments is the sense that the social contract that used to underlie the U.S. economy has broken down, making it harder to attain a stable, economically secure middle-class life. For example, a June, 2006 Penn Schoen Berland poll for the Aspen Institute found 90 percent agreeing that “25 years ago, if you worked hard and played by the rules, you would be able to have a solid middle class life”, compared to only 49 percent who agreed this characterization was true today. Ninety percent also agreed that retirement today is far less secure than it used to be, because you need to fund retirement yourself, through IRAs and 401(k)s. In contrast, 82 percent agreed that “25 years ago you could retire in dignity and comfort because most people had company pensions”. And perhaps most startling, 80 percent agreed that “Today, with the costs of housing, healthcare, education and self-financed retirement, a middle class life has become unaffordable for most people”.
Similar findings come from an August, 2006 Pew Research Center survey, released this Labor Day. In that survey, they asked respondents to compare how the average working person was faring today as opposed to 20 or 30 years ago in a number of categories. On job security, 62 percent said there was less security, compared to 11 percent who said there was more and 24 percent who thought it was about the same. On how hard one has to work to earn a decent living, 59 percent said harder, 13 percent said not as hard and 26 percent said about as hard. Concerning on-the-job stress, the analogous figures were 69 more/6 less/22 same; concerning employer loyalty to employees, the figures were 56 less/6 more/33 same; concerning retirement benefits, the figures were 51 worse/16 better/27 same; and concerning employee benefits such as health insurance and vacations, the figures were 44 worse/24 better/26 same.
Clearly, there are widely-shared pessimistic sentiments about how well the economy is working for the typical American. Indeed, there is a sense that important aspects of our economy that used to serve the middle class well are now broken. It would be as silly for Democrats to ignore these data as it would be for them to ignore the data about Americans’ personal optimism. And it would be even goofier to argue that somehow only the optimistic data are “real” data and the pessimistic data are artifacts of question wording, survey timing and so on (or vice-versa).
No, I am afraid we shall have to accept the fact that Americans, including white middle-class Americans, are optimistic and pessimistic at the same time. That is, they are optimistic about their personal economic situation and believe they will be able to get ahead, even as they pessimistically recognize that the workings of today’s economy make their struggle, and that of people like them, much more difficult than it should be. The dual nature of this economic viewpoint may be summarized as follows.

  1. When it comes to their own individual and family situations, most people say that they are succeeding (and expect their kids to succeed), thanks to their hard work and personal sacrifice in the face of great obstacles. This allows them to tell a story where they and their families are the heroes and where their difficulties redound to their credit.
  2. But, when they talk about how the economy is actually performing for “people like me” or for the entire nation or for the next generation as a whole, people are more forthright and forthcoming about the challenges that they themselves face. Now, they are not pitying themselves; they are expressing concern for their children, their friends, their neighbors, their co-workers, and their fellow citizens.

This dual viewpoint is nicely illustrated by the relationship between two questions asked on the ERG survey. The first was given above: when respondents were asked whether a pessimistic or optimistic statement about how the economy was working was closer to their view; they chose the pessimistic statement by 64-32. The other asked whether respondents thought they would attain the American Dream within their lifetime or had already attained it; 69 percent optimistically said they would attain the Dream or had already attained. But this group that thought they had reached, or would reach, the Dream, nevertheless endorsed the pessimistic statement (“Most people today face increasing uncertainty about employment, with stagnant incomes, paying more for health care, taxes, and retirement, while those at the top have booming incomes and lower taxes.”) about today’s economy by 59-38!
What explains this seeming paradox? Part of the answer surely lies in the optimistic, aspirational nature of Americans as a people, who see themselves as being able to move ahead even when overall economic circumstances are difficult. But another part of the answer lies in the fact that most people, in fact, tend to gain more income as they get older and climb the “age-earnings profile”, even when the economy as a whole is performing poorly (see Larry Mishel’s contribution over at the The American Prospect version of this debate for a lucid discussion of this phenomenon). In other words, even though workers now “start lower and go up slower” than they did in the past (part of what colors people’s jaundiced view of today’s economy), they nevertheless do go up over time and this reality helps explain why they evaluate their personal trend line positively.
So it’s not “either-or”, it’s “both-and”. On to the next question.
Do KSK Correctly Formulate an Economic Message That Will Resonate With These Voters?
Stripped down to its essentials, KSK are clearly recommending that Democrats stop blathering so much about economic security and focus instead on economic opportunity. Arguments like this contribute to my occasional sense that Democrats can’t walk down the street and chew gum at the same time.
In light of the data reviewed above, it seems much more sensible to argue that Democrats should do both. Americans clearly want both more opportunity and more security–so why talk about just one of these? As KSK correctly point out, an economic message that boils down to “your life sucks, and here’s how we’re going to cushion your fall” is a loser, precisely because Americans do not see themselves that way and believe in their ability to get ahead. But equally a message that ignores the many ways in which Americans believe today’s economy promotes insecurity and constrains their ability to get ahead and that simply says “here are some tax breaks-go get ’em tiger!” will also seem out of touch.
In fact, Democrats should not only talk about both economic opportunity and security, they should link them together. The phrase Jacob Hacker and I use in a forthcoming American Prospect article is “providing security to expand opportunity”. Here’s a summary of our approach:

Add on top of the big causes of long-term insecurity your typical family’s struggle to cover steadily rising health care costs, get or safeguard health insurance coverage, pay for decent childcare while both parents are working and simultaneously put away enough savings in their 401(k) plans (if a family has one) for a comfortable retirement and you have a recipe for running in place, rather than moving ahead. Change becomes a foe, rather than a friend, despite the typical American’s strong belief in upward mobility.
Democrats’ job is to offer the struggling but hard-working and optimistic American family a way out. The general problem of economic security can be addressed by some sort of universal insurance program that, in exchange for a small premium, protects families against catastrophic declines in their economic situation (whether that be from suddenly-falling income or rising expenses). There is probably also a role here for personal accounts that would help families manage their expenses before they reached meltdown levels. Such accounts would be less regressive than those proposed by Bush and would include small annual (and on the birth of a child) progressive contributions from the government.
The details of a universal insurance approach, of course, can be complicated and one of the present authors has provided some. But for purposes of thinking about the Democrats’ message, the details are far less important than the general approach.
That is also true of the rest of the Democrats’ economic agenda. Efforts to increase health coverage (perhaps by expanding Medicare, which most Americans know and like) and contain health care costs (including prescription drugs), to improve the quality and availability of childcare, to defend (Social Security) and extend (a universal 401(k)) existing retirement benefits, and to make college and specialized training available to all are the subjects of countless and competing policy prescriptions. But the important thing is that these policies-whatever the details-should be put in the context of helping Americans get ahead. These are measures to allow the typical American family to raise its head from the day-to-day struggle to get by and concentrate on its most heartfelt wish: to better oneself, to move up in the world, to even become wealthy.

Sounds like a winner to me.
Do KSK Offer a Set of Policy Prescriptions That Make Sense in Light of the Economic Views of These Voters and the Economic Message That Is Needed to Reach Them?
Obviously, I am skeptical. There is certainly a place for some of the targeted tax breaks they advocate, and they are correct that if you want to reach the white middle class, you must, logically, advocate policies that would benefit them. Defending transfer payments and other programs that directly assist the poor, whatever their considerable virtues, will not be enough to convince middle-class voters that Democrats embrace their economic interests and are concerned about their struggle to get ahead.
But the targeted tax breaks they advocate do not seem particularly responsive to the magnitude of the structural economic problems middle-class families currently have to negotiate–problems which don’t just exist in the minds of progressive economists but are clearly recognized by these families themselves. These tax breaks would likely be underwhelming both in practice and in the perceptions of the very constituency they are designed to reach.
A better approach is the kind of universal programs suggested above. Universal programs have succeeded in the past in both substantially improving the country for everyone and convincing white middle-class voters that their economic aspirations are well-served by identifying with the Democratic Party. And, as John Halpin and I argue in our paper, “The Politics of Definition“, this approach would help build up a “common good” identity for the party that would be congenial to both white middle-class voters and the minority/labor/low-income/professional base of the Party.
In conclusion, I commend KSK for forcefully raising the importance of optimism and economic opportunity to the Democratic economic message. But their approach is too one-sided. Time for Democrats, including KSK, to give the lie to the idea they can’t walk down the street and chew gum at the same time. Walking and chewing: try it, you’ll like it!


Message of Truth: Security and Opportunity Go Hand-in-Hand

By Jacob S. Hacker
Having just finished a book entitled The Great Risk Shift: The Assault on American Jobs, Families, Health Care, and Retirement-And How You Can Fight Back, I would guess that Anne Kim, Adam Solomon, and Jim Kessler (hereafter “KSK”) will accuse me of peddling a “message of misery.” My defense is the same one offered by Elizabeth Warren and John Halpin: I think political candidates and leaders should offer a message of truth. And the truth is that, after a generation in which more and more economic risks have been shifted onto the shoulders of hardworking middle-class Americans, the middle class is perilously insecure and palpably in need of a real agenda for economic change.
KSK don’t really dispute this reality–though they do make the common mistake of underplaying the risks inherent in the dynamism of our economy. They write, for example, that the median income is “nearly $80,000 for two-earner prime age households”–which is indeed what the data show. But that data, like all of the economic statistics they cite, are directly at odds with their own emphasis on the dynamic experience and forward-looking expectations of the middle class. That’s because these data are based on simple cross-sectional analyses of family income at a single point in time. If we instead look at family incomes using over-time studies, what we find is that middle-class Americans today are increasingly riding the economic roller coaster once reserved for the working poor, their pre-tax incomes rising and falling fully three times more violently than did middle-class incomes in the early 1970s. To take just one simple statistic, over a ten year period, families on average can expect their income in their worst year to be less than a quarter of their income in their best year–a dramatic shift toward instability since the 1970s. That means that a family with $80,000 in its richest year will, on average, have less than $20,000 in its poorest. It is surely a mistake to forget that Americans aspire to climb the economic ladder, and often do climb it. But it is just as much of a mistake to forget that Americans also fear falling from the economic ladder, and often do fall from it. Indeed, behavioral economics suggests that aversion to loss is often a more potent predictor of attitudes and behavior than attraction to gain.
All that said, I am completely in agreement on KSK’s first two points: Democrats have a middle-class problem, and it’s not just due to any disadvantages they have on cultural or national security issues. Among white middle-class voters, Democrats have been getting creamed. At the same time, class stratification in voting–with lower-income voters siding with the Democrats, and higher-income voters siding with Republicans–is stronger than in the past, not weaker. And there’s some evidence that voters are more motivated by economic issues in their voting decisions than they were in the past, too. Whatever the exact reasons for the Democrats’ middle-class deficit, it’s not a reflection of a new electoral world in which class no longer matters and cultural and security issues always trump economic concerns. As Ruy Teixeira and I put it in a piece we’re writing for the American Prospect, Democrats are, quite simply, losing on home court.
It’s when KSK move to their prescriptions that I find myself unmoved. They present their ideas as a bold break with Democratic orthodoxy, but to my mind, their message and its policy recommendations are utterly conventional. I am tempted to say that if a message of middle-class opportunity based on a bevy of targeted tax cuts for tuition and the like were an effective strategy, John Kerry would currently be sitting in the White House.
In truth, criticizing the economic program of the Democrats is like criticizing the plot of Cats–there’s no there there. In typically incoherent fashion, the Party has oscillated between defense of existing programs, which are increasingly threadbare, and embrace of fiscal probity über ales, which, whatever its economic merits, is a losing political strategy. Sometimes we hear about inequality, a problem that, frankly, resonates deeply with few middle-class voters. Sometimes we hear about Wal-Mart and the minimum wage, which aren’t bad subjects for a larger conversation but hardly substitute for an economic program. Amid all the hand-wringing and strategizing about messages and narratives, the fundamental problem consistently gets missed: Democrats need to articulate an underlying economic philosophy that not only motivates and clarifies what they say, but drives what they do in office. You can’t build a frame without a foundation.
As a starting point for such a philosophy, KSK’s emphasis on opportunity is appealing. But standing alone, it simply cannot bear the weight that they put on it. Yes, Americans have a deep faith in opportunity, but they are also deeply fearful about losing their economic security. (When opportunity-loving Americans were asked in 2005 whether they were “more concerned with the opportunity to make money in the future, or the stability of knowing that your present sources of income are protected,” 62 percent favored stability and just 29 percent favored opportunity.) And the folks who are most worried about their economic security are precisely those who have climbed up the ladder, not those stuck at the bottom–the folks who have chips to lose, not those who are trying to break into the game. More important, to treat the ends of security and opportunity as somehow in conflict is to miss the boat entirely. Economic security is the foundation of economic opportunity, and the erosion of the middle-class security is the greatest barrier today between American families and the American Dream.
In short, Democrats need to speak to both the fears and the hopes of the middle class. And here I agree with KSK’s critique. When Democrats talk about security they tend to focus on the amelioration of financial disaster. But a much more positive way to talk about security is as a means for families to get ahead. Just as businesses and entrepreneurs are encouraged to invest in economic growth by basic protections against financial risk (like limited liability for corporations and bankruptcy protections), so adequate insurance encourages workers and families to invest in their future. The worker who fears being laid off at any moment may be more productive in the short run. But in the long run, insecure workers tend to underinvest in specialized training; they are more reluctant to change jobs; they try to minimize their sense of job commitment to protect themselves against psychological loss. Similarly, the family barely scraping by may work more hours; but in the long run, insecure families are not going to be able to make the investments in education and other keys to their future that they should. Security enhances opportunity, and one of the things that government does best–or at least once did best, with Social Security, Medicare, the GI Bill, and a whole host of other measures that created and secured the middle class–is provide basic financial security.
It is notable, on this score, that KSK do not use the word “government” once in their manifesto, except in detailing the Republican attack. But any successful economic agenda will have to articulate a positive role for government. I don’t mean by this that Democrats should talk about government in general, which is never a wise course, just as talking about the economy is never as effective as talking about actual people who experience its ups and downs. I mean that Democrats should talk about the concrete things that government can do to provide security and enhance opportunity. I have outlined my own preferred roster of concrete steps in my book. But the point is that Democrats have to think beyond the next election and begin to articulate the rationale for enduring policies that help Americans deal with the new economic insecurity while anchoring the positive identity of the Democratic Party for decades to come.
With this approach, the Democrats’ position will be simple: providing security to expand opportunity. The Republicans, in contrast, will be offering only more of the same–more risk, more attacks on existing sources of security, more promises that the free-market and tax cuts will magically right all ills. Given the choice, most Americans will embrace an “insurance and opportunity society” in which they have the security to reach for the future over an “ownership society” in which they are ever more at risk. And with the home court advantage back, the Democrats’ electoral prospects will brighten considerably, whatever the state of play on cultural and national security issues.

Jacob S. Hacker is Professor of Political Science at Yale and a Fellow at the New America Foundation. His most recent book is The Great Risk Shift: The Assault on American Jobs, Families, Health Care, and Retirement-And How You Can Fight Back. His 2005 book with Paul Pierson, Off Center: The Republican Revolution and the Erosion of American Democracy, is now available in paperback with a new afterword.


Time to Move beyond the Clinton Playbook:
Don’t Neglect Economic Security

By William A. Galston
I agree with much of this memo. The Democrats do have a big problem with middle-class Americans, starting (but not ending) with white voters. Optimism sells better than pessimism. America does have large underlying economic strengths on which to draw in coming decades. Many progressives do have a distorted idea of what the middle class is and what it wants. Many signature Democratic ideas focus on those aspiring to enter the middle class, not those already there and seeking to move forward.
That said, I have two problems with the approach the authors advocate. First, optimistic policies need to be based on a realistic analysis of where we now stand. In my judgment, the American economy is experiencing structural problems that will hold most Americans back if left unaddressed–problems that middle-class tax breaks, no matter how well targeted, leave untouched. Second, as the authors know very well, the structural changes are reducing most Americans’ economic security, generating legitimate concerns that an opportunity agenda by itself cannot alleviate.
Structural problems. For most of the past century, wages and productivity have moved in tandem. As has been widely reported, however, the large productivity gains of the past five years have not been translated into gains for most workers. Wages are at their lowest share of GDP on record, falling almost 5 percentage points from their pre-recession peak. Median hourly pay adjusted for inflation is down, and even higher education has not served as an antidote. Hourly pay fell by 3.5 percent for female college graduates, and by more than 7 percent for male college graduates. Total compensation has also fallen sharply. Not surprisingly, the real median income of households headed by working-age adults has fallen by more than 5 percent since 2000. Virtually all income gains have accrued to the top 10 percent of earners, and also to retirees drawing higher-than-average shares of their income from investments.
With only 38 percent of Americans reporting an increase in take-home pay after deductions, rising prices for the basics–gasoline, utilities, property taxes, education, and out-of-pocket health care—have hit them hard. Caught in the squeeze between falling incomes and rising prices, personal savings have disappeared, actually entering negative territory in 2005 for the first time since the Great Depression. (For households headed by young adults under 35, the dissavings rate was a remarkable minus 16 percent!) These developments have become so obtrusive that even President Bush’s new Treasury Secretary has been forced to acknowledge them.
While the administration’s economic policies have done nothing to halt these trends and in some respects have worsened them, it would be unfair to blame the President and his advisors for everything that is going wrong. Between the late 1980s and mid-1990s, for example, the percentage of Americans covered by employer-based health insurance declined sharply. After a modest improvement during Clinton’s second term, the decline resumed, bringing the 2005 figure down to a level last seen in 1996. The wage picture requires an even longer view. Between John Kennedy’s election and Richard Nixon’s resignation, median earning of full-time male workers, adjusted for inflation, rose by roughly 40 percent, from nearly $31 thousand to about $42 thousand (in 2005 dollars). Since then, with modest ups and downs, they haven’t budged. Median male earnings were no higher in 2005 than in 1973. By contrast, median female wages rose by only 25 percent between 1961 and 1973 but then rose an additional 32 percent during the next three decades.
But to put these figures in perspective, consider that a household headed by two median-wage full-time workers, one male, the other female would have earned $66,683 in 1973 but only 9 percent more–$73,244–in 2005, a rate of annual increase so small as to be imperceptible. Real median household income has increased much faster, of course, but only because so many more women are working full-time than was the case in the early 1970s. Since 1973, the share of household income commanded by each of the bottom four quintiles-that is, the bottom 80 percent of households-has fallen significantly. Only the top 20 percent have registered gains, and most of those gains have been clustered in the top 10 percent. The economic escalator of the immediate postwar decade has been replaced by something more like an economic treadmill, except for those at or near the very top.
What’s going on? Most economists now believe that globalization has shifted the balance of power between labor and capital. Alan Blinder, a former vice chairman of the Fed and no wild-eyed radical, recently published an article in Foreign Affairs arguing that one of the dimensions of globalization–offshore outsourcing–will produce a “quantitative change . . . so large that it brings about qualitative changes.” He warns that “We have barely seen the tip of the offshoring iceberg, the eventual dimensions of which may be staggering.”1
One of the consequences of this structural change is a shift of risk from the private sector to individuals. Unemployment now lasts much longer than it used to, and of workers displaced from full-time jobs since 2001, those who have found new full-time jobs have ended up earning, on average, 17 percent less than they did before. Not surprisingly, the probability that a family will experience an income drop of 20% or more has risen sharply in recent years. Since the end of the post-war boom in the early 1970s, in fact, income instability has increased much more rapidly than has income inequality.2 While fears of outright job loss have ebbed, after more than three years of statistical recovery from post-9/11 lows, 64 percent of Americans–including 56 percent of college graduates–continue to report that it is hard to find a good job where they live. Fifty-two percent of Americans rate their personal financial situation as only fair or poor, a figure that hasn’t budged since early 2002.3
Security. It would be strange if the increased risks of the globalized economy had not heightened anxiety and insecurity. In fact, they have. According to a Pew Research Center report issued at the end of August 2006, 62 percent of American workers say that workers enjoy less job security than they did 20 or 30 years ago. The decline of employee benefits such as health insurance and guaranteed pensions appears to be at the heart of their concerns.4
The authors of this memo are not unaware of these trends, as they acknowledge elsewhere. Let me quote from a longer report to which they refer:

Much of the social contract that served American workers so well during the 20th century is slowly eroding. Since World War II, employers have been the principal providers of health care, guaranteed lifetime pensions, and stable long-term employment for the middle class. But this is changing as health care costs steadily rise, life expectancies increase, and deregulation, technological change, globalization, and fierce international competition have led companies to boost productivity and rein in compensation costs. Today, fewer companies provide health insurance, many ask employees to pay a greater share for coverage, traditional pensions are becoming extinct, and long term, lifetime employment with a single employer is now an anomaly. This has led to a tectonic shift in risk from employer to employee that must be the center of new public policies that modernize the social contract.5

This paragraph is a clear, accurate summary of an argument many of us have been making for some time. If you add to it the mounting fiscal pressures on public sector programs such as Social Security, Medicare, and Medicaid, you see overall trends that are not likely to fulfill long-standing American expectations about their economic and social arrangements. This eroding social contract is not a side show; it is the central development shaping the opportunity of Americans to get ahead during their working lives and to enjoy a decent, reasonably stable retirement. Otherwise put: the effective pursuit of opportunity rests on a foundation of security.
The bottom line. While I agree with the authors that Democrats’ economic program must reflect optimism and offer opportunity, I believe that it would be a serious mistake–for reasons of both policy and politics–not to take economic security concerns seriously. Let me go further. I believe that the economy and Americans’ perception of it have changed since the 1990s in ways that require corresponding changes in our economic agenda and in the ways we talk about it. An understandable nostalgia for the Clinton years must not fool us into believing that we can succeed just by dusting off and updating Putting People First. Selective benefits for the middle class are at best a small piece of the answer. We must be prepared to take on the larger structural challenges that have emerged since the end of the Clinton administration.
We can argue about the best way of doing this. I am open to the possibility that framing insecurity as a threat to economic opportunity may offer the best rhetorical roadmap. (Someone should test this hypothesis against its competitors.) My core point is substantive, not rhetorical: In the circumstances we now face, the real “politics of opportunity” must begin by taking security seriously. A narrative with a new social contract at its core will prove far more compelling than will a list of targeted benefits. And if a new focus on 21st century security as the basis for a rebirth of opportunity helps unify the moderate and progressive wings of the Democratic Party, so much the better.

William Galston is a Senior Fellow in Governance Studies at the Brookings Institution and co-editor of The Democratic Strategist.

*Unless otherwise noted, all statistics are drawn from U.S. Census Bureau reports.

1Alan S. Blinder, “Offshoring: The Next Industrial Revolution?” Foreign Affairs, March/April 2006.
2For the analysis on which this paragraph is based, see Jacob Hacker, The Great Risk Shift (New York: Oxford, 2006).
3Pew Research Center, “Economy Now Seen Through Partisan Prism,” Washington, DC, January 24, 2006.
4Pew Research Center, “Public Says American Work Life Is Worsening, But Most Workers Remain Satisfied with Their Jobs,” Washington, DC, August 30, 2006.
5Anne Kim and Jim Kessler, “The Politics of Opportunity: The Case for a New Middle Class Economic Message,” Washington, DC: Third Way, May 4 2006, p. 15.


A Happy Face Isn’t Enough

By Elizabeth Warren
Without middle class support, no political party can remain in power. The trio of Kim, Solomon and Kessler has this right. The message should be tattooed on the inside of the eyelids of every office seeker in America.
And they have another point right: Many politicians don’t have a clue about how to talk to the middle class. The reason is that they really don’t know much about the middle class-about who they are and why they are in trouble.
There is much good sense in Misery, but I think it is misleading to label the problem “pessimism.” Back in 2004, John Edwards made the leap from one of seven unknown candidates to the man who, but for sudden Iowa infatuation with the promise of nominating a war hero, would likely have been the Democratic presidential nominee. Edwards broke free from the pack and made a name for himself by talking to middle class people about their problems. The middle class squeeze wasn’t sugar candy stuff, but it connected with substantial numbers real people across the state and across the country.
Americans believe in opportunity, but they are deeply worried that their opportunities and the opportunities for their children are slipping away. Just a few tidbits:

  • Far more Americans are worried about not being able to pay all their bills than are worried about a terrorist attack1
  • 30 million American people with jobs describe themselves as “financially distressed”2
  • 28% of all Americans say that after they pay basic expenses, they have not one dollar left over-the highest number in the developed world.3
  • Half of all Americans say they worry frequently about their debt, many of them saying they worry “most of the time.”4
  • The number one fear of college grads is not terrorism, it is debt-by a margin of more than 2-to-15

No wonder last year’s most chosen New Year’s resolution was “get out of debt,” replacing “lose weight” for the first time in memory.
And the worries are grounded in reality. Job losses that once were a threat only for unskilled workers now routinely invade the middle class. Millions of middle class families have no health insurance coverage, knowing that just one bad diagnosis could destroy them financially. Debt loads are at historic highs for ordinary families. Variable mortgage rates will push more than a million families into foreclosure this year. Bankruptcies are back on the rise.
We live in an America where manufacturing jobs, engineering jobs and even computer science jobs are disappearing overseas. Today’s fast-growth job category is “debt collector.”6
This isn’t about “optimism” and “pessimism.” Sure, no one likes a hang-dog. But no one wants to spend the evening with a Wal-Mart greeter either. Lou Dobbs doesn’t draw millions of listeners by handing out smiley-face buttons. He’s mad, and he’s the voice for millions of other Americans who are even madder than he is.
To frame the debate as “optimism versus pessimism” misses the point. Who wants to be on the pessimists’ team? (They have really ugly uniforms, and they don’t bother to practice.) Labels make it all about spin. Nothing-no shorthand, no bromide, no cute phrase-will substitute for understanding the enormous pressure that is transforming the middle class. And telling candidates not to be “pessimistic” is no excuse for avoiding the serious homework needed to develop a real understanding of the increasing fragility of the middle class.
In post-war America, wages and productivity rose together, but starting in the mid-1970s, income (adjusted for inflation) flattened while productivity continued to rise. In other words, workers got a smaller share of the value they produced. Today, a fully-employed, median-earning male makes about $800 less than his counterpart made back in 1972. But costs for many of the basics-housing, health insurance, transportation, college educations-continued to rise. Families responded by cutting consumption spending, eliminating their savings plans, and sending two parents into the workforce. Kim, Solomon and Kessler herald the rise in household income, but they fail to note it happened only for families that could put two people into the workforce. Median-earning one-income households were once solidly middle class. Today they still must pay for more costly homes and health insurance on stagnating wages; without a second income, they are now sliding to the bottom of the middle class, barely hanging on by their fingernails.
Even for families with a second earner, the financial picture is not rosy. In addition to higher housing and health costs, they must also pay for a second car to get to work, childcare and a higher tax rate on that second income. Today, median two-income families commit three-quarters of their pay to basics-mortgage, health insurance, transportation, childcare and taxes. A generation ago, the one-earner family covered those same expenses using up just half of their single paycheck (see chart). The bottom line: After they pay for these basics, today’s two-income family has less cash and less savings than their one-income parents had a generation ago. (The data are reported in my book, The Two-Income Trap: Why Middle Class Parents Are Going Broke and updated in “Re-writing the Rules: Families, Money and Risk” and “What’s Hurting the Middle Class.”) Kim, Solomon and Kessler may let out a cheer, but I don’t.
What do politicians have to say to these families? When their children got sick or they lost their jobs, Democrats and Republicans alike scolded them for filing for bankruptcy, while Congress embraced a credit-industry wish list that would squeeze every last dollar out of these families. When companies revealed that they had made a lot of pension promises, but they hadn’t set aside the funds to meet those promises, a bipartisan majority in Congress passed pension reform that opened the door wide to companies’ simply dropping their coverage. When payday lenders targeted military families, charging an average 400% interest for a cash loan so that a soldier deployed in Iraq could make it until the family support allotment kicked in, military leaders and the Department of Defense asked for some protection for these families, but a bipartisan Congress turned a deaf ear. When parents stayed awake nights worrying about how they would pay for college, a bipartisan majority in Congress cut back on both aid and loan programs.
This isn’t about optimism and pessimism. This is about getting it. This is about saying to the middle class, we’re here for you. We don’t work for Citibank, Sallie Mae, FastLoan or anyone else. We work for you. Of course, if that isn’t true, it is pretty hard to say it and be believed.
In all this talk about the middle class, there is the unspoken elephant in the room: the poor. Democrats have so long seen themselves as champions of the poor that any talk about the middle class quickly slips into talk about the poor. John Edwards introduces himself to America by talking about the middle class squeeze, then picks poverty as his signature issue post-election.
When I talk with families about politics, I often hear a variation on this theme: “Democrats care most about the poor. They tell me I’m better off than the poor, and that I should give up more of my money to help the poor. Well, I’m stretched to the breaking point, and I just can’t do it any more.” Whenever a Democrat stands up and says, “I’ll help every child go to college,” then cuts off benefits at $20,000 a year, the message just burns deeper.
Democrats thought that the tax cuts would cause a national uprising because they so disproportionately benefited the rich. But they missed a key point: the cuts also benefited the middle class. The middle class might make less-heck, they might make a whole lot less on the tax breaks-than the rich folks, but they would make something. And that something would stay in their pockets and help pay down their credit cards and pay their utility bills. That Republican something looks a lot better than a Democratic nothing.
Tax cuts have been a watershed. Instead of the poor and middle class partnering up for mutual benefit, Democrats and Republicans alike have pushed the middle class to align with the rich-they both get something, and only the poor are shut out. In fact, policy after policy leaves the middle class absorbing more risks and fraying the safety nets that once kept them safe. Smart proposals would align the interests of the poor and the middle, the way Social Security developed widespread support by being a program for all workers-not just for those who were destitute.
I believe in the full range of emotions. There’s room for optimism and pessimism. But there is also room for anger and accounting. And hope and dreams. And new ideas and old ideas. But none of it will work if it is just stage dressing, just memorized lines. And that brings me to the last point, which was the first point: Keep it real.
Right now, neither Republicans nor Democrats connect with the American middle class on economic issues. That leaves the field wide open for connecting on other issues-terrorism, culture wars, Iraq, environmentalism. Middle class Americans aren’t voting Republican because they think the Republicans have something helpful and supportive to offer on economic issues (except for tax relief). But right now there aren’t many Democrats who have anything useful to say on the subject either.
The middle class is the engine of the American economy. But all the talk about proposals and messages and optimism won’t bring a single voter into the Democratic camp. To accomplish that, Democrats have to learn about this new middle class, learn about the pressures and the fears and the hopes and the dreams that drive them. Only then will they have something to say. And only then can they speak to these families from the heart.

A native Oklahoman, Warren graduated from the University of Houston and Rutgers Law School. She is now the Leo Gottlieb Professor of Law at Harvard Law School, where she teaches contract law, bankruptcy and commercial law. Her latest book, All Your Worth, is for people who worry about money. She posts on TPM Cafe.



1Center for American Progress/Center for Responsible Lending, “Frequency Questionnaire,” April 13-20, 2006 (33% of respondents “very worried” or “somewhat worried” about being the victim of a terrorist attack, 48% “very worried” or “somewhat worried” about “not having enough money to pay all your bills”).
2E. Thomas Garman, et al., “Final Report, Thirty Million Workers in America-One in Four-Are Seriously Financially Distressed and Dissatisfied Causing Negative Impacts on Individuals, Families and Employers” (March 23, 2005).
3AC Neilsen, Global Consumer Confidence and Opinions, May 2005.
4AP/Neilsen poll of 1,000 Americans December 2004, reported in “Poll: Half of Americans Worry About Debts” (December 20, 2004). The medical effects of these worries are discussed in Jean Lawrence, “Debt Can be Bad for Your Health,” WebMD (January 3, 2005).
5Partnership for Public Service, “Class of 9/11 Full Survey Results” (“What are you most fearful of at this time?” terrorism, 13.4%; going deeply into debt, 32.4%).
6See Bureau of Labor Statistics, Occupational Employment and Wages, November 2003, BLS estimates that the number of people employed as bill or account collectors increased by 44.8% from 1998 to 2003.