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Thursday, February 15, 2007
Inequality Debate: What and Whither the Middle Class
Certain policy goals and objectives are supported by the premise that the American middle class is broadly participating in and benefiting from the nation's steady economic growth of the last generation on an equitable basis. Another set of goals and objectives relies on the notion that persistent wage stagnation, debt burdens, and a growing sense of class inequality afflict much of today's middle class.
Even within the progressive movement, such a division exists today, and it was out in full view for all to see this week.
On Monday, the Third Way, a for-profit Washington-based "strategy center for progressives" that advises red state political candidates, released a report finding that the "middle class is far wealthier, more stable, and more optimistic than most progressives believe, [that its] median income was around $70,000 per year, not the $45,000 that most progressive economists cite. The typical household also held no credit card debt, experienced relatively little income volatility, and was satisfied with its economic circumstances."
Really, $70,000? That's far higher than the national median household income of $46,242. What's going on here?
Harvard Law Professor Elizabeth Warren steps into the breach, examines the Third Way report, and provides this explanation:
The numbers cited by "progressive economists" are plain old Census numbers, not some flukey, small-sample study. [The] Third Way ... arrived at the new $70,000 number by cutting out all young earners and all old earners. Since those age groups tend to have lower incomes, income for the remaining subset increases. This is just a third-grade math trick: cut out those who make less money, and the median rises. Third Way might have added that if you cut out those who earn more money, the "median" income is lower.
Astoningly, a fitting synthesis (and self-indictment) comes from the Third Way itself: "Each side of the economic debate gets some things right, but on the whole they mischaracterize the state of the middle class and the challenges they face. That leads to the wrong policy choices."
Maybe an analysis and debate starting with a definition of terms that includes the entire middle class, that accounts for family and family size, urban vs. rural economic conditions, and states the definition clearly will be more satisfying and fruitful.
Posted by Dana Chasin
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