Credited with keeping America strong and stable, America’s middle class is in need of serious repair.
Broadly defined as anyone making between $35,000 to $100,000 a year with education levels ranging from a high school diploma to a professional degree, America’s middle class has been hit hardest by both the Great Recession of 2008 and the growing income gap partially caused by economic schemes hatched by financial elites during the 1980’s and 1990’s.
Both political parties agree that without fixing the problems bedeviling the middle class, America will splinter into sub groups, none of which will be large enough to address the needs of America generally. It is estimated that approximately 66% of America’s population falls within the broad definition of middle class.
History as a guide
We have history as a guide to help us understand what should be done. For example, during World War 2, federal spending as a percentage of Gross Domestic Product (the total amount of business done in any year) was 45%. Before or since that time, federal spending has never been that high.
At the end of World War 2, politicians in both parties believed that the percentage of federal spending had to come down. Over a period of ten years it did. But not before Congress passed The Servicemen’s Readjustment Act of 1944 (The GI Bill), giving fifteen million returning veterans the following benefits: hospitalization; cash for one year to get back on their feet; low interest loans to purchase a home, start a business, or buy a farm; and money to pursue an education. When the program ended in 1956, it was estimated, for example, that for every $1.00 invested in higher education for these military personnel, there was a $6.81 return. It also prevented another depression from occurring after the war.
A similar situation exists today in America, except with the middle class. On one hand, federal spending is 25% of GDP. On the other, federal investment in the middle class needs to be made. Just like at the end of World War 2, both investment and cuts need to take place. The only difference is that the situation after World War 2 was much worse. And that’s the point. Federal expenditures as a percentage of GDP were much worse than it is today. Nevertheless, America thrived after World World 2 by both cutting and investing.
Likewise, for America’s economy to continue to be strong and robust this time around, the middle class must be invested in. And the federal government is the only institution big enough to make this kind of difference. In my opinion, over the next ten years, we need to both bring federal spending down and invest heavily in the middle class. History tells us we are capable of doing two seemingly different things at the same time. Cutting and investing.
We need to ensure that the middle class has: access to low interest loans to buy a home; jubilee periods where existing home mortgage loans are readjusted so foreclosures are cut off; a continuation of unemployment insurance for the unemployed; a jobs creation bill so employment is stimulated; robust healthcare coverage; liberal lines of credit so small businesses can be created; and liberal direct payments to those who wish to finish or enhance their education.
At the same time, we need to bring federal spending down to a historic average of 21% of GDP.
Will this be accomplished? YES, we will do these things. History has shown that this is our pattern.
Unique Challenge However
However, there is one unique challenge that must be overcome. It’s a movement where people have started to be elected to national office who do not want the federal government to exist.
Their objective is to ensure there is no victory at the federal level. It’s as though they are fighting the Civil War all over again. In fact, there are similarities between this situation and The Civil War. It’s an ideological disposition on the part of these politicians who obsess over states’ rights. They sign pledges that disallow compromise of any kind at the federal level. Most of these non-compromisers come from the hard core conservative wing of the Republican Party centered in the South. The more things change, the more they seem to stay the same.
Is There A Solution?
The democratic processes of Congress are unable to handle such a non-compromising group. That leaves it up to the voters to decide how this impasse will be solved.
What do I think will happen? Most likely, these non-compromisers will be voted out of office. History again is our guide. Look what happened in the Civil War. Recalcitrant attitudes led to a decision to leave the Union, which led to civil war. Will we risk that a second time? No. However, a decision to use a non-compromise strategy to gum up the workings of a tier of government, will press the middle class into extreme financial stress. To counter this, the middle class will act in its own best self interest.
At the end of the day, America’s middle class will unite and ensure that they get a fair deal, no matter whether that comes from the state or the Fed. In doing so, they will not only improve their personal conditions, but ensure that America’s economic recovery continues.