(Bloomberg View) — No one can quite agree on what it means, much less what to do about it, but that hasn’t stopped every announced candidate for U.S. president in 2016 from pledging to focus on it. What is it? The middle class, of course, and addressing its economic anxieties will be among the next president’s most daunting challenges.
Incomes for all but the most affluent in the U.S. have been squeezed in recent years, and there’s no relief in sight. Many fear that the economy is being hollowed out — that middle-class Americans rely on jobs that can no longer command good wages or aren’t needed at all. It’s a complex problem, and there’s no single answer. What’s required is a strategy that applies different ideas in a coherent way, so that hardworking Americans can once again expect to share in the country’s success. This is the first in a series of editorials on what such a strategy might look like.
Some of the pressure on the middle class comes directly from the crash of 2008 and its prolonged aftermath — but not all. Living standards for the broad middle class have been rising sluggishly for years, grinding away at America’s instinctive economic optimism. Parents are less confident that their children will do better than they did. The U.S. once stood for universal opportunity and mass affluence; those claims no longer seem solid.
What went wrong, and what’s to be done? One point worth emphasizing: Economic growth is essential. Over the long run, middle-class Americans’ incomes will depend on two things: raising growth in productivity and equipping workers to do the jobs that a growing economy most values.
It shouldn’t need saying that growth is what counts, but the term ”middle-class economics” — an imprecise yet useful phrase popularized by President Barack Obama – invites an undue focus on who gets what. Obama and other Democrats tend to talk more often about rising inequality than about slow growth. It’s a short step to the fallacy that middle-class Americans are falling behind because the 1 percent is enriching itself at their expense.
No question, rising inequality is a problem — both in its own right and because it’s linked to slow growth. Policies to address it are needed. Tax reform, to take the most obvious example, should strive to promote fairness as well as growth. But it’s important to understand the limits to what redistribution can do.