The Middle Class and Mitt

By David Rohde

If the 2012 election is a referendum on how the economy is treating average Americans, should Romney be concerned?

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Reuters

Mitt Romney's declaration that he wasn't concerned about "the very poor" was lampooned by Republicans and Democrats alike this week. But his next statement in a CNN interview is the one that could determine the fate of his candidacy. "I'm concerned about the very heart of America," Romney said, adding later: "My focus is on middle-income Americans."

With astonishing speed, the 2012 presidential election is becoming a referendum on how best to help the American middle class. So far, Romney's solutions are likely to be far more pleasing to the Republican base than the general electorate.

Reduce corporate taxes by 25 percent. Increase oil and gas drilling. Repeal Obamacare and Dodd-Frank. Cut non-security discretionary spending by 5 percent. Weaken unions. And reduce the federal workforce by 10 percent.

Where, Democrats contend, is the benefit to the middle class?

The conservative answer reflects the yawning ideological gap that will become more apparent in the months ahead. While Obama and Democrats call for the federal government -- and society as a whole -- to ensure that individuals have the opportunity to increase their social mobility, Romney and Republicans concentrate on broad economic growth.

"Republicans are focused much more on having a rising tide that lifts all boats, even if it lifts more yachts than dinghies," said Scott Winship, a fellow at the Brookings Institution. "It's very striking when compared to Obama's very individual focus on human capital and a federal role in increasing it."

As he has done in his approach to foreign policy, Romney is trying to channel his inner Reagan in economic policy. While Democrats contend that George W. Bush's use of supply-side, unregulated, trickle-down economics caused the Great Recession, Reagan's economic doctrine is alive and well on the right.

"Most of our problems now relate to this asset bubble that formed; it wasn't so much what Bush did or didn't do," Winship argued. "The '80s in retrospect were not a bad period economically. I think it's hard to argue that trickle-down will end up hurting the poor or reducing middle-class opportunities."

Winship and some conservative economists also go a step further. In a series of recent posts, they question a central liberal narrative: that middle-class wages have stagnated since Reagan's presidency. Terry Fitzgerald, an economist at the Federal Reserve Bank of Minneapolis, has argued that the rapid postwar growth of the American middle class has slowed over the last 30 years, but the middle class has still increased in size.

"From 1947 to 1975, was very fast growth," Fitzgerald told me. "It was slower since then, but it hasn't been stagnation."

Fitzgerald argued that economic studies showing little increase in the median income of American households are skewed by social changes, not only economic ones. Beginning in the late 1970s, high divorce rates reduced the percentage of American households made up of married couples from 63 percent in 1976 to 50 percent in 2006. Single-parent families earn far less than two-parent families, Fitzgerald argues, and drive down the median income.

Richard Burkhauser, a Cornell University economist, contends that the value of benefits families receive from the government and employers are also not included in studies showing meager increases. When the value of these benefits is included, he argues, the stagnation of middle-class incomes disappears.

Liberal economists scoff at such findings. They say a comprehensive study by the non-partisan Congressional Budget Office included such factors and still found tepid middle-class wage growth since 1979. Jared Bernstein, a former chief economic adviser to Vice-President Joseph R. Biden Jr., said supply-side economics failed in the 1980s and the 2000s and would fail again.

"Not only did it fail to reach the vast majority of American families, it actually contributed to the worst recession since the Great Depression," Bernstein told me. "I can say with complete confidence that the supply-side, deregulate, trickle-down model is a failed model."

"When I look at all the Republican candidates," he added, "this is still at the heart of their thinking."

Meanwhile, Romney, who is trying to unseat an incumbent, embraces a suffering-middle-class narrative. Doing otherwise would be political suicide. The bogey-man, he argues, is government intervention. Top-down economic growth will ease Middle America's woes, not government programs.

Obama, on the other hand, regularly unveils new federal initiatives that he says will reduce the cost of college, make it easier for homeowners to refinance, and return manufacturing jobs to the United States. The philosophical difference could not be more profound -- or more reminiscent of the 1980s.

One or two of Romney's ideas are close to those of Obama. Unlike every other Republican candidate, the former Massachusetts governor supports instituting automatic increases in the federal minimum wage to keep pace with inflation. And he talks about the central role that increasing American exports and retraining workers could have in reviving the middle class in a globalized economy. But the similarities end there.

Romney argues that the federal government should get out of the job-training business, for example, and devolve all such efforts to the states. Asked for a specific step that would aid the middle class, Andrea Saul, a campaign spokesperson, cited a Romney proposal to eliminate all interest, dividend and capital-gains taxes for people earning less than $200,000. She argued that the philosophy of Barack Obama, not Ronald Reagan, was gutting America's middle class.

"President Obama's big government policies have been disastrous for the middle class," Saul said in an email Thursday. "Mitt Romney is focused on helping those middle-income Americans who have been hurt worst by the Obama economy."

In the months ahead, we'll see if Middle America buys it.

This article also appeared on Reuters.com, an Atlantic partner site.


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