The Middle-Class Blues

We don't typically see an outbreak of populist politics when the economy is doing well. But that may be changing.

The economic statistics look pretty good. When President Bush delivered his "State of the Economy" report on Wall Street last week, he said, "Since we enacted major tax relief into law in 2003, our economy has created nearly 7.2 million new jobs. Our economy has expanded by more than 13 percent."

If you ask people how things are going, they generally agree with the president's upbeat view. In last month's CNN/Opinion Research poll, 63 percent of respondents said that the country's economy is in good shape. That's the highest number since 9/11.

Nevertheless, Democrats see signs of middle-class anxiety. Sen. Jim Webb, D-Va., declared in his response to Bush's State of the Union address, "The middle class of this country, our historic backbone and our best hope for a strong society in the future, is losing its place at the table."

Sen. Charles Schumer, D-N.Y., just released a book titled Positively American: Winning Back the Middle-Class Majority One Family at a Time. At last week's hearing of the Joint Economic Committee, Schumer characterized the state of the middle class: "They are unsure of their footing in an economy and in a world that is about change, technology, and even disruption. They feel they are alone to navigate the contours of change and that government isn't really helping them where they need it."

Middle-class Americans seem to feel buffeted by large and powerful forces such as globalization. Gary Burtless, a senior fellow in economic studies at the Brookings Institution, said, "We have not invented for middle-class households very much in the area of new protection arrangements ... that help buffer them against big ups and downs in earned income when they lose their jobs and have to accept major pay cuts."

Middle-class wages have gone up a bit in the past few months, but the rich have been making much bigger gains. Testifying before the Joint Economic Committee, Alan Blinder, a former vice chairman of the Federal Reserve Board, said, "The basic story is very clear. Inequality was mostly falling for 30 or 35 years or so until the late 1970s, and has been mostly rising since then." Webb observed in his State of the Union response, "It takes the average worker more than a year to make the money that his or her boss makes in one day."

Moreover, middle-class workers often don't see their gains translate into wages. "[The fact that] our employers are putting more money in our health care plans than they have had to in the past means that our paychecks aren't rising as fast as our compensation is," Burtless said.

Meanwhile, energy prices are taking their toll on middle-class households. "Some people had never seen anything like gas going from $1.25 to $3 a gallon in such a short period of time," Burtless said. "That, too, feeds people's sense of insecurity."

Democrats sense a wave of public anger at the large and powerful forces beyond their control. Presidential candidate John Edwards targeted the evils of bigness in his remarks to the Democratic National Committee last week. "We cannot allow America's health care policy to be set by big insurance companies and big pharmaceutical companies," he declared. He added, "It's time we stood up for an energy policy that's not dictated by the profit margins of Big Oil."

Is Bush aware of this "New Populism"? Apparently. In his State of the Economy report, he acknowledged, "Income inequality is real. It's been rising for more than 25 years." And he challenged Wall Street: "You need to pay attention to the executive compensation packages you approve." When a conservative Republican talks like that, something is happening. Schumer, Webb, and other Democrats believe that the New Populism is pointing to an important role for government: protecting the middle class.

Governors, including California Republican Arnold Schwarzenegger, are responding to the New Populism by proposing ambitious energy programs and plans for universal health insurance. If the federal government won't act, perhaps the states will.