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Heather McGhee Headshot

Who's Budgeting for a Middle Class?

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For the first time, the majority of Americans believe that their children won't be better off than they are. If current trends continue -- in just a few categories: wages, benefits, retirement income, personal debt, job creation, job quality, job security, and costs for education, child care and health care -- they're absolutely right. So as the lights are dimming on the American Dream, what are America's political leaders doing?

They're tripping over one another to reach for the off switch. That's exactly what the leading deficit reduction plans amount to, according to an analysis we conducted recently at Demos, a non-partisan policy center. In "Budgeting for America's Middle Class," we graded the various budget plans on their impact on working- and middle-class Americans and the result was disheartening. The only legislative budget to get above a "C" -- that issued by the Congressional Progressive Caucus' "People's Budget" -- only garnered 77 votes in the House and is unlikely to come to a vote in the Senate.

Download the full Report Card (PDF)

When today's deficit hawks (including, however reluctantly, the president) debate how the nation should tax and invest over the coming decades, they seem to ignore that those priorities could make or break America's future middle class. That's because the middle class did not create itself in the mid-20th century. Along with strong labor institutions, robust public investments (which we made despite high deficits) made the financial success of ordinary families a national priority. We built the national highway system; put a generation to college on grants, not loans; and invested in public research that redounded to enormous private gain. The result was the greatest middle class the world has ever known.

That all shifted in the mid-1970s as organized big business gained influence in Washington, the power of labor unions weakened, and a range of new policies undermined the living standards of working Americans. As a result, working- and middle-class families have been losing ground for the past 30 years.

This reality compelled Demos to join with the Century Foundation and the Economic Policy Institute to create OurFiscalSecurity.org, a project with the goal of conducting regular reality checks on the fiscal policy debate. We relied on the principles that created a strong American middle class to craft our own model budget blueprint, "Investing in America's Economy." The blueprint shows that we can tackle our long-term fiscal challenges while creating jobs, safeguarding Medicare and Social Security, and decreasing inequality. In Congress, the representatives in the CPC designed their "People's Budget" with similar principles in mind and achieved comparable goals.

Unfortunately, the new Demos report card shows that the budget proposals with the most political tailwinds -- Bowles-Simpson, the President's new deficit plan and Rep. Paul Ryan's (R-WI) budget -- fail to harness these proven methods. On the most urgent factor -- job creation and an accelerated recovery -- the president's plan received a "C," the Bowles-Simpson plan a "D-" and Rep. Ryan's proposal failed. None of these plans included the additional public investment needed to make up for our $1 trillion shortfall in economic demand. All three ignored the lesson President Roosevelt learned in 1937 when he cut spending and the country fell back into Depression, or more recently, when Britain's austerity measures zeroed-out GDP growth.

While educating the next generation is seldom included in long-term fiscal policy debates, our children and grandchildren are constantly evoked as reasons to slash and cap spending now. We graded the plans for the investments they make in this generation through both early childhood care and higher education. The House Progressives, OurFiscalSecurity.org and President Obama all demonstrate that we can rein in the debt without leaving behind a disintegrating nation to a poorly educated generation. They also preserve our obligation to the elderly through strengthened Social Security and Medicare, showing one generation need not be pillaged for the well-being of another.

There were some surprises. The Bowles-Simpson plan, for example, scored higher than the president's for reducing our out-of-control defense budget. For all his deficit-cutting bluster, Rep. Ryan received an "incomplete" for long-term debt reduction, since the budget chairman has failed to give adequate details on the taxes he'll need to raise to meet his target. He can't seem to give up his raft of new tax cuts for the wealthy and their heirs -- even at a time when taxes are lower than they've been since 1958.

Does Rep. Ryan really believe that Americans are willing to stomach the end of middle-class America? Until the political conversation takes note of the relationship between our fiscal choices and the future of the middle class, our leaders will continue to get away with touting policies that exacerbate its decline. The winning legislative plan in our report card -- the CPC's "People's Budget" -- demonstrates that we can achieve fiscal balance while preserving the America we all cherish.

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