Why 'middle-class economics' has moved front and center for 2016

The 2016 presidential race is taking shape already as one where the financial anxieties of middle-class Americans will play a central role, despite signs of an improving economy.

We’ve just heard Democrat Hillary Rodham Clinton frame her campaign launch around the notion that “Everyday Americans need a champion, and I want to be that champion.”

But before that, it’s also been Republicans sounding notes of alarm about the economic condition of ordinary Americans. Though best known in recent years for proposing broad tax cuts to promote economic growth, this time they are talking up the need for growth plus something more – rebuilding ladders of upward mobility.

Jeb Bush, an expected Republican candidate for president, recently lamented, “Far too many Americans live on the edge of economic ruin.” He also said that an urgent need for the nation is to “restore America’s faith ... that any child born today can reach further than their parents.”

Another prospective candidate on the right, Sen. Marco Rubio (R) of Florida, uses a new book, "American Dreams: Restoring Economic Opportunity for Everyone" to pitch a similar theme, echoing President Obama by calling saying stalled mobility is “the central challenge of our time.” (Mr. Obama has used the word “defining” rather than “central.”)

The two parties differ in their diagnosis of the problem and on solutions. But to a considerable extent, they are singing from similar song sheet: They agree that ordinary Americans – call them “working” or “middle-class” or “average” – are financially strained and that the challenge merits some focused policy attention.

Jared Bernstein, an economist and former adviser to the Obama administration, says that basic consensus represents a significant step – paving the way for a vigorous policy debate between now and the election.

“It is important and gratifying to hear pundits and politicians from all sides — many of whom assiduously avoided such topics in the past — talking with fervor about these issues,” Mr. Bernstein says in a new online column hosted by The Washington Post.

Why has the shift by politicians and others occurred? Why, even though the 2016 hopefuls don’t want to sound like an Obama retread by using the phrase “middle-class economics,” is there such focus on precisely that?

Several reasons may be at work.

One is simply that the recovery from recession remains far from complete. Although the labor market has been improving steadily, the 5.5 percent official unemployment rate masks the fact that millions remain unemployed or underemployed. Some have dropped out of the labor force because of discouragement, while others hope to shift from part-time to full-time work. And many who have jobs are eager for better ones.

As a recent Monitor cover story reported, each month of solid job growth helps to work out these problems, but it’s been much more of a slog than after most recessions – putting strains on middle-class families.

A second factor is that, by some measures, the roots of middle-class anxiety go back decades. Upward mobility in America, in fact, has always been accompanied by financial risks as well as the reward of rising living standards. But since the early 1970s, Americans have seen an era of global dominance (after World War II) replaced by an era of widening global competition.

Worker compensation began rising at a slower pace than did workplace productivity. It hasn’t helped that, in the current recovery, wage growth has essentially stalled in inflation-adjusted terms.

The challenges facing typical US households shouldn’t be exaggerated. Some economists say the news media tend to overplay the widening of income inequality and the stagnation of middle-class incomes.

“The majority of people think that they live better than their parents because they do,” writes Stephen Rose in a 2014 report for the Information Technology and Innovation Foundation, a Washington research group. “They can’t imagine doing without the new products and services that didn’t exist 30 years ago.”

To Mr. Rose, now at George Washington University, a key point is that policymakers shouldn’t conclude that economic growth no longer benefits average workers – a conclusion that might steer the policy debate solely toward how to redistribute wealth from the rich to the rest.

His point is important, and it’s why you can expect candidates from both parties to talk about economic growth as part of the middle-class solution, not just about targeted policies on things like child care, retirement, or education. At the same time though, many presidential hopefuls appear set to also pitch ideas for spreading the fruits of growth more broadly. The targeted proposals could range from policies on education and retirement savings to an expanded Earned Income Tax Credit to encourage employment for low-income Americans. 

Another reason for candidates to focus on middle-class concerns is public opinion – the feelings that go alongside the economic realities. More than five years after the Great Recession ended, Americans are still pointing to the economy as a top concern (yes, they’d welcome policies that boost growth), and they also signal considerable stress about things like being ready for retirement and how to help pay for their children’s college education.

Such worries have eased a bit since 2012, but fully half of Americans in a new Gallup survey say they’re worried about three or more personal financial issues – a higher level of concern than during the 2001 recession and its aftermath.

A final factor to consider: The demographics of the US electorate are changing, notably toward a rising share of Hispanic voters who tend to support an active problem-solving role by government.

Republicans know that, to win in the next general election and beyond, they need to not only mobilize their traditional base, but also draw considerable support from Latino and black voters, who have heavily favored Democrats in recent elections.

All this doesn’t mean you’ll hear candidates rolling out programs tailored to working families every week between now and the first primary races.

There’s a logic behind candidates avoiding getting too specific, too soon. And on the Republican side, in particular, candidate proposals may be constrained by their party’s general aversion to government intervention in the economy.

But, improving economy notwithstanding, the challenges of the middle class are pushing themselves into 2016 prominence.