The Middle Class Captures the Welfare State

February 24, 2014 Topic: EconomicsPolitical Economy Region: United States Blog Brand: The Buzz

The Middle Class Captures the Welfare State

The bottom deserves help the most. So why does more and more go to the middle?

The White House isn’t happy with a new Congressional Budget Office study of the economic impact of Obama’s proposed boost of the federal minimum wage. A gradual increase from the current $7.25 per hour to $10.10 would, they said, probably cause about half a million people to lose their jobs, but lift nearly twice that number out of poverty. Critics naturally pounced on the job-loss point. The administration is fighting back, releasing a statement from two members of Obama’s Council of Economic Advisers charging that the CBO’s job-loss estimates “are not reflective of a consensus of the economics profession.” (Jim Antle disputed that here.) And in parallel, it’s engaging in a big social-media campaign, under the hashtag #RaiseTheWage, to stir up support for its plan. A key talking point has been that a minimum-wage hike will be good for the middle class—this was the second bullet of six from the CEA, and first of two tweets from the official White House Twitter account.

This is part of a broader pattern in American politics. National politicians, even on the left, seem afraid to speak directly about helping the poor, and often justify government action in the economy with reference to the middle class, even if many of the intended beneficiaries actually are poor. It was a big theme for the Democrats in 2012. Here’s Obama at the Democratic National Convention that year, talking about budget cuts: “You can choose a future where we reduce our deficit without sticking it to the middle class.” A speech at the same convention by Elizabeth Warren, the Democratic Party’s most outspoken critic of inequality, contained eight references to the middle class and just one to poverty. Bill Clinton did manage to talk about helping the poor, though they were almost always listed as a beneficiary alongside the middle class, e.g. “They’ll cut way back on...all the programs that help to empower middle-class families and help poor kids.” Obama’s 2014 State of the Union was a similar tale—if you dozed off for a few seconds during the bit on minimum wage, you could have come away thinking that there are two social classes in America: the wealthy and the middle class. Obama did say he’d build “ladders of opportunity into the middle class,” but the ladders seem to come up from nowhere.

And there are wonks providing intellectual backing to the whole help-the-middle-class-first agenda—for example, Michael Tomasky’s progressive journal Democracy had a symposium last summer on “‘middle-out’ economics,” saying, “The not merely to say that we need economic policies that help the middle class. That’s boring and obvious. The point is to make what we call “middle-out” economics the operating progressive theory of economic growth.” Among the contributions to the symposium, by the way, was one making the same points about minimum wage and the middle class that the Obama administration is making today.

Are politicians simply afraid of being attacked as handers-out of handouts, as benefactors of “welfare queens”? There’s certainly an element of that, of politicians using aid that includes the middle class to shield themselves, to create a broader prowelfare constituency, and to ensure that their opponents can be called hypocrites for opposing aid while receiving it. (Witness “You didn’t build that!”) Yet what is really happening is something far more insidious: the middle class is capturing the welfare state.

Look, after all, at how much of the government’s social and economic policy now benefits the middle far more than the bottom. Student loans. Farm subsidies. The virtual federal takeover of the home-mortgage industry. Social Security and Medicare aren’t means-tested, so plenty of benefits under their auspices flow to the middle and the top. Even Obamacare gives subsidies to people earning four times the federal poverty line.

It’s even worse if you accept, as my left-wing friends assure me, that tax cuts are another form of government spending. There are numerous tax breaks, like in the treatment of home mortgage interest or employer-sponsored health insurance, whose benefits largely don’t go to the poor. And worse, some of these various projects to help the middle actually harm the bottom—easy student loans are fuelling the higher cost of college education, and the tax exemption for employer-sponsored health insurance has helped do the same for healthcare costs, which particularly hammer the uninsured—who are mostly poor.

The favoritism for the middle class extends beyond public finance. Consider immigration. The reform proposals currently floated would see relative wage declines for the poorest and richest quintiles of Americans—and gains for the middle three. Even the government itself, growing ever more ponderous, is largely a middle-class activity. It needs to be staffed by bureaucrats and supported by contractors. The remarkable economic stability of Washington, D.C. amidst the Great Recession, and its explosive growth in the early 2000s (City Journal branded it “America’s real Second City”), testify to the significance of that. And the bureaucracy’s values—stable, steady, largely meritocratic advancement, caution, consensus, technocratic administration, thrift and so forth—parallel the middle class’s values.

All this is not to say that the middle class is not under pressure or that we should be apathetic about its decline. Our democracy is far more likely to survive with a large, independent middle class. And rule by a middle-class government that wasn’t diverting the welfare state toward itself would certainly be more republican than our present system, which gives undue influence to an intermingled political, economic and cultural elite (the greater share of which, contrary to received opinion, leans left).

Yet if there is any group of people whose condition is rough enough that there is a public interest in the government manipulating the economy on their behalf, it is the poor. And if there is any group whose subjugation to the government dime would threaten the fundamental character of our society, it is the middle class.

If even Elizabeth Warren, the leftmost figure in the American political mainstream, can barely mention helping the poor, an inversion of these values may be the result: a government that interferes in the economy to help the middle class but still argues about whether the poor are getting too much. We may be witnessing the dawn of a new America, one that shovels more and more money to the middle class, but blames food stamps when the bill comes. That is not merely immoral. It is decadent.

Image: Wikimedia Commons/IDuke. CC BY-SA 2.5.