America’s open secret: Middle-class decline

It's become a national emergency, but where is our FDR?

Topics: Next New Deal, U.S. Economy, The middle class, Barack Obama, Mitt Romney,

This originally appeared on Next New Deal.

In the 1930s, the president and Congress responded to the economic crisis with immediate action. Why haven’t today’s policymakers done the same?

Sometimes I get bored sitting in Washington hearing certain people talk and talk about all that Government ought not to do— people who got all they wanted from Government back in the days when the financial institutions and the railroads were being bailed out in 1933, bailed out by the Government. It is refreshing to go out through the country and feel the common wisdom that the time to repair the roof is when the sun is shining.

They want the financial budget balanced. But they want the human budget balanced as well. – Franklin D. Roosevelt, October 1937

Next New Deal A recent study by the Pew Research Center has confirmed what millions of Americans have realized for some time now: that the middle class has endured its worst decade since World War II. With declining home values, falling wages, and skyrocketing higher education costs, the median wealth for the middle class fell by 28 percent over the past decade, while the wealth of higher income families rose slightly. The same sad story holds true for middle class incomes, as government data now shows that we have finally managed to break the half-century-long streak that saw inflation-adjusted family income rise in every decade between 1950 and 2000, but not in the decade ending in 2010. Thanks to these and other economic trends, the overall size of the American middle class has also shrunk, down to just 51 percent of the population as compared to 61 percent of the population four decades ago.

One might assume that these alarming statistics—and the fact that the U.S. unemployment rate has been above 8 percent for more than three years—would lead to something like a crisis atmosphere in Washington, a recognition that this is no ordinary economic downturn, but a great national emergency made all the more worrisome by the onset of the worst drought in more than 50 years. But instead of acting, members of the House and Senate have elected to go on their usual five-week summer recess, confirming in the minds of most Americans that the principal blame for their current troubles and for the decline of the middle class lies with Congress.



Roughly three-quarters of a century ago, in similar circumstances, the reactions of both the public and the government was exactly the opposite. From the day he assumed office, FDR identified the collapse of the U.S. economy as an unprecedented national emergency, not unlike the onset of war, that must be countered by “action and action now.” Indeed, his first move as president was to call Congress back into an “emergency session” that launched the most productive period in U.S. legislative history—15 major pieces of legislation in 100 days, including such “emergency” measures as the 1933 Banking Act, the Glass-Steagall Act, and the Truth in Securities Act, all of which helped provide the regulatory structure needed for the U.S. banking and financial sector to thrive for decades to come.

But FDR’s characterization of the economic crisis as an emergency did not end there. He would continue to describe the nation’s woes in the 1930s as a “national emergency” and would continue to demand the cooperation of Congress in meeting both the short-term and long-term challenges that the nation faced as it climbed its way out of the Great Depression. It was this spirit to act—in both parties—that gave us the major provisions of the New Deal and that laid the basis for that remarkable 50-year period of expansion of the middle class that may now have sadly come to an end.

Given the level of inactivity on Capitol Hill, it would appear that the steady and sharp decline in the size and economic wherewithal of the American middle class does not represent a crisis to the members of Congress. But for the millions of Americans out of work or underemployed, the millions of Americans who now face the very real prospect that they will not be able to attain the same level of economic prosperity as their parents, this is no garden-variety recession. It is a deep structural decline that may forever change the way they and their children lead their lives.

In short, we remain in the midst of a very real national emergency that demands the same sort of response taken by the president and Congress more than three-quarters of a century ago: “action and action now.” Until Congress recognizes, this, however, one suspects that little will change, except that the long, steady decline of the American middle class and American way of life will continue.

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