Mort Zuckerman, the owner and Editor-in- Chief of U.S. News wrote an editorial in his magazine about the increasing problems confronting the American middle class. Mr. Zuckerman’s concerns raise similar themes by Lou Dobbs, War on the Middle Class, and Pete Peterson, Running on Empty. In a nutshell, the American middle class faces the likely prospect of maintaining a lower standard of living in real terms. Zuckerman concludes that the growing disparity in income between to top 10% and the bottom 90% is increasing tensions, and putting our social fabric at risk.

Zuckerman made the bold statement that many members of the middle class are living at the economic margin, where they are one illness or one job loss away from catastrophe. He cites certain statistics to support his argument. In the 1970s, a family had a roughly 7 percent chance of its income dropping by half or more. Today the odds are 17 percent. Almost two thirds of workers believe that it is harder to earn a decent living now that was 20 or 30 years ago, according to the Pew Research Center. Our public education system, once the great equalizer, is perceived to be deteriorating, even as it has become dramatically harder to finance a college education or private secondary education.

 

Most people are not sharing in the improvement in our overall economy. In 2005, the average income of those in the “bottom” 90 percent of the economy dipped from the year before. Zuckerman goes on to cite that our richest 10 percent have gained the most. The top 10% now receives 44% of pre-tax income, the highest since the 1920s and 1930s, and up from 32 percent between 1945 and 1980. The richest 1 percent has done even better, with pretax income growing from 8 percent of national income in 1980 to 17 percent in 2005. Another way to look at it is that the richest 1 percent of Americans took in 21.8 percent of all recorded income in 2005—double their share in 1980. This means that the 300,000 Americans at the top made almost as much money as the 150 million Americans at the bottom.

 

Along with sluggish median earnings, these 150 million are having to meet rising healthcare costs no longer funded by government and employers. Less than one-third of employers provide health benefits compared with 80% 30 years ago.

 

Fiscal policy has been no help. Over a 20-year period, government has been taking more from the middle class in taxes than it has given back in benefits. This is the underlying cause of the Democratic capture of the middle-class vote in the past election. The prospect for higher taxes given our huge deficits to fund our increasing military costs, under funded Social Security, and Medicare System, seem inevitable..

 

Zuckerman makes 3 recommendations:

1. Make it easier for Americans to transfer jobs without losing their health and pension benefits

2. Boost our national investment in education and training. That is, we need to equip Americans with the skills to make them mobile and give them economic security

3. Make taxation fairer. He calls for expanding the earned income tax credit, and make the whole system more progressive. Average tax rates on the richest one-hundredth of Americans have been cut in half since 1970, while taxes on the middle class have risen. Other income for the wealthy, such as dividends and cap capital gains, is now taxed at lower rates that the wage income of most middle-class families.