Throughout the last century, the middle class in the United States has been declining at significant rates. “Just 52 percent of American adults lived in middle-class households in 2016 which is up slightly from 51 percent in 2011, but down from 54 percent in 2001 and 61 percent in 1971” (Arends). According to the Organization for Economic Cooperation and Development, 14 percent of those in the middle-income brackets are likely to fall into the bottom fifth in any given four-year period (para 7), insinuating that those individuals who are disappearing from the middle class are not becoming wealthier, but instead, poorer. It is also expected that at least “17 percent of middle-income jobs will face a high risk of automation, and already more than one-fifth of middle-income households are borrowing to make ends meet” (Arends).
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In an effort to avoid taking responsibility for this crisis, the government has misled the middle class by falsifying who is at fault, however, with the rising costs of education, healthcare, and housing becoming more apparent, it is nearly impossible to point fingers anywhere other than Washington, D.C. This research and its conclusions will seek to explain how the government could easily stabilize this issue by establishing a fixed progressive tax which would benefit the middle class and the economy.
Over 145 countries suffer from a deteriorating middle class (Howton); failing government programs and lack of economic opportunity make it difficult for people to get out, or stay out of poverty. According to the World Bank, “in much of the world, growth rates are too slow, and investment is too subdued to increase median incomes. For many nations, poverty reduction has slowed or even reversed” (para 3). Nearly half of the people on this earth live on less than $2.50 a day (Shue), which places them in the mid-lower-class range on a scale of social status in America. This amount of money isn’t worth hardly anything when compared to the present day prices of food, shelter, and clothes, yet almost 3 billion people are forced to find ways to live off of it in order to survive. In 2016, the average middle and lower class’ incomes combined equaled $104,066 while the upper class’ income alone equaled $187,872 (Kochhar). This means that the annual salary of 81 percent of Americans was at a 2:1 upper to middle and lower class ratio.
The Pew Research Center expresses that the percentage of people considered middle-income Americans has shrunk since 1971 by 9 percent and the percentage of lower-class Americans has increased by 4 percent (para 1). When the Great Recession of 2007-2009 hit, the upper class recovered with a $4,192 increase to their annual income, but the middle class only gained $380 more than what they had in 2000 and the lower class took a loss to the failing economy by almost $1,299 (Kochhar). In saying that, though the wealthy are getting richer, the broadening gap between the upper and lower class are causing more people to become poor. As of September 2019, a report from NBC shows that nearly 29 percent of Americans are classified as the lower class or impoverished (Elkins). Why is it that in America, a thriving first-world country, we continue to have these issues?
At the start of the Great Depression, nearly 18 million Americans lived at a bare subsistence level in the United States and by 1933, another 13 million had been thrown out of work (Constitutional Rights Foundation). Years prior to the depression, local and state governments were obligated to assist those impoverished; however, after the stock market crashed, they found it increasingly difficult to carry the weight of so many starving families. Upon winning the election of 1932, Franklin D. Roosevelt became the first president to make welfare a federal responsibility; his New Deal “took action to bring about immediate economic relief as well as reforms in industry, agriculture, finance, waterpower, labor, and housing” (New Deal). His plan succeeded for a short period of time; however, in 1937, the U.S. Supreme Court declared certain New Deal laws unconstitutional “on the grounds that neither the commerce nor the taxing provisions of the Constitution granted the federal government authority to regulate industry or to undertake social and economic reform” (New Deal). Though historians argue that Roosevelt’s New Deal marked the beginning of several failed attempts at welfare reform, it created Social Security and built the foundation for future presidents to pursue.
Following Roosevelt, Harry Truman presented his own ideas that he would later insert into the world of welfare when he was elected into office in April of 1945. Immediately after the terms of war had settled, Truman turned his attention towards other domestic matters and called for “expanded social security, new wages-and-hours and public-housing legislation, and a permanent Fair Employment Practices Act” (Fair Deal). Unfortunately, Congress was too preoccupied with balancing inflation to concentrate on his proposals which is why, upon his reelection in 1948, Truman decided to take a different approach to assert his reforms. Thus the Fair Deal was introduced which aimed to provide all Americans with health insurance and equal rights as well as increase the minimum wage. Though his plan was that of mixed successes, he did manage to “raise the minimum wage, promote slum clearance, and extend old-age benefits to an additional 10,000,000 Americans” (Fair Deal).
Next was the Great Society, enacted by Lyndon B. Johnson after his victory in the 1963 election. Upon pledging a war on poverty, Johnson set forth to ignite an enormous program of social-welfare legislation; this later influenced better federal support for education and hospital care for the elderly and the poor through an expanded Social Security program now known as Medicare and Medicaid (Great Society). Nearly all of his programs were passed with credit to a democratic Congress, but the Great Society was eventually choked off due to heavy military spending in the Vietnam War which wiped out many of Johnson’s reforms and significantly drained funding to those that survived.
In his memoirs, Richard Nixon wrote, “we decided to provide federal financial aid not just to the unemployed poor, but to the working poor” (qtd. Barber). Unlike previous presidents who had engaged in war on poverty, Nixon had quite a contrasting outlook on what poverty actually consisted of. Welfare reform was one of his highest priorities; in fact, he wanted nothing more than to dismantle the costly failures of the Great Society (Barber). In spite of his ill feelings towards Johnson’s suffering society, he immediately set out to process reforms that were geared more towards saving people from drifting into poverty and ensuring that welfare did more than just keep poor families afloat.
Among an abundance of assorted reforms, the most successful was Nixon’s proposal requiring employers to offer health insurance and transforming Medicaid from a collaboration between federal and state governments to just a federal program (Gershon). Though most of his work was washed away after the shame of the Watergate Scandal, his ideas were heavily considered by other politicians and eventually became part of other political platforms.
Jimmy Carter tried to flirt with the idea of welfare, but he eventually abandoned the concept of reform and passed down an empty slate through Ronald Regan and George H. W. Bush to Bill Clinton. Like Nixon, Clinton aimed to make American welfare more like training wheels: temporary. In saying that, upon his arrival to the White House in 1993, he immediately marked welfare reform as a top priority. While battling a republican-dominated Congress, Clinton managed to push through the Personal Responsibility and Work Opportunity Reconciliation Act which later led to the Temporary Assistance for Needy Families program.
This program “changed the financing and benefit structure of cash assistance” which meant that instead of welfare being funded in an open-ended manner, it would be funded by federal block grants given directly to the states (Pilon). For quite some time, several political analysts claimed that the reform had been a success due to the booming economy and the slight decrease in poverty during the late 1990s, but once the stock market crashed in 2008, it was clear the act had failed.
That is to say, however, the collapse of Clinton’s act wasn’t the only thing that caused the economy to struggle. In an attempt to battle the damages of the 2001 recession, George W. Bush passed the Economic Growth and Tax Relief Reconciliation Act which targeted incentives as well as estate tax and made income tax more regressive (Gale and Potter); seven years later, the stock market crashed. In tandem with the messy left-overs of Clinton’s presidency, the demise of Bush’s act not only put the country underwater, but also hurt the families paying his new tax. While his act was meant to remove the pressures felt from all taxpayers during the recession, he actually increased the stress of more than 82 percent of people paying taxes (Kochhar) since a regressive tax meant that the majority of taxes would be paid by lower and middle income families.
When Barack Obama took office in 2009, he urgently drafted a proposal to Congress that would not only to save the economy, but also the families struggling from it. In his address to Congress he stated, "[The recovery plan] makes the largest investment ever in preventive care, because that's one of the best ways to keep our people healthy and our costs under control" (Obama’s Agenda). Healthcare, especially Medicaid, is one of the greatest sources of revenue in the United States and brings nearly 18 percent of the nation's gross domestic product, or $3.5 trillion, per year (Medicaid). With this in mind, Obama passed the Patient Protection and Affordable Care Act in 2010 which aimed to provide federal subsidies to people who couldn’t afford to purchase insurance and it expanded eligibility under Medicaid (Medicaid). Alongside this, he also set a progressive tax which would tax the upper class more heavily than the lower and middle classes.
With the combination of the Affordable Care Act and progressive tax, the economy began to slowly fill out once again; 2 percent of the middle class reached upper class income levels making higher-income households grow from 18 percent to 20 percent in 2011 (Kochhar). The difference between Obama’s approach in tackling welfare is that he used the economy to his advantage instead of seeing it as another barrier. By recognizing the financial gains to be had by healthcare, he was able to repair the recession and patch spotty reforms which is why his act was successful over those of previous administrations.
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