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February 25, 2013 4:12 AM Age: 7 yrs

How to Revitalize the Middleclass

Category: Larry Checco
Source:  Larry Checco

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My father, who endured the Great Depression, survived World War II and returned home a decorated war veteran, barely had an 8th grade education. 

But in the 1950s, while my sister and I were growing up, he worked three jobs before he and my mother were able to buy a small roadside eatery where for 20 years they eked out an honest living working long hours flipping burgers and making milkshakes.

Their decades of hard work paid off.  It enabled them to build a very small, modest home, send their two kids to college, retire at age 62 and spend the remainder of their lives in modest comfort.

Sadly, they’re both gone now—and so is the memory of their experience of hard work, leading to a viable middleclass lifestyle, slowly but surely fading from the American landscape.

Fact is middleclass America has been losing ground for the past several decades.

When adjusted for inflation, for example, the average American household is bringing in less now than it was under Bill Clinton’s presidency, and, according to the Federal Reserve, median family net worth dropped nearly 40 percent between 2007 and 2010, alone.

The reasons for this are many, including technology and globalization, which combined have increased productivity while decreasing the need for and cost of labor. 

But something else has been at work here in America, something much more within our control. 

For the past several decades, through our tax code, there has been a huge transfer of wealth upwards. Those who have received the biggest income gains have also seen the largest tax cuts.

Supply-side Economics Results in Trickle-down Misery

It’s called supply-side, or trickle-down economics.  The Center for American Progress, a liberal Washington Think Tank, describes the theory as follows:  Reward wealth, allow the rich the freedom to use their money as they see fit, give corporations a free hand in how they treat their workers and customers and the result will be eventual prosperity for everyone.

In the 1980s, President Ronald Reagan put the theory into action by slashing the highest marginal tax rate from 70 percent to 28% and reducing the maximum capital gains tax to 20% (it’s currently 15%).

In Mr. Reagan’s now famous analogy, a rising tide lifts all boats.

Unfortunately, for the overwhelming majority of Americans, it hasn’t quite worked out that way. And  it hasn’t worked out that way after repeated attempts, including President George W. Bush’s tax cuts for the wealthy, which -- in combination with waging two off-budget wars -- ballooned our national debt to disastrous proportions.  

So why continue to pursue a strategy that has failed so miserably? 

Maybe, just maybe, it’s because the very people who have done so well since the 1980s have, along with their second, third and fourth homes, bought our government, as well. 

Remember, it’s no longer just about We, the People.  Now, according to some of our politicians and our Supreme Court, corporations are people, too.  They may not bleed the way we do, but they, and the people who profit from them, certainly know how to get their way in Washington.

According to the Center for Responsive Politics, last year special interest groups of all stripes and sizes spent US$3.3 billion lobbying the federal government, employing 12,633 registered lobbyists to do so. Combine those figures with our 535 perk-loving congressional representatives, and is there any wonder why our government is so dysfunctional?! 

Brand America

If Brand America once stood for anything, it stood for a solid middleclass.  It stood for working hard and moving ahead, not working hard and moving backwards, like so many Americans are doing today.

If we’re serious about revitalizing the middleclass in this country, corporate shareholder value and excessive executive salaries and bonuses need to be put in balance with workers’ wages and benefits.  

In addition, given recent history, there appears to be no good reason why earned income (wages and salaries) should be taxed at a much higher rate than unearned (investment) income.  

If supply-side economics actually worked, we would be flush with good-paying jobs and money would be flowing freely throughout all sectors of our economy.  Instead, corporations are sitting on trillions of dollars of cash, and the people who run them are worth exponentially more than the people who work for them.

If nothing else, a more balanced economy would make my mother and father rest easier knowing that there was a modicum of equity in the system—and that the hard work of their grandchildren stands a chance of being properly rewarded, as was theirs.  

Contents (c) 2013 by Larry Checco - All Rights Reserved

Larry Checco is president of Checco Communications. His latest book is entitled Aha! Moments in Brand Management: Commonsense Insights to a Stronger, Healthier Brand. Checco Communications is a consulting firm that specializes in branding.

Published by: Corporate Governance & Accountability Advisors, Inc. Content & Concepts ©2008 by CG&AA, Inc. All rights reserved