Sunday, July 22, 2018
Business

Reviving the U.S. middle class: Trump, Clinton tout different ideas — but will any of them work?

For a U.S. middle class shrinking before our eyes, Donald Trump and Hillary Clinton and their supporters spend a lot of time and sound bites offering ways to reinflate (or blame his or her opponent for hurting) that core slice of American life.

Will any of them work?

The middle class made up 61 percent of American households in 1971. Since then it has steadily declined to about 50 percent as of 2015. Now it may no longer represent an economic majority of this country.

The Pew Research Center pegs the nation's middle class at households (with three people in this example) with incomes as low as $41,641 or as high as $124,924. Those figures are largely the same for the Tampa Bay market — except the mix of rich versus poor is different. Nationally, 20 percent of U.S. households have incomes topping $124,924, but just under 16 percent do in Tampa Bay. And while 29 percent of U.S. households have incomes less that $41,641, nearly 32 percent of Tampa Bay households do.

It has gotten worse. In 2000, less than 28 percent of Tampa Bay households were identified as lower income, with 57 percent considered middle class and 15 percent upper income. By 2014, 31.8 percent of households were lower income, 52.5 percent were middle class and 15.7 percent were upper income. In fact, from Tampa Bay east to Daytona Beach, Central Florida is one of the larger geographic areas in this country where lower-income households exceed 30 percent.

Of 15 metro areas in Florida analyzed by Pew, 13 suffered declines in their middle-class households between 2000 and 2014.

In the race for president, the fate of the middle class is a red meat political topic.

"My opponent," Trump said during his acceptance speech at the recent Republican National Convention in Cleveland, "has supported virtually every trade agreement that has been destroying our middle class."

In her acceptance speech at the Democratic National Convention in Philadelphia, Clinton said, "America thrives when the middle class thrives." She called on U.S. corporations to be more patriotic in how they run their businesses.

"It's wrong to take tax breaks with one hand and give out pink slips with the other," she said.

Earlier this year, a Pew Research Center analysis concluded the American middle class is losing ground in 203 of 229 metropolitan areas across the country.

The so-called hollowing out of America's middle class has both Republicans and Democrats scrambling for public policy answers. Data show the middle class is getting smaller. Some households are doing better and edging into the upper-income strata of American households. But more households that were once deemed middle class are slipping economically and now are identified as lower-income households.

Here's a canary or two in the middle-class coal mine.

The U.S. homeownership rate in the second quarter of 2016 fell to 62.9 percent, the lowest in more than 50 years, the Census Bureau said Thursday, as rising prices put buying out of reach for many renters. And on Friday, the U.S. GDP in the second quarter was reported to have grown a mere 1.2 percent.

Economists fret that a weaker middle class means fewer households have the income or even the confidence to buy not only homes but cars and major appliances, to afford college educations for their kids or spend money on vacations. Less consumption, economists warn, means less economic demand, slower growth and little if any wage increases.

A rise in lower-income households means more must be spent on government programs to assist, which takes tax money away from other needs.

And, as now-former presidential candidate Bernie Sanders has argued time and again, the bulk of wealth being created in the United States is flowing into the hands of the elite rich — the top 1 percent — which means the vast bulk of the country benefits little from those economic gains.

Trump's protectionist solutions call for an America-first strategy to discourage globalization, steer U.S. company job expansion back to the United States and end — or at least renegotiate — international trade agreements that have hurt job opportunities among U.S. workers. Recently, though, even Trump is calling for a federal minimum wage increase to $10 an hour from today's $7.25.

Clinton's prescription to aid the middle class ranges from raising taxes on high-income households while trimming those on the middle class, making college more affordable, raising the minimum wage to $12 an hour, lowering child care costs and creating more jobs by investing in long-neglected infrastructure and clean energy initiatives.

Both candidates' solutions come at substantial cost. Neither is guaranteed to work. Each has some good ideas that call for changes that probably won't materialize. If Congress remains in Republican hands, Clinton will face strong resistance on legislative matters.

So, too, might Trump, since the mainstream Republican leadership in Congress continues to express doubts about the maverick Republican candidate.

Solving the dwindling middle class will not be easy or quick, no matter what any candidate may claim.

A Fortune magazine headline this month captures the correct tone: "The Death of the Middle Class Is Worse Than You Think." It is one of many articles that reported on a new study from the McKinsey Global Institute, with its own somber title: "Poorer Than Their Parents: Flat or Falling Incomes in Advanced Economies." Pressure on the middle class is global, not national, the report warns.

The McKinsey authors estimate that fewer than 10 million people were affected by flat or falling incomes between 1993 and 2005.

But that figure then exploded to between 540 million and 580 million people in the 2005-2014 period.

Are those big enough numbers for you? Keep in mind the entire population of the United States is fewer than 330 million.

Here's how Fortune sees this new and broader context playing out. "A huge swath of the world's population, one that had been taught to expect their material wealth to grow through their lifetimes and across generations, has learned that this promise was a lie," the article states. "No wonder voters in the rich world are being seduced by radical politics and specious solutions to their economic problems."

So, Donald, Hillary and the other candidates pursuing a most demanding White House job: One of you will face an angry world with some daunting standard-of-living challenges — not to mention a few other thorny matters.

Good luck.

Contact Robert Trigaux at [email protected] Follow @venturetampabay.

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