Commentators were right to point out that Mitt Romney committed a flagrant gaffe last week. Unfortunately, they were only half-correct in identifying the offense. Yes, Romney was impressively inartful in announcing that he was “not concerned about the very poor” because “we have a safety net there,” managing to upset both liberals (for his apparent insensitivity) and conservatives (for his apparent satisfaction with a welfare state they believe promotes dependency). But another objectionable part of Romney’s statement went mostly unremarked upon—namely, his declaration that his paramount concern was the economic circumstances of the middle class.
The idea that 90 or 95 percent of Americans are struggling may have achieved the status of conventional wisdom, but that doesn’t mean it’s correct. Indeed, it ultimately functions as a distraction: The attention we insist on paying to the overstated problems of the middle class come at the expense of the more critical challenges facing the poor.
Certainly a great number of Americans are in the throes of economic hardship and anxiety, and we should not be cavalier about the real crises they face: Things are significantly worse than they were before the Great Recession. But conventional accounts of how the broad middle is doing systematically overstate economic insecurity. For example, over 40 percent of those who were unemployed at the end of 2011 had been jobless for 27 weeks or more, a fraction unseen between the Great Depression and the Great Recession. But this figure is based on a statistical snapshot taken during one week. The long-term unemployed are captured in these snapshots month after month, the equivalent to churchgoers who never miss service.
In contrast, those with brief spells of joblessness cycle into and out of unemployment. They constitute a relatively small share of the unemployed at any point in time but a large share of all of those experiencing unemployment over longer periods. The briefly jobless are like occasional churchgoers who might attend a wedding here or a funeral there or who faithfully show up at Christmas and Easter. On any given Sunday, committed churchgoers dominate, but considering everyone who attended service during some year, they may be swamped by infrequent attendees. Reflecting these dynamics, over the past four years, no more than one in ten workers has experienced a spell of unemployment lasting 27 weeks. Similar claims about middle class families struggling with retirement security, debt problems, and other economic troubles are also overstated, as I’ve described in National Affairs.
Accounts of income stagnation or decline are likewise flawed. Income growth has slowed, but research by Richard Burkhauser and his colleagues and by Bruce Meyer and James Sullivan has shown that median household income still rose by as much as 35 or even 55 percent over the last 30 years. There were even small gains during the “lost decade” of the 2000s, prior to the Great Recession. While the gains since 2000 have more or less evaporated, that the typical household is—at worst—at the same level as in the boom years of the late 1990s is disappointing but hardly alarming. Accordingly, statistics show that middle class anxiety, contrary to many press reports, has been relatively muted: In mid-2010, half of Americans said their financial situation was better or no worse than before the recession, while just 16 percent said they were in “much worse shape”. These are not numbers to inspire cheers, but they do not paint a picture of a drowning middle class. Instead, they suggest focusing on a small minority who could use some help.
Meyer and Sullivan’s research also shows that incomes at the bottom have increased robustly over the past 30 years, contrary to what official income trends show. By 2009, the household income at the 10th percentile—the household poorer than 90 percent of the others—was only about a third lower than that of the median household in 1980, after adjusting for inflation. The increase was due to expanded generosity of federal cash and noncash benefits—the safety net that Romney trumpeted. Burkhauser’s research, too, shows that the federal safety net has effectively raised the living standards of the poor over time.
But there are two good reasons for focusing on the economic problems of the poor. First, just because living standards have improved does not mean that the lives of the poor are comfortable. Meyer and Sullivan find (roughly) that the household at the 10th percentile gets by on $20,000 a year, or under $1,700 a month. That is hardly luxurious. If you want a working definition of “struggle” or “insecurity,” consider for a moment the one in five household heads who reported that sometime in 2010 they worried about whether they would run out of food before they could afford to buy more.
A second reason for worrying about the poor is the restricted opportunities of low-income children. As I have argued in the pages of National Review, the U.S. is singularly ineffective at lifting poor children into the middle class as adults (poor boys, actually—we are as effective as other nations at lifting up poor girls). If you are reading this, chances are good that you are in the top two-fifths of the income distribution or can expect to be there at age forty. Just 17 percent of kids raised in the bottom fifth will make it there. Based on historical patterns, your own kids will have a 60 percent chance of doing so if they start out in the top two fifths.
Here the concern of conservatives about complacent satisfaction with the safety net—Romney’s included—is relevant. Our safety nets might simultaneously lift the poor out of destitution yet discourage the upward mobility of poor children. They may provide a floor but impose a ceiling, through inefficient incentives related to work, marriage, and saving. Furthermore, much of the left does not want to confront the important issues of family instability, criminality, and personal responsibility in limiting life chances.
At the same time, much of the right is reluctant to acknowledge the role of luck in determining one’s economic fate. Many conservatives are too ready to accept inequalities in adulthood that reflect decisions kids’ parents made and the decisions of kids themselves during the notorious period of irrationality that we call “adolescence.” We need more conservatives willing to experiment—using federal dollars—to figure out how to get more poor kids the greater skills that are prerequisites to economic independence and comfort in today’s economy.
Whether politicians ignore the poor and pander to the middle class or scare the middle class into thinking they are as bad off as the poor, the result is likely to be the same. Most of our policies will continue to be mis-targeted, as analyses by the Pew Economic Mobility Project and CFED have demonstrated. In turn, they will explode the deficit, leaving less money to promote upward mobility among the poor. And those policies that take the form of tax breaks for investing in savings or education will further price the poor out of markets for mobility-promoting assets—whether higher education or homes—by subsidizing investment the non-poor would have made even without tax incentives. Think “mortgage interest deduction”.
In fact, complacency about how well the poor are doing and scare-mongering targeted at the middle class both have the potential to reduce support for policies that would disproportionately help the poor, which would be a tragic irony for liberals who think they are promoting class solidarity by playing up the woes of middle-income Americans. Let us hope that 2012 might feature a real debate—and not only among the presidential candidates—over which economic problems merit the most attention in a nation that cannot afford to help everyone.