“Mr. Graves points out that the middle class is not a natural phenomenon; it's a product of state policy – of progressive taxation, redistribution of wealth, laws that allow for union organization, substantial support of education, health care and housing.
“As state supports diminish and taxation advantages are increasingly skewed to the wealthy, the middle class shrinks and inequality increases.”
Click on: www.theglobeandmail.com/news/politics/is-a-liberal-comeback-mission-impossible/article2250088/page3/
– Frank Graves, president of Ottawa based pollster Ekos Research Associates, in The Globe and Mail, November 25, 2011.
Obviously, the Liberal Party better go after the middle classes if it’s going to survive. However, Graves’s message is historically inaccurate and over-wrought—beguiling, but wrong. Primarily, economic circumstances not big government have turned away from the lucky middle class of our memories.
The breadth and affluence of Canada’s and America’s middle classes were not created by Henry Ford’s beneficence or by government spending — and, unfortunately, will not simply be restored by penitent One-Percenters and longer lists of public projects.
In fighting the last World War and mass unemployment, the public sector’s appetite for goods and human resources exploded and, for a while, government ran the economy. However, after building the atomic bomb, governments didn’t then decide to invent the most prosperous middle class in economic history.
That middle class—with its wonderful deep pockets—was already taking shape. Certainly, it was receptive to liberal and European ideas about how to use government to expand social benefits and secure its future. It was optimistic—after all, democratic governments had successfully performed extraordinary tasks for nearly a decade.
North American politics in the 50s and the 60s did generate new domestic policy ideas and promises. But above all, increasing middle-class wages and salaries enriched government revenues and made it easy for governments to spend. Indeed, in the 70s, governments were so sure that the money would keep coming in that they started capping income tax increases caused by inflating wages and salaries, and also enriched social entitlements like unemployment insurance, universal healthcare, and access to post-secondary education.
Republicans in the United States are being overheard telling each other that the next time they’re in charge they’ll dismantle much of the social safety net financed by Washington. (And Obama is effectively calling them for it.) However, the squeeze on the middle class today was not engineered by conservative governments or fainthearted liberals in the 1990s.
Governments in Western Europe and North America are struggling to keep up with rising inequality. The OECD reports that the redistributive impact of Canadian government tax policy on Canada’s wage gap offsets less that 40 per cent of the rise in inequality since the mid-1990s.
Click on: www.theglobeandmail.com/report-on-business/economy/canadas-wage-gap-at-record-high-oecd/article2259657/
Of course, that 40 per cent can be raised somewhat by adjusting how government taxes and spends. Being frank about more fairly taxing individuals and more effectively targeting benefits to people would give Liberals fresh attention. That approach, however, might credibly address the increasing inequality—but not the underlying problem.
Democratic governments never before have succeeded in significantly redistributing incomes in a flat economy. Liberals, as well as conservatives, need to start considering new ways for government to facilitate, not frustrate, private sector economic growth.
The changes going on in society and in the economy today are far more profound than the squirming that is going on in the state.