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Democrats want to rise with the middle class

The Democrats are trying to take on the widening gap between rich and poor, stagnant wages and inflation as signature issues.
/ Source: a href="" linktype="External" resizable="true" status="true" scrollbars="true">The Washington Post</a

Meet Joe and Eileen Bailey, a politically independent couple from Long Island with three kids in public school, mounting financial anxieties and a flock of Democratic lawmakers clamoring to feel their pain.

The Baileys are fictional -- the creation of Sen. Charles E. Schumer (D-N.Y.), who used the family's worries to help Democrats chart a course to victory in last year's election and claim control of the Senate. Now Schumer wants to transform a sleepy congressional committee into a high-profile platform for examining the troubles of real people like the Baileys. His goal: to come up with a cure for middle-class angst that will carry Democrats into the White House.

"We have big plans," said Schumer, who is betting that economic insecurity will replace the Iraq war as the most important issue in the 2008 elections. "The party that can create a model paradigm, a platform that can answer some of these questions, will not only win in 2008 but could create a long-term majority."

As the third-ranking Democrat in the Senate, the chairman of the Democratic Senatorial Campaign Committee and the author of a new book on the middle class, Schumer is emerging as a key figure in that effort. But he is hardly alone.

Yesterday, as Schumer convened his first hearing as chairman of the Joint Economic Committee, two House panels were also taking testimony on the travails of the middle class. Sen. Edward M. Kennedy (D-Mass.) did the same two weeks ago in the Senate Committee on Health, Education, Labor and Pensions. And economists, academics and think tanks -- not to mention presidential candidates -- are grappling with the problem.

Many answers
What, exactly, is the problem?

In testimony yesterday, there were almost as many answers as experts. But they cited some common themes, ranging from stagnant wages to rising costs for college and health care.

As President Bush traveled to New York to tout a robust economy with a low jobless rate, low interest rates and low inflation, "this is not what's generally felt out there in America," said Rep. Charles B. Rangel (D-N.Y.), chairman of the House Ways and Means Committee, which yesterday wrapped up a four-part inquiry into economic conditions with a hearing on "economic challenges of the middle class."

"To me, even though you got more compassion for the poor, you've got to pay attention to the middle class. Because they vote," Rangel said. And right now, "the middle class are scared to death they could become poor."

By any measure, the middle class is not becoming poor. But it has stopped getting ahead quite so rapidly. Over the 15 years ending in 2004, median household net worth grew by 35 percent in the United States, with all income groups showing increases, according to a recent report by the Council on Competitiveness.

But wages in the vast majority of households rose by less than 15 percent when adjusted for inflation, while the top 20 percent had increases twice that large in the 20-year period ending in 2005. For the top 5 percent of earners, the report shows wages jumped by nearly 50 percent, as their average annual salary rose to $281,155.

Rising inequality -- the growing gap between the rich and everyone else -- is often cited as a primary cause of middle-class angst. Republicans yesterday disputed the notion that income inequality has widened during President Bush's years in office, citing Census statistics that show it has been relatively static since 2001.

In testimony before the Joint Economic Committee, Richard Vedder, a visiting scholar at the American Enterprise Institute, argued that income, at any rate, is the wrong measure. Spending is far more important to economic well-being, Vedder said, and "we know that, in any given year, consumer spending is far more equally distributed than income."

That view met with skepticism from other witnesses, who included two former Clinton administration Treasury secretaries, Robert E. Rubin and Lawrence H. Summers, and Princeton University economist Alan S. Blinder, a former vice chairman of the Federal Reserve Board of Governors. All are involved with the Hamilton Project, an initiative at the Brookings Institution that aims to rebuild the social safety net without interfering with international trade and the free market.

"The basic story is very clear," Blinder said. "Inequality was mostly falling for 30 or 35 years or so until the late 1970s and has been mostly rising since then." He offered a vivid example: In 1979, the average taxpayer in the top one-tenth of 1 percent earned about as much as 44 average taxpayers in the bottom half. In 2001, the rich taxpayer earned as much as nearly 160 less affluent people.

Modest agenda
So far, Democrats have offered a modest agenda for economically challenged families, pushing bills to raise the federal minimum wage, slash interest rates on college loans and reduce the price of prescription drugs for Medicare recipients.

Schumer and others are pushing for a broader response. In his book, "Positively American: Winning Back the Middle Class Majority One Family at a Time," Schumer acknowledges that he does not know "the eight words that will save the Democratic party." The book proposes to help the fictional Baileys by pursuing such goals as higher federal funding for public schools, a $15,000 tax deduction for college tuition and reduced dependence on foreign oil.

As chairman of the Joint Economic Committee, Schumer plans to look for ways to help Americans become more flexible in their work lives, in part by making it less traumatic to change jobs. Witnesses yesterday proposed making health insurance and pensions more portable, and more closely targeting job retraining programs. Summers also urged the committee to consider "wage insurance that would enable increasingly inevitable economic mobility to take place without significant and painful dislocation."

As for trade, Schumer said in an interview that, "deep in their gut, the average middle-class person knows that protectionism is throwing in the towel. Protectionism doesn't work. But the all-out, total-free-trade model isn't working, either."