Mitt and the middle class

By David Rohde
February 3, 2012

Mitt Romney’s declaration that he wasn’t concerned about “the very poor” was lampooned by Republicans and Democrats alike this week. But his next statement in a CNN interview is the one that could determine the fate of his candidacy.

“I’m concerned about the very heart of America,” Romney said, adding later: “My focus is on middle-income Americans.”

With astonishing speed, the 2012 presidential election is becoming a referendum on how best to help the American middle class. So far, Romney’s solutions are likely to be far more pleasing to the Republican base than the general electorate.

Reduce corporate taxes by 25 percent. Increase oil and gas drilling. Repeal Obamacare and Dodd-Frank. Cut non-security discretionary spending by 5 percent. Weaken unions. And reduce the federal workforce by 10 percent.

Where, Democrats contend, is the benefit to the middle class?

The conservative answer reflects the yawning ideological gap that will become more apparent in the months ahead. While Obama and Democrats call for the federal government — and society as a whole — to ensure that individuals have the opportunity to increase their social mobility, Romney and Republicans concentrate on broad economic growth.

“Republicans are focused much more on having a rising tide that lifts all boats, even if it lifts more yachts than dinghies,” said Scott Winship, a fellow at the Brookings Institution. “It’s very striking when compared to Obama’s very individual focus on human capital and a federal role in increasing it.”

As he has done in his approach to foreign policy, Romney is trying to channel his inner Reagan in economic policy. While Democrats contend that George W. Bush’s use of supply-side, unregulated, trickle-down economics caused the Great Recession, Reagan’s economic doctrine is alive and well on the right.

“Most of our problems now relate to this asset bubble that formed; it wasn’t so much what Bush did or didn’t do,” Winship argued. “The ’80s in retrospect were not a bad period economically. I think it’s hard to argue that trickle-down will end up hurting the poor or reducing middle-class opportunities.”

Winship and some conservative economists also go a step further. In a series of recent posts, they question a central liberal narrative: that middle-class wages have stagnated since Reagan’s presidency. Terry Fitzgerald, an economist at the Federal Reserve Bank of Minneapolis, has argued that the rapid postwar growth of the American middle class has slowed over the last 30 years, but the middle class has still increased in size.

“From 1947 to 1975, was very fast growth,” Fitzgerald told me. “It was slower since then, but it hasn’t been stagnation.”

Fitzgerald argued that economic studies showing little increase in the median income of American households are skewed by social changes, not only economic ones. Beginning in the late 1970s, high divorce rates reduced the percentage of American households made up of married couples from 63 percent in 1976 to 50 percent in 2006. Single-parent families earn far less than two-parent families, Fitzgerald argues, and drive down the median income.

Richard Burkhauser, a Cornell University economist, contends that the value of benefits families receive from the government and employers are also not included in studies showing meager increases. When the value of these benefits is included, he argues, the stagnation of middle-class incomes disappears.

Liberal economists scoff at such findings. They say a comprehensive study by the non-partisan Congressional Budget Office included such factors and still found tepid middle-class wage growth since 1979. Jared Bernstein, a former chief economic adviser to Vice-President Joseph R. Biden Jr., said supply-side economics failed in the 1980s and the 2000s and would fail again.

“Not only did it fail to reach the vast majority of American families, it actually contributed to the worst recession since the Great Depression,” Bernstein told me. “I can say with complete confidence that the supply-side, deregulate, trickle-down model is a failed model.”

“When I look at all the Republican candidates,” he added, “this is still at the heart of their thinking.”

Meanwhile, Romney, who is trying to unseat an incumbent, embraces a suffering-middle-class narrative. Doing otherwise would be political suicide. The bogey-man, he argues, is government intervention. Top-down economic growth will ease Middle America’s woes, not government programs.

Obama, on the other hand, regularly unveils new federal initiatives that he says will reduce the cost of college, make it easier for homeowners to refinance, and return manufacturing jobs to the United States. The philosophical difference could not be more profound — or more reminiscent of the 1980s.

One or two of Romney’s ideas are close to those of Obama. Unlike every other Republican candidate, the former Massachusetts governor supports instituting automatic increases in the federal minimum wage to keep pace with inflation. And he talks about the central role that increasing American exports and retraining workers could have in reviving the middle class in a globalized economy. But the similarities end there.

Romney argues that the federal government should get out of the job-training business, for example, and devolve all such efforts to the states. Asked for a specific step that would aid the middle class, Andrea Saul, a campaign spokesperson, cited a Romney proposal to eliminate all interest, dividend and capital-gains taxes for people earning less than $200,000. She argued that the philosophy of Barack Obama, not Ronald Reagan, was gutting America’s middle class.

“President Obama’s big government policies have been disastrous for the middle class,” Saul said in an email Thursday. “Mitt Romney is focused on helping those middle-income Americans who have been hurt worst by the Obama economy.”

In the months ahead, we’ll see if Middle America buys it.

PHOTO: U.S. Republican presidential candidate and former Massachusetts Governor Mitt Romney mingles with the crowd after speaking at a campaign stop in Eagan, Minnesota, February 1, 2012. REUTERS/Craig Lassig



23 comments

We welcome comments that advance the story through relevant opinion, anecdotes, links and data. If you see a comment that you believe is irrelevant or inappropriate, you can flag it to our editors by using the report abuse links. Views expressed in the comments do not represent those of Reuters. For more information on our comment policy, see http://blogs.reuters.com/fulldisclosure/2010/09/27/toward-a-more-thoughtful-conversation-on-stories/

So Republicans’ response to the fact that supply side trickle down top down voodoo economics has been repeatedly tried and has never worked is that it actually did work and we just didn’t realize how good we actually had it?

Posted by 4ngry4merican | Report as abusive

Does anyone know where Romney draws the income line for the “very poor” he is not concerned about?

It would appear to be that he means anyone earning less than $1,000,000. per year. If you make between 1 and 10 million per year you are in his “middle class” and thus qualify for getting your life improved via Government money??

Republicans. In touch with the heart of America — or at least Goldman Sachs.

Posted by txgadfly | Report as abusive

The elephants have lost touch with the real world, really since Gerald Ford, I do not believe there is anybody decent that can vote for their current “ideals”

Posted by Checksbalances | Report as abusive

“…a Romney proposal to eliminate all interest, dividend and capital-gains taxes for people earning less than $200,000.”
Gee, that would help ever so much! A middle class worker making less than $200K, typically derives almost all of his income from salary/wage NOT from capital gains.

Gee-Whiz Andrea, you mean I won’t have to pay capital gains tax on the $43.16 that I earned in interest this year?!? WOW that will really help me pay for my own life insurance, health insurance, and savings/investments now that I have no company benefits!

How about you tax income – regardless of the source – at the same rate?? So that if I earn $80K a year working and you earn $80K a year in capital gains while sitting on your duff, we would pay the exact same amount of taxes!?! Novel concept, eh? How about a more fair tax system so that I didn’t end up paying about 27% on my paltry earnings while your boss pays about half that percentage on his vast earnings? THAT might help the middle class!

Posted by MidwestVoice | Report as abusive

“…a Romney proposal to eliminate all interest, dividend and capital-gains taxes for people earning less than $200,000.”
Gee, that would help ever so much! A middle class worker making less than $200K, typically derives almost all of his income from salary/wage NOT from capital gains.

Gee-Whiz Andrea, you mean I won’t have to pay capital gains tax on the $43.16 that I earned in interest this year?!? WOW that will really help me pay for my own life insurance, health insurance, and savings/investments now that I have no company benefits!

How about you tax income – regardless of the source – at the same rate?? So that if I earn $80K a year working and you earn $80K a year in capital gains while sitting on your duff, we would pay the exact same amount of taxes!?! Novel concept, eh? How about a more fair tax system so that I didn’t end up paying about 27% on my paltry earnings while your boss pays about half that percentage on his vast earnings? THAT might help the middle class!

Posted by MidwestVoice | Report as abusive

If trickle down economics worked why do 3rd world economies continue to suffer?

Posted by JulsMan | Report as abusive

Excellent piece. The Republicans are wrong to regard government as “part of the problem” just because Reagan said so for rhetorical effect. But Obama had better start stealing the Republicans’ clothes and exercising his power of veto over wasteful spending programs, if he wants to be re-elected.

Posted by matthewslyman | Report as abusive

IMHO, both parties have their own “Elect Us” verbal verities, “shelved” until the next election if they win. Since Warren Buffet said, (I heard this first hand), the top 400 wealthiest families gained an average or 50 million per year 2001 and 350 million on average 2010, they gained in wealth by 700% while “the rest of us stayed level or lost 30 to 40%? Right, lets do that “one more time!” Essentially, the Republicans think that is just “fine” and the “way” capitalism should work. It is a very different view of the “capitalism,” I grew up to believe in, a “fairness” capitalism of responsible and moral leaders doing something more that merely “strip-mining” the wealth of the nation by exporting jobs and maintaining a porous border where illegals cross at will and “take” jobs — of course those are the jobs that “Americans refused to do (GW Bush). Well, I seen some of these in jobs I would like to take. But they watch out for each other and hire one another as if the typical American seems to have less opportunity because of it all.

Posted by WouldChuk | Report as abusive

“Corporations are people, my friend.” — Mitt Romney

As long as he stands by that statement, Romney is not even close to being a representation of the middle class. His means of income follows a pattern to that of the 1%.

Posted by KyuuAL | Report as abusive

Trickle down economics might work if it actually trickled down. But the big guys just want to use that rhetoric to brain wash us. Then they make ever bigger profits and keep the trickle for themselves. Very few middle class have any financial intruments that would even take advantage of savings from interest, dividend, or capital gains. Maybe they should try and live on 40 thousand dollars a year it might just ring a bell.

Posted by David123456789 | Report as abusive

Please please somebody else join this race. An honest citizen with no big business ties or membership in the Chamber of Commerce. Someone we can all call friend. We need you NOW.

Real Name: Doug Pederson AKA SpectateSwamp

Posted by bloggerswamp | Report as abusive

I feel for the GOP. If Mitt and his mittens are the best they can do for the middle class, they’re going to get their hats handed to them in November. Watch for the economy to continue to improve, the unemployment rate to continue decreasing, and for the ‘middle class’ to get some of the jobs created as a result of the current administration’s policies to help out. The USA needs to start switching away from ‘share holder’ capitalism (or predatory / cannibalistic capitalism) over to ‘stake holder’ capitalism which is what Europe has. Germany is an excellent example of this trend. It’s time to bury ‘supply side economics’ once and for all. The only people that benefited was the 1% – and for good reason. It was never aimed at benefiting the middle class, only weakening it thru deficit spending, taking heavy industry’s jobs offshore, eliminating jobs here in the US, open hostility towards unions, and molly coddling the oligopolies (big oil, big pharma, etc). Mitt Romney is Gordon Gecko’s second favorite love child. The first being Donald Trump.

Posted by USDemocrat | Report as abusive

Mr. Romney has failed to define “poor”. By an absolute measure employing a hard number, the poor represent fewer than 15% of American. But, if over one-third of Americans depend on public assistance to make ends meet via Food Stamps, Medicare, education grants, and EITN payments, then what pray tell is true size of the middle?

My sense is that Mr. Romney’s callous reference to the fate of the poor in a Romney Administration further evidenecs his disconnection with the reality in America. The reality is that the ranks of those without the means to effect personal change have grown dramatically since the beginning of the 21st Century. Romney’s vision is a radical departure from the enlightened vision of Theo. Roosevelt, and his designs for the 20th Century.

Posted by SanPa | Report as abusive

Just want to say that the comment by Julsman puts it succinctly: “If trickle down economics worked why do 3rd world economies continue to suffer?”

My following comment may be off the direct topic which focuses on income and taxes, but I believe it is relevant to the topic of the middle class.

The big-money Repubs in effect want a 3rd world type situation: total control and dominion by the 1-2% of everyone else. Trickle-down economics has been shown to not work, but don’t bother them with the truth, they are busy maintaining their dog and pony show. There are many people who do work hard, with either a good trade or college education, that by nature of what they do and where they are, do not make $200,000/yr or near half that, and at best are just staying even with where they were 10-15 yrs ago. There will always be the individuals that happen to get into a job/business where they make big money, even without any education beyond high school, but they are an exception. Republicans are adept at recruiting those fortunate individuals into their fold.

The Republican party has excelled for decades in using ideological concepts, not facts, to get votes and stay in power. Use of religious beliefs is a prime example. Note the use of Christian, “faith-based” ideology and fervor at the “Faith and Freedom” event that was central in media attention in the days preceding the South Carolina primary.

A step down on their social engineering checklist is the propagation of the notion that to be Republican is to be one of “the good guys in the white hats”; to be one of the elite, to be “better than those…people”.

Education is an example of Republican prowess at the use of ideology, such as religion, to garner votes from those in a profession who the Republicans actually work against at every turn. Some public school teachers have voted Republican due to the perception that the Republicans are more Christian, more godly. Yet, the same party attempts to destroy our system of free public education, by demeaning those who are most important in doing the real work of education, the teachers. By making teaching more difficult, by popularizing the idea that everything wrong in schools, and most of society, is because of public school teachers (and unions), they have lessened the respect for teaching as a noble and worthwhile career. The Repubs have succeeded in driving many a young person away from a career in education, or away from their home state to another state to teach. This works toward the Repub objective of controlling minds by controlling education, in their private and charter schools, while closing more and more public schools. This is another strategic effort, disguised by rhetoric pretending to want to improve education for the masses, to control both the middle and lower (income) classes. What is not said in their rhetoric which villainizes teachers, is that teachers do not the run schools (administrators, school boards and state officials do), and that teachers certainly do not direct what goes on in students’ homes, if they have a home. Good schools are important, but without good free public schools, the middle class will certainly have the rug pulled out from under them.

Posted by taxcorps2 | Report as abusive

“Broad economic growth” Republican definition: Suck as much money put of the middle class as possible and transfer it to the 1%. It’s not in the GOPs DNA to help anyone but the wealthy. Americans are beginning to get it. Obama will hammer it home.

Posted by myownexperience | Report as abusive

American’s are slowly starting to get it. Politican’s like Romney step out there and claim to be concerned about the middle class. But when you examine their policies and plans…there’s nothing there that ACTUALLY supports or helps the middle class. The 35% tax rate is the biggest lie going in America. It’s getting harder and harder to find anyone who actually pays that much in taxes. Romney says he pays 14% (on over $20M in 2010 earnings), Gingrich says he paid 31%. We already know that Buffett pays about 15% and that GE pays zero in taxes.

Posted by xyz2055 | Report as abusive

the gop has only two agendas – both spoken in private only:
1. eliminate taxes on the wealthy and large corporations.
2. eliminate all public programs.
nothing else matters. all else they say is just lip service, smoke and mirrors. what the rest of us propose is to return to tax rates they have already paid, before 1980, and between 1994 and 2000. that is not an increase, just giving back the lucrative breaks given by reagan and bush2. they were wealthy then they will still be wealthy. America is not an oligarchy yet and i trust that the 99% will understand it cannot become one, and that their votes will always outnumber the gop. but we have to vote! they have at most 25% of the population that swallow everything the gop, fox, & the radio bobble heads say.
abortion? didn’t the gop have all four branches of govt in total control for 6 years? why then was nothing done about roe v wade, or for that matter a balanced budget, deficit control, social security, medicare, medicaid, healthcare? for the answer see #1&2 above. smoke and mirrors – wake up before they ruin this country – they came much too close the last time they were in control.

“My heart and my best intentions still tell me that’s true, but the facts and the evidence tell me it is not.” Ronald Reagan

Posted by jcfl | Report as abusive

An interesting aside on “Mormon” beliefs with respect to secular government, and its role in society:

http://www.lds.org/scriptures/dc-testame nt/dc/134?lang=eng

http://www.lds.org/scriptures/pgp/a-of-f  /1.11-12?lang=eng#10

Posted by matthewslyman | Report as abusive

Just to add a little more flavor to the comments from a different perspective. Just the appearance of Romney seems commical to me, his clumsy and uncordinated body language, the expression on his face, a bit like a clown, a bit like someone not so clever. His jeans with that blue shirt, no-style dressing is just confirming the above.. I am wondering, who is smarter, he or a 5th grader?
Hope this guy does not get in to the White House, I really hope so.

Posted by AAAplus | Report as abusive

I think a basic problem of semantics that both parties and the voters have is a clear and agreed upon definition of who is in the the middle class. There used to be a blue collar working class that was above the poor yet not quite teh white collar middle class which seems to have morphed into the current middle class and the upper regions of it are anyone’s guess.

It seems that some people I would consider to be poor still consider themselves to be middle class because they work and own a home (and struggle to do that). I think it’s a matter of pride where many people call themselves middle class who wouldn’t pass an objective test of have much if any net worth.

I think quite a few wealthy people also call themselves middle class since they still see themselves wanting more things than they earn enough for and forget that they are doing quite well in comparison to most.

We really need some objective criteria such as a lower limit of $60K of both income and/or net worth and a higher cutoff of $250K in either income or net worth.
My numbers are just examples and may be different than what others would use, but the point is that only then could we really assess who and what helps the middle class and what doesn’t.

Posted by mikemm | Report as abusive

The heresay and innuendo in this article and comments seems less a search for the truth than a justification of the prejudice. How about we ask what has the current administration done to improve the middle class? How about what has the administration done to enable the poor to dig themselves out of poverty and move to middle class? It should be every American’s objective to be rich by their own hand, not by a handout. Let’s first ask if this president deserves another term based upon the results of his performance. Then we can sort out who to best replace him, if that’s the conclusion about what’s to be done.

Posted by wildbiker | Report as abusive

The trickle up poverty does not work either. Penalize people who take risk on themselves? Or have a good idea and execute it well?Or work many long hours and make sound investments? Bring down the successful in our nation, that’s the ticket. Pander to the lazy, and use class warfare, that will get you re-elected.

The heavily Marxist laiden comments lead me to believe that the re-distributionist campaigner in chief will be re-elected. I apologize for my demographic. Young, twenties, who are uniformed and say socialist things becuase it is cool.

Posted by dbird82 | Report as abusive

These over the top names and labels which the GOP intelligentsia has ordained are purposely inaccurate and hark back to the good ole Red Scare days shortly after the Bolshevik Revolution in Russia. What’s disturbing is it’s directed at a moderate president who has no collectivist tendencies. He does believe that “trickle down” is an empty promise and has legitimate concerns about the disappearing American “middle class”. America’s super power status was a result of the whole sale destruction of Europe’s industrial base during the war and our emergence as the only modern industrialized country not ravaged by the war. Our returning GI’s took advantage of the GI Bill and suddenly the new middle class was born of these new college graduates who led the nation into the second half of the 20th century. It was a tremendous expansion of the economy and the new men born in war rather than with a silver spoon ran it. The ruling class has a huge infusion of “new” blood. That has gradually shrunk since the early 70′s to the new economy which has transferred huge wealth to the top 1% mainly by tax law. It has shrunk the ruling class dramatically. It’s undemocratic and more like 19th century Great Britain than what 21st century America should be.

Posted by mkr1953 | Report as abusive