I think that one of the reasons I frequently find myself in disagreement with the Washington Post columnist Robert Samuelson is that, although he’s not an economist (he’s a journalist), he shares a handicap that afflicts many economists. He simply does not have a broad enough background of experience against which to test his understanding of events. I believe that’s how he can write, as he does in his most recent column:
The middle class is thinning. Belonging is a matter of self-identity, and fewer Americans buy into its defining presumptions. Whether an improved recovery begins to reverse these attitudes and restore traditional beliefs and confidence is a crucial question for 2015. But repairing the middle class won’t be easy, because it’s a matter of psychology as much as economics.
He hinges much of his argument on the percentage of income tax revenue paid by the highest income earners and his assertion that most policy is intended to help the middle class.
I think that both of those are misreadings. It’s true that the top 10% of income earners pay the lion’s share of personal income taxes (as the lion will do). But personal income taxes as a share of federal revenues have been pretty flat over the years while FICA (payroll taxes) as a proportion of federal revenues has shot up. Since FICA is capped at about $8,000 those in the top 10% of income earners pay a smaller percentage of their income than those below.
And I challenge the claim that policy is intended to help the middle class in anything but a trickle-down sort of way. The federal government giveth and the federal government taketh away. Our trade policy overwhelmingly benefits those at the highest and lowest ends of the income spectrum while the steady erosion of middle income jobs over the last decade or so has been a foreseeable consequence of our trade policy.
I think that the reality is that middle incomes other than middle incomes paid to government workers have been pretty flat.
I think I’d also suggest that middle income people (from the second to ninth deciles) tend to be risk-averse and over the period of the last fifteen years nearly every institution we have has shown itself to be unworthy of trust, from government to companies to churches to the media. It reminds me of a Woody Allen wisecrack:
Question: What’s a three syllable word beginning with “p” that means you think everybody is against you?
I do not believe that when government is corrupt, overreaching, and spying on you, companies are rapacious, people in the United States are being killed by terrorists, churches are predatory, and the media mendacious it is a psychological problem. Under the circumstances continuing to trust would suggest a psychological problem.
If middle income people are losing the traits of middle income people, it may be because they are starting to live the insecure, low trust lives of the poor.