Vice-President Biden recently released the report of his task force on how to help the middle class. While there are a few excellent recommendations, most of the report focuses on failed policy prescriptions of the past. An early indication on the biased nature of the report is the early admission that labor unions contributed heavily to the writing of the report, while business input is sparse in comparison.
The report claims that middle class income has been stagnant since the 1970’s, and middle class families need the hand of government to get ahead. The report plays fast and loose with the numbers as its focuses on families hides the rise of single-parent families. While the report correctly focuses on the rise of single parents contributing to income inequality, the report does not compare a middle class married family with a single parent family. Married couples have moved steadily up the economic ladder.
The report also focuses on wage income, while ignoring the fact that benefits such as retirement and health have been quickly increasing. Evidence omitted from the report shows that overall compensation, which includes all benefits, closely tracks productivity, both having roughly doubled over the past forty years. Since 1970, wages have grown 94 percent while productivity has grown 120 percent.
The overstatement of income inequality would not be as harmful, except Vice-President’s recommendations would slow economic growth and waste taxpayer dollars. For example, the reports calls for increased unionization and the implementation of assured union jobs at government pay levels.Recently however, the General Accounting Office concluded that adherence to cumbersome labor rules from Washington slows construction projects and other evidence shows that it increases costs.
While most of the other solutions involve more government spending and subsidies, there are some good ideas that would help middle class families. Primarily, the Administration would create a mechanism to automatically enroll workers into IRA savings accounts. Small businesses would be given a tax credit to offset administrative costs. This is a real solution that helps more workers take advantage of some of the best aspects of the US economy.
More provisions such as the auto-IRA would have valuable in helping the middle class. Other good ideas would be to promote better schools, more stable families and a decline in out of wedlock birth, since these are impediments to mobility. Instead, Vice-President Biden is focusing on turning back the clock to a period of increased unionism and government subsidies for government-approved behavior.