As Congress adopts a "fiscal cliff" solution providing Bush-era tax cuts to those making as much as $450,000, it's worth asking: What is the middle class?
To hear President Obama tell it until recently, the middle class consists of any household that makes less than $250,000 in annual income. That’s an expansive definition. Fewer than 10 percent of all United States households have an income higher than $150,000 – and the nation’s median household income is just over $50,000.
Congress, perhaps because it consists of those making, on average, $174,000, has uncritically embraced this definition. Because the budget “deal” so dramatically raised the income tax exemption, beyond the congressional median net worth, it’s easy.For the sake of accountability, it is also important to nip in the bud any “Mitch McConnell Made Us Do It” myths about why this concession was made.
As the goalposts move yet again, from January 1, 2013 forward, perhaps the benchmark of liberalism will be the question: “WWJD?” or “What Would John (Boehner) Do?"
For example, Congressman Steve Israel, the chair of the Democratic Congressional Campaign Committee, had long advocated for a middle-class threshold higher than Obama’s definition – he urged the president to go as high as $500,000, stating, “$250,000 may make you rich in some parts of the country, but not in places like New York.”
Actually, the average New Yorker, with a median household income of $55,246, would probably run out and buy a monocle and a top hat if he or she pushed into even a six-figure income.
Israel’s advocacy, coming as it did from a leading Democrat, reveals the disconnect between the political class and the economic one they’re supposedly championing. A fellow New Yorker, Franklin Delano Roosevelt, would have been appalled.
Roosevelt derided the theory “that if we make the rich richer, somehow they will let a part of their prosperity trickle down to the rest of us.”
Further, language can become perceived reality. Small wonder Iowa Senator Tom Harkin was disgusted by the tax concession, framed as the debate has been around discussion of the middle class. "We're going to lock in forever the idea that $450,000 a year is middle class in America,” he protested. This is quite apart from the fact that there is no mention of the "poor" anymore in American politics.
If we define the middle class as middle-income, there was really nothing for this population to gain under the fiscal cliff negotiations. The end of the payroll tax holiday is tantamount to a 2 percent pay cut for those whose wages have already been dropping. In fact, if you make betweeb $50,000 and $75,000, you’ll pay an average of $985 annually more under this “deal.”
In Thurston County, where I live, with state workers already sustaining a 3 percent pay cut, a 2 percent additional pay cut is just insult on top of injury.
Furthermore, the estate tax exemption would begin as large as $10 million for couples and grow to $15 million. Conveniently, this easily encompassed the Senate’s median net worth of $2.3 million, not to mention the fact that seemingly permanent House Democratic leader Nancy Pelosi is worth $26.4 million.
And as it turned out, Pelosi was no more liberal than House budget chair Paul Ryan, the 2012 Republican vice presidential nominee, when it really counted. It’s hard to imagine, had a President Mitt Romney been facing a Democratic Senate majority, things could have worked out much better – given that the default was tax increases. Kudos to Congressmen Jim McDermott and Adam Smith for joining three Oregon Democrats in voting no and avoiding race-to-the-bottom bipartisan triumphalism.
In a sign of what truly matters to Senate Democrats, they snuck in the continuation of a tax loophole for NASCAR: Mitt Romney raised over $266,000 from NASCAR executives and NASCAR itself. The coming cuts to domestic programs, to accommodate this gift, will easily exceed NASCAR’s $37 million a year boondoggle.
Another sweet deal included what the Washington Post called "a little-noticed sop for Wall Street banks and major multinationals": $9 billion annually for firms outsourcing American jobs overseas, like GE and JPMorgan. There was even tax-exempt financing for Goldman Sachs' New York City headquarters! All while eliminating an Affordable Care Act program to create more nonprofit health care options.
Triumphant anti-tax zealot Grover Norquist blessed the deal, tweeting: “Congress about to make permanent most of the temporary tax cuts that Democrats voted against in 2001 and 2003. Permanent beats temporary.”
Indeed. God bless America! As the goalposts move yet again, from January 1, 2013 forward, perhaps the benchmark of liberalism will be the question: “WWJD?” or “What Would John (Boehner) Do?" With taxes off the table, all leverage is gone. Now the spending cut war on the real middle class can begin in earnest.