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Fight for middle class economic security

By Julian E. Zelizer, Special to CNN
  • Velma Hart spoke for the middle class, which fears economic reverses, says Julian Zelizer
  • Economic insecurity has risen sharply for most Americans, he says
  • He says neither party is taking the right steps to combat economic insecurity
  • Zelizer: U.S. needs to make smart investments in education, research

Editor's note: Julian E. Zelizer is a professor of history and public affairs at Princeton University. He is the author of "Arsenal of Democracy" and a book on former President Carter and editor of a book assessing former President George W. Bush's administration, to be published this fall by Princeton University Press.

Princeton, New Jersey (CNN) -- In an extraordinarily powerful moment last Monday, a middle class mother named Velma Hart confronted the president for whom she had enthusiastically voted.

During the town hall, Hart expressed to President Obama her deep frustration with the current state of affairs: "I've been told that I voted for a man who said he's going to change things in a meaningful way for the middle class. I'm one of those people, and I'm waiting sir. I'm waiting. I just don't feel it yet . . . I need you to answer this honestly: Is this my new reality?"

With this simple question, Ms. Hart articulated a feeling that is shared by millions of Americans who are growing more desperate for our current economic situation to change.

There is good reason for people to be anxious. The economic recovery has been sluggish. Although the National Bureau of Economic Research concluded that the recession ended in 2009, the reality of an unemployment rate that still hovers at 9.5 percent belies such optimism. Many of those who have been fortunate to obtain a job or to keep their existing positions feel as if they are barely hanging on to keep up with their financial obligations.

What makes the situation so troubling is that the basic problem is not the recession. The problem is that the economic insecurity of the middle class has been increasing for several decades.

Yale political scientist Jacob Hacker, both in a study that he developed for the Rockefeller Foundation as well as in a book entitled "The Great Risk Shift," has documented the gradual erosion of economic security that has taken place.

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Hacker defines the economically insecure as those Americans whose available household income has declined by at least 25 percent in one year as a result of falling wages and/or rising medical expenses, as well as those who lack a financial safety net.

Hacker's findings are shocking. Economic insecurity has steadily increased since the 1980s. The intensity of the swings in family income has doubled over the past forty years.

The possibility that Americans will suffer through a drop in their income of 50 percent or more over a two-year period has increased significantly (from 3-4 percent in the 1970s to almost 10 percent in 2004).

Parents are struggling to provide for their children and their parents, while the number of Americans declaring bankruptcy has grown. "The rising prevalence of two-earner couples," he writes, "does not appear to have provided a big income cushion to families."

The number of companies offering workers a defined benefit pension has dropped from 80 percent in 1980 to under a third. Worse yet, each economic recovery is weaker than the one that came before. With every downturn, Americans are forced to adjust to a "new normal" characterized by diminished expectations.

There is no single cause behind these changes. Rising medical and educational costs have squeezed families whose incomes have not risen accordingly. The amount of debt that Americans hold hampers their ability to achieve stable long-term financial conditions, while many emerging jobs don't offer good benefits or employment security.

Globalization has weakened many of our key industries and allowed businesses to produce goods in other countries with cheap, non-unionized workers. Many of the best jobs have gone abroad, while technology has rendered other positions obsolete. In Slate, James Ledbetter recently wrote about the end in growth of one of the nation's iconic jobs -- the salesman. No other occupation has experienced as sharp of a drop as sales has in recent years, a job that was the fastest-growing occupation in the period between the 1950s and 1980s.

Public policy is to blame as well. The value of cash benefits that the government provided to Americans who are in difficult conditions has shrunk. Many benefits have not been updated over the past few decades so their value has diminished as well. Although the overall wealth of the country has risen, regressive fiscal policies that started with the tax cut of 1981 have helped to skew wealth toward a narrower segment of the population.

Neither party has yet developed viable solutions to change this new reality. Last week, Republicans responded by unveiling an agenda that centers on tax cuts, a policy which will do little to alleviate economic insecurity.

Thus far, Democrats have taken a more aggressive stance. Most important, Congress passed a health care reform bill aimed at containing the cost of insurance premiums and preventing insurers from easily dropping beneficiaries. But huge questions remain about how effective the health care legislation will be at controlling costs -- a central concern for the middle class.

If the cost controls don't work and the regulatory structures prove to be feeble, the legislation will not achieve its prime objectives. Furthermore, on its own, health care reform is not enough to reverse the underlying challenge our nation faces.

If the nation is serious about responding to Velma Hart's complaint, and we should be, the government and private sector will need to generate much bolder ideas than anything currently on the table. This will require public-private partnerships that can stimulate investment and research in new economic areas that will allow us to compete in international markets.

The U.S. must look for the kinds of public investment that took place in the 1940s and 1950s, when government and private funds, combined with entrepreneurial genius, fueled the high technology sector and resulted in rapid development in areas such as the Silicon Valley in California and Route 128 in Massachusetts.

Improving economic security will also require smarter investments -- as well as reforms -- of our primary educational system so that we are training the best and brightest. Some of our nation's finest public universities are being badly damaged by the current cuts in state funds and will need to be revitalized.

The sad truth is that even when this recession officially ends, the economic pain felt by millions of middle class Americans won't go away. This is our new reality and one that has been building for decades. Restoring the security that middle class Americans enjoyed in the 1940s and 1950s -- fighting a war for economic security -- must be our central goal in years to come.

The opinions expressed in this commentary are solely those of Julian E. Zelizer.