Middle Class Jitters

By Robert Samuelson

WASHINGTON -- We middle-class Americans are in a funk. "The overarching economic narrative of the 2008 campaign is the idea that life for the middle class has grown more difficult," writes Paul Taylor of the Pew Research Center, which recently published a massive report on middle-class anxieties. By its survey, more than half of Americans believe they either have not moved ahead in the past five years (25 percent) or have fallen behind (31 percent). Pew pronounces this "the most downbeat short-term assessment of personal progress in nearly half a century."

It's not that Americans have lost their optimism. About two-thirds say they have higher living standards than their parents did at the same age, and by a 2-1 margin they expect their children to live better than they do. But there's an underlying disenchantment that seems to predate today's higher oil prices, falling home values and declining employment.

"When my college-educated, gainfully employed thirty-something friends and I get together, we talk about money," writes Nan Mooney in her new book, "(Not) Keeping Up With Our Parents." "We talk about our inadequate health insurance and whether we can afford it, about how to juggle credit card payments and crushing student loans. ... This wasn't the life I'd expected."

Part of the deceptive sense of falling behind reflects the elastic nature of being middle class. According to Pew, 70 percent of households now have two or more cars, and a similar share has satellite or cable TV; 66 percent have high-speed Internet; 42 percent already have flat-panel TVs. Thirty years ago, no one's parents had this inventory. More students go to college and graduate school, so more have debt. Health care is expensive in part because modern medicine can do so much. Someone has to pay. One in 10 households now has a vacation home.

"Progress" keeps draining our pocketbooks. Pew finds that four-fifths of Americans find it hard to maintain middle-class lifestyles; in 1986, two-thirds did. But today's middle-class anxieties transcend the well-advertised "squeeze" on incomes. The deeper source of disquiet, I think, lies elsewhere. Middle-class families value predictability, order and security, and these reassuring qualities have eroded. People worry about rising living expenses; but what really upsets them is the possibility that their incomes or fringe benefits -- pensions, health and disability insurance -- might vanish.

Paradoxically, "the lives of individual Americans have grown simultaneously more prosperous and more precarious," writes Peter Gosselin in his new book, "High Wire." Gosselin, a Los Angeles Times reporter, has provided the most thorough account of this phenomenon to date. As he shows, the chances of being hit by a life-altering event (a long spell of unemployment, divorce, a big decline in work hours for one spouse) have declined slightly since the inflation-plagued 1970s and early 1980s.

But the consequences of setbacks have grown, he finds. The share of families suffering a 50 percent loss of income with a spell of unemployment rose from 17 percent to almost 26 percent. Fear of these setbacks has also climbed up the social ladder: not just factory workers and low-paid service employees but also managers and engineers. Companies downsize. Older workers exit in buyouts. Companies raise health-insurance premiums. The reliable "defined benefit" pension (which paid a fixed monthly amount) has given way to the riskier 401(k) -- vulnerable to bad investment decisions and sinking stocks. Corporate protections have weakened, as Gosselin notes.

One result is that bad economic news packs greater psychological punch than it once did, because more people identify with the victims. Change isn't just something that happens to them; it could happen to us. People worry even if they hold well-paying jobs.

We are losing our sense of entitlement. Under the implied social contract, people who "played by the rules" (to use a phrase popularized by Bill Clinton) deserved modest middle-class guarantees: a steady job, rising income and protection against random misfortune (sickness, disability, job loss, accidents). There was a belief that diligence and responsibility were their own rewards.

It's worth noting that this imagined entitlement never universally existed. From 1975 to 1984, unemployment averaged 7.7 percent (today's: 5 percent). The now venerated defined-benefit pensions sometimes weren't fully funded (so that promised benefits weren't always paid) or were funded at the expense of the next generation. Today's retired and well-pensioned autoworkers have condemned those who followed to lower-paid jobs or no jobs at all.

Almost all Americans consider themselves middle class. In the Pew survey, 53 percent put themselves in the "middle class" and 19 percent each in the "upper middle" and "lower middle" classes. But the prevalence of middle-class ambitions and values creates a vexing contradiction: The advances in living standards that Americans expect require a flexible and competitive economy that weakens the security and stability that Americans also expect.

McCain Won't Play by Obama's Rules

By Robert Novak

WASHINGTON, D.C. -- When one of the Democratic Party's most astute strategists this week criticized John McCain for attacking Barack Obama's desire to engage Iran's President Mahmoud Ahmadinejad, I asked what the Republican presidential candidate ought to talk about in this campaign. "Health care and the economy," he replied. That is a sure formula for Democratic victory, but it is one that McCain's campaign rejects.

Obama embraced that formula once it became clear that he would best Hillary Clinton for the Democratic nomination. He began pounding McCain for seeking the third term of George W. Bush. At the same time, Obama implores McCain in the interest of "one nation" and "one people" not to attack him. The shorthand, widely repeated by the news media, is that the Republican candidate must not "Swift boat" Obama. That amounts to unilateral political disarmament by McCain.

McCain is not about to disarm. His campaign has no intention of fighting this battle on Democratic turf. During the more than five months ahead, Republicans will explore the mindset of this young man who is a stranger to most Americans. That includes his association with the Chicago leftist William Ayers, who has remained unrepentant about his violent role as a 1960s radical. This will not be popular with McCain's erstwhile admirers in the mainstream news media, but America has not heard the last of Bill Ayers in this campaign.

Indicating what lies ahead is the McCain campaign's plan to bring in Tim Griffin, a protege of Karl Rove, who is a leading practitioner of opposition research -- digging up derogatory information about opponents. Although final arrangements have not been pinned down, Griffin would work at the Republican National Committee, as he did in Bush's 2004 re-election campaign.

It is an article of Democratic faith that John Kerry would have been elected president had not Republicans undermined public confidence in his leadership and integrity by assailing his performance as a Swift boat commander in Vietnam. McCain, idolized by much of the news media in 2000 as the potential Bush slayer, is now stigmatized as adopting not only his former intraparty adversary's policies but also his tactics.

Simultaneously, with Clinton no longer around to worry about, Obama deplores "the failed policies that John McCain wants to double down on." He is relentless in pressing home that point. Last Saturday, in Roseburg, Ore.: "If you agree we've had a great foreign policy over the last four or eight years, then you should vote for John McCain. ... (He) wants to give you the failed Bush health-care policy for another four years." On Monday, in Billings, Mont.: "John McCain has decided to run for George Bush's third term."

While on this attack, Obama rails against any responsive fire from McCain. He has lashed out against criticism of his declared willingness to sit down with Ahmadinejad and Cuba's Raul Castro. McCain's strategists are infuriated by prestigious political reporters and commentators whom they see supporting Obama's position. Time columnist Joe Klein turned up in Savannah, Ga., Monday for McCain's press conference, declaring that McCain had misrepresented Obama as proposing unconditional talks with the Iranian president. After asserting that "I've done some research" and "also checked with the Obama campaign," Klein said Obama "never mentioned Ahmadinejad directly by name. He did say he would negotiate with the leaders."

In fact, Obama has repeatedly been questioned specifically about Ahmadinejad. At a press conference in New York last September, Obama was asked whether he still would meet with Ahmadinejad. He replied: "Yeah ... I find many of President Ahmadinejad's statements odious. ... But we should never fear to negotiate." In November on NBC's "Meet the Press," he defended "a conversation with somebody like Ahmadinejad."

The debate over such "a conversation" was heightened by Bush's speech last week to the Israeli Knesset, suggesting "appeasement" by Obama. The White House has privately informed the McCain campaign it had no intention of leaping into presidential politics, but Obama's defensive response enabled him again to link McCain with Bush. Although the Republican candidate would like the unpopular president to get offstage politically, McCain is not about to run a campaign about health care mandates and home foreclosures.

Change You Can't Believe In

President Bush vetoed the $300 billion farm bill yesterday, and a bipartisan throng in the House promptly voted to override. The Senate is expected to follow shortly. Every one of these Congressional worthies purports to be an advocate of "change."

Yet you couldn't write a piece of legislation that more thoroughly represents the Beltway status quo than this one. In every way imaginable, and even a few more, it repeats and compounds the spendthrift errors of previous farm bills.

Since the last farm bill in 2002, the price of cotton is up 105%, soybeans 164%, corn 169% and wheat 256%. Yet when Mr. Bush proposed the genuine change of limiting farm welfare to those earning less than $200,000 a year, he was laughed out of town. The bill purports to limit subsidies to those earning a mere $750,000, but loopholes and spousal qualifications make it closer to $2.5 million. As Barack Obama likes to say, it's time Washington worked for "the middle class," which apparently includes millionaire corn and sugar farmers.

Another purported change is the arrival of "fiscal discipline," in Nancy Pelosi's favorite phrase from the 2006 campaign. Yet it turns out this farm extravaganza may bust federal budget targets even more than we thought a week ago. That's because the new price supports – the guaranteed floor payments farmers receive for their crops – have been raised to match this year's record prices.

The USDA reports that if crop prices fall from these highs to their norm over the next five years, farm payments will surge. For example, if corn prices return to $3.25 a bushel from today's $6, farmers would get $10 billion a year in support payments. If bean prices fall to their norm, they'd get $4 billion. Thus, if farm prices stay high, consumers face higher grocery bills and farmers get rich. If farm prices fall, taxpayers kick in the difference and farmers still get rich.

Sugar producers also make out like Beltway bandits, receiving the difference between the world price of sugar, which is now $12 per pound, and the guaranteed price of about $21 per pound. That's a roughly 75% subsidy for already wealthy cane growers and a nice payoff for the $3 million they contribute to House candidates each year.

All of this is a status quo that both political parties can believe in. More than a few liberal Democrats are privately embarrassed by this corporate welfare spectacle. But they've been mollified by Speaker Pelosi, who spent the last week assuring her left that the bill also includes another $10.4 billion for food stamps and nutrition programs. This entitlement expansion comes only days after the Congressional Budget Office reported that paying the bills for existing entitlements could require tax rates to climb to 80% in the future. Yes we can!

House Republicans are equally as complicit, despite their claims of having found fiscal religion after 2006. About half of them voted to override a Republican President. GOP leaders refused to whip against the bill, and two of them – Roy Blunt of Missouri and Adam Putnam of Florida – even voted for it. These are the same House Republicans who last week unveiled their new slogan, "The Change You Deserve."

Which brings us to Mr. Obama, who says he supported the bill though he wasn't around to vote for it. One of the Illinois Senator's major campaign themes is that he has no truck with corporate lobbyists, but the farm bill is the ultimate lobbyist triumph. Every special interest gets massaged. Just as Mr. Bush bent too far to GOP spending in his first term, Mr. Obama's farm bill support suggests he'd bow to the Pelosi Democrats on Capitol Hill.

To his credit, John McCain opposes the bill, and this week he gave a speech attacking it. Yet he's also missed an opportunity to make his opposition part of a larger case that he represents change from both parties in Washington. He could also turn the tables on Mr. Obama's claim that he better represents middle-class taxpayers. Failing that kind of campaign, the farm bill suggests that the only real change coming to Washington is more of what's in taxpayer pockets.