Can America's Middle Class Be Saved from a New Depression? - The New York Times - 0 views
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great depression great recession welfare government spending middle-class history culture politics
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In 2016 the Pew Research Center released a study that examined 229 metropolitan areas across the country: In 203, the share of adults living in middle-income households declined from 2000 to 2014, while the share of adults living in lower- and upper-income homes each rose in more than 150 areas.
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At the same time, the cost of minivans, homes, health care and college tuition has increased. Families reacted to this new reality by plunging themselves into debt and neglecting to save,
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in America, you become middle-class by consuming: If you cannot afford a home in a respectable school district, a pet, summer vacations and so on, you have not ‘‘made it.’’ Despite their outward trappings of prosperity — and often because of them — many middle-class families have negligible savings and too much debt.
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But the American middle class is neither stable nor self-reliant. Recognizing this is the prerequisite to determining what we need to weather this storm.
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The American middle class long has been presented as evidence that self-reliance leads to stability, even prosperity. The very existence of a middle class appears to prove the notion that if we work hard enough and make the right choices, everything will be OK — and also its corollary: that the poor must have somehow brought poverty upon themselves and that we, industrious workers that we are, will surely never be one of them
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Before the pandemic, Americans saved approximately 8 percent of their income, which would cover a fraction of their living expenses. American households carry an average of $111,198 in debt. Even in flush times, this kind of financial exposure can be stressful. During long spells of unemployment and underemployment, it can lead to ruin.
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virtually every American has benefited from some form of public aid, from programs widely recognized as ‘‘welfare,’’ like food stamps, to more hidden subsidies issued through the tax code, like government-subsidized retirement benefits
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the average middle-class American family (with a before-tax household income of $66,400) receives more help from the government than it pays in federal taxes and collects more aid than the average American family in the lowest income quintile (with a before-tax household income of $24,600).
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countries with more robust welfare states have been able to respond to the recent economic downturn with a high level of competence and the kind of deep investment that the Covid-19 pandemic demands.
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In nations like Britain and Germany, workers have been allowed to keep their jobs even as businesses shuttered because their governments are paying all or most of their wages.
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Because Germany already had a system, known as Kurzarbeit, in place to pay workers whose hours are reduced during economic crises, it didn’t need to reinvent the wheel when the coronavirus began to spread. Other countries that didn’t have such a system in place, including Ireland and Denmark, quickly fashioned one.
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it’s not just the design of a nation’s welfare infrastructure that matters but also its level of commitment to protecting basic human needs.
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just as states go to war with the army they have, in a recession they tend to catch the unemployed with the safety net they have
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America not only lacks many programs that buffer workers from economic calamity — such as the right to housing or universal health care — it is also bereft of a national culture characterized by social solidarity and faith in government.
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About a third of Americans express trust in the government, unlike most Germans, Norwegians and Swiss.
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countries that have been able to bend the curve of Covid-19 cases, both in Europe (Switzerland, France) and Asia (South Korea, Taiwan), have been those where citizens recognize the importance of strong government.
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Countries that have yet to respond as effectively — including Brazil, the United Kingdom and the United States — have publics deeply skeptical of their governments as well as current heads of state (Jair Bolsonaro, Boris Johnson and Donald Trump) who share, and stoke, that sentiment.
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‘‘The American public consistently expresses a desire for more government effort and higher levels of spending for almost every aspect of the welfare state,’’
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The New Deal erected an institutional scaffolding designed to provide unprecedented stability and predictability for the American economy,’
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The quarter century of prosperity that followed World War II was rooted in the profound structural reforms of the New Deal. A strong market was made possible by strong government intervention.
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It is now widely acknowledged that the federal government should have acted sooner and spent bigger when addressing the 2008 financial crisis. In March, Neel Kashkari, who oversaw the rescue package (the Troubled Asset Relief Program) and is now president and chief executive of the Federal Reserve Bank of Minneapolis, wrote, ‘‘My experience underscores that if there is a principle policymakers need to keep in mind going forward, it’s this: Err on the side of helping as many workers and businesses as possible rather than on prudence.’’
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In 2008, the government hobbled the rescue package by trying to make sure that only ‘‘deserving’’ Americans received help, slowing and narrowing relief. ‘‘The American people ultimately paid more because of our attempts to save them money,’’ Kashkari wrote with hindsight.
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‘‘Adding $3 trillion in spending,’’ as the HEROES Act would, ‘‘is necessary for spending after the summer and most importantly to start helping states.’’ J. W. Mason, an associate professor of economics at John Jay College in New York, pointed out that $3 trillion corresponds to a 20 percent decline in private demand, which, based on what happened in the 2008 recession, we should prepare for.