David Leonhardt identifies stagnant wages as the political issue of our time and the prime mover of Democrats' current woes, as they've been left holding the bag during a period in which median income has fallen. He runs through a list of measures that in part address the problem, of which some (infrastructure) have been blocked by Republicans, others (investment in education) work slowly (if at all), and still others (health reform) have made some headway -- but without much direct or immediate impact on most middle class voters. He then segues to a short-term solution that he suggests might provide at least political relief:
Truly new ideas don’t come along very often in any field, including economics.Leonhardt admits that the country as a whole is under-taxed, short of revenue for other economy-building action. Hence he suggests pairing a middle class tax cut with a further hike on the wealthy, which of course Republicans will never allow. It's not entirely clear whether he's touting the tax cut because it helps plug the income gap a bit, or because it may stimulate the economy and thus tighten the labor market enough to generate upward pressure on wages. Most likely both.
So it goes with lifting middle-class incomes. The best hope for doing so, in the immediate future, is probably the oldest and most obvious play in the book: a tax cut.
A few years ago, a middle-class tax cut would have seemed a silly idea. Both Mr. Bush and Mr. Obama had already cut taxes, and the federal budget deficit was enormous. But the deficit has since fallen sharply, thanks in part to lower health costs. Meanwhile, middle- and lower-income families are reaping a disproportionately small share of economic growth. Having the government try to rectify the situation doesn’t sound so silly now — and probably won’t in the 2016 presidential campaign.
