Alan Reynolds

Washington Post columnist Richard Cohen laments the fact that candidates are under heavy pressure to tailor their beliefs (or rhetoric) to "get past ideological bottlenecks" in early primary states: "For Republicans, it's the religious right; for Democrats, it's economic pressure groups such as teachers unions. The rest of us can only stand by, helpless, waiting for extremists to pick a man or woman on the basis of issues that mean less to us."

To appeal to affluent trial lawyers, movie producers and union bosses, Democrats are expected to preach and moralize about "the inequality crisis." This involves chanting about things that are flatly untrue, such as wage stagnation and the shrinking middle class, and speaking ominously of some undefined "economic anxiety." New York Times columnist David Brooks noted that "the Democratic view of the global economy has grown unremittingly grim. When John Edwards talks about the economy, you think he's running for the Democratic nomination in 1932."

A contest for the soul of the Democratic Party seems to be developing between super-grim "neo-populists" at the Economic Policy Institute, semi-grim "mainstreamers" at the Brookings Institution and the relatively upbeat "progressive realists" at Third Way. A new Third Way report, "The New Rules Economy," notes that median household income is misleading because "one-third of American households are headed by someone who is either very young and earning an entry-level paycheck or by someone who is of retirement age and likely to be earning no paycheck."

The authors suggest that "the 'real' middle class is made up of households in their prime working years, ages 25 to 59, 75 percent of whom are couples and 56 percent of whom are couples with two earners. The median income of these prime-age households is more than $61,000. If it is a married-couple household, the median is more than $72,000. And if both spouses work, the median is more than $81,000. ... The bottom line is that the middle class is shrinking, but not because the bottom is dropping out; it is because more people are better off. From 1979 to 2005, the percentage of prime-age households earning over $100,000 in current dollars grew 12.7 percentage points, while those earning between $30,000 and $75,000 shrank 13.3 percentage points."

I made similar factual observations in the second and third chapters of "Income and Wealth." Yet it seems far more likely that some wise Democratic presidential candidate might actually look at such facts if they came from progressives. Doing so requires abandoning the AFL-CIO party line and campaign support, of course, but a dose of independence and economic optimism could prove surprisingly effective in the general election.

Alan Reynolds

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