“To the degree that polarization is exacerbated by government action, that can be undone overnight, for example by the expiration of the upper-income tax cuts,” Furman said. “On the deeper economic forces, we can start making significant progress right away, but it will certainly be an ongoing effort, which is why the president has made leveling the playing field for the middle class his priority.”
Perhaps Obama’s biggest success in helping the middle class, economists say, is the passage of his health-care bill, which they expect to keep medical costs down over time if the initiative works as advertised. The biggest challenge may be the slow recovery of the economy.
To achieve more fundamental improvements, Obama also is calling for a range of policies that would support economic growth at home. Examples include offering companies with employees abroad tax incentives to bring jobs home, investing in roads, bridges and rail systems that would make America a competitive place to work and investing in education at all levels. Research shows — unsurprisingly — that better-educated Americans have higher incomes.
But even if Obama was able to overcome Republican opposition in Congress and advance his agenda, economists say they can’t tell how long it could take to overcome the forces working against the middle class.
“It’s important to realize it’s difficult and, no matter how effectively we’re going to pursue it, we’re not going to have anything to show in one year or three years or even five years,” said Benjamin Friedman, a Harvard economist.
The middle class has been under pressure for decades. The factors most widely cited by economists are changes in technology that have allowed workers to be replaced by machines and globalization. Other factors include the long-running decline of labor unions and the dwindling number of two-parent households.
Recent research has showed that at least one of these trends, such as increasing productivity in China as a result of the nation’s investments in technology, are accelerating, adding to the economic pressure on the U.S. middle class.
“It’s not the result of any single policy and the forces that are contributing to it are not ones that politicians create,” Autor said.
Obama has spoken nostalgically of his grandparents’ generation and said he hopes to “restore an economy where everyone gets a fair shot, everyone does their fair share, and everyone plays by the same set of rules.”
Economists have come to call that period, following World War II, the “Great Compression,” because inequality dramatically declined as middle-class wages surged. It lasted until the 1970s.
Some economists today are skeptical about whether that could happen again.
The economy often achieved growth of nearly 4 percent per year in the decades after World War II, and much of the gains accrued to middle-class workers. Over the past 30 years, it has grown at an annual pace of less than 3 percent.
In 1960, there were more than five workers for every retiree. Today, there are fewer than three. And in 1960, the U.S. economy represented about 40 percent of the world economy. Today, it represents less than a quarter of the world economy.
“It’s a very different world and I don’t think it’s going to come back close,” said James Heckman, a Nobel winning economist at the University of Chicago.
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