Class Warfare or Class Welfare

It is no secret that the middle class in America is shrinking. The recent recession – if we can believe it is over – has left far too many people still struggling to make ends meet. In way too many instances, those that lost jobs that gave them not only a living wage but also left them money in their pockets to save or spend on enjoyment found jobs that pay far below the jobs they once held.

I’m no economist, but then, what do they know? Someone, I can’t remember who, once said, “if all economists were laid end to end, they would still point the wrong direction.” I look at this problem from a more practical viewpoint.

The term “class” as commonly used in this country today, refers to a category of the amount of wealth one has. The lower class being the poor, the upper class is the rich, and everything in between is the middle class. Economists like to assign degrees to each class, such as upper-middle and lower-middle, but does it really make much difference to you and me? We know if we are not rich and not poor, we must be somewhere in the middle.

With every price increase on items we need to survive that is not followed by a corresponding income increase, we lose ground and slip closer to the lower class. Because of the recession, a lot of people who were comfortably in the middle class are now knocking on the door of the poverty level.

Mr. Obama’s latest State of the Union speech was intended to give hope to those holding on by their fingernails to the middle-class status. He wants to raise the minimum wage, increase family tax credits, and give away free junior college. To pay for this he wants to increase taxes on the “rich”, end tax cuts on capital gains, and eliminate tax cuts on inheritances. It’s yet another wealth redistribution plan won’t work and has never worked.

Many economists call this class warfare. I call it class welfare. You take from those that have earned theirs and give to those that have not – the socialist utopia. Mr. Obama claims this will end the slide of the middle class. If that is his goal, he is going about it the wrong way.

Henry Ford created the middle class in America. He devised a method for manufacturing a large number of automobiles, reduced the price of his cars so everyone could buy one, added an enormous workforce, paid them high wages, reduced their hours, and grew his company. In the process, he created a ready market for his product by giving his workforce higher wages with extra money to save or spend and time to use the extra wages.

The middle class was formed due to Ford’s manufacturing strategy and ethic, not by some government program or presidential order.

The bottom line is that government can best reduce slippage of the middle class by allowing manufacturing to expand. They need to give manufacturers the ability to invest in larger, more modern plants, and in research and development. It is here that you find the good-paying jobs. The ones that won’t just stop the slide from middle-class, but bring everyone up from the depths of economic anxiety and solidly back into the middle class.

If Obama was truly interested in helping the middle class, he would kill the inheritance tax, eliminate corporate tax, and give tax incentives for manufacturing expansion and research. Instead, he mistakenly believes that class welfare and redistribution of wealth might somehow create a sustainable economic environment and bring more people into the middle class.

Well he is right about one aspect, there will be more middle-class people. But it will be populated by those formerly in the upper class. Obama’s way cannot and will not create a sustainable economic environment that can promote GDP growth or prosperity.