The Middle Class Grows the Economy, Not the Rich
President’s Speech Hints at Alternative Model of Growth
The speech President Barack Obama delivered yesterday on the state of the middle class was a forceful refutation of the failures of supply-side economics. Most promisingly, it reached for an alternative theory of economic growth based on the role of the middle class.
The president is certainly on to something. A weakened middle class doesn’t just hurt those who are losing ground. It hurts all of us by stifling our country’s economic growth, as my Center for American Progress colleagues and I have argued in a number of places. In fact, aspects of the president’s speech closely paralleled an article I wrote a year ago on the topic.
Consider that from 1947 to 1979, when the middle class received 54 percent of the nation’s total income on average, the economy grew at a steady clip of 3.7 percent per year. That was 1 percentage point higher than the 2.7 percent rate it grew at from 1980 to 2010, when the middle class was weakening to its current share of only 46 percent.
A 1 percentage-point difference in annual growth rates is a big deal: Over 30 years, an economy increasing at 2.7 percent annually will grow to about two-and-a-quarter times its original size. One growing at 3.7 percent annually will more than triple.
Further, New York University economist William Easterly’s research on international economic development finds that “relatively homogenous middle-class societies have more income and growth.”
While the president didn’t fully develop the argument for why a strong middle class is good for economic growth, he did articulate some key connections. I expand on those and offer some others below.
Dr. David Madland is the Director of the American Worker Project at American Progress.
To speak with our experts on this topic, please contact:
Print: Katie Peters (economy, education, poverty, Half in Ten)
202.741.6285 or firstname.lastname@example.org
Print: Anne Shoup (foreign policy and national security, energy, LGBT issues, health care, gun-violence prevention)
202.481.7146 or email@example.com
Print: Crystal Patterson (immigration)
202.478.6350 or firstname.lastname@example.org
Print: Madeline Meth (women's issues, higher education, Center for American Progress's Legal Progress)
202.741.6277 or email@example.com
Spanish-language and ethnic media: Tanya Arditi
202.741.6258 or firstname.lastname@example.org
TV: Lindsay Hamilton
202.483.2675 or email@example.com
Radio: Chelsea Kiene
202.478.5328 or firstname.lastname@example.org