Reviving the middle class
The most important long-term result of President Reagan's tax-cutting and tax-adjusting operation in the United States may well be something which neither he nor his political critics mentioned during the debate over the new tax bills and which no politician advocated, or opposed.Skip to next paragraph
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The talk during the debate was all about whether it would help the rich or hurt the poor. But what about the middle economic and social classes who are neither rich nor poor and who are usually much admired by sociologists?
Who are the middle classes? I would define them as the people who insist on the best possible education for their children but have to save and scrape and economize in order to provide it. If you do not have to scrape and save to get good education for your children provide it. If you do not have to scrape and save to get good education for your children then you are rich -- I would say very rich. If you can't afford anything extra for a better education for your children you are poor.
The Reagan tax program combined with Reagan budget-cutting is usually criticized on the ground that it will reduce welfare for the poor in order to make the rich richer. I doubt that in the long rung the poor are going to be made poorer. That will depend on what amount of federal aid to the poor will be taken over by states, cities, and private charities. The accounting on this part of the Reagan program will be in the future.
As for making the rich richer, does it make much difference? Their numbers ar relatively few. They were never seriously hurt by the taxes of the past because they could afford the lawyers who found the loopholes. The truly rich have not been paying taxes anyway. Tax reduction in the upper brackets merely broadens their investment opportunities. They will not be quite so dependent on the tax shelters. Perhaps they will become more socially useful by putting more of their wealth into job-generating investments, but they are touched only marginally by taxes.
The big difference will be in the changes in the tax laws which affect the middle classes. Mostly, middle-class people obey the laws, declare their incomes honestly, pay their taxes, support local charities, go to church on Sundays, seek higher education, care about improving the national culture, read worthwhile books, enjoy good music. Mostly they are the people who build a country and make it better.
The New Deal liberals of the past generation never set out deliberately to destroy the middle classes in the US, but the tax structure which has built up gradually since the New Deal era and which has been accentuated and accelerated by inflation was doing just that.
Inflation turned taxes which were intended to hit the rich into taxes which were hitting the middle classes, and dragging them down. Creeping taxation had become the great leveler of the middle classes. Inflation plus taxes have been wiping out two traditional features of the American scene -- the small businessmen of cities and towns and the farming family which lived on its farm and lived off its own farm and handed it down from generation to generation.
Small-scale farming is being swallowed up by agribusiness. In towns and cities mergers swallow little business to make big business and big corporations.
An ideal society would at least in theorty be classless, but where has a truly classless society ever existed? The nearest approach to such a society is probably to be found in the smaller countries of Western Europe -- Switzerland, Scandinavia, and the Netherlands. There is no classlessness in the communist countries. All of them have "new classes" exercising such power and privilege as the Western world has not known since the Middle Ages.
The US in the pre-Reagan era was headed toward a division of society between rich and poor. Was that a good thing? I prefer a society and an economy of many gradations from enough poverty at the bottom to provide an economic goad to enough wealth and visible enjoyment of it at the top to provide the carrot. Social mobility is a stimulus to a prosperous economy.
Mr. Reagan has at least checked the deterioration of the middle classes in America. Under the new tax laws some farms will continue to be farms in the same family for at least another generation. And under the new tax laws the middle classes of towns and cities will get enough relief of be able to give their children a better education for another generation, and to leave some inheritance to them.
This is certainly a reprieve for the middle classes. It might even save them.