Killing the American Dream

President Obama won re-election on the premise that he is defending the middle class.  But that very assertion assumes, firstly, that the middle class needs "defending" and, secondly, that it is the function of government to defend it.  Both assumptions are wrong.

Basic to Obama's thinking is the idea that the American middle class is endangered, and endangered not by government, but by capitalism.  That belief has profound implications for all of society.  It suggests, for example, that one's individual efforts are futile.  As the left sees, if an individual does succeed, it is on the backs of others who then are classed as victims.  By definition, an individual's effort to rise above the crowd is immoral because it creates "income inequality."  The proper course is to accept one's place as an anonymous worker within the gray collective ruled by a distant and all-powerful bureaucracy.

That image of the state, right out of Nineteen Eighty-Four, is what guides Obama's actions, and it has nothing to do with defending the middle class.  Instead, it is a concentration of power in the state that will lead to the destruction of the middle class.  The essence of the middle-class ethos is faith in the individual, not in government.  Those who have become "solidly middle class," as they say, are those who by their own efforts earn a secure and comfortable livelihood.

These upstanding, self-responsible citizens are precisely those whom Obama targeted in his infamous "you didn't build that" speech.  While some of them were spared -- for the time being, at least -- in the year-end fiscal cliff agreement, they are targeted for further tax increases demanded by the White House in exchange for still unspecified spending cuts.  Reportedly, those new taxes, whether through increased rates or elimination of deductions, would affect those making as little as $200,000.  Absent indexing and factoring in future inflation, $200,000 soon becomes $100,000, and then $50,000.

Obama's collectivist faith that we succeed "because we do things together" has frightening implications for the middle class.  What that means, in real terms, is that successful individuals don't have a right to keep what they have earned -- because they didn't earn it.  The state in the name of the collective has the right to confiscate nearly all of what successful individuals earn, and even now Obama is defining "the rich" as those earning $200,000 annually, whether or not those earnings are reinvested in a small business, a family farm, or some other enterprise that demands reinvestment to compete and survive.

The American left never specifies exactly what portion of earnings one should be entitled to keep, doubtless because most on the left believe that all private earnings should be confiscated and then redistributed by government.  What they have in mind is certainly more than the 75% that the socialist regime of François Hollande seeks from high earners.  The French law would affect only those earning more than one million euros, or approximately $1,335,000.  Obama wants a much broader tax: those Americans earning more than $200,000 would pay a similar rate, including federal, state, and local taxes, and more if one factors in death taxes of up to 50% in some states.  Before long, Americans will be heading for the Riviera to escape taxes.

The implication of the administration's tax policy is that no one should aspire to earn much more than others.  Not once in his presidency has Obama lauded the accomplishments of those hardworking Americans whose earnings place them in the top 1% (those earning more than $369,000) or even the top 5% (earning more than $161,000).  And yet those are the individuals who contribute most to their fellow men: the physicians, accountants, small business owners, and entrepreneurs who are affluent because they are productive.  It is as if the president thinks that aspiring, educated, hardworking individuals are stealing from others because they take home a bigger paycheck.  He wants us all to be unionized public employees compensated just for showing up.  That is not the road to prosperity, and without a growing economy, the middle class is dead.

The fact is that the middle class is endangered, but not by capitalism.  It has been placed at risk by those same actions that the president believes are necessary to save it: rising tax rates, greater regulation, and huge stimulus and wealth redistribution schemes designed to increase dependency.  As the past four years have demonstrated, these actions result in economic stagnation and slow job growth.  The long-term effect is less opportunity for the middle class.

As damaging as this stagnation has been, worse yet is the damage to the middle-class psyche.  For decades the left has preached a message of defeatism, and the Obama administration has translated that negative message into policy.

Before this insidious message took hold, it was always assumed that one's standard of living reflected one's individual ability and hard work.  From early childhood, middle-class children were told that "if you study hard and do your best, you will succeed."  Those words had a powerful effect on most young people from the middle class -- and on those who aspired to join the middle class.  They inspired Clarence Thomas to educate himself at the College of the Holy Cross and Yale law school.  The values of hard work and education that Thomas learned, especially from his maternal grandfather, are the same as those imbibed by most middle-class children in the past.

What should the President do to "defend" the middle class? He should admit that the middle class does not need defending. High taxes and excessive regulation are the greatest obstacles standing in the way of middle-class income growth.  Freed of government restraints, the middle class will return wage growth from its recent 2% level to the 5% that prevailed in recent decades.

Nominal average wages grew from just below $3,000 in 1951 to $41,335 in 2008, the last year of the Bush presidency.  Since then, they have grown just $1,644, not even keeping up with inflation.  During the Bush years, average wages grew by more than 25%.  What Bush did right was to lower taxes across the board, promote investment by introducing Health Savings Accounts and other savings mechanisms, and restrain the EPA and other agencies from killing jobs.  In other words, he got government out of the way.

Unfortunately, President Obama has spent four years on a very different path.  He has convinced many in the middle class that their own efforts make little difference.  According to this view, capitalism is rigged against the poor and middle class, and only government has the power to change things.

That cynical mentality is even more destructive to the middle class than high taxes or excessive regulation.  And, as Justice Thomas would be quick to point out, it is also opposed to the teaching of natural law that self-responsibility is the key to human happiness.  The middle class have always known this principle to be true.  Obama is working overtime to convince them it is not. 

Jeffrey Folks is the author of many books on American politics and culture, including Heartland of the Imagination (2013).