If we’re serious about

Rebuilding the working middle class

A lot has been written about the demise of the working class and the middle class in America as though they were somehow two different groups of people, one of which didn’t have to work to pay their bills. The reality is that unless your income is well over $400,000 annually (more in some places), you are probably dependent on continued income from your job to pay for the house, the car, food, and the other necessities of life and, if you’re one of the 50% of American households making less than $80,610 (2022 figures) annually, dependent is an understatement and if you lose your job or even a couple of weeks due to an emergency, your financial stability is suddenly shaky. Almost as much has been written about what government programs can do to remedy the situation with very little action following, mostly because Congress has become a wholly owned subsidiary of the wealthy class that pays for their campaigns, consultants, and contract staff. If we were really serious about revitalizing the working middle class, there are some simple to do but difficult to get passed things that Congress could take care of in between legislating bathroom access and determining the duration of the next Continuing Resolution to allow the government to operate.

1) Employee Stock Ownership Programs (names vary, but the concept is the same) were very common in the 60s, 70s, and early 80s as engaged employees were regarded essential to the ongoing stability and well-being of the companies they worked for. Changes to tax law and the rise of venture capital led to the demise of many such plans and, as a direct result, the stock market has become much more focused on short term return and fewer people are providing for their retirement through payroll deducted purchase of their employer’s stock. If that has also resulted in a less stable workforce and made mergers and acquisitions easier for the Monopoly Money class, they consider that a feature, not a bug. Undoing those changes and enabling more people to participate in the equity market is key to building a strong middle class.

2) Stock market investments were once regarded as income stabilizers because the focus of corporate finance was the profits that enabled the payment of dividends which determined the value of owning the stock. When the focus of corporate finance became the maintenance of the stock price to provide for executive bonuses and the justification of exorbitant salaries and benefits to the senior management and boardroom class dividends became less important and, as a direct result, more is spent now on manipulating the stock price through buybacks and short term “advisories” and maintaining a solid corporate operation and financial foundation so that the stock price is based on core value and operating returns. Making buybacks illegal as they were until 1982 would be a psychological step in the right direction as well as a solid economic move. Additionally, dividends should be paid from pre-tax corporate net and taxable as income to the recipient instead of double taxed as they are now.

3) Finally, interest on borrowed funds whether for stock buybacks, operating cash flow support, or to maintain a dividend level in companies that are financially challenged should no longer be tax deductible. Consumer interest is paid from post-tax personal income and, if companies are political people, they should be taxpayers on the same basis that everyone else is. It would be interesting to see a politician, political party or even a creative business magnate implement some of this or encourage one of their Congresscreatures to submit the enabling legislation.