President Obama’s War on the Middle Class

I saw this today, and thought I’d share it:

More bad economic news for President Obama—and for the middle class.

The Bureau of Labor Statistics (BLS) reports that the U.S. average weekly wagedecreased by 1.7 percent to $955 between the fourth quarter of 2010 and the fourth quarter of 2011. This is only the fifth time wages have declined in the past 33 years, according to BLS. And the only time they have declined while the number of jobs is growing.

Maybe there really is a war on the middle class, and Obama’s policies declared it.

While politicians and the public see a wage decline as ominous, from an economic standpoint, it could be both reasonable and beneficial.

The demand for economic inputs, of which labor is one, declines in an economic downturn. When demand for some product or service falls, a falling price usually isn’t far behind. And that falling price, including the price of labor, often spurs people to buy (or hire) again.

The recent fall in the price of oil had everyone cheering; falling wages, by contrast, usually produce a different response: panic.

Both President Herbert Hoover and Franklin D. Roosevelt tried to fight falling wages during the Great Depression by keeping wages artificially high. That was the worst thing they could do. By forcing employers to pay more than the market could bear when the economy was tanking, they ensured that more people would remain unemployed—which only exacerbated the Depression.

So economists can make a good case for falling wages in a recession. However, as BLS points out, we are not in a recession (at least not officially, yet). The economy has been growing, albeit very slowly. And declining wages in a growing economy is unique, says the BLS.

Had Obama given the economy some breathing room it might be roaring back by now—and along with it jobs and wages. But he thought he had a better idea: suffocating the economy with massive new taxes and regulations.

The president wants to blame the “rich” and tax policy for what he sees as a decline of the middle class, but no one has done more to hurt the middle class than the president’s policies.

Today’s PolicyByte was written by IPI Resident Scholar Dr. Merrill Matthews.