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The Middle Class and Economic Growth

The Middle Class and Economic Growth

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CAP's Middle Class and Economic Growth project looks to provide a better understanding of the relationship between middle-class strength and the nation’s economic health.
CAP's Middle Class and Economic Growth project looks to provide a better understanding of the relationship between middle-class strength and the nation’s economic health.

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Published by: Center for American Progress on Jul 31, 2012
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07/31/2012

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1Center or American Progress |  The Middle Class and Economic Growth
 The Middle Class and Economic Growth
A Project of the Center for American Progress
Michael Ettlinger
Over he pas 236 years, he Unied Saes has risen rom a backward band o peripheralcolonies o he greaes economic orce in he hisory o he world. Why? Has i been because an elie handul o wealhy Americans made brillian invesmens? Or has i been because hundreds o millions o Americans have worked hard, improved hem-selves, sared businesses, invened new hings, buil communiies, and consrucedan economy ha provides or he many and no jus he ew?Te Cener or American Progress’s Middle Class and Economic Growh projecexamines hese wo divergen views o how he economy works: one ha embraces hesupply-side, rickle-down dogma ha has dominaed policymaking or he pas 35 years,and he oher, which insead o atribuing he success o our counry o a scan ew a he op, ascribes he naion’s economic success o he role o he ens o millions o engines o growh who are he American middle class. Te projec does his hrough: Economic analysis rom CAP and ouside economiss  An even series eauring prominen economiss, business leaders, journaliss,and policymakers Mulimedia presenaions o he issues and he evidence Policy proposals o address he challenges aced by middle-class Americans
Our philosophy
Te undamenal hesis o his projec is ha he middle class is he hearbea o he American economy. Te middle class is he indispensable workorce and he all-impor-an consumer. Te grea American enrepreneurs and invenors who have been vial oour naional success have come rom he middle class. I is he educaion and skills o he middle class ha have driven he rise in produciviy ha has underpinned our pros-periy. And i is a sable middle class ha has kep America ree o he urmoil o mucho he res o he world and has made vial invesmens in educaion, roads, and ohereconomically imporan inrasrucure. Te ascendency o America o being he riches
 
2Center or American Progress |  The Middle Class and Economic Growth
naion in he hisory o he plane is undamenally a middle-class achievemen. For ourcounry o succeed going orward, we need o ge back o he undamenal ruh haour success hinges on he srengh o he middle class.Te proo o his can be ound in: Te clear ailure o supply-side economics as an economic sraegy 
1
  A growing economic lieraure as documened in our paper, “Te American MiddleClass, Income Inequaliy, and he Srengh o Our Economy,”
2
ha shows how asrong middle class is vial, and how excessive income inequaliy is harmul o ournaional economic success  A look back a our naions economic hisory Te reason he middle class is so imporan isn’ complicaed:
•
Businesses need middle-class cusomers. I you ask business owners wha moivaeshem o make invesmens and creae jobs, hey’ll ell you is cusomers. From wheredo he majoriy o cusomers come? Te middle class.
•
Te economy depends on he skills o he middle class. I you look o wha has beena he roo o economic growh over ime, i has been growh in worker produciviy and he inveniveness o our people. Who among us has had he exibiliy o pospone jumping direcly ino he workorce aer a minimum level o educaion and inseadavail hemselves o he opporuniy o enhance skills by pursing higher educaion?Te children o hose securely in he middle class.
•
Innovaors, invenors, and enrepreneurs come rom he middle class. Why is his so?Unlike hose wih lower incomes—who, by necessiy, are consumed wih issues o day-o-day survival—middle-class individuals have he ime and capaciy o come up wih inno- vaive new business ideas, o inves in hem, and o develop and oser hem. Moreover,scary hough i may be, middle-class Americans can aord o ake he risk o leaving a jobo sar a business. I you look a he orunes o he Forbes 400, hey were mosly sared wih a risk, an invenion, or an invesmen by someone rom he middle class.
•
Te middle class creaes sabiliy and invesmen in he economy. I’s also he middle classha has he bigges sake in seeing he U.S. economy succeed. Te rich are largely immunerom he success or ailure o any paricular counry’s economy—he quesion or hemis he exen o heir wealh, no wheher hey are going o be able o live lives o comoror wheher hey can aord o send heir children o college. Te res o us, however, are very dependen on he success o our counry’s economy. Tis doesn’ mean ha herearen’ wealhy individuals who care deeply abou he naion’s economic well-being, bumiddle-class voers are hose who orm he backbone o suppor or public invesmensin educaion, inrasrucure, and he oher building blocks o a srong economy.

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