A great deal has been written about the death of the American dream for the middle class. Yet, talk to middle-class citizens and they will almost certainly not point to their mobile phone, or their flat-screen television, or the food they buy, or the cost of their car as the source of their financial worries. They will point to three things: the cost of housing, the cost of medical care, and the cost of sending their kids to college.
These are the three areas squeezing the middle class. All three are the result of bad government policy.
The cost of housing is almost entirely the result of zoning and other housing laws which artificially restrict supply. One only has to look at the cost of housing in areas (such as Houston) where supply is allowed to expand versus areas (such as San Francisco) were it is not. These laws are particularly devastating for the young, who are both denied affordable housing and are also prevented from moving to areas with some of the strongest employment markets.
(Housing policy is not a matter for the Federal Government. However, as your Representative, I would use the “bully pulpit” to press for better local policies. I would also resist Federal policies, such as housing and mortgage subsidies, that only paper over the problem.)
Healthcare is the subject of a separate discussion. There is probably no sector of the economy where government policy has been more destructive, driving up costs by inflating demand and restricting supply and competition. It is also worthwhile to note that one of the major reasons for slow income growth for the middle class is that wage increases have been swallowed by the rising cost of employer-provided health insurance.
Education is also the subject of a separate discussion. The cost of higher education is the only major sector in the economy where costs, pushed up by massive government subsidies, have risen even faster than healthcare. The terrible job done by government K-12 education, which has made college a seeming necessity, has also been a contributing factor.
Although these are the key steps that the government should take to relieve the expense pressure on the middle class, there are steps that can be taken on the income side also. A major improvement would be to reverse the explosion of occupational licensing, which has risen from approximately 4% of all jobs in the 1950s to something approaching 30% today. The requirement for a license to perform an occupation is almost always justified on the basis of protecting consumers, but in reality, it mostly exists to protect producers from new competition. These laws make it harder for people to climb into the middle class.
The best thing that the government can do for the American middle-class is to stop crushing it.