A few ways to really help the middle class

In these challenging, chaotic times, in which each day our president and his allies introduce more-divisive falsehoods into our national political debate, one must take solace where one finds it. I find it in the fact that the GOP tax cut has proved to be a huge dud for Republicans on the campaign trail.

Essentially, they promised that their tax cut wasn’t just a boon for the rich, that it would raise middle-class wages, juice business investment and pay for itself. Most people now recognize that none of these promises has come to pass.

As further evidence that the tax cut isn’t selling, President Donald Trump introduced a new tactic: promising yet another tax cut, one that this time is really going to reach the middle class.

If there’s any lemonade to be squeezed from this lemon, it is this: Suppose you actually wanted to use the tax code, along with other policies, to help middle- and low-income people, many of whom have been left behind even as the U.S. economy closes in on full employment in Year Nine of the current expansion. Which policies would you pursue?

I’ll focus on three: expand refundable tax credits, raise the minimum wage and maintain full employment.

But before I get into the details, here’s a critical design point about economic policies intended to help lower-income people: If we want to be sure they work, they must be direct. No bank shots allowed.

Consider the chain of events allegedly linking the Republican tax cuts with workers’ paychecks: After-tax profits must rise, stimulating greater investment, which leads to faster productivity growth, which trickles down into paychecks.

Here are some examples of direct shots into the paychecks on which low- and middleincome households depend.

Expand the earned-income tax credit: The EITC is widely recognized as a pro-work, antipoverty wage subsidy that lifts millions of working families out of poverty. Consider a married couple with two children, with one spouse working full time and the other working half time, both at the federal minimum wage. Their income would be about $23,000, not enough for a family to get by in virtually any U.S. city (and they’d have to pay payroll taxes on their earnings). But the family would be eligible for an EITC of about $5,700.

Although the Republicans’ tax plan added $1.9 trillion to the 10-year debt, not a penny of it went to expand the EITC (Republicans increased the child tax credit, but their design left out millions of low-income, working families with children). This must not stand, and one strong proposal to expand the EITC is the GAIN Act, introduced by Sen. Sherrod Brown, D-Ohio, and Rep. Ro Khanna, D-Calif. Sen. Kamala Harris, D-Calif., recently proposed a similar credit, one that reaches higher, into the upper-middle class, but otherwise maps similarly against the Republican cuts.

Raise the minimum wage: In the example of the working couple above, I used the federal minimum wage, which has been stuck at $7.25 for almost a decade.

Most states have raised their wage floors, and the findings of their impacts from very highquality research are consistently positive, by which I mean the earnings of the vast majority of workers affected by the policy get a lift, but millions of workers, especially in the South, are still subject to the unacceptably low federal wage floor. Minimumwage expert David Cooper makes a compelling case for a federal minimum wage of $15 phased in by 2024.

This debate sometimes pits the EITC against the minimum wage when they are, in fact, complements.

Maintain full employment: I’ve long banged on about how the benefits of tight labor markets disproportionately help the least advantaged: The less you earn, the more tight labor markets boost your earnings. In fact, the only workers whom tight labor markets fail to help are the highest-wage earners, whose pay is more a function of profits than low unemployment.

True, it has taken a long time in this recovery for the pressure of tight labor markets to show up in wage trends, but we’re finally starting to see some of that, which means a) the Federal Reserve needs to be patient in raising interest rates to prevent wage-push inflation, especially since there’s not much evidence of that occurring, and b) the direct wage and income enhancers discussed above are essential complements to full employment.

Trump’s imaginary middleclass tax cut is nothing more than a political tactic for the midterms. But if policymakers want to make a real difference in the economic lives of middleand lower-income working households, these three ideas provide an excellent start.

Jared Bernstein, a former chief economist to Vice President Joe Biden, is a senior fellow at the Center on Budget and Policy Priorities. He wrote this for the Washington Post.