“Room to Grow” is the new GOP manifesto to win middle-class voters.

A few interesting excerpts:

"Two-thirds of Americans think it is harder to reach the American Dream today than it was for their parents, and three-quarters believe it will be harder for their children and grandchildren to succeed"

"Americans do not have a sense that conservatives offer them a better shot at success and security than liberals. For that to change, conservatives in American politics need to understand constituents’ concerns, speak to those aspirations and worries, and help people see how applying conservative principles and deploying conservative policies could help make their lives better."

"As for political parties, Pew found that middle-class adults are more likely to say the Democrats rather than the Republicans favor their interests. Sixty-two percent of those in the middle class say the Republican Party favors the rich while 16 percent say the Democratic Party favors the rich. Thirty-seven percent of those in the middle class say the Democratic Party favors the middle class while 26 percent say the Republican Party does. And 34 percent say the Democratic Party favors the poor, while only two percent say the GOP favors the poor."

http://ygnetwork.org/wp-content/uploads/2014/05/Room-To-Grow.pdf

Then there’s the matter of upward mobility. Upward mobility is the central moral promise of American economic life; the hallmark of our system is the potential for advancement and greater prosperity rooted in merit and hard work, rather than in the circumstances of one’s birth. Yet the odds of moving up or down the income ladder in the United States are roughly the same as they have been for decades. Many European countries now have more social mobility and opportunity than the United States. And today a child’s future income depends on parental income more in America than it does in Canada and Europe. (The odds of escaping poverty are about half as high in the United States as in more mobile countries like Denmark.) So while mobility isn’t getting worse, it isn’t getting better, and according to Lawrence F. Katz, a Harvard economist and mobility scholar,  “What’s really changed [are] the consequences of it. Because there’s so much inequality, people born near the bottom tend to stay near the bottom, and that’s much more consequential than it was 50 years ago.”

So whom does the public hold responsible for these stifled opportunities? According to Pew, a majority of middle-class adults put most of the blame on the government for the difficulties they have faced in the past ten years, and people blame Congress more than any other institution. Fully 62 percent placed “a lot” of blame on Congress, followed by banks and financial institutions (54 percent) and large corporations (47 percent).

The Heartland Monitor Poll, meanwhile,found that 64 percent of Americans believe Congress has made things worse for the middle class while only 8 percent believe legislators are making things better. And when asked to choose between three competing explanations for the  creasing struggle facing average Americans, 54 percent of those surveyed blamed “elected officials making the wrong policy decisions.” Twenty-three percent named “business leaders not paying their employees enough.” And only 17 percent blamed “the economic impact of technology and globalization.”

Upon taking office, President Reagan cut rates across the board; marginal income-tax rates that had spanned from 14 to 70 percent were cut to a range of 11 to 50 percent. The positive impact on work incentives for high-income households was enormous, as the workers with the most control over their hours, output, and pay structures had a strong reason to increase their earnings. These tax cuts improved work incentives much more for higher-income households than for the middle class. Cutting the income tax rate from 70 percent to 50 percent meant the highest earners could keep 50 cents instead of 30 cents on every dollar of extra earnings. Marginal after-tax earnings rose 67 percent. By contrast, a more typical middle-class household saw an 8 percent increase in marginal after-tax pay. The much smaller improvement in incentives for the middle class was not class warfare. It was the result of having a progressive tax code with a very high top rate.

A strategy of reducing tax rates simply cannot enhance work incentives as much for those who already keep most of what they earn. Let’s say we cut the 15 percent federal income-tax rate faced by much of the middle class to 10 percent. Instead of keeping 85 cents for a dollar of extra effort, a worker would get 90 cents—an improvement of only 5.9 percent. Meanwhile, the tax cut would make a real dent in revenues—and we could not count on its having any major effect on behavior to make up for it. Cutting the 15 percent rate to 10 percent would reduce government revenue by about $100 billion per year over the next decade.

Even worse, IRS data show that only about one-third of the tax relief would go to taxpayers who would see even a slight improvement in incentives. The other two-thirds of the tax cut would go to workers who earned some money in the 15 percent tax bracket on their way to higher tax brackets. For these workers, cutting the 15 percent rate to 10 percent would make absolutely no difference in work incentives. For them it would be a lump-sum Keynesian-style tax cut, putting money in their pockets while leaving incentives unchanged.

In their emphasis on marginal tax-rate cuts, some conservative tax reformers have made two silent assumptions. First, they assume incentives start and stop at the workplace door, as if people are only workers, employers, entrepreneurs, or investors and incentives have no influence outside our roles as accumulators of material wealth. Second, they assume the only goal of tax reform should be to reduce economic distortions caused by the tax code itself, even if the tax code is the best place to address other distortions to human activity caused by fiscal policy.

Finally, policymakers should complement welfare reforms with an economic-growth agenda and an early-childhood agenda to promote mobility. The elements of the former are suffused throughout this volume. Meanwhile, the phrase “early childhood agenda” justifiably evokes skepticism in conservative policy circles, as we have little evidence that  previously adopted programs run by federal or state bureaucracies have succeeded when scaled up. But when less than one-third of poor children can expect to reach the middle class as adults, conservatives cannot afford to simply shrug apologetically and regret that there is nothing to be done. Welfare reform is likely to improve upward mobility by exposing children to the world of work, reorienting their understanding of what is expected of them, and turning working parents into role models. But as the education chapters in this volume recognize, conservatism can help parents who want to invest in the skill development of their children. It can succeed where liberalism has failed because it recognizes the basic flaw of the Left’s approach: centralized bureaucracies that distribute money to local monopoly providers and write rules that constrain their creativity are unlikely to produce desirable child outcomes.