Politicians should heed the might of the ravaged middle class

The hollowing out of the middle class is accelerating, but politicians can glean opportunities by responding to voter discontent.

In Australia, the US or Europe, the elephant in the room is the ravaged middle class.

That’s why you should keep your eye on US Democrat Senator Elizabeth Warren, who looks likely to challenge Hillary Clinton for the Democratic Presidential nomination.

In Australia, the three politicians who best understand what is happening to the middle class are Small Business Minister Bruce Billson, incoming Senator Bob Day and at least one or two of the Palmer United Party senators.

Warren understands just how much the policies of previous administrations have hollowed out the middle class, as more US wealth is accumulated at the top and more middle-class people find their way into lower income brackets.

And so Warren has attacked Wall Street and the big investment banks and the failure to jail their executives. That won’t solve the problem, but she has gained great traction with those who have slipped out of the middle class. 

If she decides to run against Hillary Clinton, Warren will probably embrace anti-globalisation policies. At this stage she is simply tapping the fury of those who have moved into lower-income brackets.

And the US figures are staggering.

Analysis by Michael Snyder shows that six years ago, some 53 per cent of all Americans considered themselves to be ‘middle class’. Now it’s only 44 per cent -- and falling (A grim prediction for the middle class, February 17). The middle-class hammering is most vicious for American youth because too few young people can get good-paying jobs.

In 2008, a quarter of all Americans in the 18 to 29-year-old age bracket considered themselves to be ‘lower class’. In 2014, that has risen to an astounding 49 per cent.

In Australia, the hollowing out of the middle class is not as pronounced as in the US, but the pace of change may be even faster and will accelerate when the mining investment boom ends, the retail retrenchments kick in and motor-making closes. Infrastructure investment will help. 

In government, the ALP attacked the middle class relentlessly. I fear that Treasurer Joe Hockey will also get his advice from Treasury and intensify 'kick the middle class' policies -- a very dangerous path.

Unlike Warren, Bruce Billson advocates clear policies to reverse the trend. His biggest move is to protect smaller enterprises (who dominate employment) by widening consumer protection laws to cover small enterprises in their contracts with big companies and government. Originally that was the policy of Kevin Rudd when he was opposition leader against John Howard. But when Rudd became Prime Minister, lobbying by large corporations and government was so intense that Rudd caved in on boosting small enterprises.

Exactly the same lobbying pressure will now be directed against Bruce Billson. Indeed, it is already happening, as the big shopping centres try to be excluded from his proposed legislation.

There will be enormous pressure put on Tony Abbott to renege on promises, which would leave Billson out in the cold and once again hit the middle class.  

Senator-elect Bob Day has a very clear policy to reverse rising youth unemployment and boost first home buying. He is biased, of course, because he runs a home building business, but there is no better person in Australia to frame middle class and youth employment policies on the housing front. He set out his plan in his KGB interview.

In essence, the Day plan is to free up outer suburban land in order to substantially lower the cost of houses while making it much more practical to train apprentices.

Day and the Palmer United Party senators talk regularly. If Clive Palmer cottons on to the unhappiness in the Australian  middle class, then both the ALP and the Coalition had better watch out -- particularly if Bruce Billson is nobbled.