As members of Congress ponder President Barack Obama’s State of the Union address this year, they should reflect on how, at critical junctures in our nation’s history, Congress made the decision to strengthen the American middle class, which proved instrumental in the country’s growth and prosperity.
Previous Congresses passed legislation that increased access to health care and education, expanded home ownership, protected the savings of average Americans, and ensured the rights of Americans in the workplace and beyond.
The current Congress would be well served by looking at their predecessors’ record when considering how to strengthen the middle class in the 21st century.
Homestead Act of 1862 and the Morrill Land-Grant Act of 1862: Together these two acts helped grow the American middle class, especially in the central and western parts of the country. The Homestead Act allowed citizens to lay claim to federal lands if they lived on the land and improved it. Thus, instead of large swaths of the country being sold off to the highest bidders, creating a region of wealthy landowners and impoverished tenant-farmers, those lands ended up in the hands of farmers who underpinned a strong, growing, middle class among the farmers and in the communities that flourished with them. The Morrill Act created the land-grant colleges that developed agricultural improvements and created educational opportunity for a broader cross-section of Americans.
Glass-Steagall Act of 1933: Passed in the wake of the Great Depression, Glass-Steagall, among other things, created the Federal Deposit Insurance Corporation, the government agency that insures commercial bank deposits. The FDIC insures that the savings of average Americans are not lost if a bank fails. This made banking secure and viable for the middle class and offered a means for maintaining and growing savings. Although portions of this act have been repealed, the FDIC continues to fulfill this important role today.
National Housing Act of 1934: The creation of the Federal Housing Administration helped make the 30-year, fixed-rate mortgage a pillar of the American mortgage market. The loans allowed middle-class Americans to become homeowners with stable and predictable payments. Homeownership became a key source of middle-class wealth creation over the next few decades and the FHA continues to increase homeownership among Americans.
Social Security Act of 1935: One of the signature achievements of the New Deal, this act created Social Security, the unemployment insurance system, and other assistance programs. An update to the law passed in 1939 added dependent and survivor benefits to Social Security, and a disability insurance benefit was added in 1956. These programs created the foundation of the modern American social safety net. Social Security is the basis of the American retirement system while unemployment insurance cushions the blow of unemployment as well as boosting the economy in downtimes. Both of these programs have kept Americans in the middle class in retirement and between jobs.
National Labor Relations Act of 1935 and the Fair Labor Standards Act of 1938: These acts created many of the workplace protections that modern Americans depend upon. The NLRA, also known as the Wagner Act, created modern American labor law and eased the way to union membership and collective bargaining, keys to creating a strong middle class. The act also established the National Labor Relations Board, which oversees union elections and adjudicates labor law. The FLSA created several labor market protections including the minimum wage, overtime regulations, and restrictions on child labor.
G.I. Bill (the Servicemen’s Readjustment Act of 1944): After World War II, many returning veterans were able to attend college and other postsecondary programs thanks to the G.I. Bill. The program helped veterans receive grants to pay for higher education, which in turn increased the number of college graduates. Expanding access to college education simultaneously boosted the competitiveness of the United States and opened up a path to well-paying, middle-class careers to millions of Americans. A similar benefit was extended to veterans of the Korean War, the Vietnam War, and the post-9/11 era.
Social Security Act of 1965: The creation of Medicare and Medicaid expanded health insurance coverage to elderly, the poor, and the disabled. This was accomplished through amendments to the Social Security Act and surely ranks as one of the most important middle-class policies. Assuring that Americans have access to health insurance in old age and when they fall on hard times has helped bring an important level of security to the middle class. Medicare and Medicaid also paved the way for later reforms that increased health insurance coverage.
Civil Rights Act of 1964: The expansion of civil rights for communities of color, religious minorities, and women allowed them not only to fight back against discrimination in society writ large, but in the workplace as well. The CRA created the Equal Employment Opportunity Commission, which insures that no one is discriminated against on the basis of race, color, religion, national origin, or sex. Fighting back against discrimination increased the ability of many Americans to become more fully part of the workforce and the middle class. While this effort is not yet over, the Civil Rights Act was a major step forward increasing the size of the middle class. Later laws increased the rights of the elderly and the disabled.
Higher Education Act of 1965 (the creation of Pell Grants): Increasing access to a college education is a critical way of strengthening the middle class. Pell Grants are need-based financial aid that allows students to pay for postsecondary education that might otherwise be out of reach. Like the G.I. Bill before it, expanding the pool of college students, including those who couldn’t afford it before, has significantly helped the American middle class.
Affordable Care Act of 2010: The ACA will, when fully in effect, constrain the cost of health care for middle-class individuals and families, ensuring that it is available and affordable to all Americans. It will also make it more affordable for a broad range of businesses to offer health coverage to their employees.
As Congress debates how to build our economy back up, these laws serve as a reminder that helping the middle class helps everyone and leads to robust growth for our country.
Nick Bunker is a Special Assistant with the Economic Policy team at the Center for American Progress.