How To Help The Middle Class Without Spending Government Money

The middle class has been shrinking since the recession as most of the country’s wealth has traveled upward. But any policy aimed at helping working families that also comes with a hefty price tag has little chance of passing through Congress and becoming law.

That doesn’t mean there’s no hope for trying to bolster the middle class, though. The Center for American Progress’ David Madland and Karla Walter put together a list of six policies that could be enacted now that would have a huge impact on those struggling to get by without costing the government anything. Here are some surprising highlights:

Boost retirement savings: Most Americans don’t have enough saved up for retirement to maintain their standard of living: Nearly 60 percent of middle-class retirees will outlive their savings and about half of all households are at risk of having an insecure retirement.

In response, the government could facilitate the creation of a new hybrid retirement plan that combines a traditional pension and a 401(K), the Secure, Accessible, Flexible, and Efficient (SAFE) Savings Plan, and by opening the federal Thrift Savings Plan (TSP), the 401(K) plan for federal employees, to the public. Neither would cost any federal money. The SAFE plan is estimated to cost about half as much as a 401(K) while providing the same benefit level and being more secure. The TSP would provide more suitable investment options with lower fees.

Reduce housing costs: One in five homeowners are underwater on their mortgage. Given that many middle-class families rely on home value to build wealthy, this is a big financial burden.

To address this problem, investors can provide principal forgiveness — permanently reduce the outstanding principal balance of an underwater loan. This would not just give struggling homeowners a boost, thus helping the economy by increasing their spending, but it would also help ensure the long-term success of mortgage modifications and stabilize the hardest hit housing markets. In order for investors to avoid taking the full loss, they could offer “shared appreciation,” in which the borrower pledges to share a portion of future appreciation when the home is eventually sold or refinanced.

Ensure paid sick days: Given that there are no federal laws that guarantee paid sick days, nearly 40 percent of middle-class workers and 55 percent of low-income workers don’t have access to them. Workers who go to their jobs sick cost the economy $160 billion a year.

The government could guarantee the ability to accrue job-protected, paid sick days, which would provide greater job security and reduce turnover. The Healthy Families Act is one way to do just that.