Debt ceiling outcome’s effect on the middle-class

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Many middle-class Americans have been tuning out the debt ceiling debate, but they may want to start paying attention. According to Street Journal reporter Sara Murray, the changes being discussed in Washington will have a profound impact on the incomes and lifestyles of the middle-class.

Middle-class Americans  benefited in the past from programs that included tax benefits — mortgage interest and childcare deductions, along with healthcare flex spending accounts — which add up to about $160 billion dollars worth of lost revenue for the government in 2010. These tax benefits are under review by federal budget analysts, along with social security and medicare.

Murray went to Gloucester County, New Jersey, a suburban community with a median income of $69,000 a year, to understand the how proposed budget cuts will effect its residents. She estimates cuts in tax benefits for families there could have an impact amounting to $20,000 a year.

Many in Gloucester County see the federal budget deficit as far removed from their lives, “but when you say ‘what would your life be like if the government taxed this extra $20,000,’ that was much more concrete,” Murray said.

President Obama and the Republican leadership have said the middle-class won’t be the targeted, but the reality is the budget gaps are so large, they can’t be covered by taxing the rich alone.

“When you run the numbers, there’s really no way that you can do a true deficit reduction deal of this scope … without hitting the middle-class. And that’s partly because of all these tax breaks they get, and partly because of the programs that are growing and spending so exponentially.”

The programs, social security and Medicare, will get more expensive — and they are what most middle-class families rely on, Murray says.

Read Sara Murray’s story in the Wall Street Journal.

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