"How to think about rebuilding the middle class" - four policy options.

The demise of our middle class might be the most compelling problem in U.S. economics. It lives at the heart of our debates about income inequality, U.S. competitiveness, tax policy, Social Security and so much more. Each of these debates have their distinct orbits, but drawing them together is the question of how we give average Americans a chance to elevate their standard of living, work for decent pay and retire in dignity.

You don't need more words on the 30-year stagnation of median wages (CliffNotes version: They're really, truly stagnating). What might be more useful is a frame for thinking about how Washington can thaw the middle-class freeze. As I see it, there are four categories of intervention.

The first category is Weak Intervention. This is the classic laissez-faire approach that says stable taxes and smart, lax regulations are the best way to let private-sector wages grow themselves. The second category is Income Intervention, using a progressive tax code to take wealth from the top and send it below in the form of tax credits or services. The third category is Education Intervention, where government actively supports schools, especially at the post-secondary level, by investing in colleges and helping students attend them. The fourth category is Industrial Intervention, where government backs certain industries implicitly (e.g. with a carbon tax) or explicitly (e.g. with solar energy subsidies).

With income and industrial intervention facing gridlock, it's no wonder Washington is paying serious attention to bucket No. 3: education reform. In particular the president has called out the promise of community colleges. Yes, they suffer from vertiginous drop-out rates. But yes, they can really make a difference. According to the Bureau of Labor Statistics, jobs that require two-year associate degrees are projected to rise by 19 percent in the next 10 years, faster than jobs at the doctoral, master's or any other level. Even better, an associate degree confers up to a 66 percent bonus over high school graduates' wages.

http://voices.washingtonpost.com/ezra-klein/2011/02/how_to_think_about_rebuilding.html