Robert Reich: The Truth About the American Economy

[marmar]

The Truth About the American Economy
Monday, May 30, 2011


The U.S. economy continues to stagnate. It’s growing at the rate of 1.8 percent, which is barely growing at all. Consumer spending is down. Home prices are down. Jobs and wages are going nowhere.

It’s vital that we understand the truth about the American economy.

How did we go from the Great Depression to 30 years of Great Prosperity? And from there, to 30 years of stagnant incomes and widening inequality, culminating in the Great Recession? And from the Great Recession into such an anemic recovery?

The Great Prosperity

During three decades from 1947 to 1977, the nation implemented what might be called a basic bargain with American workers. Employers paid them enough to buy what they produced. Mass production and mass consumption proved perfect complements. Almost everyone who wanted a job could find one with good wages, or at least wages that were trending upward. ...........(more)

The complete piece is at: http://robertreich.org/post/5993482080

[pampango]

1. "Government could have enforced the basic bargain. But it did the opposite. ..."

"It’s easy to blame “globalization” for the stagnation of middle incomes, but technological advances have played as much if not a greater role. Factories remaining in the United States have shed workers as they automated. So has the service sector.

Government could have enforced the basic bargain. But it did the opposite. It slashed public goods and investments — whacking school budgets, increasing the cost of public higher education, reducing job training, cutting public transportation and allowing bridges, ports and highways to corrode.

It shredded safety nets — reducing aid to jobless families with children, tightening eligibility for food stamps, and cutting unemployment insurance so much that by 2007 only 40 percent of the unemployed were covered. It halved the top income tax rate from the range of 70 to 90 percent that prevailed during the Great Prosperity to 28 to 35 percent; allowed many of the nation’s rich to treat their income as capital gains subject to no more than 15 percent tax; and shrunk inheritance taxes that affected only the top-most 1.5 percent of earners. Yet at the same time, America boosted sales and payroll taxes, both of which took a bigger chunk out of the pay the middle class and the poor than of the well off.

That requires resurrecting the basic bargain linking wages to overall gains, and providing the middle class a share of economic gains sufficient to allow them to purchase more of what the economy can produce. As we should have learned from the Great Prosperity — the 30 years after World War II when America grew because most Americans shared in the nation’s prosperity — we cannot have a growing and vibrant economy without a growing and vibrant middle class."

[Warpy]

2. We also can't have a stable country without a stable middle class.

The only way to have a stable middle class is to put a tax structure in place that encourages the growth and stability of a middle class instead of automatically favoring a plutocracy.

I guess we're going to have to learn those lessons all over again.

Reich did hit the coping mechanisms for dealing with rapidly declining purchasing power perfectly: dual incomes, increased productivity (longer hours being part of that), and debt.

[patrice]

5. Have you heard anything about raising the bottom of the highest bracket rates?

Several weeks ago the Progressive Congressional Caucus said something about: ending the Bush Tax Cuts for everyone, raising the rates in the highest brackets, BUT also taking a look at where the beginning of those highest tax rates starts at less than $500K a year, which seems quite low to me, considering how high the top of those same income ranges is, i.e. astronomically high, so I think the Progressive Caucus was saying raise the bottom of the top tax rate brackets, to e.g. $1 million, giving those < $1 million, who were previously in those high brackets, new lower tax rates. Hoping to turn that windfall, for what is really only the top of the Middle Class, into seed capital for NEW more LOCAL entrepreneurship and very welcome investment opportunities in their communities.

Have you seen any detailed discussion of the Progressive Caucus's budget and tax proposals?

[nonperson]

3. Someone please explain to me again why Obama continues to rely on Wall St. douchebags

And ignore people like Reich and Krugman.

Oh, nm. I know the answer already.

[patrice]

4. American labor has been made vulnerable to international downward pressure on wages, by those who

aren't all THAT sure where their own equity is since Bush's Derivative Crash.

[Tierra_y_Libertad]

6. Shorter version.