|Robert Reich Fmr. Secretary of Labor; Professor at Berkeley; Author, Aftershock: ‘The Next Economy and America’s Future’
Posted: December 8, 2010 09:12 PM
Apart from its extraordinary cost and regressive tilt, the tax deal negotiated between the president and the Republicans has another fatal flaw: It confirms the Republican worldview.
Americans want to know what happened to the economy and how to fix it. At least Republicans have a story — the same one they’ve been flogging for thirty years. The bad economy is big government’s fault and the solution is to shrink government.
Here’s the real story. For three decades, an increasing share of the benefits of economic growth have gone to the top 1 percent. Thirty years ago, the top got 9 percent of total income. Now they take in almost a quarter. Meanwhile, the earnings of the typical worker have barely budged.
The vast middle class no longer has the purchasing power to keep the economy going. (The rich spend a much lower portion of their incomes.) The crisis was averted before now only because middle-class families found ways to keep spending more than they took in — by women going into paid work, by working longer hours, and finally by using their homes as collateral to borrow. But when the housing bubble burst, the game was up.