The economy was in perpetual motion, jobs were easy to find, and life was good. Then the ideologues somehow managed to convince prosperous Americans that they really were bad off and that perhaps we needed to change the tax rates and regulatory structure. That was the beginning of the end, and from 1981, the economy continually spiraled into Hell, with a brief respite coming in the Bill Clinton administration, with the economy booming because the top tax rates were raised from 33 percent to 39.6 percent.
Alas, the Evil People took over in 2001, after stealing the presidential election, and the proceeded to lower the top rates from 39.6 percent to 35 percent, and that caused the economy to collapse, first in 2001, and then in 2008, and now it is tanking further because the Evil People don't want high rates of inflation and are against raising the top tax rates to 70 percent.
Thus, if one receives a steady diet of the NYT, the solution to our problems is as follows:
- Raise the top income tax rates at least to 40 percent and preferably back to 70 percent;
- Unionize all American industries, and if workers don't want a union, force one on them, anyway;
- Get the Federal Reserve System to manipulate the monetary transmissions until the rate of inflation reaches at least 6 to 8 percent, with goals of pushing it into double-digits;
- Create more highway-building schemes with the hopes that middle-class people will be employed, which will enable them to get more money, which means they can spend us into that "virtuous circle" of job creation.
Look back over the last hundred years and you’ll see the pattern. During periods when the very rich took home a much smaller proportion of total income — as in the Great Prosperity between 1947 and 1977 — the nation as a whole grew faster and median wages surged. We created a virtuous cycle in which an ever growing middle class had the ability to consume more goods and services, which created more and better jobs, thereby stoking demand. The rising tide did in fact lift all boats.Yes, ladies and gentlemen, blame cutting tax rates and...Steven Jobs. That's right, read what Reich says. He actually blames the entrepreneurs for increasing wealth through new capital.
During periods when the very rich took home a larger proportion — as between 1918 and 1933, and in the Great Regression from 1981 to the present day — growth slowed, median wages stagnated and we suffered giant downturns. It’s no mere coincidence that over the last century the top earners’ share of the nation’s total income peaked in 1928 and 2007 — the two years just preceding the biggest downturns.
Starting in the late 1970s, the middle class began to weaken. Although productivity continued to grow and the economy continued to expand, wages began flattening in the 1970s because new technologies — container ships, satellite communications, eventually computers and the Internet — started to undermine any American job that could be automated or done more cheaply abroad. The same technologies bestowed ever larger rewards on people who could use them to innovate and solve problems. Some were product entrepreneurs; a growing number were financial entrepreneurs.
So, it seems that economically speaking, we have come full circle. The Golden Age of which Reich speaks was one in which post-World War II, the USA had the capital advantages, but as other countries began to rebuild their economies, like Japan, and also adopt superior capital and production methods, the U.S. advantage began to wane.
The big warning should have been the currency crisis of 1971, but notice that people like Reich consider this to have been a triumph, since the 1970s was a decade of inflation, and Reich and his fellow Keynesians are champions of destroying the value of money. An economy, in their view, is nothing more than a big circle in which people spend and spending creates jobs and jobs allow us to spend, and the circle continues.
So, if all it takes is spending, I have a better idea, one that I am sure that Reich, Krugman, and the NYT would support: Just give everyone lots of money. Don't worry about jobs at all. Just give people money, and since production is automatic, the goods will be there as long as the government puts money into the hands of everyone.
Such a scheme should not be difficult, and we need not worry about the costly monetary transmission mechanism of "the job." Why bother when all that is needed is more spending?
So, why don't we see Reich, Krugman, and others promoting this scheme? After all, it is consistent with what they are demanding whenever they take to print or the airwaves. I mean, jobs are dangerous, bosses can be mean, and they are so, so unnecessary when all that is needed is spending.
And please don't pull a "work ethic" line on me. Progressives for years have denigrated the world of work, speaking of "dead-end-jobs" and accusing employers and business owners of exploitation of workers -- and worse. Krugman, Reich, and the NYT editorial writers and other Progressives see "jobs" mainly as transmission devices for providing incomes to the middle class, so that those people can spend us back into prosperity.
Apparently, that is what they wanted us to believe was the case in post-war America. The government taxed the rich at very high rates, unions forced up wages, and people spent like crazy, creating Reich's "virtuous circle." As one who was working in the late 1970s, I don't remember the U.S. economy being in the great shape that Krugman and Reich claim it was.
Furthermore, for all of the talk about ideology and deregulation, it was the liberal Democrats like Ted Kennedy, Jimmy Carter, and Alfred Kahn that were at the forefront of those initiatives. However, that narrative doesn't fit the current set of false facts, so like everything else, it must be shoved into the Orwellian Memory Hole so that Americans can be told by Progressives that giving the state more regulatory powers, high tax rates, and lots of inflation will bring back prosperity.