Finally Robert Reich with how we got here, the economic story, and what we can do about jobs.

I hate posting so much print copy, but this is good, better than the stuff Reich has to come up with on the talk circuit. By ROBERT REICH: 

THE 5 percent of Americans with the highest incomes now account for 37 percent of all consumer purchases … the middle class doesn’t have enough purchasing power to keep the economy going without sinking ever more deeply into debt — which, as we’ve seen, ends badly … prone to great booms and busts. Even if by some miracle President Obama gets support for a second big stimulus … Pump-priming works only when a well contains enough water. 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.

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 …  when the nation’s total income peaked in 1928 and 2007 — the two years just preceding the biggest downturns.

Enabled by the flow of women into the work force … (In the 1960s only 12 percent of married women with young children were working for pay; by the late 1990s, 55 percent were.) When that way of life stopped generating enough income, Americans went deeper into debt.  

We might have enlarged safety nets — by having unemployment insurance cover part-time work, by giving transition assistance to move to new jobs in new locations, by creating insurance for communities that lost a major employer. And we could have made Medicare available to anyone.

Big companies could have been required to pay severance to American workers they let go and train them for new jobs. The minimum wage could have been pegged at half the median wage, and we could have insisted that the foreign nations we trade with do the same, so that all citizens could share in gains from trade. We could have raised taxes on the rich and cut them for poorer Americans.

But starting in the late 1970s, and with increasing fervor over the next three decades, government did just the opposite. It deregulated and privatized. It cut spending on infrastructure as a percentage of the national economy and shifted more of the costs of public higher education to families. It shredded safety nets. (Only 27 percent of the unemployed are covered by unemployment insurance.) Fewer than 8 percent of private-sector workers are unionized. More generally, it stood by as big American companies became global companies with no more loyalty to the United States than a GPS satellite.

Meanwhile, the top income tax rate was halved to 35 percent and many of the nation’s richest were allowed to treat their income as capital gains subject to no more than 15 percent tax. Inheritance taxes that affected only the topmost 1.5 percent of earners were sliced.

Most telling of all, Washington deregulated Wall Street while insuring it against major losses. In so doing, it allowed finance — which until then had been the servant of American industry — to become its master, demanding short-term profits over long-term growth and raking in an ever larger portion of the nation’s profits. By 2007, financial companies accounted for over 40 percent of American corporate profits.

Some say the regressive lurch occurred because Americans lost confidence in government. But this argument has cause and effect backward. The tax revolts that thundered across America starting in the late 1970s were not so much ideological revolts against government — Americans still wanted all the government services they had before, and then some — as against paying more taxes on incomes that had stagnated. Inevitably, government services deteriorated and government deficits exploded, confirming the public’s growing cynicism about government’s doing anything right.

Some say we couldn’t have reversed … Germany has grown faster than the United States for the last 15 years, and the gains have been more widely spread. While Americans’ average hourly pay has risen only 6 percent since 1985, adjusted for inflation, German workers’ pay has risen almost 30 percent. At the same time, the top 1 percent of German households now take home about 11 percent of all income — about the same as in 1970. How has Germany done it? Mainly by focusing like a laser on education (German math scores continue to extend their lead over American), and by maintaining strong labor unions.

THE real reason for America’s Great Regression was political. As Marriner S. Eccles, a former chairman of the Federal Reserve, described in the 1920s, when people “with great economic power had an undue influence in making the rules of the economic game.” Yet the rich are now being bitten by their own success. Those at the top would be better off with a smaller share of a rapidly growing economy than a large share of one that’s almost dead in the water.

The economy cannot possibly get out of its current doldrums without a strategy to revive the purchasing power of America’s vast middle class. Reviving the middle class requires that we reverse the nation’s decades-long trend toward widening inequality. Moreover, an economy is not a zero-sum game. Even the executive class has an enlightened self-interest in reversing the trend; just as a rising tide lifts all boats, the ebbing tide is now threatening to beach many of the yachts.

As the historian James Truslow Adams defined the American Dream when he coined the term at the depths of the Great Depression, what we seek is “a land in which life should be better and richer and fuller for everyone.”