Too much common sense....

[Norman Bernstein]

...for the bilge, perhaps. From Robert Reich:

Rarely in history has the cause of a major economic problem been so clear yet have so few been willing to see it.

The major reason this recovery has been so anemic is not Europe's debt crisis. It's not Japan's tsumami. It's not Wall Street's continuing excesses. It's not, as right-wing economists tell us, because taxes are too high on corporations and the rich, and safety nets are too generous to the needy. It's not even, as some liberals contend, because the Obama administration hasn't spent enough on a temporary Keynesian stimulus.

The answer is in front of our faces. It's because American consumers, whose spending is 70 percent of economic activity, don't have the dough to buy enough to boost the economy -- and they can no longer borrow like they could before the crash of 2008.

If you have any doubt, just take a look at the Survey of Consumer Finances, released Monday by the Federal Reserve. Median family income was $49,600 in 2007. By 2010 it was $45,800 -- a drop of 7.7%.

All of the gains from economic growth have been going to the richest 1 percent -- who, because they're so rich, spend no more than half what they take in.

Can I say this any more simply? The earnings of the great American middle class fueled the great American expansion for three decades after World War II. Their relative lack of earnings in more recent years set us up for the great American bust.

Starting around 1980, globalization and automation began exerting downward pressure on median wages. Employers began busting unions in order to make more profits. And increasingly deregulated financial markets began taking over the real economy.

The result was slower wage growth for most households. Women surged into paid work in order to prop up family incomes -- which helped for a time. But the median wage kept flattening, and then, after 2001, began to decline.

Households tried to keep up by going deeply into debt, using the rising values of their homes as collateral. This also helped -- for a time. But then the housing bubble popped.

The Fed's latest report shows how loud that pop was. Between 2007 and 2010 (the latest data available) American families' median net worth fell almost 40 percent -- down to levels last seen in 1992. The typical family's wealth is their home, not their stock portfolio -- and housing values have dropped by a third since 2006.

Families have also become less confident about how much income they can expect in the future. In 2010, over 35% of American families said they did not "have a good idea of what their income would be for the next year." That's up from 31.4% in 2007.

But because their incomes and their net worth have both dropped, families are saving less. The proportion of families that said they had saved in the preceding year fell from 56.4% in 2007 to 52% in 2010, the lowest level since the Fed began collecting that information in 1992.

Bottom line: The American economy is still struggling because the vast American middle class can't spend more to get it out of first gear.

What to do? There's no simple answer in the short term except to hope we stay in first gear and don't slide backwards.

Over the longer term the answer is to make sure the middle class gets far more of the gains from economic growth.

How? We might learn something from history. During the 1920s, income concentrated at the top. By 1928, the top 1 percent was raking in an astounding 23.94 percent of the total (close to the 23.5 percent the top 1 percent got in 2007) according to analyses of tax records by my colleague Emmanuel Saez and Thomas Piketty. At that point the bubble popped and we fell into the Great Depression.

But then came the Wagner Act, requiring employers to bargain in good faith with organized labor. Social Security and unemployment insurance. The Works Projects Administration and Civilian Conservation Corps. A national minimum wage. Taxes were hiked on the very rich. And in 1941 America went to war -- a vast mobilization that employed every able-bodied adult American, and put money in their pockets.

By 1953, the top 1 percent of Americans raked in only 9.9 percent of total income. Most of the rest went to a growing middle class -- whose members fueled the greatest economic boom in the history of the world.

Get it? We won't get out of first gear until the middle class regains the bargaining power it had in the first three decades after World War II to claim a much larger share of the gains from productivity growth.

[David G]

Just so.

[Ted Hoppe]

Reich has made a good historical account. sadly the horse left the barn and was eaten by the starving neighbor down the holler.

I can't see the recovery coming until industrial capacity is returned to include sizable low and medium skilled labor. That can not happen until the United States standard of living equals that of El Savador.

[Canoez]

Reich has made a good historical account. sadly the horse left the barn and was eaten by the starving neighbor down the holler.

I can't see the recovery coming until industrial capacity is returned to include sizable low and medium skilled labor. That can not happen until the United States standard of living equals that of El Savador.

Well, I'm not so sure about that. I've been fortunate enough to work in some relatively high-tech R&D type work during my career. I can see value added in production of medium and high skilled labor doing manufacturing work here. Sadly, I don't think that much low-skilled labor will find work until something like the threshold you discuss.

[switters]

how much of the work force is organized labor? (11.4%) Is that a significant decrease since 1992? (it was 35% in 1954) war is not the answer, though that looks like a conclusion of the article.

I too would like to see the economy for the middle class get better, but pandering to unions does not benefit the rest of the working class unless the unions start getting more representation in non traditional trades in the service sector. Obama's tax cut extension did not help matters, and I still think the TARP and auto bailout funds could have been spent better than they were. We saved an auto industry, and according to the article, most of which I do not dispute, we cannot afford new cars. brilliant. and the part I disagree with is the conclusion. I am unsure of the correct path, but putting money into the hands of homeonwers instead of banks would have been a good start.

wiki is my source btw. http://en.wikipedia.org/wiki/Labor_u..._United_States

[John of Phoenix]

Every third world nation knows that a growing economy requires a vibrant, growing middle class - more money in motion. We've just taken a healthy middle class for granted the entire time it's been disappearing. Now it's accelerating as more and more wealth is concentrated at the top.

[Ted Hoppe]

Well, I'm not so sure about that. I've been fortunate enough to work in some relatively high-tech R&D type work during my career. I can see value added in production of medium and high skilled labor doing manufacturing work here. Sadly, I don't think that much low-skilled labor will find work until something like the threshold you discuss.

No doubt your career has required both technical skill and above average math and writing skils. The ability to produce jobs which match the basic educational skill sets taught to the majority of our younger population is a real challenge. In the age of polical dominance of the 1 percent, lowly jobs for fast food resturaunts, flat employment with box store domination, decline in union particapation and standardized college prep for all public school pupils regardless of aptitude and energy... The economic tunnel is quite dark until we get to the other end to this turn around. it seems the US is becoming more like Latin America than the other way around.

[wardd]

how much of the work force is organized labor? (11.4%) Is that a significant decrease since 1992? (it was 35% in 1954) war is not the answer, though that looks like a conclusion of the article.

I too would like to see the economy for the middle class get better, but pandering to unions does not benefit the rest of the working class unless the unions start getting more representation in non traditional trades in the service sector. Obama's tax cut extension did not help matters, and I still think the TARP and auto bailout funds could have been spent better than they were. We saved an auto industry, and according to the article, most of which I do not dispute, we cannot afford new cars. brilliant. and the part I disagree with is the conclusion. I am unsure of the correct path, but putting money into the hands of homeonwers instead of banks would have been a good start.

wiki is my source btw. http://en.wikipedia.org/wiki/Labor_u..._United_States

pandering to the unions created the middle class

the right seems to think that unions are some sinister organizations like the mafia, not something that benefits working people

[hanleyclifford]

It would seem that Robert Reich is suggesting that the American standard of living is declining and that median income is the measuring stick thereof. A better stick than mean.

[Norman Bernstein]

It would seem that Robert Reich is suggesting that the American standard of living is declining and that median income is the measuring stick thereof. A better stick than mean.

Reich is right about that; between me and Bill Gates, we have an average (mean) wealth of $25 Billion dollars or so. The median income, while not perfect, is a VASTLY better measuring stick.

[switters]

pandering to the unions created the middle class

the right seems to think that unions are some sinister organizations like the mafia, not something that benefits working people

wonder why? and it isn't just the right. I am very supportive of the concept of unions, the current execution is short-sighted and inefficient, IMHO.

http://www.fbi.gov/newyork/press-rel...amily-indicted

[Norman Bernstein]

No doubt your career has required both technical skill and above average math and writing skils. The ability to produce jobs which match the basic educational skill sets taught to the majority of our younger population is a real challenge. In the age of polical dominance of the 1 percent, lowly jobs for fast food resturaunts, flat employment with box store domination, decline in union particapation and standardized college prep for all public school pupils regardless of aptitude and energy... The economic tunnel is quite dark until we get to the other end to this turn around. it seems the US is becoming more like Latin America than the other way around.

Look, neither political ideology (or, perhaps I should say, NO political ideology) could prevent the economy from the global forces that have shaped it.

Globalization both opened up foreign markets to our products.... and helped to create foreign competition for our products. It was inevitable that, as manufacturing declined due to competition from cheaper labor in emerging countries and economies, we'd be switch from a manufacturing economy, to more of a service economy.

The thing that made us strong, in the 50's and 60's, was indeed manufacturing..... but it was really the effeect of that manufacturing economy; the demand and the profits were sufficient to provide for more or less full employment, at wages significant enough to build a middle class with a remarkably high standard of living. The average factory worker, with no more than a high school education, could get a good job in the manufacturing sector, sufficient for him to be able to afford to actually own a home (a HUGE difference from previous decades), send his kids to school, keep his wife home to care for them, and even afford medical care.

In order to cope with the inevitable transition, we would recognize that we need improved education, because more and more jobs require education well beyond the ordinary high school level... but at the same time, we failed to recognize that not everyone would be joining the ranks of the increasingly educated.... and as a result, the prevailing attitude has been that those without advanced education deserve progressively smaller and smaller chunks of the economic pie.

Mitt Romney, for example, made what is possibly the stupidest statement of the campaign so far: the allegation that teachers are hired exclusively by local government, and the federal government provides no financial support for them. Evidently, he wasn't listening, in school, when the billions of dollars of support to public education, from the federal level, was passed in the halls of congress decades ago, and still exists today.

The work of the middle class is no less noble than it was 50 years ago.... ANY work is noble, no matter HOW modest. But in an economy which devalues work, the inevitable consequence is the decline of the middle class.... because the middle class ends up consisting of people with strong educations, earning no more, and possibly less, than people with no advanced education earned in the 50's (adjusted for inflation).... or people without advanced educations, earning FAR less than they did, adjusted for inflation, in the 50's and 60's.

Why? Why did this happen? Might it have something to do with the upper class restructruring the economy for their own advantage, rather than for the benefit of the nation, as a whole?

[Concordia 33]

...for the bilge, perhaps. From Robert Reich:

Not all is going to the 1%. Government employees have an unemployment rate of 4.2% (half the rate of private sector workers) and the 95.6% that are employed have a higher median income too. DO you have any outrage for them or is it just focused on the 1%? FYI: the 400 richest taxpayers pay almost as much to the government as the bottom 50% combined!

Federal employees whose compensation averages more than $126,000 and the nation’s greatest concentration of lawyers helped Washington edge out San Jose as the wealthiest U.S. metropolitan area, government data show.
The U.S. capital has swapped top spots with Silicon Valley, according to recent Census Bureau figures, with the typical household in the Washington metro area earning $84,523 last year. The national median income for 2010 was $50,046.

“There’s a gap that’s isolating Washington from the reality of the rest of the country,” Zeese said. “They just get more and more out of touch.”
Total compensation for federal workers, including health care and other benefits, last year averaged $126,369, compared with $122,697 in 2009, according to Bloomberg News calculations of Commerce Department data. There were 170,467 federal employees in the District of Columbia as of June. The Washington area includes the District of Columbia, parts of Northern Virginia, eastern Maryland and eastern West Virginia.

[Norman Bernstein]

Not all is going to the 1%. Government employees have an unemployment rate of 4.2% (half the rate of private sector workers)....

This defies logic. Are government employees doomed to ALWAYS be government employees? Is someone who is no longer a government employee somehow excluded from being counted just like the REST of the unemployed? In fact, 'government employees' are, by definition...... EMPLOYED! Where in the world do you get this stuff?

and the 95.6% that are employed have a higher median income too.

And is there a reason why this would be surprising? Does the cross section of government employees match the general cross section of the entire population.... or, even, should it?

FYI: the 400 richest taxpayers pay almost as much to the government as the bottom 50% combined!

Take a look at the median income of the 400 richest... and compare it to the median income of the bottom 50%.... and explain why this would come as a shock to anyone.

[nautiguy]

I hate to sound Malthusian, but a factor not mentioned (net even by Riech), is that more work of all kinds is being automated while the rate of human population growth holds steady. This means that some portion of productivity growth is the result of newer and better everything produced by automated machines which take the place of human workers.
Meanwhile, work done by most workers is devalued because the skills required are reduced. The guy who spent years developing the skills to weld stainless or run a milling machine are pretty near useless when those skills are replaced by computer based manufacturing processes. The workers who had those skills and aspired to the middle class are the same ones who are now flipping burgers if they have any work at all.
I’m not trying to be all inclusive, someone will be along to cite specific examples but those examples don’t negate the generality.

[Paul Pless]

I hate to sound Malthusian. . .

Maybe France does have the right idea in their 35 hour work week, eight weeks of vacation per year, and a retirement age of 60. . .

[Ted Hoppe]

Look, neither political ideology (or, perhaps I should say, NO political ideology) could prevent the economy from the global forces that have shaped it.
...
Why? Why did this happen? Might it have something to do with the upper class restructruring the economy for their own advantage, rather than for the benefit of the nation, as a whole?

Norm - the difference between then and now is quite distinct. I believe we are a reflection of our values and those we hold in esteem. currently - culturally our heroes are not from the middle class. they represent the 1 percent affluence as seen by a strong controlled media following. has there ever been a time where entertainers, sports heros and billionaires are held so high while working with ones hands nobly is looked upon lowly.

leadership needs to come from the middle class to save itself. the only way that will come is from its own awareness. it does not have one and has no mechanism to promote the values of the common good over the ability of affluence to pay for better access, connivence and direct representation.

[David W Pratt]

Wasn't TReich the same guy who suggested that "stimulus" funded construction jobs go to minorities rather than the most skilled?

[Concordia 33]

This defies logic. Are government employees doomed to ALWAYS be government employees? Is someone who is no longer a government employee somehow excluded from being counted just like the REST of the unemployed? In fact, 'government employees' are, by definition...... EMPLOYED! Where in the world do you get this stuff?

There is NOTHING logic defying about the concept that half as many government employees find themselves without a job, and have difficulty obtaining re-employment over those that lost their private sector job and are in a similar position. I think the issue is that governmental workers are less likely to lose their jobs and are more likely to be called back to work than their non-governmental counterparts.

And is there a reason why this would be surprising? Does the cross section of government employees match the general cross section of the entire population.... or, even, should it?

Well, the private sector has CEO's (the 1%'ers that you despise) and lowly functionaries, and so does the US government although the ones at the top of the food chain are usually department Chiefs and elected officials. Unless you are saying that the US government likes to create more leaders than followers than does the private sector. That would be a problem as well if you stop to think about it. I have a hard time accepting the concept that government workers are less likely to lose their jobs and more likely to earn a better income than the private sector employees whose taxes are paying for these jobs.

Take a look at the median income of the 400 richest... and compare it to the median income of the bottom 50%.... and explain why this would come as a shock to anyone.

I don't think it should be a shock, but for all the villainizing that you engender on the top 1% you would think that they contribute nothing when in fact they contribute quite a bit.

[Norman Bernstein]

There is NOTHING logic defying about the concept that half as many government employees find themselves without a job, and have difficulty obtaining re-employment over those that lost their private sector job and are in a similar position.

Sorry, but this still DOES NOT COMPUTE! How would you define the rate of unemployment of government employees? Who is included? Only those who WERE government employees, but lost their jobs? Are they only looking for government jobs?

Are they not counted among the generally unemployed?

The more I torture my mind on this, the less it makes ANY sense whatsoever!!!!

Maybe someone else might like to chime in?

I think the issue is that governmental workers are less likely to lose their jobs and are more likely to be called back to work than their non-governmental counterparts.

Wouldn't it make logical sense that when a government job opens up, the candidates most likely to be hired are those with government experience?

Well, the private sector has CEO's (the 1%'ers that you despise) and lowly functionaries, and so does the US government although the ones at the top of the food chain are usually department Chiefs and elected officials. Unless you are saying that the US government likes to create more leaders than followers than does the private sector.

This only works if you assume the the average cross section of government employees is roughly similar to that of private industry, an assumption which stretches credulity to a very fine thread. The private sector has a vastly larger ratio of indians to chiefs, because there are a vastly higher number of 'indian' jobs. How many extremely low level jobs does the government create?

I have a hard time accepting the concept that government workers are less likely to lose their jobs and more likely to earn a better income than the private sector employees whose taxes are paying for these jobs.

If you applied that very same concept to private industry, then you'd have to admit that the company which does best at retaining long term employees, and pays them well, is more successful than the ones that have high turnover and low wages.

Whether that is true of gov't vs. private industry or not can be debated... but there are plenty of long time government employees who do good work, and they don't deserve to be excoriated, just because they are well paid. It might be fashionable, in some circles, to indict public employees as lazy overpaid slackers, but it isn't true, and it's the worst kind of stereotyping.

I don't think it should be a shock, but for all the villainizing that you engender on the top 1% you would think that they contribute nothing when in fact they contribute quite a bit.

You were the one who said

FYI: the 400 richest taxpayers pay almost as much to the government as the bottom 50% combined!

I merely pointed out that it's not unexpected, considering the ratio of welath between them. Both are statements of fact.

[Norman Bernstein]

Maybe France does have the right idea in their 35 hour work week, eight weeks of vacation per year, and a retirement age of 60. . .

Same story in Germany, which is probably the strongest economy in all of Europe. Having spent time with counterparts in Germany, I can attest that their standard of living, when you factor in ALL elements, is remarkably higher than it is for their US based counterparts.

[Greg Nolan]

Originally Posted by Concordia 33:

"I have a hard time accepting the concept that government workers are . . . more likely to earn a better income than the private sector employees whose taxes are paying for these jobs."

Why? Lots of people earn more than other people, and there are times when the lower-paid person needs to hire a person earning more.

Do you really find it hard to accept that health care workers (public or private) may be more likely to earn a better income than the average private sector employee whose health insurance fees are paying for their jobs?

Most private sector "employees" pay more to other private sector "employees" when they hire doctors, lawyers, contractors, plumbers, accountants, or other "employees" with specialized skills that they don't have. The Washington DC workforce is, generally speaking, a group of specialized, well-educated people with skills that the general public, generally speaking, does not have. The Bloomberg article you reference compares the DC government workforce to the workforce of Silicon Valley, a group that also makes more than the average member of the general workforce.

Do you never hire someone who earns more than you? If not, I expect you must be pretty rich -- well up into the 1%.

Let's get real -- you are just cheap, and seem to believe that no one deserves to be paid fair compensation if they happen to be providing necessary services as a government employee.

[JimD]

Reich has made a good historical account. sadly the horse left the barn and was eaten by the starving neighbor down the holler.

I can't see the recovery coming until industrial capacity is returned to include sizable low and medium skilled labor. That can not happen until the United States standard of living equals that of El Savador.

That's about it. And the rich don't need or care about a vibrant middle class or how the 99% live. The 99 can live in squalor for all they care. All the rich need is an economy that channels most of the available wealth into their hands. Look at countries like El Salvador, Nicaragua, dozens of others in South America, Africa, Asia. Largely poor populations ruled by very wealthy elites with little in the way of (dangerously democratic) middle classes. There is no reason America can't or won't look like that.

[Boater14]

I figure than anyone shilling for the 1% is a member of that group. Why else would you give a hoot about taxing billionaires. They own presidents, senators, congressmen, doormen, boat skippers, cooks, nannies, lawyers and at least one media empire. O....right...fairness. Like the fairness of writing crap mortgages, insuring them, and sticking us with the consequences. They're laughing at fairness all the way to the bank.