Game Over, Austerity—Obama's Speech Clinches the Case Against Right-Wing Economics
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If you need any further evidence of the stark ideological divide that separates progressives from conservatives, you can find it by contrasting President Barack Obama’s speech on the economy with the response of the House Republicans.
In his speech, the president provided a capsule summary of the mainstream progressive narrative about the U.S. economy from 1945 to 2009:
In the period after World War II, a growing middle class was the engine of our prosperity. Whether you owned a company, swept its floors, or worked anywhere in between, this country offered you a basic bargain – a sense that your hard work would be rewarded with fair wages and benefits, the chance to buy a home, to save for retirement, and, above all, to hand down a better life for your kids.
But over time, that engine began to stall. That bargain began to fray. Technology made some jobs obsolete. Global competition sent others overseas. It became harder for unions to fight for the middle class. Washington doled out bigger tax cuts to the rich and smaller minimum wage increases for the working poor. The link between higher productivity and people’s wages and salaries was severed – the income of the top 1% nearly quadrupled from 1979 to 2007, while the typical family’s barely budged.
Towards the end of those three decades, a housing bubble, credit cards, and a churning financial sector kept the economy artificially juiced up.
That’s an excellent statement of the progressive theory of the case. What collapsed in 2008 was not merely the lesser stock and real estate bubble of the 2000s, but the larger Bubble Economy which had been “artificially juiced up” since the 1980s.
If you accept this thesis, as most progressives do, there can be no going to back to pre-2008 “normality”— because from Reagan to George W. Bush the “normal” was abnormal and sustained only by the Keynesian stimulus provided by Reagan’s and George W. Bush’s military build-ups and the stock market and real estate bubbles fueled by tax cuts for the rich. (Conservatives oppose Keynesian stimulus in the form of productive infrastructure investment, but support Keynesian stimulus if it benefits rentiers, defense contractors, real estate speculators and money managers).
In the progressive view, rebuilding a broken economy requires productivity-enhancing investment in manufacturing, innovation, infrastructure and education. In his speech, the president called for federal action in all four areas.
Manufacturing: “The first cornerstone of a strong and growing middle class has to be an economy that generates more good jobs in durable, growing industries. Over the past four years, for the first time since the 1990s, the number of American manufacturing jobs hasn’t gone down; they’ve gone up. But we can do more. So I’ll push new initiatives to help more manufacturers bring more jobs back to America.”
Innovation: “And I’ll push to open more manufacturing innovation institutes that turn regions left behind by global competition into global centers of cutting-edge jobs.”
Infrastructure: “We’ve got ports that aren’t ready for the new supertankers that will begin passing through the new Panama Canal in two years’ time. We’ve got more than 100,000 bridges that are old enough to qualify for Medicare. Businesses depend on our transportation systems, our power grids, our communications networks – and rebuilding them creates good-paying jobs that can’t be outsourced. And yet, as a share of our economy, we invest less in our infrastructure than we did two decades ago.”
Turning to education, the president set forth a vision of comprehensive reforms from preschool to college: