There's lots to like in Robert Reich's piece in the Huffington Post today, as he details how the Obama tax cut deal confirms the Republican worldview that big government is the problem with the economy.
He says "the real story" is that an increasing share of the benefits of economic growth have gone to the top 1 percent and the vast middle class no longer has the purchasing power to keep the economy going.
The best part of his piece is his take on the solution: "reorganize the economy so the benefits of growth are more widely shared," and how to accomplish it, through a specific set of progressive policies that should become the new platform of the Democratic Party--or just of the progressive left in general.
Reich nails the real story of what happened to the economy:
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.
Reich then gets specific about how to do that in a surprisingly short, tight message that every progressive should have as their mantra:
The solution is to reorganize the economy so the benefits of growth are more widely shared. Exempt the first $20,000 of income from payroll taxes, and apply payroll taxes to incomes over $250,000. Extend Medicare to all. Extend the Earned Income Tax Credit all the way up through families earning $50,000. Make higher education free to families that now can't afford it. Rehire teachers. Repair and rebuild our infrastructure. Create a new WPA to put the unemployed back to work.
Pay for this by raising marginal income taxes on millionaires (under Eisenhower, the highest marginal rate was 91 percent, and the economy flourished). A millionaire marginal tax of 70 percent would eliminate the nation's future budget deficit. In addition, impose a small tax on all financial transactions (even a tiny one -- one half of one percent -- would bring in $200 billion a year, enough to rehire every teacher who's been laid off as well as provide universal preschool for all toddlers). Promote unions for low-wage workers.
It's great to read someone like Reich point out that middle class working people don't have the money to keep the economy going--and that's the problem we need to solve. I've been calling for expanding the Earned Income Tax credit and a big government jobs program in past diaries, in addition to eventually creating a basic income for all to provide income security--a program of demand-side Rise Up Economics.
For a fairly mainstream pundit, Reich's policy program is amazingly straightforward and truly progressive, and I believe that it will take something like this to defeat the Republicans in 2012.
I think the Republicans won so handily in November because President Obama and the Democrats never had a solution to the economic crisis that was ever anywhere close enough to being equal to the task of replacing 8 million missing jobs.
Voters know that the Dems failed to bring down unemployment and failed to help anyone but Wall St. So they are giving the other guys a chance. But the other guys have nothing but "government is bad and tax cuts are good."
If we could say to voters that we will directly create millions of good new government jobs, put real money into their pockets by making the Earned Income Tax credit a middle class program, and make higher education affordable, we would win them over.
But minus the real story about the economy and a real program to make a difference, 2012 could be a bad year indeed.