"The day the right lost the economic argument...President Obama's speech clinched the case..." [View all]

[ProSense]

The day the right lost the economic argument

President Obama's speech clinched the case against Norquist-style austerity — and won over the likes of USA Today

By Michael Lind

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...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).

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http://www.salon.com/2013/07/25/the_day_the_right_lost_the_economic_argument/