Why The Three Biggest Economic Lessons Were Forgotten

[Crewleader]

Tuesday, February 11, 2014

by Robert Reich

Why has America forgotten the three most important economic lessons we learned in the thirty years following World War II?

Before I answer that question, let me remind you what those lessons were:

First, America’s real job creators are consumers, whose rising wages generate jobs and growth. If average people don’t have decent wages there can be no real recovery and no sustained growth.

In those years, business boomed because American workers were getting raises, and had enough purchasing power to buy what expanding businesses had to offer. Strong labor unions ensured American workers got a fair share of the economy’s gains. It was a virtuous cycle.

Second, the rich do better with a smaller share of a rapidly-growing economy than they do with a large share of an economy that’s barely growing at all.

Between 1946 and 1974, the economy grew faster than it’s grown since, on average, because the nation was creating the largest middle class in history. The overall size of the economy doubled, as did the earnings of almost everyone. CEOs rarely took home more than forty times the average worker’s wage, yet were riding high.

Third, higher taxes on the wealthy to finance public investments — better roads, bridges, public transportation, basic research, world-class K-12 education, and affordable higher education – improve the future productivity of America. All of us gain from these investments, including the wealthy.

In those years, the top marginal tax rate on America’s highest earners never fell below 70 percent. Under Republican President Dwight Eisenhower the tax rate was 91 percent. Combined with tax revenues from a growing middle class, these were enough to build the Interstate Highway system, dramatically expand public higher education, and make American public education the envy of the world.

http://robertreich.org/post/76339971895

[championofreason]

1. Over 70% of GDP is due to consumer spending.

Good post and great points from that article.

[Crewleader]

5. Robert Reich is one of my favorites covering the Economy.

Nice meeting you championofreason.

[Warpy]

2. The reason they forgot these lessons is terror of inflation

When Nixon was all agog about inflation, the annual rate was 4%, something that sounds quaint now but devastated senior citizens in their 80s who were living on pensions that had looked pretty good 20 years later. Whipping inflation became the be all and end all of the Republican Party and many conservatives in the Democratic Party.

They thought by keeping wages low they'd kill off the inflation built into fiat currency. Unfortunately, what they killed was the economy. We still have the inflation, as anybody who has been shopping recently knows.

Future liberals who find themselves back in power need to realize there is inflation built right into the currency, itself, and pass any future social safety net programs indexed to inflation.

Failing to do any of it was the major flaw of the New Deal and why Reagan was given carte blanche to wreck it in 8 short years. It was also why neither Clinton nor Obama has sought to overturn the Reaganism that is killing this country.

[Demeter]

4. Add to that the fact that the 1% are sick with GREED

and they felt horribly threatened by the Middle Class, because social mobility proved that they weren't BORN to be rich and powerful, and circumstance could take it away, just as randomly as it gave out the goodies.

They are truly mentally, emotionally, socially sick sad-sacks, and they all need treatment, if we are to survive.

[Crewleader]

6. Healthy Population

[KoKo]

8. Tune says Much about what's going on all over the Global Economy these days...

Sadly...

[Crewleader]

9. Sad indeed KoKo and I hope you have a

[KoKo]

12. And to You...for the "old times"...and the "new times."

's

[bemildred]

3. They are infantile people and they wanted to forget. That is all you need. nt

[KoKo]

7. Recommend...!

[snot]

10. K&R'd.

[jtuck004]

11. They haven't forgotten them. The decision makers are working on a different curriculum than we

think they are. Those aren't even part of the lesson plan they completing, entitled "Creating Servitude".