Who Stole the American Dream? Read Free Page B

financial cleavage created by wedge economics has provoked popular discontent. Today,two-thirds of Americans—far more than just a couple of years earlier—say they see “strong” conflicts between rich and poor, and they see economics as more divisive than race, age, or ethnic grouping.
“The Virtuous Circle” of the 1950s–1970s
vs. the New Economy of the 1980s–2000s
    The New Economy is not smart. It hurts our capacity to grow, as we have seen from America’s painfully slow recovery from the financial collapse of 2008. The job losses and stagnant pay of the New Economy have broken what economists call “thevirtuous circle of growth”—long the engine of America’s economic growth and middle-class prosperity.
    In the heyday of the middle class, for thirty years after World War II, America’s great companies paid high wages and good benefits.Tens of millions of families had steady income, and they spent it, generating high consumer demand. Robust consumer demand is the main driving force of the U.S. economy. It propels businesses to invest in new technology, new plants and equipment, and more employees. Corporate expansion contributes to full employment, fueling “the virtuous circle of growth” to another round of expansion and higher living standards.
    But in our New Economy, thedynamic thrust of “the virtuous circle” has been disrupted by job losses and the lid on average pay scales. Flat pay is bad not only for individuals, but for the whole economy. Weak pay leads to weak consumer demand. Companies don’t expand and hire, and as a country, we bog down in long, painful “jobless recoveries.” That has happened several times in the past two decades.
    In short, downsizing, offshoring, and wedge economics have backfired. For the economy, they don’t work. For the nation, they don’t work. Individual corporations may profit, especially multinationals that have moved production overseas. But by sharing so little of their gains with their U.S. employees, they have put a crimp on middle-class spending, and without big consumer demand, the nation’s economy can’t move well.
Crisis Politics
    Washington can’t move either—because it is frozen in dysfunctional partisan gridlock.
    Certainly, genuine differences divide us as a people. That has always been true. America’s political pendulum has swung back and forth as parties battled over policy. But there was an accepted center of gravity. Work got done. Political rivals like Democrat Lyndon Johnson and Republican Richard Nixon would differ, but there was some consensus. Both expanded Social Security; neither tried to privatize it. Republicans might cut specific government programs or trim the budget more than Democrats, but they were not out to dismantle government and shut down entire cabinet departments.
    Today, everything is in dispute. Political Washington has lost the habit of compromise and belief in compromise. No issue is ever settled. One Congress passes a law, the next tries to repeal it. The hallmark of the New Power Game is crisis politics—political ultimatums and a partisan blame game. But the stakes are too high for perpetual brinkmanship. It is time to heed Lincoln: “A house divided … cannot stand.”
Challenge and Response:
a New Mind-Set, a Domestic Marshall Plan
    It will take a political metamorphosis, a populist renaissance, in America to reverse the political and economic tides of the past three decades and to make our country strong and whole again. The Toynbeean challenge we face requires a response from all of us, a rebirth of civic activism from average people at the grass roots as well as from America’s political and economic leaders. Millions of Americans will have to come off the sidelines and reengage in direct citizen action in order to reestablish “government of the people, by the people, for the people” and to achieve a genuine people’s agenda in Washington.
    It is not hard to conceive of the measures