Economic prosperity can be tangible or it can be fabricated. During America’s boom times, mainly 1945-1975 we had tangible prosperity, when economic growth was shared by corporations, executives and the worker. The American worker’s productivity was rewarded with higher wages and benefits, ultimately leading to the strongest middle class the world has ever seen.
Prosperity can also be fabricated through monetary policy, interest rates and easy credit. This age, which happened the last 30 years, is what many conservatives point to toward as proof the theory of supply-side economics worked. Since 1979 U.S employee compensation relative to the GDP of this country has been in free fall. The worker gained most of what was lost during the 1980s around 1999 only to realize a dramatic fall out again in 2000.
If you ask people who are not studying statistics or involved in reporting on the economic issues, they would tell you that the 1980s were an age of growth and prosperity. They would be partly correct, the stock market gained a lot of points and the GDP grew at about 18%, but was the growth tangible? Was the growth derived from wages, which is really the only way to effect growth in an economy? No it wasn’t, wages have been declining. The increased economic activity was based on borrowed money. So in the 1980s, 1990s and 2000’s factories hired, stores were adding workers and many people found a job The problem is, the demand the caused this economic boom wasn’t paid for. It was fabricated.
So how does an economy grow without wage increases? Credit, debt and loans. Alan Greenspan, the Federal Reserve chair for about 2 decades created through the Fed a policy that made credit easier to obtain and effectively masked the ever dropping wages within our economy.
To understand the reason, one must also understand the gimmick behind Reaganomics. The theory that the tax savings of the 1981 tax cuts to the wealthiest Americans and corporations would be realized in increased investment and wages which as I and many others before me have illustrated have not come to fruition.
Ravi Batra’s book Greenspan’s Fraud elaborates on this article and further brings to the forefront the massive raping of the American middle class for the benefit of the wealthy.
Today, the chickens have come home to roost. The National Federation of Independent Businesses, a predominately conservative group, has said recently that their main concern regarding the economy is consumer confidence and demand.
Unfortunately for America, we no longer have the real wages needed to create tangible demand. Today’s wages are going towards paying off past personal debt, leaving little disposable income to create new demand needed for the current economy to grow. Wall Street and major banking institutions are no longer lending, even though they are sitting on a trillion dollars of taxpayer money, so credit is tighter than ever.
What America needs is real economic demand like we had and has been proven to work in the past. The federal government needs to directly stimulate the economy through a CCC or another WPA. Use those tax dollars to put people to work by having the federal government build major projects. This would put millions back into the workforce, create economic demand through real wages rather than credit.
What we need is to move away from the conservative, supply side economic model, and embrace the proven demand side. We need to elect real progressives to D.C., state houses and city councils in order to move this country forward.