Where is the US economy headed?

Reich is a paid hack of organized labor. He sits on their "Economic Advisory Council along with all the heads of the major unions and gets a very large salary from them.

What's Germany's secret? In sharp contrast to the decades of stagnant wages in America, real average hourly pay has risen almost 30 percent there since 1985. Germany has been investing substantially in education and infrastructure.

How did German workers do it? A big part of the story is German labor unions are still powerful enough to insist that German workers get their fair share of the economy's gains.

The American economy can't get out of neutral until American workers have more money in their pockets to buy what they produce. And unions are the best way to give them the bargaining power to get better pay.

For three decades after World War II - I call it the "Great Prosperity" -- wages rose in tandem with productivity. Americans shared the gains of growth, and had enough money to buy what they produced.

That's largely due to the role of labor unions. In 1955, over a third of American workers in the private sector were unionized. Today, fewer than 7 percent are.

With the decline of unions came the stagnation of American wages. More and more of the total income and wealth of America has gone to the very top. Middle-class purchasing power depended on mothers going into paid work, everyone working longer hours, and, finally, the middle class going deep into debt, using their homes as collateral.

But now all these coping mechanisms are exhausted -- and we're living with the consequence.

Some say the Great Prosperity was an anomaly. America's major competitors lay in ruins. We had the world to ourselves. According to this view, there's no going back.

But this view is wrong. If you want to see the same basic bargain we had then, take a look at Germany now.

Germany is growing much faster than the United States. Its unemployment rate is now only 6.1 percent (we're now at 9.1 percent).

What's Germany's secret? In sharp contrast to the decades of stagnant wages in America, real average hourly pay has risen almost 30 percent there since 1985. Germany has been investing substantially in education and infrastructure.

How did German workers do it? A big part of the story is German labor unions are still powerful enough to insist that German workers get their fair share of the economy's gains.

That's why pay at the top in Germany hasn't risen any faster than pay in the middle. As David Leonhardt reported in the New York Times recently, the top 1 percent of German households earns about 11 percent of all income - a percent that hasn't changed in four decades.

Contrast this with the United States, where the top 1 percent went from getting 9 percent of total income in the late 1970s to more than 20 percent today.

The only way back toward sustained growth and prosperity in the United States is to remake the basic bargain linking pay to productivity. This would give the American middle class the purchasing power they need to keep the economy going.

Part of the answer is, as in Germany, stronger labor unions -- unions strong enough to demand a fair share of the gains from productivity growth.

The current Republican assault on workers' rights continues a thirty-year war on American workers' wages. That long-term war has finally taken its toll on the American economy.

It's time to fight back.

June 16, 2011 9:25 AM
Playing the blame game

Dave Weigel noted in passing yesterday that President Obama’s approval rating, while down from the bump it received in May, “still seems insanely high considering how unhappy voters are about the economy.”

I agree. It’s not that Obama’s support is insanely high; it’s clearly not. The point is we would expect it to be much lower given public anger and frustration. In general, folks are widely dissatisfied with just about everything, and yet, the president’s support remains in the high 40s.

There are competing explanations for this, but something in the NBC/WSJ poll (pdf) stood out for me. Respondents were asked a good question:

“How responsible is President Obama and his administration’s policies for the country’s current economic conditions?”

Just 10% said Obama is “solely responsible,” and 24% said he’s “mainly responsible.” Nearly half the country (48%) believes the president is “only somewhat responsible,” while 16% consider him not responsible for economic conditions at all. These results are roughly the same as they were last fall, before the midterms.

In contrast, the same poll asked how responsible George W. Bush is for the economy. Nearly half the country (47%) believe Bush is either mainly or solely responsible, well more than blame Obama. In fact, more people hold Bush responsible now than they did last fall.

The point is, people are frustrated and pessimistic, but they don’t necessarily see President Obama as the culprit. Indeed, the poll asked, “When you think about the current economic conditions, do you feel that this is a situation that Barack Obama has inherited or is this a situation his policies are mostly responsible for?” A large 62% majority said he inherited the mess.

This may not keep up, but it may help explain why Obama’s approval rating hasn’t completely tanked.

The same poll, by the way, also asked about the debt ceiling. A 39% plurality said the limit shouldn’t be raised, 31% said they don’t know enough to answer, and just 28% said it should be raised. Then the poll told respondents that “some” people believe failing to raise the ceiling “could stop the government from meeting its obligations, including payments to those on Social Security and in the military, and cause a shock to the economy.”

Suddenly, support for doing the right thing went from a 28% minority to a 46% plurality.

The situation of the middle class in the 1970s & 1980s was pretty good (except for the disastrous Democrat interegnum under the hapless & inept Jimmy Carter).

The Army has also spent $1.1 million on iPads to date, and you have to wonder if that's really necessary. Sorry to go all line-item on you, Army, but I have a hard time justifying the $1200 I've spent on mine, and I work for ******* Gizmodo. And while it's not a gadget, strictly speaking, we'd really love to know what's up with the $50,000 the State Department spent on a Porsche in Budapest in 2009. (And why it was funded by the Department of Justice? And can I get a job driving Porsches for the Department of Justice?)

I've got emails in to the procurement officers responsible for some these purchases (when one was listed) to try to learn more, but as of yet have not heard anything back. Unsurprising! Don't worry. We're still digging.

In the meantime, here's a breakdown of what the federal government spends on some of its favorite gadgets, courtesy of the federal procurement database.

We had very little econonomic growth and very high rates of inflation.