Two articles in the Sunday New York Times, appearing side-by-side, together told the fundamental truth that our current discussion of economic policy ignores: Generating greater economic growth and ensuring that middle-class wages grow with productivity are essential for restoring shared prosperity and achieving our budget goals.
Steven Greenhouse’s piece, “Our Economic Pickle,” states:
“Federal income tax rates will rise for the wealthiest Americans, and certain tax loopholes might get closed this year. But these developments, and whatever else happens in Washington in the coming debt-ceiling debate, are unlikely to do much to alter one major factor contributing to income inequality: stagnant wages.”
The article notes, “Wages have fallen to a record low as a share of America’s gross domestic product” and quotes Harvard’s Larry Katz appropriately summarizing the situation: “What we’re seeing now is very disquieting.”
This is not totally new, as shown by the data from The State of Working America that Greenhouse cites: “From 1973 to 2011, worker productivity grew 80 percent, while median hourly compensation, after inflation, grew by just one-eighth that amount.”
These have been disappointing decades for the vast majority, and over the last 10 years, even college graduates have not seen any improvements in real wages and benefits. Employers have the upper hand in dealings with almost every segment of the workforce. This is no way to run an economy and we need to refocus economic policy on generating good jobs and economic security for workers at every skill and education level, starting with: a much higher minimum wage; taking necessary actions to dramatically lower unemployment; restoring the right to collective bargaining; and generally establishing labor standards so that competition between employers does not take the form of who can beggar their workforce the most.
Annie Lowrey’s accompanying piece, “The Low Politics of Low Growth,” is a perfect complement and rightly points out:
“… growth has broadly disappeared from the fiscal discussion that continues to occupy Congress and the White House, a discussion that has focused obsessively on deficits and debts, spending and taxes and fairness. But growth will be one of the most crucial determinants of whether the country can find its way back to fiscal health in the long run.”
The article notes, “The deal just struck by Congress to remove the worst of the blow from the so-called fiscal cliff will nevertheless give the economy a cold chill of austerity this year,” lowering growth from “3 percent to 2 percent or even lower” because of the end of the payroll tax holiday and spending cuts. That is, economic policy is moving us in the wrong direction.
Some economists argue that we should undertake a plan of long-term deficit reduction coupled with short-term job creation measures. The problem with this is that the chorus of people advocating for a long-term deficit plan NOW, NOW, NOW, drowns out the more urgent need for job creation. And, many of those who do argue for this combination seem unduly silent and passive about the short-term needs, almost as if they are covering their, well, whatevers.
We are having the wrong conversation. Let’s focus on jobs and restoring wage growth.