The US is stuck in an economic quagmire featuring near ten percent unemployment. As politicians argue about the solution — massive tax cuts or increases in Federal spending — what’s missing is a succinct analysis of the problem. Why has America lost 8 million jobs?
The roots of the jobs crisis stretch back to the Ronald Reagan presidency when conservative economic ideology began to dominate American political discourse. At the forefront of this philosophy were three malignant notions: helping the rich get richer will inevitably help everyone else, “a rising tide lifts all boats;” markets are inherently self correcting and therefore there’s no need for government regulation; and the US does not need an economic strategy because that’s a natural consequence of the free market.
What followed was a thirty-year period where America’s working families were abandoned in favor of the rich. Inequality rose as middle class income and wealth declined. As corporate power increased, unions were systematically undermined. As CEO salaries soared, fewer families earned living wages.
Conservative ideology produced a warped and brittle US economy, where more than two-thirds of our GDP was housing related: building, buying, and furnishing new homes or borrowing against existing homes in order to maintain a decent standard of living. When the credit bubble burst, the debt-based consumption model failed, taking down first the housing sector and then the entire economy, resulting in catastrophic job losses.