Conservatives, Repeat after me: It's not Obama's fault!

This piece by William Galston in the Wall Street Journal is a terrific review of the most important issue facing this country and the world: the gutting of the middle class (what I refer to as the Second Gilded Age).  It calls for a drastic response by both conservatives and liberals.  Most of the old ideas have been rendered irrelevant by the new world order where capital and a few lucky and/or brilliant folks get all the wealth and where the "low income" category becomes the great majority of workers.  We need new ideas - but first there has to be an appreciation of the scale and importance of the issue. I appreciate his unwillingness to even mention Obama.  Yes, ACA is likely to have made things a tiny bit worse but otherwise what Obama has done or not done has had very little impact on this.

The biggest economic story of this era is the Great Decoupling of wages and benefits from economic productivity. There has been a massive shift of national output from labor to capital. With it have come stagnating household incomes and a creeping loss of confidence. Translating productivity gains into rising living standards for average families is the country's central economic challenge.

Galston points out the fact that labor recieved 2/3 of national income in 1947 and 1973 but now the figure is below 60%.  And he recognizes that this is a global issue.

Since 1990, labor's share of total output has declined in almost every country. In half of them, the decline began in the 1970s and amounts to 10 percentage points or more. The U.S. is anything but an outlier. Summarizing a large body of research, a 2012 report for the Organization for Economic Cooperation and Development (with 34 member countries) attributes this development to three principal factors: the worsening position of low-education workers, changes in technology, and the globalization of production, competition and capital flows.

This great hollowing out has been masked by two trends since 1990: rising debt and the entrance of China, India, Russia, and other EMs into the global economy.

But U.S. household debt reached unsustainable levels by 2007, and the boom in developing countries—especially China, India, Brazil, South Africa and Turkey—appears to have peaked. As both Europe and the U.S. are discovering, the domestic market still matters, and weak gains in household income are bound to retard economic growth.

He discusses infrastructure spending, increasing the minimum wage, and improving public schools as things that would help but only at the margin.

But the facts push me to a more radical conclusion: We cannot expect robust, sustainable economic growth unless we can figure out how average households can participate in the fruits of that growth, as they did in the postwar period. We need nothing less than a new norm—a revised social contract—that links compensation to productivity. And because we cannot return to the conditions that once sustained that link, we need new policies to bring it about. Neither political party has come close to proposing anything of the sort, and the American people know it.

Maybe even Fox can come around to the idea that lower taxes and smaller government are pathetic responses to this ugly new paradigm.