The Reagan diagnosis neglected the fact that the federal government had been a handmaiden of the country's inclusive growth of the 1950s and '60s. Worse, the Reagan Revolution failed to grapple with the even bigger upheaval of globalization.
The new globalization has accelerated the hollowing out of U.S. industries such as apparel, autos and textiles and in the process devastated the middle class employed in manufacturing, except in the highest-skill areas. Although American consumers have been the beneficiaries of a flood of low-cost and high-quality Chinese products, America's industrial workers have paid for it in wage cuts and higher unemployment.
The median earnings of full-time male workers reached their peak way back in 1973. Female workers have fared somewhat better, in part because they are disproportionately in areas like health care and education, which are more sheltered from global competition. The earnings of the CEOs who oversaw this loss of competitiveness, of course, soared spectacularly, especially as they grabbed stock options designed for their benefit.
The truth is that it will take more spending--not in the form of haphazard stimulus but in smart long-term public investments in education, infrastructure and human capital--to get us out of our present mess. It's time to stop arguing about spending cuts for everyone and tax cuts for the rich. Instead, Congress should be having a serious discussion about how we're going to fund our future competitiveness. In this way, we can build the skills and productivity in our society to compete effectively in the 21st century.
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