The middle class is still there. The middle
class and even more people at the bottom are not sharing in the gains of economic growth
to the degree they did in earlier decades, particularly the decades after World War II,
and as a result many of them are feeling squeezed. It is different than shrinking, but it’s still
a problem. Our immediate goal is how do we get out of this deep economic downturn. But
the related goal is we get back to having an economy that grows. We need to have shared
prosperity, more broadly shared prosperity, so people at the bottom do not lose ground.
People in the middle are not as squeezed. And that would mean that we need the gains
from income growth more broadly shared across the whole population, which they were for
30 years ago after WWII, and less concentrated at the top. That is hard to do. It has a lot
to do with broader issues of national and international economics, but we do need governments,
particularly the federal government, to pursue policies that at least mitigate the degree
to which the income growth gets concentrated among a small slice of people at the top. People often look at the policymakers in Washington
and say what’s wrong with them. Why can’t they just act? We know we have a longer-term
deficit problem. Now for starters in the very short term, right now we are in a bad economic
downturn. We have a nearly 10 percent unemployment. We actually need to do more in the state fiscal
relief in unemployment insurance and it can be deficit financed in the short run as long
as it is strictly temporary. But the question is why is it that policymakers cannot start
moving now to enact things that would go into effect not today, but after the economy recovers,
to deal with the longer-term fiscal problems? Well it is not just the problem of the policymakers.
The policymakers are often reflecting what their constituents think, what the public
thinks, so the public often I think doesn’t understand that there are no easy choices.
Where I fault policymakers often is that they often don’t level with the public that there
are really these hard choices. In the long run there are some easy things
to do but they are small. The long-term problem is big. In the long run there are very tough
choices. We are going to have to close the Social Security financing gap, slow health
care cost growth, deal with inefficiencies and raise a significant amount of new revenue.
All hard politically. The sooner the public begins to understand that is the case, the
more room there will be for policymakers to have the guts to take those actions. It is very much my view that we should approach
this very carefully and we should have a principle at the federal and state levels both that
in dealing with fiscal problems we do not further disadvantage people at the bottom
and we do not increase poverty or make the poor poorer and that if possible we actually
couple actions to reduce the projected longer-term deficits with actions to increase opportunity
and reduce poverty at the bottom. Now someone listening might say how can we
do that, or that’s naive, it won’t happen. But it has happened. In both 1990 and 1993
the Congresses and Presidents of that time, one was a Republican president, the other
was a Democratic president, passed big deficit reduction packages. In each case they reduced
the deficit half a trillion dollars over five years. And in both cases they included measures
like big expansions of the Earned Income Tax Credit for low-income working families in
the deficit reduction package and reduced the deficit in ways that not only shielded
people at the bottom but actually lifted working-poor parents and children out of poverty and made
some of those who were poor less poor. It can be done. It takes political will to do
it, but it can be done and in my view that’s the course we ought to be taking.

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