The Big Economic Story, and Why Obama Isn’t Telling It

Quiz: What’s responsible for the lousy economy most Americans continue to wallow in? 

A. Big government, bureaucrats, and the cultural and intellectual elites who back them.

B. Big business, Wall Street, and the powerful and privileged who represent them.

These are the two competing stories Americans are telling one another.

Yes, I know: It’s more complicated than this. In reality, the lousy economy is due to insufficient demand – the result of the nation’s almost unprecedented concentration of income at the top. The very rich don’t spend as much of their income as the middle. And since the housing bubble burst, the middle class hasn’t had the buying power to keep the economy going. That concentration of income, in turn, is due to globalization and technological change – along with unprecedented campaign contributions and lobbying designed to make the rich even richer and do nothing to help average Americans, insider trading, and political bribery.

So B is closer to the truth.

But A is the story Republicans and right-wingers tell. It’s a dangerous story because it deflects attention from the real problem and makes it harder for America to focus on the real solution – which is more widely shared prosperity. (I get into how we might do this in my new book, Aftershock.)

A is also the story President Obama is telling, indirectly, through his deficit commission, his freeze on federal pay, his freeze on discretionary spending, and his waivering on extending the Bush tax cuts for the rich.

Most other Washington Democrats are falling into the same trap.

If Obama and the Democrats were serious about story B they’d at least mention it. They’d tell the nation that income and wealth haven’t been this concentrated at the top since 1928, the year before the Great Crash. They’d be indignant about the secret money funneled into midterm campaigns. They’d demand Congress pass the Disclose Act so the public would know where the money comes from.

They’d introduce legislation to curb Wall Street bonuses – exactly what European leaders are doing with their financial firms. They’d demand that the big banks, now profitable after taxpayer bailouts, reorganize the mortgage debt of distressed homeowners. They’d call for a new WPA to put the unemployed back to work, and pay for it with a tax surcharge on incomes over $1 million.

They’d insist on extended unemployment benefits for long-term jobless who are now exhausting their benefits. And they’d hang tough on the Bush tax cuts for the wealthy – daring Republicans to vote against extending the cuts for everyone else.

But Obama is doing none of this. Instead, he’s telling story A.

Making a big deal out of the deficit – appointing a deficit commission and letting them grandstand with a plan to cut $4 trillion out of the projected deficit over the next ten years — $3 of government spending for every $1 of tax increase – is telling story A. 

What the public hears is that our economic problems stem from too much government and that if we reduce government spending we’ll be fine.

Announcing a two-year freeze on federal salaries – explaining that “I did not reach this decision easily… these are people’s lives” – is also telling story A.

What the public hears is government bureaucrats are being paid too much, and that if we get the federal payroll under control we’ll all be better off.

Proposing a freeze on discretionary (non-defense) spending is telling story A. So is signaling a willingness to extend the Bush tax cuts to the top. So is appointing his top economic advisor from Wall Street (as apparently he’s about to do).

In fact, the unwillingness of the President and Washinton Democrats to tell story B itself promotes story A, because in the absence of an alternative narrative the Republican story is the only one the public hears.

Obama’s advisors explain the President’s moves are designed to “preempt” the resurgent Republicans – just like Bill Clinton preempted the Gingrich crowd by announcing “the era of big government is over” and then tacking right.

They’re wrong. By telling story A and burying story B, the President legitimizes everything the right has been saying. He doesn’t preempt them; he fuels them. He gives them more grounds for voting against raising the debt ceiling in a few weeks. He strengthens their argument against additional spending for extended unemployment benefits. He legitimizes their argument against additional stimulus spending.

Bill Clinton had a rapidly expanding economy to fall back on, so his appeasement of Republicans didn’t legitimize the Republican world view. Obama doesn’t have that luxury. The American public is still hurting and they want to know why.

Unless the President and Democrats explain why the economy still stinks for most Americans and offer a plan to fix it, the Republican explanation and solution – it’s big government’s fault, and all we need do is shrink it – will prevail.

That will mean more hardship for tens of millions of Americans. It will make it harder to remedy the bad economy. And it will set Republicans up for bigger wins in the future.


Originally published at Robert Reich’s Blog and reproduced here with the author’s permission.

2 Responses to "The Big Economic Story, and Why Obama Isn’t Telling It"

  1. CH   December 3, 2010 at 12:38 pm

    Robert,I’m having trouble with your disjointed post. Where do you get your statistics that the rich don’t spend their money? Why don’t you admit that much of this mess while certainly made worse by B was actually mandated by A. 9/10 of the folks with non-performing mortgages should never have had a mortgage in the first place but the Left and their entitlement philosophy insisted that cheap, stupid money be made available to them.The path out of this mess is not pinching the rich with greater taxes to further fuel an out of control government which is inefficient with everything it touches. Dude, even in freakin Berkeley the DMV lines, post office, IRS, and every other government office are a joke to interface with. Come down off the mountain, off the lecture stand, out of the library or wherever your head is currently buried and see the reality that the Right simply wants to stop the feeding of the beast and channel that capital into the hands of the leaders and entrepreneurs in our country that actually CREATE jobs…..the Wall is down, Europe is drowning in entitlement debt, Cuba and North Korea are starving….the experiment doesn’t work!

    • hlowe   December 5, 2010 at 7:53 pm

      CHDemand is the problem, rich will not build and hire to sell goods and services to an over indebted nation, they will save. You have obviously been watching the fox/wingnuts for too long, and you didn’t see this mess coming; taxes are the lowest in 50 years DUDE, Debt is out of control. Look up the word cults to understand what you’re following.See “inside job” for a starter.