On his blog Robert Reich writes:
With so much income and wealth concentrated at the top, the vast middle class no longer has the purchasing power to buy what the economy is capable of producing. (People could pretend otherwise as long as they could treat their homes as ATMs, but those days are now gone.) The result is prolonged stagnation and high unemployment as far as the eye can see.
This says to me that the continued growth at Starbucks, attendance at Disney parks, buyers of blow up lawn ornaments for Halloween and all the other buying in America beyond the necessities of life is the sole result of buying by the 1%. Who tells the middle class to fill their oversized shopping carts at the likes of COSTCO or BJs with unnecessary garbage and junk food?
Yes, some Americans are hurting, I know a dozen people who have not had a raise in several years. I know the unemployed must have a tough time as do the uneducated and unskilled. I know people who have their entire raise obliterated because their payroll deduction for health benefits is increased. Tying all this to the top 1% may make good headlines (just like claiming some CEO’s pay caused high health insurance premiums) but it is a liberal line that is getting old.
If the economy was humming along all these years because of the home equity ATM then the reality is that too many people were living beyond their means for a very long time. They are not worse off today, they are back to normal.
Instead of harping on the income gap Reich, Krugman and others should tell Americans the truth about structural unemployment, about world competition, and about the kinds of jobs America needs and can create. They should tell them a degree in art history isn’t going to get them a job out of the lower middle class. But most of all, they need to explain how Bill Gates, Warren Buffett, George Soros and thousands of other high achievers hold down the rest of our citizens.