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Who lost the middle class?
Who will save the middle class?
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Who lost the middle class?
That's the question confronting President Obama and Mitt Romney as they march toward voting day. Their answers are predictable: Romney blames regulations and big government; Obama points to policies favoring rich guys like Romney. Sadly for the embattled American middle class, both viewpoints miss the mark.
The great stagnation in median incomes since the early 1990s stems from a failure to calibrate domestic policy to the demands of a rapidly changing world economy. Whether Democrats tax too much or Republicans too little is irrelevant against the sweeping economic disruptions caused by two decades of unprecedented globalization.
Global money flows have grown exponentially as restrictions on trade and investment have eased. But the exchange rates used to price these money flows have become distorted. China's manipulation of its currency has reduced the price of its exports in dollar terms. Meanwhile, the dollar's role as the world's reserve currency has given America access to a colossal amount of cheap credit.
This combination generates a multi-trillion-dollar excess of savings in China and a dangerous dependence on debt-financed consumer spending in the United States. The result: an evisceration of America's competitiveness.
At the same time, Wall Street's risk-taking ethos has infected the entire global financial sector. It's permitted bankers to draw exorbitant pay checks while the risk of financial crises has risen. And, as we've seen, the burden of paying for those meltdowns has shifted to middle class taxpayers.
Since we cannot wind back the clock on globalization, we must match it with globalized policymaking, where a degree of sovereignty is sacrificed in return for economic stability and a more evenly balanced global playing field. It's the only way to restore the American middle class. Just don't count on either presidential candidate to make the case.
I agree that monetary manipulation contributed to China's current strategic advantage, that Wall Street's reckless greed further positioned us badly, and Americans have gotten addicted to "cheap credit" which was frittered away, fast and loose... but,
the conclusion that we must sacrifice "a degree of sovereignty ... in return for economic stability" is wrong on many levels.
The EU tried that give-up-a-degree-of-sovereignty thing and we see where that got 'em. We tried some "sacrifice-lite" with NAFTA, CAFTA, et al and that didn't work out so well, either.
Our problem, then, isn't having exercised too much control over our trade policy but too little.
We need to exercise seriously more sovereignty over imports from countries willing to sacrifice safety (here, have some melamine in your coffee creamer), environmental regulation (Pacific acidification, anyone?) and worker standards (I dare you to name one worker's union in Vietnam).
What we need is something called Fair Trade.
Americans can compete on a genuinely"evenly balanced global playing field" but there's a gnat's chance we could on the steep-slope-of-a-field called "free trade."
Handing over bits and pieces of economic sovereignty in the insane hope that somehow that would make foreign countries adopt fairer standards in return is, not to put too fine a point on it, ludicrous.
"Romney blames regulations and big government; Obama points to policies favoring rich guys like Romney. Sadly for the embattled American middle class, both viewpoints miss the mark."
True, but then Casey misses the mark again.
Plain fact: Regulations and big government are SPECIFICALLY AND SOLELY DESIGNED to favor rich guys like Romney and Obama. All regulations help the biggest corporations to freeze out smaller business; all tax laws help the rich evade taxes.
Our two "parties" agree on everything important, and everything they agree on is suicidal.
We desperately need a second voice to oppose this single voice with two tongues.
I followed Mr. Casey, right up until the conclusion: "where a degree of sovereignty is sacrificed in return for economic stability and a more evenly balanced global playing field." What specifically are you referring to? WTO? A change in reserve currency? Or... ???? This is really a little to vague to be understandable at this time of day.
(Maybe you could pull in the Planet Money team on this concept of how best to play in the global economy?)
