In December, NDN made the decision that the most appropriate term to describe the last decade was as a lost decade for everyday Americans. I blogged on this topic on December 3 and published a white paper on December 17 entitled, A Lost Decade for Everyday Americans.
Since that time, the lost decade narrative has been discussed in a variety of other sources. On Saturday, Neil Irwin in the Washington Post covered the lack of job growth over the last decade:
It was, according to a wide range of data, a lost decade for American workers. The decade began in a moment of triumphalism -- there was a current of thought among economists in 1999 that recessions were a thing of the past. By the end, there were two, bookends to a debt-driven expansion that was neither robust nor sustainable.
There has been zero net job creation since December 1999. No previous decade going back to the 1940s had job growth of less than 20 percent. Economic output rose at its slowest rate of any decade since the 1930s as well.
Middle-income households made less in 2008, when adjusted for inflation, than they did in 1999 -- and the number is sure to have declined further during a difficult 2009. The Aughts were the first decade of falling median incomes since figures were first compiled in the 1960s.
Thankfully, 2009 ended better than it began. Economists talk about green shoots of recovery taking hold. Consumer confidence has improved. Equity markets have soared. But for all the progress, the American economy remains extremely vulnerable.
To understand those economic risks, it is worth considering Japan’s experience in the 1990s. A bursting housing bubble there sparked a banking crisis that was followed by a decade of economic stagnation.
The Japanese government lacked the resolve to do what was necessary. It failed to fix its banks and stopped its early fiscal stimulus before recovery had taken hold, leaving the economy all too vulnerable to outside shocks, including the Asian currency crisis and the dot-com collapse in 2001. Japan’s annual growth rate — which had averaged 4 percent since 1973 — slowed to less than 1 percent, on average, from 1992 to 2003.
While obvious, it bears repeating that American economic policy must, first, account for fact that the last decade was already lost for everyday Americans, and, second, do everything to avoid another one. The economic, social, and political consequences of back-to-back lost decades would be catastrophic, and such a scenario is a legitimate possibility.
The Wall Street Journal recently published this fascinating graphic (h/t Bill Easterly):
Energy and ICT are truly dominant as this decade comes to a close, and the three largest banks are (with HSBC's headquarters move to Hong Kong) now based in China. Certainly global competition will only continue to intensify over the next decade. I'd venture a guess that the chart in 10 years will include more Asian companies and perhaps more from Latin America (and fewer from Europe). Will it include an energy company whose business relies on alternatives, or will fossil companies continue to dominate? Will state-owned enterprises continue to grow? Will one be the biggest company in the world?
NDN President Simon Rosenberg just sent out this note alerting people to the release of a new paper from NDN:
In recent weeks, policymakers in Washington have begun to take a new look at the American economy and the increasing struggle of everyday people in this new era of globalization.
To help inform this conversation, NDN will be releasing a series of targeted "white papers" over the next few months designed to highlight particularly significant aspects of this important debate.
We proudly release the first in this series, A Lost Decade for Everyday Americans. This new paper, written by Jake Berliner, Deputy Policy Director of NDN’s Globalization Initiative, makes the point that over the last ten years the typical American family has seen their incomes decline; and, that for many, economic hardship had come long before the recent recession began.
To ensure the success of the economic strategy the government adopts next year, it is imperative that the plan accounts for and explains the underlying economic weakness that affected everyday Americans in the years prior to the Great Recession. As this paper illustrates, this past decade in America has been a lost decade for ordinary Americans.
Marked by stagnating wages, declining median household income, rising living costs, abnormally slow job creation, and then capped by the destruction of many trillions of dollars in personal wealth held in housing and stocks, the decade has left most everyday Americans worse off than they were ten years ago. Too little of our national dialogue has focused on the intense struggle of everyday people prior to the Recession, yet understanding that struggle is critical to formulating an adequate response to this great economic challenge.
Thu, Dec. 17 - In this paper, Jake Berliner, Deputy Policy Director of NDN's Globalization Initiative, argues that everyday Americans are at the end of a “lost decade” and explains the still misunderstood causes of the virulence of the recession.
The First in a Series of White Papers on the American Economy in a New Era of Globalization
A Lost Decade for Everyday Americans
December 17, 2009 By Jake Berliner
To ensure the success of the economic strategy the government adopts next year, it is imperative that the plan accounts for and explains the underlying economic weakness that affected everyday Americans in the years prior to the Great Recession. As this paper illustrates, this past decade in America has been a lost decade for ordinary Americans.
Marked by stagnating wages, declining median household income, rising living costs, abnormally slow job creation, and then capped by the destruction of many trillions of dollars in personal wealth held in housing and stocks, the decade has left most everyday Americans worse off than they were ten years ago. Too little of our national dialogue has focused on the intense struggle of everyday people prior to the Recession, yet understanding that struggle is critical to formulating an adequate response to this great economic challenge.
Wages Stagnate and Household Incomes Decline
At the center of this lost decade lies the fact that average wages stagnated and median household incomes declined by over $2000 during the Bush presidency. As the graph below illustrates, both the Clinton and Bush presidencies saw strong gains in per capita GDP and productivity. Yet while the Clinton presidency also saw strong income growth, households during the Bush presidency saw their incomes go down.
Both per capita GDP and productivity historically have been reliable indicators of prosperity. In the kind of free labor markets we enjoy, productivity increases – the ability of a given worker to produce more, per hour – are supposed to lead to higher wages; and GDP growth is supposed to yield more job creation and prosperity that translates into higher living standards. In the Bush era, however, this did not happen, and the stagnation of wages in a time of surging productivity meant that workers were failing to get ahead, even as they produced more.
Rising Costs Pinch Households
As household incomes fell, rising costs further pinched many Americans’ ability to improve – or even maintain – their standards of living, contributing to the lost decade. Health care premiums and out-of-pocket costs both more than doubled, college tuition costs increased rapidly, and energy costs shot up, with retail gasoline prices doubling.
Amid these difficult economic pressures, millions of Americans found themselves able to meet these rising costs and maintain their standards of living only by drawing on the value of their largest and fastest-appreciating asset, their homes, through home equity lines and mortgage refinancings. These tactics turned against many when home values began to fall, mortgage payments rose with interest rates, and hours worked were cut back. The foreclosure crisis – and the financial meltdown it helped fuel – further reduced home values, while also driving down the value of the other assets, investments and pensions, upon which many American households also rely.
In the end, virtually all of the gains that most Americans had seen in the preceding decade were wiped out, leaving debt in the form of second and third mortgages and credit card bills. The IMF estimates that $3.4 trillion in wealth disappeared in the financial meltdown alone, Bloomberg reports that homeowners lost $5.9 trillion in value since the housing market peaked in 2006, and economic columnist Michael Mandel has pointed out that the initial dip in the S&P 500 (now partially recovered) during the financial crisis was comparable to the stock market decline during the Great Depression.
Diminished Wage Growth and Job Creation Ability
One of the critical roots of these economic problems is the fact that the once-vaunted American job-creation machine has slowed dramatically. While employment is generally seen as a lagging economic indicator, the job creation problems of the last decade are not the result of a standard lag. Rather, Okun’s Law – which tracks the correlation between GDP growth and employment – doesn’t work as it used to: While job creation relative to economic growth occurred in a consistent manner in every expansion from the 1960s through the 1990s, the job-creation rate fell by more than half in the 2002-2007 expansion.
On top of the stagnant wages and incomes of the past decade, the American economy has also seen a net loss in private sector jobs. According to a Wall Street Journal analysis of Labor Department statistics, in October of 2009, “private sector companies employed 108.401 million U.S. workers, a million fewer than in October 1999, when they employed 109.487 million. Not since the Labor Department began tracking payroll employment in 1939 has there been such a stretch with no net job gains.” (See Wall Street Journal graph below.)
Furthermore, after the 2001 recession (the mildest downturn since WWII) it took twice as long to begin to generate net new jobs as in previous recoveries. And while productivity surged at that time, more productive workers cannot explain this longer than usual lag, since their wages did not increase either.
Where Economic and Employment Policy Goes from Here
Because the challenges of job creation and wage growth in our economy are structural, economic policy must focus directly on creating higher employment that carries high wages. Fortunately, many of the measures that can lead to higher wages and incomes will also tend to increase employment. But relying simply on GDP growth to produce these outcomes is no longer a tenable economic policy for America.
Policymakers should focus on containing the rising costs (outside of wages) facing American businesses, costs coming out of the wage increases that normally would follow from higher productivity, and raising the value of workers to business. Lowering the cost of employment can take the form of reducing payroll taxes and decreasing the cost of benefits by reigning in health care and pension costs. Containing energy costs, due to their impact on both households and business, must also be a priority. Raising the value of workers requires increasing skills through education and training. Such reforms will make workers more competitive compared to their substitutes, including technology, and alleviate some of the structural forces creating downward pressure on jobs and wages.
Understanding the Virulence of the Recession: A Lost Decade, Not Just a Burst Bubble
While many economists and policymakers have been surprised by the virulence of this recession, understanding the weakened economic position of American workers long before the recession began helps explain why this downturn has been so damaging.
The declining incomes, stagnating wages, weak job creation, and rising prices resulted in an increase of more than 8 million Americans living below the poverty line in 2008, compared to when President Bush took office. By contrast, 8 million people were lifted out of poverty over the eight years of the Clinton presidency. Similarly, over 7 million more Americans were forced to go without health insurance in 2008 than in 1999.
Explaining our current economic problems as simply a financial meltdown caused by a burst housing bubble dangerously oversimplifies our true economic challenges. Not only did the recession begin in December 2007, before the financial crisis, but, more importantly, everyday Americans already were stuck in a lost decade before the downturn started. When the financial crisis struck and credit tightened, houses lost further value and jobs began to disappear quickly. American consumers – the drivers of global demand – were left paralyzed. The bursting housing bubble was a capstone – and not the defining feature – of that lost decade.
About the Author
Jake Berliner, NDN Globalization Initiative Deputy Policy Director
In his capacity of the Deputy Policy Director of NDN’s Globalization Initiative, Jake Berliner manages NDN’s work on economic and energy policy. Jake worked for Governor Bill Richardson for two election cycles, including his presidential campaign, and co-founded and directed the Energy Security Initiative, a program of the Tufts University Institute for Global Leadership.
Much of the analysis and insight in this work is a synthesis of that previously done by NDN Globalization Initiative Chair Dr. Robert Shapiro and NDN President Simon Rosenberg.
the Vice President will hold a roundtable discussion on this Administration’s commitment to enforcing laws against the piracy of intellectual property. The Vice President will be joined by Attorney General Eric Holder, Homeland Security Secretary Janet Napolitano, Commerce Secretary Gary Locke, FBI Director Robert Mueller, USSS Director Mark Sullivan, as well as CEOs from major media conglomerates, union representatives, legal experts and other government officials. This White House meeting is the first of its kind, and will bring together all of the stakeholders to discuss ways to combat piracy in this rapidly changing technological age.
In 1984, the market value of the physical assets of the top 150 U.S. public companies – their “book value” – accounted for 75 percent of the total value of their stocks. A firm was worth nearly what its plant, equipment and real estate could be sold for. By 2004, the book value of the top 150 U.S. corporations accounted for 36 percent of the total value of their shares. Nearly two-thirds of the value of large companies now comes from what they know and the ideas and relationships they own.
With that fact in mind, it is easy to see why ensuring that our IP is adequately protected is an important priority for policymakers.
Martin Wolf in the FT sums up nicely the big problem with China’s currency practices:
At the conclusion of a European Union-China summit in Nanjing last week, Wen Jiabao, the Chinese premier, complained about demands for Beijing to allow its currency to appreciate. He protested that “some countries on the one hand want the renminbi to appreciate, but on the other hand engage in brazen trade protectionism against China. This is unfair. Their measures are a restriction on China’s development.” The premier also repeated the traditional mantra: “We will maintain the stability of the renminbi at a reasonable and balanced level.”
We can make four obvious replies to Mr Wen. First, whatever the Chinese may feel, the degree of protectionism directed at their exports has been astonishingly small, given the depth of the recession. Second, the policy of keeping the exchange rate down is equivalent to an export subsidy and tariff, at a uniform rate – in other words, to protectionism. Third, having accumulated $2,273bn in foreign currency reserves by September, China has kept its exchange rate down, to a degree unmatched in world economic history. Finally, China has, as a result, distorted its own economy and that of the rest of the world. Its real exchange rate is, for example, no higher than in early 1998 and has depreciated by 12 per cent over the past seven months, even though China has the world’s fastest-growing economy and largest current account surplus.
Do these policies matter for China and the world? Yes, is the answer. Mark Carney, governor of the Bank of Canada, notes in a recent speech, that “large and unsustainable current account imbalances across major economic areas were integral to the build-up of vulnerabilities in many asset markets. In recent years, the international monetary system failed to promote timely and orderly economic adjustments.”* He is right.
What we are seeing, as Mr Carney points out, is a failure of adjustment to changes in global competitiveness that has unhappy precedents, notably during the 1920s and 1930s, with the rise of the US, and, again, during the 1960s and 1970s, with the rise of Europe and Japan. As he also notes, “China’s integration into the world economy alone represents a much bigger shock to the system than the emergence of the US at the turn of the last century. China’s share of global gross domestic product has increased faster and its economy is much more open.”
Moreover, today, China’s managed exchange rate regime is quite different from those of other big economies, which was not true of the US when it rose to prominence. Thus, China’s managed exchange rate is shifting adjustment pressure on to other countries. This was disruptive before the crisis, but is now worse than that in this post-crisis period: some advanced countries, notably Canada, Japan, and the eurozone, have already seen big appreciations of their currencies. They are not alone.
China’s currency practices are hurting the United States far less than developing nations and the eurozone, amongst others, and the US government knows it. Two things are mind-boggling to me: why other countries don’t stand up to the Chinese more (I’m glad many have avoided the all-too-easy protectionist route, because that could be a disaster, but am not sure the current dialog on rebalancing is going to move the ball enough), but, more importantly, how the Chinese could possibly think that currency manipulation is a good long term strategy. Sure, it helps exports, and the CCCP has basically made a massive political bet on dramatic GDP growth based on exports, but it doesn’t have to be this way.
For a so-called socialist country, China is barely one at all. The domestic social safety is virtually non-existent, and as badly as the U.S. needs to expand healthcare coverage, China needs to much more. A social safety net would lessen the incredibly high savings rates that Chinese operate with (because they have no choice), in turn giving China’s people a greater ability to consume, a positive outcome for both the Chinese economy and the rest of the world.
In America these days, it’s popular to agonize over the amount of money we owe China. But China is saving because it has to, not because it wants to. As the saying goes, when you owe the bank $100,000, the bank owns you, but when you owe the bank $1.6 trillion, you own the bank. (For more on this, read Christopher Hayes’ recent article in The Nation.)
At last week’s Jobs Summit, President Obama said he’ll consider any good idea to create jobs. I heard him say it, and I believe him. His speech yesterday at the Brookings Institution offered some decent, standard approaches, including more infrastructure spending and tax breaks for small businesses. The President would be well-served to cast his policy net a bit wider. Since the Great Recession began, the economy has shed an astounding 7.3 million private-sector jobs – and based on the last two recoveries, businesses could continue to cut back their labor forces for another year or longer. The President and Congress can create more government jobs whenever they like, for example by giving states an additional $50 billion or so targeted to jobs. But finding the right lever to get private companies to hire more people than they would otherwise is a lot harder.
The most direct and sensible approach is to somehow reduce the costs of hiring for companies. The unsurprising catch is that the incentives required to get them to hire a million or more new people, whom otherwise they wouldn’t have hired, are very expensive. So, most serious jobs proposals would either drive up our already-mammoth deficits or require a significant new tax.
Most, but not all, because there is one approach I know of that wouldn’t cost taxpayers anything. The foreign subsidiaries of America’s multinational companies currently hold offshore an estimated $1 trillion in past earnings, because our tax laws defer the U.S. corporate tax on those earnings until the parent companies bring them back to the U.S. parent company. The challenge is to leverage these funds for job creation at home, by creating a strong incentive for them to bring back a share of those earnings tied to a requirement that they use the funds to finance new hires. It’s the closest thing to “found money” that this administration and Congress will ever find.
We actually tried this once before, in a fashion, and it worked reasonably well. In 2004, Congress slashed the corporate tax on such “repatriated” earnings for one year, from 35 percent to 5.25 percent, and IRS data show that it increased net inflows of those earnings by $312 billion, including $252 billion by U.S. manufacturers. The 2004 law also told companies they had to use the new funds they brought back to, among other things, finance new workers, new investment, or pay down domestic debt. Recent surveys found $73 billion of the repatriated earnings went to create or retain jobs, $75 billion for new capital spending, and $39 billion to pay down domestic debt. Here’s the free lunch: In the short run, the temporary program raised $34 billion in new federal revenues. And it may not even have reduced revenues over the long-term, or not by much, since without the tax break, most U.S. multinationals keep their foreign-source earnings abroad indefinitely, or at least until they can be used to offset domestic losses for tax purposes.
We can estimate what would happen if we tried this approach again. A recent analysis I did with AEI’s Aparna Mathur found that such a policy could bring back $420 billion in foreign-source income now held abroad. And if the program were targeted again in the same way as in 2004, it could mean $97 billion for new employment, or enough to create or save 2.6 million jobs over two years, as well as $101 billion for new capital spending, enough to produce long-term wage gains of 1.3 percent.
Skeptics will claim that most companies would use their repatriated funds in other ways, such as stock buy-backs; and since money is fungible, the government couldn’t stop them. Two academic studies built models which inferred that this happened last time; but there’s no real evidence that companies evaded the restrictions, and a recent academic survey suggests that most did follow the law. Even if some didn’t, we can tighten the restrictions this time. We could allow multinationals to bring back offshore earnings for one or two years and pay just 5 or 10 percent corporate tax on them here, so long as they use those funds only to create new, net jobs or increase their net investment. That means they would have to not only hire new people, but expand their overall workforces. It might just help businesses create between 1 million and 2 million new jobs while actually reducing the deficit, which seems like the kind of new idea the President is looking for.
President Obama delivered remarks on the economy this morning. Below are a few points from what he is planning to do to spur job creation. The whole speech can be found here on the White House website.
Today, I want to outline some of the broader steps that I believe should be at the heart of our efforts to accelerate job growth – those areas that will generate the greatest number of jobs while generating the greatest value for our economy.
First, we’re proposing a series of steps to help small businesses grow and hire new staff. Over the past fifteen years, small businesses have created roughly 65 percent of all new jobs in America. These are companies formed around kitchen tables in family meetings, formed when an entrepreneur takes a chance on a dream, formed when a worker decides its time she became her own boss. These are also companies that drive innovation, producing thirteen times more patents per employee than large companies. And, it’s worth remembering, every once in a while a small business becomes a big business – and changes the world.
That’s why it is so important that we help small business struggling to open, or stay open, during these difficult times. Building on the tax cuts in the Recovery Act, we’re proposing a complete elimination of capital gains taxes on small business investment along with an extension of write-offs to encourage small businesses to expand in the coming year. And I believe it’s worthwhile to create a tax incentive to encourage small businesses to add and keep employees and I’m going to work with Congress to pass one.
These steps will help, but we also have to address the continuing struggle of small businesses to get the loans they need to start up and grow. To that end, we’re proposing to waive fees and increase the guarantees for SBA-backed loans. And I am asking my Treasury Secretary to continue mobilizing the remaining TARP funds to facilitate lending to small businesses.
Second, we’re proposing a boost in investment in the nation’s infrastructure beyond what was included in the Recovery Act, to continue modernizing our transportation and communications networks. These are needed public works that engage private sector companies, spurring hiring across the country. Already, more than 10,000 of these projects have been funded through the Recovery Act. And by design, Recovery Act work on roads, bridges, water systems, Superfund sites, broadband networks, and clean energy projects will all be ramping up in the months ahead. It was planned this way for two reasons: so the impact would be felt over a two year period; and, more importantly, because we wanted to do this right. The potential for abuse in a program of this magnitude, while operating at such a fast pace, was enormous. So I asked Vice President Biden and others to make sure – to the extent humanly possible – that the investments were sound, the projects worthy, and the execution efficient. What this means is that we’re going to see even more work – and workers – on Recovery projects in the next six months than we saw in the last six months.
Even so, there are many more worthy projects than there were dollars to fund them. I recognize that by their nature these projects often take time, and will therefore create jobs over time. But the need for jobs will also last beyond next year and the benefits of these investments will last years beyond that. So adding to this initiative to rebuild America’s infrastructure is the right thing to do.
Third, I’m calling on Congress to consider a new program to provide incentives for consumers who retrofit their homes to become more energy efficient, which we know creates jobs, saves money for families, and reduces the pollution that threatens our environment. And I’m proposing that we expand select Recovery Act initiatives to promote energy efficiency and clean energy jobs which have proven particularly popular and effective. It’s a positive sign that many of these programs drew so many applicants for funding that a lot of strong proposals – proposals that will leverage private capital and create jobs quickly – did not make the cut. With additional resources, in areas like advanced manufacturing of wind turbines and solar panels, for instance, we can help turn good ideas into good private-sector jobs.
Finally, as we are moving forward in these areas, we should also extend the relief in the Recovery Act, including emergency assistance to seniors, unemployment insurance benefits, COBRA, and relief to states and localities to prevent layoffs. This will help folks weathering these storms while boosting consumer spending and promoting jobs.
Of course, there is only so much government can do. Job creation will ultimately depend on the real job creators: businesses across America. But government can help lay the groundwork on which the private sector can better generate jobs, growth, and innovation. After all, small business tax relief is not a substitute for the ingenuity and industriousness of our entrepreneurs; but it can help those with good ideas to grow and expand. Incentives to promote energy efficiency and clean energy manufacturing do not automatically create jobs or lower carbon emissions; but these steps provide a framework in which companies can compete and innovate to create those jobs and reduce energy consumption. And while modernizing the physical and virtual networks that connect us will create private-sector jobs, they’ll do so while making it possible for companies to more easily and effectively move their products across this country and around the world.
Given the challenge of accelerating the pace of hiring in the private sector, these targeted initiatives are right and they are needed. But with a fiscal crisis to match our economic crisis, we also must be prudent about how we fund it. So to help support these efforts, we’re going to wind down the Troubled Asset Relief Program, or TARP – the fund created to stabilize the financial system so banks would lend again.
There has rarely been a less loved or more necessary emergency program than TARP, which – as galling as the assistance to banks may have been – indisputably helped prevent a collapse of the entire financial system. Launched hastily under the last administration, the TARP program was flawed, and we have worked hard to correct those flaws and manage it properly. And today, TARP has served its original purpose and at a much lower cost than we expected.
In fact, because of our stewardship of this program, and the transparency and accountability we put in place, TARP is expected to cost the taxpayer at least $200 billion less than what was anticipated just this summer. And the assistance to banks, once thought to cost the taxpayers untold billions, is on track to actually reap billions in profit for the taxpaying public. This gives us a chance to pay down the deficit faster than we thought possible and to shift funds that would have gone to help the banks on Wall Street to help create jobs on Main Street.
Small business, infrastructure, clean energy: these are areas in which we can put Americans to work while putting our nation on a sturdier economic footing. That foundation for sustained economic growth must be our continuing focus and our ultimate goal. For even before this period crisis, much of our growth had been fueled by unsustainable consumer debt and reckless financial speculation, while we ignored the fundamental challenges that hold the key to our economic prosperity. We cannot simply go back to the way things used to be. We cannot go back to an economy that yielded cycle after cycle of speculative booms and painful busts. We cannot continue to accept an education system in which our students trail their peers in other countries, and a health care system in which exploding costs put our businesses at a competitive disadvantage. And we cannot continue to ignore the clean energy challenge or cede global leadership in the emerging industries of the 21st century. That’s why, as we strive to meet the crisis of the moment, we are laying a new foundation for the future.
Because an educated workforce is essential in a 21st century global economy, we’ve launched a competitive Race to the Top fund through the Recovery Act to reform our schools and raise achievement, especially in math and science. And we’ve made college more affordable, proposed an historic set of reforms and investments in community college, and set a goal of once again leading the world in producing college graduates by 2020.
Because even the best trained workers in the world can’t compete if our businesses are saddled with rapidly increasing health care costs, we’re fighting to do what we have discussed in this country for generations: finally reforming our nation’s broken health insurance system and relieving this unsustainable burden.
Because our economic future depends on a financial system that encourages sound investments, honest dealings, and long-term growth, we’ve proposed the most ambitious financial reforms since the Great Depression. We’ll set and enforce clear rules of the road, close loopholes in oversight, charge a new agency with protecting consumers, and address the dangerous, systemic risks that brought us to the brink of disaster. These reforms are moving through Congress, we’re working to keep those reforms strong, and I look forward to signing them into law.
And because our economic future depends on our leadership in the industries of the future, we are investing in basic and applied research, and working to create the incentives to build a new clean energy economy. For we know the nation that leads in clean energy will be the nation that leads the world. I want America to be that nation. I want America’s prosperity to be powered by what we invent and pioneer – not just what we borrow and consume. And I know that we can and will be that nation, if we are willing to do what it takes to get there.
There are those who claim we have to choose between paying down our deficits on the one hand, and investing in job creation and economic growth on the other. But this is a false choice. Ensuring that economic growth and job creation are strong and sustained is critical to ensuring that we are increasing revenues and decreasing spending on things like unemployment so that our deficits will start coming down. At the same time, instilling confidence in our commitment to being fiscally prudent gives the private sector the confidence to make long-term investments in our people and on our shores.
With the White House Forum on Jobs and Economic Growth getting underway, now is a good time to note that the problem isn’t just jobs. As we’ve long argued and the Wall Street Journal pointed out recently, the last decade has been a lost one for everyday Americans. First, we generally note that, even as GDP and productivity surged, household income didn’t keep up. In fact, the average household income took more than a $2000 loss during the Bush presidency.
A second point, illustrated by theWall Street Journal, is that private sector employment has basically not grown in a decade.
It is difficult to understand how bad this recession has been without fully understanding the pre-recession weakness of the American consumer caused by dropping incomes and higher costs. NDN’s Dr. Rob Shapiro – who is at the White House Forum right now – has agued that structural dynamics in the American economy have broken down its job creation and wage growth capability. For NDN’s latest thinking on these important issues, please consult:
I enjoyed this latter section of the President's speech last night. It is perhaps the clearest holistic indication to date of his view of America's role in the world:
As President, I refuse to set goals that go beyond our responsibility, our means, or our interests. And I must weigh all of the challenges that our nation faces. I don't have the luxury of committing to just one. Indeed, I'm mindful of the words of President Eisenhower, who -- in discussing our national security -- said, "Each proposal must be weighed in the light of a broader consideration: the need to maintain balance in and among national programs."
Over the past several years, we have lost that balance. We've failed to appreciate the connection between our national security and our economy. In the wake of an economic crisis, too many of our neighbors and friends are out of work and struggle to pay the bills. Too many Americans are worried about the future facing our children. Meanwhile, competition within the global economy has grown more fierce. So we can't simply afford to ignore the price of these wars. ...
But as we end the war in Iraq and transition to Afghan responsibility, we must rebuild our strength here at home. Our prosperity provides a foundation for our power. It pays for our military. It underwrites our diplomacy. It taps the potential of our people, and allows investment in new industry. And it will allow us to compete in this century as successfully as we did in the last. That's why our troop commitment in Afghanistan cannot be open-ended -- because the nation that I'm most interested in building is our own.
Now, let me be clear: None of this will be easy. The struggle against violent extremism will not be finished quickly, and it extends well beyond Afghanistan and Pakistan. It will be an enduring test of our free society, and our leadership in the world. And unlike the great power conflicts and clear lines of division that defined the 20th century, our effort will involve disorderly regions, failed states, diffuse enemies.
So as a result, America will have to show our strength in the way that we end wars and prevent conflict -- not just how we wage wars. We'll have to be nimble and precise in our use of military power. Where al Qaeda and its allies attempt to establish a foothold -- whether in Somalia or Yemen or elsewhere -- they must be confronted by growing pressure and strong partnerships.
And we can't count on military might alone. We have to invest in our homeland security, because we can't capture or kill every violent extremist abroad. We have to improve and better coordinate our intelligence, so that we stay one step ahead of shadowy networks.
We will have to take away the tools of mass destruction. And that's why I've made it a central pillar of my foreign policy to secure loose nuclear materials from terrorists, to stop the spread of nuclear weapons, and to pursue the goal of a world without them -- because every nation must understand that true security will never come from an endless race for ever more destructive weapons; true security will come for those who reject them.
We'll have to use diplomacy, because no one nation can meet the challenges of an interconnected world acting alone. I've spent this year renewing our alliances and forging new partnerships. And we have forged a new beginning between America and the Muslim world -- one that recognizes our mutual interest in breaking a cycle of conflict, and that promises a future in which those who kill innocents are isolated by those who stand up for peace and prosperity and human dignity.
And finally, we must draw on the strength of our values -- for the challenges that we face may have changed, but the things that we believe in must not. That's why we must promote our values by living them at home -- which is why I have prohibited torture and will close the prison at Guantanamo Bay. And we must make it clear to every man, woman and child around the world who lives under the dark cloud of tyranny that America will speak out on behalf of their human rights, and tend to the light of freedom and justice and opportunity and respect for the dignity of all peoples. That is who we are. That is the source, the moral source, of America’s authority.
Since the days of Franklin Roosevelt, and the service and sacrifice of our grandparents and great-grandparents, our country has borne a special burden in global affairs. We have spilled American blood in many countries on multiple continents. We have spent our revenue to help others rebuild from rubble and develop their own economies. We have joined with others to develop an architecture of institutions -- from the United Nations to NATO to the World Bank -- that provide for the common security and prosperity of human beings.
We have not always been thanked for these efforts, and we have at times made mistakes. But more than any other nation, the United States of America has underwritten global security for over six decades -- a time that, for all its problems, has seen walls come down, and markets open, and billions lifted from poverty, unparalleled scientific progress and advancing frontiers of human liberty.
For unlike the great powers of old, we have not sought world domination. Our union was founded in resistance to oppression. We do not seek to occupy other nations. We will not claim another nation’s resources or target other peoples because their faith or ethnicity is different from ours. What we have fought for -- what we continue to fight for -- is a better future for our children and grandchildren. And we believe that their lives will be better if other peoples’ children and grandchildren can live in freedom and access opportunity. (Applause.)
As a country, we're not as young -- and perhaps not as innocent -- as we were when Roosevelt was President. Yet we are still heirs to a noble struggle for freedom. And now we must summon all of our might and moral suasion to meet the challenges of a new age.
In the end, our security and leadership does not come solely from the strength of our arms. It derives from our people -- from the workers and businesses who will rebuild our economy; from the entrepreneurs and researchers who will pioneer new industries; from the teachers that will educate our children, and the service of those who work in our communities at home; from the diplomats and Peace Corps volunteers who spread hope abroad; and from the men and women in uniform who are part of an unbroken line of sacrifice that has made government of the people, by the people, and for the people a reality on this Earth.
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