To fix what’s wrong with the U.S. economy, we have to replace the failed low-wage economic strategy of the past 30 years with a high-wage strategy for shared prosperity.
The first step in such a high-wage strategy is to put America back to work because high unemployment keeps wages down. Our goal should be “full employment,” meaning everybody who wants to work should be able to find a decent job. We can’t allow the unfounded fear of inflation to be used as an excuse to keep unemployment high and wages low.
Full employment will require much higher levels of investment in education, clean energy and infrastructure, which is the foundation for long-term economic productivity and growth. The economic blueprint “Prosperity Economics,” by Jacob Hacker and Nate Loewentheil, recommends an annual investment in infrastructure of $250 billion for the next six years.
This level of investment will require more revenue from the people and corporations that benefited from the failed economic policies of the past 30 years. We can do that by allowing the Bush tax cuts for the richest 2% to expire; taxing overseas corporate income the same way we tax domestic income, so corporations no longer can lower their tax bills by shifting jobs and income overseas; imposing a modest tax on financial speculation; taxing investment income (capital gains and dividends) the same way we tax labor income (wages and salaries); and allowing estate and gift tax cuts to expire.
The second step of a high-wage strategy is to restore workers’ ability to bargain collectively, which will raise wages, reduce economic inequality, fuel consumer demand and help rebuild the middle class. To guarantee that workers who want to join a union and bargain collectively can do so, we need urgent reform of our unfair labor laws. We also can reconnect wages with productivity by ensuring that every job is a good job, raising and indexing the minimum wage, extending minimum wage and overtime protection to more workers and strengthening investment in workers’ education and skills training.
The third step of a high-wage strategy is to make things in America again. We can do that by eliminating our trade deficit, ending overvaluation of the dollar, combating currency manipulation by our trading partners, eliminating all incentives for offshoring in our tax code, enhancing Buy America safeguards, aggressively enforcing our trade laws and promoting a Global New Deal to help our trading partners rely on domestic incomes, rather than trade surpluses, as their source of economic growth.
The fourth step of a high-wage strategy is to shrink our bloated financial sector and make it serve the real economy again. We can do that by re-regulating Wall Street, eliminating the tax benefit for leveraged buyouts and imposing a modest tax on financial speculation.
Doing all these things would restore a “virtuous circle” in which wage growth leads to healthy consumer demand…which encourages business investment…which drives productivity growth…which (if we have strong unions and low unemployment) leads us back to dynamic wage growth.
Obviously, such a strategy will encounter intense opposition from Wall Street and the 1%, who benefit economically from the status quo and wield outsize influence in our political system. Fixing our economy also will require political reform to loosen the stranglehold of money over our politics and breathe new life into our democracy.
However, the failure of the economic strategy of the past 30 years has shown us there is no good alternative. We no longer can rely on household borrowing, real estate bubbles, tech bubbles, stock bubbles or any other kind of bubble to fuel our economic growth.
We must forge a new model of economic growth—one in which everybody who wants to work can find a decent job, everybody who wants to join a union is able to do so, working people can afford to buy the things they make, we make things in America again, the U.S. economy produces as much as it consumes and prosperity is broadly shared.