The Center for America Progress recently released a lengthy report that seeks to grow our economy through policies that would strengthen America’s middle class. The report, 300 Million Engines of Economic Growth, states:
To be successful, a country’s economic agenda has to strengthen its people. It has to educate them, train them, and reward them with financial security. This is the core of a middle-out plan for economic growth. In other words . . . to have a strong and growing economy, we need a strong and growing middle class.
The report is lengthy, and has many laudable goals, starting with perhaps the most important: initiatives that would create jobs right now. These are followed by plans to bring more Americans back into the middle class by improving early childhood education and improving education overall, raising workplace standards, and realizing the potential of our immigrant workforce. The report also lays a path for strengthening the economic environment by creating mechanisms that would result in better public sector investments, spurring renewed vitality in the energy sector, science and technology, trade, infrastructure, housing, and capital markets.
There are a lot of good ideas in the CAP report. In fact, much of the same arguments were made in a similar report issued by the Our Fiscal Security project in 2010—Investing in America’s Economy. That report—the result of a partnership between The Century Foundation, the Economic Policy Institute, and Demos—has a very similar starting point:
This report reflects the belief that the first priority for our nation is to secure the fundamentals of the economy: strong growth and good jobs. In order to reduce our long-term national debt we must refuel the engine of our economy: the middle class.
Many of the policy prescriptions in Investing in America’s Economy also call for increased public investment in many of the same areas as the CAP report—early childhood education, infrastructure, scientific research and development—as well as some additional ones, such as quality child care and rural broadband connectivity.
The two-and-a-half years that have passed between the releases of these two reports have seen sustained sluggish growth, slowed by the expiration of federal job creation measures combined with federal, state, and local government austerity. The Dow has climbed over 15,000 for the first time ever, but the unemployment rate remains too high, and Americans are suffering through the worst long-term unemployment crisis on record. As TCF fellow Andrew Fieldhouse has pointed out, the U.S. economy is projected to be just as demand-constrained at the end of 2013 as it was at the end of 2010—we have been stuck in a cycle of economic expansion without economic recovery.
This is in large part the result of Congress pivoting away from prioritizing job creation and toward austerity in 2010 and 2011. The all too widespread misidentification—on both sides of the aisle—of the federal budget deficit as the most pressing economic challenge has already delayed full economic recovery, leaving it at minimum years away. And while the two primary academic justifications for this pivot toward austerity have both been debunked in the interim between the two reports’ releases, those doing their homework on depression economics should have known all along that running bigger deficits to boost aggregate demand was the most effective policy lever for ensuring restoring full employment once monetary policy had run into the zero lower bound of nominal interest rates.
The plans may differ somewhat in the details, but in terms of overall scope, there seems to be a consensus, at least among progressives, about what is needed to move the U.S. economy forward to a healthier recovery.
But this consensus in favor of fiscal stimulus and public investment appears to have come too late, as Congress has already set the country on an austerity autopilot course, and, as a whole, seems to have no idea how to reverse their misguided pivot away from job creation.