“Prosperity Economics: Building an Economy for All?”

    "Prosperity Economics: Building an Economy for All," by Jacob Hacker and Nate Loewentheil, and supported by the Economic Policy Institute provides a useful manifesto to contrast with the prevailing Austerity Economics. But it is misnamed: it is focused more on improving the lot of the middle class than that of ordinary working Americans. (To contrast with the wealthy, the manifesto uses the term "middle class," not the more accurate "working class" or "working Americans.") And it relies too much on government spending; it does not seem to trust workers with the fruits of their own labor.
    A better approach to the current economic malaise is to identify the problem of low wages as being fundamental, affecting not only the living standards of poorer Americans, but also directly being the cause of the insufficiency of aggregate demand to achieve fuller employment – the crux of our current lingering recession. What we are suffering from in the current recession, like the Great Depression, is "under-consumption as a result of extremely unequal distribution of income."
    The problem should be faced directly: the political economy of wage-setting should be completely changed over time, reversing the trends of recent decades. Nothing short of this sweeping goal will fix the problems of unemployment and the working poor. The elements of a new labor policy would include setting and indexing a general living wage, shifting the collection of Social Security and Health costs from employers and employees, eliminating payroll taxes, strengthening and enforcing labor laws, and mortgage debt relief for struggling households. Note that this would put more money into the hands of ordinary working Americans, not into the hands of government.
    Admittedly, on page 41 of "Prosperity Economics" there is a policy recommendation to raise the minimum wage so that "Americans who work are able to support themselves and their families." But this is lost in the welter of recommendations, such as expanding support for housing (which would involve government money), expand job training (government money again), economic revitalization strategies (government money), create pathways out of low-wage work (government money), a national innovation foundation (government money), expand the Manufacturing Extension Program (government money), augment investments in clean energy (government money), and increase federal investments in R&D by 50% (government money again). Would measures like these truly be conducive to full employment in the short run -- or effective in the long run? Do they place enough trust in businesses large and small to figure out what to invest in and how?
    One area where we believe that government taxation is essential is to pay for universal, more cost-effective, single-payer health insurance. There are two reasons for this. One is to remove the cost of health care off employment. This single measure would dramatically increase the competitiveness of U.S. manufacturers and be an important component of a full-employment economy. The other reason is to provide a pathway to reducing health costs and making the health care industry more efficient. Health services would be provided by private providers, but with improved government regulation of the cost. Generally, however, we believe that ordinary working Americans are the best repositories of the income they have generated.
    The title "Prosperity Economics" is inspiring and sets the right tone for the many constructive policy proposals in this manifesto, but we believe it would be strengthened by a more fundamental focus on the workplace conditions being experienced by the vast majority of Americans.