The Lost Decade and Our Moral Compass

Abstract

The data are in and they are not pretty. By all accounts, the of the aughts, frequently characterized as our has been an outright economic disaster. Beginning with the cataclysmic terrorist attacks of September 11, 2001, and their immediate aftermath, this has experienced events and policies that have been especially inimical to the economic status and social well-being of our much revered middle class, and at the same time, have made life far more tenuous for lower-income households. As a consequence, we find a key economic constituency adrift, one that in the past has proven to be essential to our nation's progress and vitality. The current status of the middle class and its economic prospects warrant serious attention by those concerned with promoting a productive, inclusive, and fair society. To highlight the importance of this issue, I focus here on the consequences of the decade for our middle class and less affluent groups, especially concerning their diminished economic status and security, and their expectations and attitudes regarding the future. I also discuss the importance of reorienting our policy priorities to support these groups. As I argue, such a reorientation will be challenging, requiring the leadership of our key economic and political institutions to shed the behavior of the past and be guided by a moral compass that leads to policies that value the common good, help to ensure a vibrant middle class, and lend support to our most vulnerable citizens. The Lost Decade and the Middle Class Background After the horror of September 11, the first hall of the lost witnessed the initiation of an arguably unnecessary Middle East war with its attendant drain on economic resources and devastating human carnage. In addition, the implementation of two income tax cuts proposed by President George W. Bush by many accounts have disproportionately benefited the wealthy and yielded little impact on the kind of economic growth that would benefit middle- and low-income families. Both initiatives helped to deplete the budget surplus from the Clinton years and diverted other resources that might have been used to benefit less affluent groups through, for example, needed investments in education and in human capital, repairs to our crumbling infrastructure and public transportation systems, and by shoring up our safety net and social insurance programs. The culminated with an economic catastrophe second only to that of the Great Depression of the 1930s, requiring taxpayer-driven bailouts to prevent the collapse of our major financial institutions, while providing little in relief for homeowners caught in this maelstrom. At the decade's end, fiscally strapped states were reducing commitments to education, public safety, and public health, and hopes of a bipartisan solution to problems devolved into the reality of a fiscal cliff with its promise of draconian spending cuts and the threat of a new recession. As we entered a new decade, public protests, catalyzed by the short-lived Occupy Wall Street movement, erupted against the huge economic gains of our financial elites and income inequality not seen since the Gilded Age. This outcry helped to stimulate a public policy debate over the consequences of excessive inequality, engaging some of our most thoughtful economic and policy analysts. Implications for the Middle Class It is generally acknowledged that a robust middle class is essential to a country's economic progress and growth, and necessary for the stability of its political institutions. Having said this, there is growing concern that the economic vitality of the U.S. middle class has been compromised and that this may have significant implications for our nation's prospects. Such concerns have crystallized in light of the experience of the middle class during the lost and that of the prior three decades. …