President’s Speech Hints at Alternative Model of Growth By David Madland
The speech President Barack Obama delivered yesterday on the state of the middle class was a forceful refutation of the failures of supply-side economics. Most promisingly, it reached for an alternative theory of economic growth based on the role of the middle class.
The president is certainly on to something. A weakened middle class doesn’t just hurt those who are losing ground. It hurts all of us by
stifling our country’s economic growth, as my Center for American Progress colleagues and I have argued in a
number of
places. In fact, aspects of the president’s speech
closely paralleled an article I wrote a year ago on the topic.
Consider that from 1947 to 1979, when the middle class
received 54 percent of the nation’s total income on average, the economy grew at a
steady clip of 3.7 percent per year. That was 1 percentage point higher than the
2.7 percent rate it grew at from 1980 to 2010, when the middle class was weakening to its
current share of only 46 percent.
A 1 percentage-point difference in annual growth rates is a big deal: Over 30 years, an economy increasing at 2.7 percent annually will grow to about two-and-a-quarter times its original size. One growing at 3.7 percent annually will more than triple.
more Great read!
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