Editors' Note: This piece has been corrected.
Americans want to know what happened to the economy and how to fix it. At least Republicans have a story -- the same one they've been flogging for 30 years. The bad economy is big government's fault, and the solution is to shrink government.
But what exactly is President Barack Obama's story or the Democrats'?
That Wall Street screwed up big time and the solution is to fix the Street? That Americans have lived beyond our means and now we have to tighten our belts? That our trade imbalance got too big and the Chinese have to spend more and we have to save more? That American companies have been outsourcing jobs abroad and must be deterred?
Without a clear story, there's no competition. Republicans win.
Here's the real story. For three decades, an increasing share of the benefits of economic growth have gone to the wealthiest 1 percent. Thirty years ago, the top got 9 percent of total income. Now they take in almost a quarter. Meanwhile, the earnings of the typical worker have barely budged.
The vast middle class no longer has the purchasing power to keep the economy going. (The rich spend less of their income.) The crisis was averted before now only because middle-class families found ways to keep up with their spending -- first, as more women went into paid work, then as everyone worked longer hours, and finally as people used their homes as collateral to borrow. When the housing bubble burst, however, the game was up.
The solution is to reorganize the economy so the benefits of growth are more widely shared. Exempt the first $20,000 of income from payroll taxes, for example, and apply payroll taxes to incomes over $106,800 (the current cap). Extend Medicare to all. Make higher education free to families that now can't afford it. Rehire teachers. Repair and rebuild our infrastructure. Pay for this by raising marginal income taxes on millionaires -- under President Dwight D. Eisenhower, the highest marginal rate was 91 percent, and the economy flourished. Promote unions for low-wage workers. And so on.
Here's the obstacle, though. As income and wealth have risen to the top, so has political power. Money is being used to bribe politicians and fill the airwaves with misleading ads that block us from hearing this story.
The midterm elections offered dramatic evidence. According to NBC News, for example, Crossroads GPS -- one of the largest Republican groups channeling secret money -- received a big donation from Wall Street hedge-fund and private-equity managers who had been fighting a Democratic proposal to treat their earnings as ordinary income rather than as capital gains, subject to only a 15 percent tax.
In other words, the problem isn't big government. It's power and privilege amassing at the top.
This is the story Obama, Democrats, and progressives must tell. Stop talking policy. People don't think in terms of policies. Policies make sense only to the extent they illustrate a larger story. Obama's biggest failure has been an inability to connect the dots.
The Republican story is wrong but at least coherent. If the problem is big government, cutting the deficit is part of the solution -- although a higher priority is cutting taxes, including taxes on the rich. That leaves the only way to cut the deficit as axing spending -- even on safety nets like unemployment insurance and health care and on public services like education and infrastructure.
But if we see the problem as self-reinforcing power and privilege at the top -- and a shrinking share of the benefits of economic growth for everyone else -- any solution has to begin with safety nets and public services: Their inadequacy illustrates the problem, but their expansion is part of the remedy. Taxes and deficits are relevant only because the rich have failed to pay their fair share to support these safety nets and services. (So don't, by any means, continue the Bush tax cuts for the top.) More fundamentally, since deficits are problematic only compared to the size of the economy, part of the solution is to get the economy growing again by increasing the buying power of the middle class.
Because power at the top is distorting our democracy, another part of the solution is to limit the impact of big money on politics. This requires, for example, publicly financed campaigns, disclosure of all sources of political spending, and resurrection of the fairness doctrine for broadcasters.
Our story is real. Theirs is bogus. But unless ours is told clearly and consistently -- and specific policies are explained in light of that larger story -- the public will never know.