In my opinion, America's first Great Recession was the beginning of the end for American industry. Steelworkers showed up to find padlocks on mill gates. Autoworkers were laid off for years. The lucky ones were transferred to plants far from home; the unlucky never built another car. It was assumed that America's shared prosperity was the natural endpoint of our economy's development, that capitalism had produced the workers paradise to which Communism unsuccessfully aspired. Between 1970 and today, the share of the nation's income that went to the middle class - households earning two-thirds to double the national median - fell from 62 percent to 45 percent. Last year, the wealthiest 1 percent took in 19 percent of America's income - their highest share since 1928. It's as though the New Deal and the modern labor movement never happened. The shrinking of the middle class is not a failure of capitalism. It's a failure of government. Capitalism has been doing exactly what it was designed to do: concentrating wealth in the ownership class, while providing the mass of workers with just enough wages to feed, house and clothe themselves. Young people who graduate from college to $9.80 an hour jobs as sales clerks or data processors are giving up on the concept of employment as a vehicle for improving their financial fortunes: In a recent survey, 24 percent defined the American dream as "not being in debt." They're not trying to get ahead. They're just trying to get to zero. Had Nixon survived Watergate, he might have set the nation on a course that emphasized government regulation of the economy, and trade protection as a response to globalism. We might also have preserved more of the manufacturing base necessary for a strong middle class. But his successors dismantled that vision, beginning with Jimmy Carter, an economically conservative Southern planter. Nixon's answer to inflation had been wage and price controls, an intrusion into the free market that would be unimaginable today. Carter deregulated the airline, rail and trucking industries, hoping that competition would result in lower prices. It didn't, but it gave the newly liberated companies more leverage against their unions. When inflation nonetheless reached 14 percent, Carter's hand-picked Federal Reserve Board chairman, Paul Volcker, responded by tightening the money supply, raising interest rates so high that Americans could not afford loans for cars or houses. Ronald Reagan also chose low prices over employment, refusing to free up money until inflation declined. Car sales hit a 20-year low. In the fall of 1982, the national unemployment rate was 10.8 percent, the highest since the Great Depression. Walter Mondale accused Reagan of turning the Midwest into "a rust bowl" - a term reformulated to Rust Belt. Buffalo, Cleveland, Flint and Detroit still haven't recovered. Neither has the middle class. You can't grow an economy, grow a middle class, without making things.
Behold the effect of excessive regulation, excessive litigation, and excessive taxation. Too much government is killing the economy from the bottom up.
