The signers of The Declaration of Independence combined political courage with intellectual honesty. Indeed for them, the first was entirely rooted in the second. As they said, since “prudence…will dictate that Government long established should not be changed for light and transient causes,” “a decent respect to the opinions of mankind requires that” those proposing radical change “should declare the causes which impel them to the separation.” This they duly did in what is now the Republic’s founding document. We need that combination of political courage and intellectual honesty again, and we need it as urgently now as it was needed in the 1770s.

We need it now not to win independence but to retain it.

 We need it not to break political bonds but to reset economic ones.

 For little by little, American independence is being undermined by economic under-performance. It is being undermined from abroad by the growing indebtedness of the entire economy to foreign creditors. It is being undermined at home by the growing indebtedness experience by so many struggling Americans, and by the threat/reality of involuntary unemployment experienced by so many others.  As Lyndon Johnson said a generation ago, “The man who is hungry, who cannot find work or educate his children, who is bowed by want, that man is not fully free.” That lack of freedom is the contemporary curse of at least one American in seven, and the potential fate of one American in three – the third of our fellow citizens, that is, who currently live within one tranche of the poverty level. And there is no full freedom beyond these shores for a country – however powerful – whose daily financing is at the whim of creditors who owe us no political allegiance. You only have to watch the changing relationship between Washington and Beijing to recognize how power still follows the dollar, even when so many of those dollars are ones we no longer own.

It is time for some intellectual honesty.

Conservative commentators will claim, of course, that they already give us that. They will point to the stimulus package (the American Recovery and Reinvestment Act) introduced by the Obama administration in February 2009, and insist upon its failure. They will point to the size of the federal deficit, liken the federal budget to a domestic one, and insist that the route to future economic prosperity lies through a drastic reduction in federal spending: pain now (shared pain, they will always claim) to avoid greater pain later. And they will say that the modern equivalent of the political courage shown in the 1770s is the courage to return us to the limited government and low taxation of the revolutionary age itself.

In arguing so, they delude themselves; and if we believe them, they delude us also.[1]

The route back to full independence is not to be found by a return to the policies originally responsible for this erosion of independence. The route back to full independence requires rather an honest analysis of the causes which impel us to our contemporary condition, causes which should then invite us to make as sharp a break with our immediate economic past as the generation of the 1770s made with their immediate political one.

Three causes in particular:

1. American industry, once a world leader, leads no more; and American wages, once the highest in the industrialized world, have now fallen far behind the best of the rest elsewhere. Well-paying jobs that were once solidly anchored  here have been steadily outsourced, as across the length-and-breadth of the Union, hard-working Americans find themselves competing for employment and pay with foreign workers used to lower economic standards. Where once U.S. global leadership rested on the solid foundation of world-wide demand for American-made goods, that leadership now rests on the shaky foundation of global tolerance of U.S. debt.  There will no return to long-term American prosperity without the recreation, here at home, of a world-class manufacturing base providing middle class Americans with middle class wages once more – wages which American workers can then predominantly spend on things made by themselves. The Pentagon does not allow industries supplying our men and women in uniform to fall behind in the global arms race. It is time for the federal government to be equally committed to the prevention of global slippage by U.S.-based industries geared to more peaceful purposes.
   
   
2. The post-1945 American dream was built on the firm belief that strong American families could, by their own efforts, built a proper home for their children, from which to equip those children with the capacity to win a higher standard of living for themselves by the skills they acquired and by the wages those skills attracted. In today’s global economy, American educational standards no longer excel; and the immediate condition of the American housing market acts as a major drag on even short-term economic recovery.[2] There will be no return to long-term American prosperity without a fundamental reform of the way private housing is now funded – the removal forever of the blight of large-scale foreclosures – and without a renewed commitment to a strengthened and better funded public education system. Currently Fannie Mae and Freddie Mac dominate the U.S. housing market and are under public control. It is time to use them to ease the mortgage burden on the nearly one-in-four house-owning families whose mortgage is currently underwater;[3] and it is time to offset short-term shortfalls in state revenues for education by a second round of federal financial aid, targeted for that purpose.
   
   
3. When the American economy prospered most – in the generation that followed the end of World War II - most Americans prospered with it. Income inequality narrowed and poverty levels fell. It was not a golden age – African-American poverty in particular remained entrenched and largely rurally invisible – but it was an age when, amongst unionized workers in America’s industrial heartland at least, wages and productivity rose together. But no longer: now income inequality in the United States is at an all-time high, put there by the staggering generosity of American corporate leaders to themselves.[4]  Economies scarred by high levels of income inequality do not easily generate growth trajectories based on generalized prosperity. There is a finite limit to how much job creation can trickle down from income growth concentrated just in the hands of the few.  Economies scarred by high levels of income inequality create widespread prosperity only by having the rich indirectly lend to the less affluent, in the process generating mountains of middle class debt and upper class speculative investments of the kind that brought us to the financial crisis of 2008. There will be no return to long-term American prosperity without a fundamental redistribution of income downwards, and without the re-establishment of a closer relationship between effort expended and reward earned. It is time therefore for a celebration of the positive role played by strong trade unionism in the underpinning of post-World War II generalized affluence, and for the rolling back of excessive income inequality by the progressive taxation of the rich and the raising of the minimum wage.

We are at the end of post-war America’s second sustained period of economic growth. Any policy-maker truly committed to intellectual honesty should surely be seeking the strengths and weaknesses of each of the periods now behind us, the better to replicate only their strengths. As we have just noted, the first growth period between 1948 and 1973 combined U.S. global manufacturing leadership with strong industrial trade unionism. In those years, productivity and wages rose together, and employment was sustained by strong and rising internal levels of demand. In the second shorter growth period between 1992 and 2008, a weakened trade union movement could not prevent productivity growth outstripping wage growth, with employment levels increasingly guaranteed at home only by rising volumes of personal debt. In the first of those two growth periods, American living standards were maintained by wages already earned: in the second, living standards came increasingly to depend on wages to be earned later and borrowed against now. Keynesian demand management during the latter half of the first growth period was replaced by active market deregulation through the entirety of the second, as the war on poverty gave way – under the label of welfare reform – to a veritable war on the poor. Of the two growth periods, the social consequences of the first were infinitely preferable to those of the second; but both have now gone.

Republican free-market fundamentalism, if it prevails in Washington, will simply perpetuate across the entirety of the United States the weaknesses of that second growth period: income inequality and entrenched poverty; systemic outsourcing and the loss of middle class jobs; diminished public revenues and the  associated under-funding of vital public services. Short-term Democratic Party-inspired stimulus packages, though preferable, will, if not accompanied by structural reform, simply hold the flood-waters at bay for a brief while: avoiding the immediate consequences of economic under-performance while leaving the fundamental causes of that under-performance unaddressed. The critical task before us, therefore, is to do more than either of the main parties are currently proposing to do. It is to simultaneously stimulate and transform the contemporary American economy, by reconstituting for a new age the kind of industrial strength and collective labor power characteristic of American capitalism’s first post-war period of growth.

“At the very least, a permanently successful regeneration of prosperity at home will require three fundamental changes. It will require a different global role for the United States (effectively, an incremental retreat from empire), an extensive reindustrialization of America’s industrial core, and a complete reversal of the drift towards social inequality and ethnic separation characteristic of the post-Reagan years.”[5]  None of that will happen without new industrial and trade policies to recreate American wealth. None of it will happen without new taxation and welfare policies to ensure that the wealth is more evenly spread; and none of it will happen without a new foreign policy that replaces nation building abroad with national reconstruction at home. We will not rekindle long-term American prosperity, that it, without a fundamental change of public policy of a wholly progressive kind. We will not rekindle long-term American prosperity without creating an entirely new growth model for the economy, one based on a fairer social contract between all Americans.

Our contemporary tragedy is that we currently combine growing economic weakness in mainstream America with political stalemate in Washington D.C. Unless the political class wake up to the severity of our condition, and recognize that the causes of our immediate condition lie in the deregulated nature of our immediate economic past, the danger is that their preoccupations with the trivial will serve to make the underlying weakness worse. So let us, by all means, look backwards to celebrate the political courage and intellectual honesty of the first generation of independent Americans. But let us also honor them by looking forward, and by showing some courage and honesty of our own.

First posted at www.davidcoates.net

This argument is laid out in greater detail in Making the Progressive Case: Towards a Stronger U.S. Economy, published by Continuum Books in June. A preview is available here until July 9 http://cipg.codemantra.us/UI_TRANSACTIONS/Marketing/UI_Marketing.aspx?ID=MTPChuffpo&ISBN=9780826433060&sts=b