Middle-class incomes stagnated under President Bush. During the recovery of the 1990s under President Clinton, middle-class incomes grew at a healthy pace. However, during the jobless recovery of the 2000s under President Bush, that trend reversed course. Middle-class incomes continued to fall well into the recovery, and never regained their 2001 high. The first year of the Great Recession dealt a sharp blow to middle-class families, who had not yet recovered from the pain of the last recession.
High levels of income inequality may precipitate economic crises. Peaks in income inequality preceded both the Great Depression and the Great Recession, suggesting that high levels of income inequality may destabilize the economy as a whole.
Income inequality may be part of the root cause of the Great Recession. Stagnant incomes for all but the wealthiest Americans meant an increased demand for credit, fueling the growth of an unsustainable credit bubble. Bank deregulation allowed financial institutions to create new exotic products in which the ever-richer rich could invest. The result was a bubble-based economy that came crashing down in late 2007.
Policymakers have a great deal of leverage in mitigating income inequality in order to stabilize the macro-economy. In the decades following the Great Depression, policy decisions helped keep income inequality low while allowing for continued economic growth. In contrast, policy decisions made during the economic expansion during the Bush administration failed to keep income inequality in check, and may have exacerbated the problem. Policymakers working to rebuild the economy in the wake of the Great Recession should heed these lessons and pay particular attention to policy options that mitigate economic inequality.
Now is an opportunity to "mitigate" income inequality. By not granting the richest 2% continued or new tax breaks that will increase the deficit, policymakers could begin to close the gap, which puts this nation at risk economically. Unfortunately, President Obama hasn't the courage to lead and push Democrats to challenge Republican ideas, which have a clear record of failure. He hasn't the guts to take on ideas, which are a danger to Americans and this economy, by giving a primetime speech similar to the one Sen. Sanders gave on the Senate floor.
The legacy of President Jimmy Carter, whom centrists believe went too far left in his governance, dogs President Obama. Centrists like Obama claim to have learned you cannot assert yourself too much or you lose. Giving "malaise" speeches with concepts foreign to the public will just make it easy to get business done. So, this is what Americans get. This is what the middle class gets.
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