"I think the big thing I'd add to that is growth in median incomes"

Kevin Drum on Mother Jones with a good post:

"MEDIAN WAGES....So let's assume that we manage to stabilize the economy sometime soon via whatever combination of stimulus spending, tax cuts, and bailouts you think is best. What's next? Where will demand come from to get the economy moving normally again? Paul Krugman comments:

I find it useful to compare U.S. spending in recent years with spending in the mid-90s, when things seemed much more sustainable. What changed? Well, we had bloated housing investment and bloated consumer spending. Meanwhile, nonresidental investment as a percentage of GDP was about the same in 2007 as it was in 1996.

So what offset the consumer/housing boom? A vastly increased trade deficit. And that suggests that a return to normalcy would involve getting savings up ( FINE ), housing spending down ( NOT NECESSARILY ), and a combination of more exports and less imports ( NO POSITION. POOR COUNTRIES NEED TRADE. I HAVE NO PERFECT NUMBER )

I think the big thing I'd add to that is growth in median incomes( YES ). One way or another, there's really no way for the economy to grow strongly and consistently unless middle-class consumers spend more, and they can't spend more unless they make more ( YES ). This was masked for a few years by the dotcom bubble, followed by the housing bubble, all propped on top of a continuing increase in consumer debt. None of those things are sustainable, though. The only sustainable source of consistent growth is rising median wages. The rich just don't spend enough all by themselves. ( I AGREE )

The flip side of this, of course, is that rich people are going to have to accept the fact that they don't get all the money anymore. Their incomes will still grow, but no faster than anyone else's. ( I DON'T CARE ABOUT THE RICH. I DO CARE ABOUT THE POOR AND MIDDLE CLASS )

How do we make this happen, though? I'm not sure. Stronger unions are a part of it ( NO POSITION ). Maybe a higher minimum wage ( NO POSITION ). Stronger immigration controls ( NO POSITION ). More progressive taxation ( IN SOME FORM ). National healthcare ( YES ). Education reforms ( FINE ). Maybe it's just a gigantic cultural adjustment ( BINGO! ). Add your own favorite policy prescription here.

This isn't just a matter of social justice. It's a matter of facing reality. If we want a strong economy, we can only get it over the long term if we figure out a way for the benefits of economic growth to flow to everyone, not just the rich. This is, by far, Barack Obama's biggest economic challenge. Until median wages start rising steadily and consistently, we haven't gotten ourselves back on track."

I also believe that there must be a rise in Median Wages, and, yes, I understand that there's a debate about the figures, but not for the same reason as Drum. In order to have less government intrusion in our economy and life, we need a Middle Class that feels itself to be middle class, not barely above subsistence level. In other words, the Middle Class must be and feel able to take care of more of its own expenses, leaving the government to provide for the truly needy and indigent. Without that comfort level, people will want more government help to keep them above water. That's the simple truth.

So, I would say that, second to trying to raise the people at very lowest earning levels to a point that they are not indigent, we need to have a rising middle class in this country for a more libertarian society to emerge as regards the economy. Strangely, this view does accord in some respects with views like Drum's.

"the only way to accomplish this is to get America back on the course of rising median incomes."

Robert Reich has a post that I think is correct, but not necessarily for the same reasons:

"If this isn't a Great Crash I don't know how to define one. Stocks were down another 7 percent today. Since the peak of last year, major stock indexes have dropped 47 percent. We're in range of the Great Crash of 1929."

I think that this is a Stock Market Crash, but that doesn't mean it's like 1929.

"Why is the Great Crash of 2008 happening? First, because investors are beginning to understand the enormity of the bubble economy that began to form in the late 1990s when all contraints were lifted on borrowing in order to buy everything that was assumed to be increasing in value -- starting with houses and including securities and shares of stock themselves. So-called "margin requirements," first instituted in the wake of the Great Crash of 1929, were all but abandoned, as big banks and hedge funds found ways around them."

I agree that Leveraging was the problem, and that Deleveraging is the solution. However, I believe that this financial innovation has been an ongoing process, and I would offer the S & L Crisis as proof. I don't think it's that investors are beginning to understand the enormity of the problem, so much as being surprised that government action hasn't been more effective. You see, I believe that investors had a robust view of the size and efficacy of government intervention.

"Even more important, investors are starting to fathom the emptiness of American consumers' wallets. Retail sales last Friday and Saturday -- the first days of the Christmas buying season -- were disappointing. Had retailers not discounted to the point of taking losses, sales would have been abysmal. In other words, consumers have gone on strike."

I didn't see the sales being that bad given the enormity of the fear and aversion to risk now prevalent. I would say that consumers are being prudent.

"Why have they gone on strike? Not because of the difficulty of getting credit. Most consumers can barely afford to pay the interest charges on the debt they're already carrying. Consumers have gone on strike because their earnings haven't kept up. The recovery that officially ended December, 2007 (the National Bureau of Economic Research now tells us) was the first on record in which median earnings declined, adjusted for inflation. Since then, many people have also lost their jobs or are working part time when they'd rather be working full time, or else know they're in danger of losing their jobs."

Now, there's a big debate on this, which I've posted about, and I feel that Reich's figures might be off. However, he's not incorrect about how people feel, which is more important than numbers, which are only that.

"The speculative bubble still has some air in it; asset values will continue to drop before they hit bottom. That will take at least a year, possibly two. But don't expect asset values to bounce substantially back, even then. The only way to revive Wall Street is to revive Main Street, and the only way to accomplish this is to get America back on the course of rising median incomes."

I actually feel more strongly about this than Prof. Reich. Unless and until we have a Middle Class that feels itself to be middle class and not just above destitution, there will never be a serious movement to limit government. The feeling and security of wealth is necessary for a population to cut itself loose from a social safety net, which will always have to exist for the truly needy, instead of using government to remain just above destitution.

One other thing. I agree with this strategy. I would not accept a society of gross inequalities in wealth and power, and so, as Thoreau, I believe that people will only have less government when they are prepared for it.