Judith Stein: Wanted: A New Economy

Judith Stein is a professor of history and the author of Pivotal Decade: How the United States Traded Factories for Finance in the Seventies (Yale University Press, 2010).

In his speech on jobs Thursday, President Obama will offer tax credits for new hiring, extension of the payroll tax cut, and other small items, his aides hinted. These measure may be helpful at the margins, but the only way they, and much needed larger ones, will get people's attention is if they are attached to a narrative that makes jobs the centerpiece of a new economy that produces more of the goods that Americans consume.

In 2009, the president seemed to agree when he told CNN, "We can't go back to the era where the Chinese or the Germans or other countries just are selling everything to us, we're taking out a bunch of credit card debt or home equity loans, but we're not selling anything to them."...

Despite Obama's words, the tax cuts and spending in his $787 billion stimulus did not encourage the investment and growth we needed. Most of it was saved or used for consumption. The unemployed obviously needed income support. But some of the increased buying went for imports, providing jobs for foreign, not American workers. The low interest rates and quantitative easing of the Federal Reserve Bank aided the global as much as the American economy. Banks and multinationals used cheap money to invest in emerging markets, not in the United States. The wealth effect of the rising stock market encouraged upper-class consumption, not investment. The telltale trade deficit has been rising again, meaning that the United States is consuming more than it is producing again....