Aftershock: The Next Economy and America's Future

Reich (Supercapitalism), secretary of labor under Bill Clinton and former economic adviser to President Obama, argues that Obama's stimulus package will not catalyze real recovery because it fails to address 40 years of increasing income inequality. The lessons are in the roots of and responses to the Great Depression, according to Reich, who compares the speculation frenzies of the 1920s–1930s with present-day ones, while showing how Keynesian forerunners like FDR's Federal Reserve Board chair, Marriner Eccles, diagnosed wealth disparity as the leading stress leading up to the Depression. By contrast, sharing the gains of an expanding economy with the middle class brought unprecedented prosperity in the postwar decades, as the majority of workers earned enough to buy what they produced. Despite occasional muddled analyses (of the offshoring of industrial production in the 1990s, for example), Reich's thesis is well argued and frighteningly plausible: without a return to the "basic bargain" (that workers are also consumers), the "aftershock" of the Great Recession includes long-term high unemployment and a political backlash--a crisis, he notes with a sort of grim optimism, that just might be painful enough to encourage necessary structural reforms. 
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Since his tenure as secretary of labor in the 1990s, Reich has expounded his economic and political opinions in books, and here he reviews the recent recession. His retrospective diagnosis for the recession’s cause is simple: too much national income went to the rich, which induced the federal government and the middle class to subsist on credit, creating a bubble that inevitably burst. From his identification of stagnant consumer purchasing power as the problem, Reich’s solution unfolds with ineluctable Keynesian predictability: raise income, inheritance, and capital-gains taxes on the rich, and move the revenue down the income scale in the form of expanding programs such as Medicare and Medicaid or tax breaks such as the earned income tax credit. Reich also wants a “wage insurance” program and a carbon tax: blissfully, the federal government’s debt would not increase under such a restoration of the “bargain” between rich and nonrich, according to Reich. Ensured a current-events hearing by his public prominence, Reich may find his readership defined by those in tune with his short tract’s expansionist view of government. --Gilbert Taylor --This text refers to the Hardcover edition.