The American Dream is a precious and curious thing. According to the basic narrative, if you work hard, opportunities will present themselves – which, to be sure, usually involve working even harder. And if you do this long enough, you’ll be able to raise a family in conditions that prepare your children, like you, to work hard for the opportunities to work harder. It should be said that the aspirations of most modern societies do not revolve around a lifetime of work. What makes the American dream something precious is the freedom to choose the work you do, especially if you’ve worked hard, and the prospect that your hard work will lead to a better life. Americans believe in this dream, because it generally has delivered as promised — at least until the last decade.

The next four years will test whether Mr. Obama can do anything meaningful about the economic forces which have recently blocked access to that dream for most Americans. In fact, a vivid statement of this problem hung in the Chicago campaign office of David Simas, who headed up polling operations for the President’s reelection. As it happened, the chart came from research and analysis which I did for NDN. That research showed how productivity and per-capita GDP grew fairly steadily from 1992 to 2009, while average incomes grew at nearly the same rates only until 2000, and then flat-lined for the past decade. Simas and David Axelrod, the president’s chief strategist, dubbed the chart the “North Star” of the campaign, while Time Magazine simply called it, “The Most Important Chart in American Politics.”

The chart was meant to remind the campaign staff that the rewards (income gains) of working hard (productivity and per capita GDP gains) had largely stopped for most Americans. From this came the campaign’s central theme of growth based on progress by the middle class, in contrast to Mr. Romney’s shopworn Republican faith in growth spurred by tax breaks for the wealthy. The theme has even gone trans-Atlantic: NDN’s Simon Rosenberg and I have made the same case to leaders of Britain’s Labour Party, and last week the Guardian reported that the analysis was reshaping that party’s agenda.

The realization that the long-time link between incomes and productivity gains and the link between job creation and growth had both weakened, actually came from research I had done for Futurecast, a book I published in 2008. Rosenberg and I had sounded the first alarm even earlier in an NDN report in 2005. By June 2007, NDN issued a long essay I did on how certain elements of globalization could hold down income progress and job creation even as productivity and GDP increase. And from that point on, we returned again and again to this new challenge to the American Dream. It was the subject of five of these blog essays in 2012, for example, as well as a Washington Post op-ed published just last week.

Now, we are developing additional analysis to gauge just how broad and deep the problem has become. Using new Census Bureau data, I recently tracked the income progress of every age group – those born, for example, in 1950, 1951, 1955, and so on — as it aged through recent expansions and recessions. Looking across all of the age cohorts, I found that people’s incomes grew an average of 1.5 percent per-year in the 1983-1989 expansion, followed by income losses of 2.6 percent per-year in the 1990-1991 recession. So, the entire 1983-1991 business cycle produced average, net income gains of 5.3 percent. Things got even better in the 1990s: Across all age groups, the incomes of Americans grew an average of 1.6 percent per-year from 1992 to 2000, followed by the brief and modest recession of 2011 which brought income losses averaging just 0.2 percent. Across all ages, then, the 1992-2001 business cycle produced average net income gains of 14.2 percent. That’s the American Dream truly paying off.

From that point on, all of the data point to the grim conclusions of the “most important chart in American politics.” Tracking all age groups as they aged through the 2002-2007 expansion, we find that people’s income grew an average of zero percent per-year over those six years, followed by income losses averaging 1.7 percent per-year in the 2008-2009 recession. So, the 2002-2009 business cycle produced net income losses averaging 3.4 percent across all age groups. For the first time in America’s postwar history, most people lost ground over the course of an entire business cycle. And the early signs for the current expansion are even more discouraging: In its first two years, 2010-2011, incomes across all age groups continued to fall at an average rate of 1.0 percent per-year.

In his response to the President’s State of the Union address, Marco Rubio gave the GOP’s current prescription for the American Dream: Cut federal spending now, because incomes and jobs can come back only if Washington will do less of everything. It’s the Romney platform without the tax cuts. It’s also the game plan which conservative governments in Britain and Germany followed faithfully, until it produced double-dip recessions in both countries.

Mr. Obama’s program, at least, starts in a reasonable place economically. For example, it focuses on research and development by promoting “advanced manufacturing,” and on a variety of efforts to upgrade people’s skills. The Census data do show that since 2000, people with graduate degrees have seen their incomes rise pretty steadily, though more slowly than in the 1980s and 1990s. However, recent evidence also suggests that a college degree no longer guarantees healthy income progress. A more comprehensive response also would involve, for example, steps to reduce certain business costs that come out of people’s wages and salaries, such as employer-provided medical coverage.

The President’s approach, by itself, won’t restore the American Dream. Like his senior campaign staff, however, he clearly recognizes the challenge we all face and its pivotal role in American life.

At last weekend’s IMF/World Bank annual meetings in Washington, the question on everyone’s minds was, what’s happened to Europe’s instinct for economic survival? While our Congress squabbles over bookkeeping for disaster assistance, the talk in the corridors of the IMF was that Europe is two to three weeks away from financial meltdown. It would start in the sinking market for Greek government debt, followed by turmoil in much-bigger markets for the public debt of Italy and Spain, as well as Portugal and Ireland. And if Europe’s leaders can’t head that off, it will likely take down most of Europe’s large banks. Angela Merkel, Nicholas Sarkozy and their counterparts across Europe get this. What they don’t want to face is that the only solutions ultimately lead to a radical rewriting of postwar social contracts across the Eurozone. 

The financial carnage wouldn’t stop at the continent’s shores. British banks have large holdings of Spanish, Italian and Irish government bonds, so they would be very vulnerable. Our own banks sold most of their portfolios of European government bonds over the last year. But U.S. officials worry privately that U.S. banks are holding unknown billions of dollars of credit-default swaps against both those bonds and the European banks that hold them. That puts them in a position that recalls AIG in late August 2008, as insurance providers for a catastrophe that now lies somewhere between the possible and the likely. Finally, a meltdown of European finance would mean horrendous recessions across Europe and an end to our own recovery.

The sober minded men and women at the IMF aren’t given to nightmare scenarios. They believe in data, and it’s the analysis of those data that now points to impending crisis. Over the last six months, for example, the shares of the largest banks of Greece, Italy, Spain and France have sunk 30 percent to 50 percent. Even scarier, the costs to insure against the failure of those banks reached the same levels last week as they did here for Lehman Brothers a few weeks before its collapse. And the costs to insure against the complete default of Greek, Italian and Spanish government debt — financial Armageddon — have risen 60 percent to 80 percent.

For months, financial analysts and global investors have tracked the perfect storm now taking shape across the Eurozone. But unlike the weather, European leaders know how to head off much of it and to contain most of the rest. Yet, like Henry Paulson’s Treasury throughout much of 2008, Germany’s Merkel and France’s Sarkozy have spent the last six months trying to ignore the undeniable. The bottom line this time: Monetary unions across states or countries, like the Eurozone, work only when the full faith and credit of the whole stands behind the full faith and credit of each part. 

The classic example of a successful monetary union was the United States in the late 1700s.  Under the Articles of Confederation, the southern states paid off their revolutionary debts, and their credit was sound — think of them as Germany, the Netherlands, and Northern Europe today. But profligate Massachusetts, Connecticut and most of the rest of the north let their debts, both old and new, just pile up — they were the Greece, Italy, Spain, Ireland and Portugal of their day. Resolving these debts hung up approval of the new U.S. Constitution, so the framers created a Bank of the United States which assumed the debts of the northern states. In return, by the way, the credit-worthy southern states got to take the national capital away from New York and relocate it in a swampy track on the border of Virginia. 

A similar task now faces Merkel, Sarkozy and the Dutch and Finnish members of the Eurozone — in effect, pledge their own good credit to guarantee the same for the Eurozone’s profligate southern countries. So far, they’ve thrown a lot of money at Greece, hoping it would satisfy global investors. We now know that hasn’t worked, and that much harder adjustments lay ahead.

In fact, Europe’s crisis is even more serious than our own in 2008. To begin, Europe’s banks hold the failing sovereign debts of the southern Eurozone countries as well as toxic assets left over from 2008. Moreover, no one doubted the U.S. Government’s capacity to step in and bail out our banks and provide massive stimulus for an economy spiraling downward. This time, it’s sovereign debt itself that’s under attack, so that option isn’t available for Greece, Spain, Italy, Portugal, or even France. Washington also could head off bank runs when Lehman, AIG and Merrill Lynch collapsed, by guaranteeing everyone’s money market balances. None of the Eurozone countries in such deep trouble today would have the credibility to take such a step. So, if everything begins to unravel, there’s very little they can do to save their banking systems. And such a banking crisis will hit Germany as well, since its private banks also hold many tens of billions of Euros in Greek, Spanish and Italian debt. 

There are still a few precious weeks left to head off this Euro-catastrophe. The Eurozone’s rescue fund so far has focused on delaying Greece’s default. In the next two weeks, it will have to, at once, inject capital into unknown numbers of large banks and buy massive amounts of Greek, Spanish, Italian and Portuguese debt on the open market. The politics of pulling that off are daunting, because it will require the unanimous support of 17 Eurozone governments. So far, only six have agreed, and they’re mainly the ones that would be rescued. Of the others, Finland, for one, has put up impossible demands that will have to be dialed back. And while Merkel now says she’s prepared to do what she said a month ago she’d never do, it’s unclear if her own party will go along in a vote scheduled for later this week. 

One reason for their opposition is that most of the bill will fall to Germany and the five other Eurozone countries that still have sound credit. There are ways to stretch the bail-out capital, however. The European Central Bank could underwrite it — it still says no to that — or the rescue mechanism could guarantee losses of up to 20 percent on sovereign bonds. But such moves are immensely complicated matters to work out in just a few weeks, especially when everything requires the unanimous consent of the Eurozone governments. When Henry Paulson had to come up with a bailout plan quickly as Wall Street melted down, he managed to pull together three pages of general principles saying the Treasury could do whatever it wanted. That won’t wash this time. 

The second reason will be even harder to handle. If the Eurozone can find its way to guaranteeing the sovereign debts of all of its members, their future debts will have to be centrally and uniformly constrained.  In short, the solution to the crisis could spell the end of each government’s autonomous right to conduct its own spending and tax policies, since that’s what generates sovereign debt. That would require fundamental revisions of the long-time social contracts these governments have with their peoples, including provision for the world’s most extensive public pensions and health care coverage. That’s the real reason Merkel, Sarkozy and the rest have spent so long denying the emerging crisis. The next two to three weeks will tell whether they have the courage and vision to finally address it.

There is plenty of blame to go around for the recent debt and deficit shenanigans, but who should get the credit?    I nominate George W. Bush.  Not only did his administration’s negligence secure the foundations for the financial upheavals which ultimately created much of the short-term deficit.  The role of his tax cuts in driving much of the medium term deficits is also certainly well-known.  But the last month’s budget warfare also highlights the significance of his distinctive innovation in fiscal policy:  Unlike FDR and LBJ, W established a major new entitlement – Medicare Part D prescription drug benefits for seniors – without a revenue stream to pay for it.  This unhappy innovation also helped shape the austerity plan the President signed this week.

Consider the following.  The only certain budget cuts in the deal are $915 billion in discretionary program reductions over ten years.  In fact, those cuts very nearly match the $815 billion in unfunded costs for Medicare Part D over the same period.  And Bush’s dogged resistance to paying for those benefits has now revealed the priorities of those in both parties who think we do have to pay for them.  Since those priorities dictate no new revenues for Republicans and no cuts in Part D benefits for Democrats, that leaves only the large-scale cuts in discretionary programs in this week’s deal.

But this also creates a quandary that is certain to become very prominent, very soon.   The plan says clearly that avoiding entitlements and taxes trumps everything else in the budget.  Yet, the arithmetic, both budgetary and political, says that Congress and the President cannot deal with the long-term deficits and debt without venturing deeply into both areas. So far, the Tea Party’s acolytes in both houses have vetoed any new revenues, which in turn has locked in the progressives’ veto on entitlement changes.  Yet, this week’s deal also sets up a choice down the road that will very likely isolate the Tea Party’s denizens in Congress.

The President and Harry Reid in the Senate have already vowed that unless revenues are part of the next, $1.5 trillion tranche of fiscal changes, they’re prepared to let across-the-board cuts go forward – and blame the other side.   And when that tranche of deficit reductions comes due, the Tea Party won’t have the leverage of an expiring debt limit.  Instead, progressives will have more leverage, because the across-the-board cuts would slice through the fat at the Pentagon and well into the muscle.  If history is any guide, conservative Republicans hate deep cuts in defense spending even more than they abhor tax increases.

George W. Bush never had to choose between defense and taxes, because Bill Clinton left a big budget surplus to spend.   When it ran out, W. opted for his legacy of large, structural deficits.  Ronald Reagan started out the same way, but the deep recession of 1981-1982 brought on his big deficits quickly.  And when that happened, Reagan opted repeatedly for new revenues to protect his defense spending.   Today’s Tea Party Republicans are no Reaganites:  As John Boehner discovered when he tried to cut a deal with Barack Obama that included higher revenues and limited defense cuts, Tea Party House members have been determined to avoid new revenues even if it means much less for defense.

Limited defense cuts – $350 billon over ten years – are already part of the initial round of cutbacks.  When the additional $1.5 trillion comes due, defense’s share of across-the-board cuts will draw dire predictions and protests – all with the administration’s tactical blessing.  When that happens, what can conservatives like John Boehner and Mitch McConnell do but follow Ronald Reagan’s example.  So, whatever the rightwing flank of the GOP says today, next time out Republicans will be forced to accept revenue increases.  And since Medicare is on the line with defense, Democrats will also be forced to accept some changes in entitlements.  The combination will leave the Tea Party with no choice but to howl and take their case into the 2012 elections.

The United States, everyone seems to agree, faces an economic crisis, though its character depends on who raises the alarm.  Most economists are mainly worried about financial turmoil and a deep slump if the U.S. government defaults on its sovereign obligations.   Traditional conservatives fret about the prospects for future business investment and growth if Washington doesn’t cut deeply into its long-term deficits.   And progressives are stewing about rising unemployment and falling incomes if the drive to slash the federal budget succeeds.   The truth is, while all of these concerns are justified, the real crisis today isn’t really about the economy.  It’s about our capacity to govern ourselves – and this crisis of governance has more serious implications than any of the economic scenarios now haunting the experts and politicians.

The proof lies in the fact that everyone involved in the process knows full well how to resolve our current economic challenges.  We can avoid the turmoil that would follow a U.S. sovereign debt default by doing what Congress has done countless times before, raising the legal debt limit.  We can avoid stunting business investment and growth by adopting some version of the plans put forth by at least three bipartisan groups in just the last twelve months.  The Simpson Bowles Commission, the Rivlin-Domenici Task Force and, the new favorite, the  Gang of Six in the Senate have all laid out the basic outlines for reforming entitlements and defense spending and raising additional revenues.  And if the press accounts are correct, President Obama and House Speaker Boehner briefly agreed a few weeks ago on a blueprint with the same basic outline.   Even progressive concerns can be addressed by phasing in such a plan slowly, starting a year or two down the road.

Everybody knows what they have to do and how to do it.  The crisis, then, comes entirely from their unwillingness or real incapacity to do what has to be done.   And since most politicians understand their own self-interest, we have to assume that their incapacity reflects popular sentiment in some way.

It all goes back to the way by Washington responded to the financial and economic turmoil of 2008-2009.   Two presidents and two Congresses spent $1 trillion of taxpayers’ money to stabilize the financial system.  Yet, somehow, they neglected to require that the rescued institutions use any of the funds to help the rest of the country, for example by jumpstarting business lending or staunching the waves of home foreclosures.  They didn’t even apply any of those conditions to companies such as AIG, Citigroup, Fannie Mae and Freddie Mac, which the government owned outright or held a controlling interest after the bailouts.  Then, the Federal Reserve compounded this negligence by providing additional trillions of dollars in virtually cost-free funds to every large financial institution, again with no requirements that any of that largesse go to help support American businesses or homeowners.  The result is a corrosive popular cynicism that renders the normal responses to the debt limit and budgetary problems as somehow deeply suspect.

As much as anyone, the President had a profound interest in these steps working out better than they did.  One only has to recall the confident assertions of the White House that 2010 would see a “recovery summer” to know that that the President’s advisors truly believed that the flood of bailouts, stimulus, and free money for the banks would be enough to reignite business activity and stabilize housing prices.  This misplaced confidence is also the only reasonable explanation for the decision to turn the page on economic policy by turning to health care reform.

Like all good leaders, the President came to recognize and learn from his mistakes.  So he cleaned out most of his original economic team and called for new public investments to invigorate the economy.  By then, however, the political damage was done.  Millions of voters turned to a new group of Tea Party radicals so caught up in their own cynicism about government that their agenda became its dismantling.  And with many of those radicals winning office by first defeating traditional conservatives like Utah’s Bob Bennett for GOP nominations, it put a quickening fear of involuntary retirement in the hearts of many GOP leaders.

The current crisis of governance comes from these radicals’ decision to begin their dismantling by refusing to approve any increase in the legal debt limit.  Some say so directly; others couch it in a catalogue of extravagant demands to slash spending and raise no new revenues.  So far, at least, the radicals’ intransigence has precluded the kind of compromise that the President and traditional conservatives seem prepared to carry out.

That leaves the resolution of this crisis largely with the Republican leadership.  Can John Boehner, facing an underground challenge from the radical Eric Cantor, and Mitch McConnell, facing a similar threat from Jim DeMint, face down their Tea Party members and cut the deal with the President?   And can the President give them some cover by mobilizing public support for such a compromise from the majority of Americans who remain cynical about government, even as they want to preserve most of it?

If they fail, we may all face an economic deterioration that will only further magnify the public’s cynicism.  And, who knows?  We could also see new forms of radicalism emerge across the political spectrum which would make governing the world’s most powerful and important nation even more difficult and treacherous.

International economic conferences like the one I attended in Rio a few weeks ago can be a little tedious, when experts debate their latest econometric models. Yet, I sat up and listened very intently when an IMF official remarked, almost as an aside, that the world’s emerging economies would account for 48 percent of global GDP this year. That means that by 2013 or so, developing countries will produce a majority of the world’s output. Since the 1980s, globalization has proceeded largely along the lines of American capitalism. These developments, however, herald the beginning of Globalization 2.0, which will present entirely new challenges to the American economy.

Experts will quibble over the numbers. The IMF used “purchasing power parity (PPP)” to produce its numbers, adjusting each country’s official GDP data for its relative cost of living before converting it into US dollars. However, the same pattern holds if we measure each country’s GDP simply in U.S. dollars at current exchange rates. By that measure, the share of global output coming from the advanced economies — that’s us, plus Western and Northern Europe, Canada, Japan and Australia — has fallen from more than three-quarters a decade ago to somewhere between 60 and 65 percent today. Most of that decline has come out of the economic hide of Europe and Japan. Still, our ability to shape globalization in our own economic image — from opening up everyone else’s borders to U.S. investors, and strictly protecting intellectual property rights; to the dollar’s role as the world’s reserve currency — grows weaker, year by year.

The evidence is all around us. China and India scuttled the Doha multilateral trade round, an outcome unimaginable a decade ago when they and most developing nations were much more willing to accept our judgments about the global economy. From Latin America to Africa and parts of Asia, the recent efforts of the international “Financial Action Task Force” to crack down on money laundering and terrorist financing have been openly flouted. And the international financial system’s rules for dealing with sovereign debt defaults, which for decades ensured generally fair compensation for foreign lenders to developing nations, have been openly mocked and discarded by such countries as Argentina and Ecuador. If those nations’ approach were to spread in Europe’s festering sovereign debt crisis — still a remote prospect — it would destabilize German and French banks, with awful consequences for the United States; and dampen future foreign funding for poorer developing nations.

No country can roll back this kind of global economic development. Experts expect China and India alone to account for 40 percent of worldwide growth over the next several years — that used to be our role — with other emerging economies accounting for another 30 percent. Chinese, Indian and Brazilian multinationals will contest with our own for global market shares, and use their home field advantages to good effect — for them. And on the model of the purchase of IBM’s POC division by the Chinese firm Lenovo, emerging market multinationals will begin to claim a real share of our own domestic markets by buying up our companies.

We have our own advantages, especially in developing and applying new technologies, materials and production processes; adopting new ways of financing, marketing and distributing goods and services; and coming up with new ways to manage the workplace and organize a business. But the rise of the developing world will inescapably intensify the dark side of Globalization 1.0, especially pressures on job creation and wages. U.S. job losses from direct off-shoring could become less of a problem, since the new prosperity and rapid modernization of developing economies drive up their wages and other costs. But the squeeze on job creation and wages that we’ve seen for the past decade, as intense global competition collides with fast-rising health care and other costs for U.S. employers, almost certainly will become fiercer.

The policy imperative here is to reduce the cost of creating new jobs. We can start right now by cutting the employer’s side of the payroll tax. And so long as the economy remains weak, we shouldn’t try to replace those revenues. As we recover, however, we can replace the foregone revenues from lower payroll taxes through a new, carbon-based energy fee, a tax shift with the extra benefits of driving greater energy efficiency and addressing climate change. A second step we can take to address the impact of Globalization 2.0 on American jobs would involve expanding and strengthening the cost-saving provisions of the President’s health care reforms. Under the new model of globalization as under the old one, the inescapable fact is that we simply cannot restore strong job creation until we slow the rate of increase in medical insurance costs for both businesses and the rest of us.

Here are a few thoughts on the breaking news from the FCC on net neutrality, a matter I’ve written about repeatedly for several years. 

Today, FCC Chairman Julius Genachowski spelled out his proposal for new rules for the regulation of broadband networks.  They won’t satisfy everybody, and some outspoken advocates of so-called network neutrality are already throwing their stones, but the truth is, they’re pretty balanced and reasonable.  Mr. Genachowski wants the Commission to vote before the year ends, so they can use 2011 to focus on critical issues such as universal broadband.  Progress in that area — the key to digital equality — has been slowed by the telecom community’s focus on the neutrality rules. 

In brief, the Chairman’s proposal outlined at a press conference today (December 1st, 2010) would bar service providers from blocking any consumer’s access to any legal websites and applications of their choosing, and from unreasonable discrimination in delivering Internet traffic.  Net neutrality advocates may not acknowledge it, but that’s a big win for them — it directly addresses their fears that the large service providers will become gatekeepers to the web, deciding what consumers can do online.  For their part, the companies have always insisted that they have no interest in being gatekeepers, and this proposal should make that part of the debate moot. 

On the other side, Mr. Genachowski’s framework shouldn’t interfere with the incentives that the providers need to invest an estimated additional $300 billion or more in broadband infrastructure, to handle the sharp recent and projected increases in bandwidth demand coming largely from video applications.  The Commissioner did just the right thing by confirming the service providers’ right to manage their networks for congestion and offer specialized services to boost their bottom line.  And the best news is that it also should help the economy in coming years.

To borrow a construction from the Sherlock Holmes mysteries, there’s a dog that hasn’t barked in this election.  In a campaign dominated by the economy, Republicans have never invoked some version of Ronald Reagan’s devastating query from 1980, “Are you better now than you were four years ago?” It turns out, there’s good reason for their reticence:  By every basic economic measure — GDP growth, corporate profits, business investment, the stock market, incomes, wages, and jobs — Americans actually are quite a bit better off now.  That’s the inescapable conclusion after comparing the economy’s performance over the first six-to-seven quarters of Barack Obama’s presidency with its performance during the last six-to-seven quarters under George W.  Bush. 

Let’s start with overall growth.  The Bureau of Economic Analysis (BEA) tells us that from January 2009 through June 2010, the first six quarters of the Obama presidency, the country’s real GDP grew by more than 2.8 percent.  That may not be strong growth by the standards of the Clinton or Reagan eras.  But it leaves Americans considerably better off compared to the last six quarters of George W.  Bush’s term, when the economy’s output shrank by 2.1 percent. 

Business leaders complain a lot that President Obama unfairly bashes them.  Yet, the data suggest that they should thank him, because American business is clearly a lot better off under Obama.  The BEA reports that corporate profits grew 62 percent in the first six quarters of his term, rising from an annual rate of $995 billion in the first quarter of 2009 to $1,425 billion in the second quarter of 2010.  That’s a complete turnaround from the last six quarters of Bush’s term, when the annual rate of corporate profits fell 34 percent, from $1,501 billion to $995 billion.  It’s the same story for gross domestic investment by American businesses, which fell at an annual rate of 14.2 percent over the last six quarters of the Bush presidency, but has turned around under Obama to increase by 17.5 percent over his first six quarters. 

Given this record, it’s no wonder that American investors also are much better off today.  Standard & Poors reports that over the first 21 months of the Obama presidency, their benchmark index, the S&P 500, rose more than 46 percent, from 805.22 to 1,176.19.  The healthy gains under Obama have wiped out the miserable record of the last 21 months of the Bush presidency, when the S&P 500 sank 43 percent, from 1,495.4 to 850.1.

Political scientists say that the most powerful economic measure, for affecting elections, is what happens to people’s incomes.  The BEA has issued six quarters of personal income data since Obama took office.  Again, the contrast is clear.  From January 2009 through June 2010, the real per capita income of Americans rose 0.7 percent, from $32,780 to $33,009.  That’s not much, but it’s nearly twice the gains seen over the last six quarters of the Bush presidency, when real per capita income rose 0.4 percent, from $32,681 to $32,810.  The hourly wage data from the Bureau of Labor Statistics (BLS) tell the same story.  Adjusted to 2010 dollars, hourly wages over the first 19 months under Obama increased 1.0 percent, from $22.45 to $22.67.  Again, that’s not great progress, but it’s considerably stronger than the wage gains over the last 19 months of the Bush presidency, when the real hourly wage grew 0.7 percent, from $22.18 to $22.33.

Finally, we come to jobs.  A few months ago, I calculated that 92 percent of all private-sector job losses in this period occurred under Bush or during the first six months of Obama’s term, before his policies took effect.  Even if we don’t draw that fine distinction and compare the jobs record of the President’s first 19 months in office with the last 19 months under his predecessor, Americans again are clearly better off under Obama.  BLS reports that total non-farm employment in September of this year was 130.2 million or 2.0 percent lower than the level in January 2009.  That’s a marked improvement from the much sharper job losses over the last 19 months under George W.  Bush, when total non-farm employment shrank 3.5 percent, from 137.7 million to 132.8 million jobs.

There is no doubt that Americans are disappointed and angry that the jobs and incomes picture hasn’t improved more.  But elections involve choices.  How the early-term Obama economy stacks up against the late-term Bush economy may help explain why, as my NDN colleague Simon Rosenberg has acutely argued, we may not be headed for a GOP wave this November.  At least, it’s now obvious why Republicans aren’t asking Americans if they’re better off now than they used to be.  The mystery is why more Democrats aren’t using Ronald Reagan’s famous question to frame their own campaigns.

As President Obama focuses this week on education, it seems an appropriate time to examine recent criticisms of the fastest-growing segment of American higher education, the private for-profit colleges, universities and institutes.  From 1995 to 2008, the student bodies of private for-profit institutions increased from 240,000 to 1.8 million, a jump of 750 percent.  With my Sonecon colleague, Dr. Nam Pham, I recently conducted a broad study of how much support government provides to the three major types of institutions – private for-profit, public, and private not-for-profit – and the results.   We found that most of the current criticisms of private-for-profit higher education are misplaced.  They receive much less taxpayer support, per-student, provide greater access for students from low-income and minority backgrounds, and often produce better results.

For idea-based economies like our own or those of Western Europe and Japan, a workforce increasingly dominated by those with advanced skills and education is a critical factor in global competition.  And for individuals, access to higher education is the most important ticket to long-term prosperity.  Americans with bachelor degrees today, for example, earn 83 percent more than high school graduates.  Such stark differences have spurred the recent, rapid increases in the numbers of young Americans pursuing higher education.   Over the last two decades, the number of students attending post-secondary institutions soared from 14.3 million to 19.6 million, and the even more rapid expansion of private for-profit institutions accommodated nearly 30 percent of the increase.

This turbo-charged expansion of private for-profit higher education hasn’t been serendipitous.   The share of post-secondary students attending private for-profits rose from less than 2 percent to nearly 10 percent, because they established certain real advantages.  To begin, they could finance their expansion through capital markets, a more secure channel than appealing to governments and alumni, as public and private not-for-profit institutions have to do.   As young upstarts, many private for-profit institutions also have been more eager and willing to adopt new, cost-effective technologies, especially online learning to scale up their enterprises.   Moreover, new rules from the Department of Education in 1994 required strict accreditation of any institution accepting students with federal loans and grants, and many private for-profits responded by upgrading their facilities, faculties and course offerings.  Perhaps most important, private for-profit institutions moved to meet the economically-driven, burgeoning demand for higher education by emphasizing career-track courses to prepare students for jobs in particular fields rather than a more traditional liberal arts education.

Private for-profit colleges and universities have especially drawn those who historically have had the least access to more traditional institutions, enrolling disproportionate numbers of students from low-income and minority families.  Looking across all four-year institutions, for example, we find that lower-income students make up nearly two-thirds of those attending private for-profit colleges and universities, compared to just over one-third of those at public and private not-for-profit institutions.   Further, minorities comprise more than half of the student bodies at private for-profits, compared to one-third at private not-for-profit and public institutions.   This focus on those with traditionally little access to higher education has been quite successful:  The graduation rates for four-year institutions with predominantly lower-income students are 55 percent for private for-profits, compared to 39 percent for private not-for-profits and 31 percent for such public institutions.   Similarly, across four-year institutions with predominantly minority student bodies, graduation rates are 47 percent at the private for-profits, compared to 40 percent at their private not-for-profit counterparts and 33 percent for public institutions.

The real fight here, however, is not over results but over access to government support, with many critics charging that the private for-profits absorb taxpayer assistance.  It’s no coincidence that that these criticisms have escalated recently, as tight government budgets squeeze many public institutions and a weak economy put new pressure on the endowments and gift-giving for private not-for-profits.  Once again, National Center for Education Statistics refutes the critics.   All three types of institutions get both direct support through government appropriations, grants and contracts, as well as indirect support through government student loans and grants.   And across all four year institutions, private for-profits and their students receive an average of $2,394, per-student, in all forms of government support, compared to $7,065 per-student for the private not-for-profits and $15,540 per-student for public institutions.  The same pattern holds across all two-year institutions, though with smaller gaps.

The biggest differences involve the direct support through government appropriations, grants and contracts.  Focusing again on four-year colleges and universities, the data say that private for-profits actually pay more in taxes than they receive in such direct support.  By contrast, four-year private not-for-profit colleges and universities receive an average of $4,765 per-student in direct support, and public institutions collect $13,240 per-student.

Government is more even-handed in its indirect support through student loans and grants.  Students attending four-year private for-profits receive an average of $2,416 in loans and grants from all levels of government, compared to $2,300 per-student for those attending four-year public or private not-for-profit institutions.  Students at private for-profits, on average, do receive larger federal grants and loans than other students – and significantly smaller loans and grants from state and local governments.  These differences reflect the historic mission of federal student loan and grant programs to help low-income students, who predominate at many private for-profits.  It’s also true that students from private for-profits are more likely to default on these loans.  That’s also not unexpected, since students from low-income families have fewer family resources to help pay them off, especially at first.

No one can blame traditional private and public institutions from trying to claim as much support as possible from government.  Yet, on a strict per-student basis, private for-profit institutions already receive only a small share of what other institutions get from the taxpayers.  And in less than a single generation, the private for-profits have created a new pathway to economic opportunity for millions of people with traditionally limited access to American higher education.   At a time when what we know determines both what we earn and how effectively we can compete in global markets, the United States can ill afford to shortchange the fastest-growing segment of American higher education.

An economic slowdown is now here – one we repeatedly cautioned would come – so even the Federal Reserve is downgrading its forecast.   Alas, the United States isn’t alone.  The prospects for Europe look even worse, especially with their largest banks so heavily invested in the bonds of EU member countries still skirting the edge of sovereign debt defaults.  And now China faces the cross pressures of trying to boost their weakening exports while letting some of the air out of their own housing and financial bubbles.  That will spell serious problems for China’s four state megabanks, whose loans keep much of Chinese industry afloat.   We’ll be lucky to come out of this dismal environment with just another year of slow growth and high unemployment.

So, with the midterm elections coming on, most Americans have one question for their elected officials and those hoping to replace them:  What decisive steps are they prepared to take to rescue this economy?   Remarkably, the answer from much of the GOP opposition seems to be, repeal part of the 14^th Amendment and stop Muslims from building a mosque in downtown Manhattan.    Of course, there’s also lots of finger-pointing about the economy, including the audacious claim that the fault for the high unemployment lies in the Administration’s economic policies, especially the stimulus.

Since that claim has some popular traction, and even support from a handful of muddled conservative economists, let’s test it with the hard data from the Bureau of Labor Statistics.

From December 2007 to July 2009 – the last year of the Bush second term and the first six months of the Obama presidency, before his policies could affect the economy –  private sector employment crashed from 115,574,000 jobs to 107,778,000 jobs.  Employment continued to fall, however, for the next six months, reaching a low of 107,107,000 jobs in December of 2009.  So, out of 8,467,000 private sector jobs lost in this dismal cycle, 7,796,000 of those jobs or 92 percent were lost on the Republicans’ watch or under the sway of their policies.  Some 671,000 additional jobs were lost as the stimulus and other moves by the administration kicked in, but 630,000 jobs then came back in the following six months.  The tally, to date:  Mr. Obama can be held accountable for the net loss of 41,000 jobs  (671,000 – 630,000), while the Republicans should be held responsible for the net losses of 7,796,000 jobs.

So, when some of those GOP candidates change the subject from unemployment to treacherous immigrants, they actually may know precisely what they’re doing.

Some Democrats may take satisfaction from these data; but that won’t be enough for most voters, not while Democrats still control the White House and Congress.   The opposition may get away with silence about what they would do to bring down unemployment – apart, of course, from the traditional GOP catechism of tax cuts.  But Democrats will have to lay out a more serious program if they hope to convince America to keep them in power.

So, here’s a four-part program for Democrats to take to the voters.  First, create jobs by expanding an Administration initiative already in place:  Deep cuts in the payroll tax for employers who expand their workforce.   Second, shore-up the weak housing market and stabilize falling home prices with a long-overdue, new initiative:  A loan program for homeowners with mortgages in trouble, modeled on federal student loans, to bring down foreclosure rates.  Third, prepare tens of millions of Americans for the jobs the economy will begin to create once it’s back on track:  Provide grants to community colleges to fund free computer training for any American adult who walks in and asks for it.  And fourth, put in place some long-term deficit reduction to head off higher interest rates when the economy does begin to expand again.  Rolling back the Bush tax cuts for higher-income folks is a beginning, but it should be paired up with serious spending restraints.  The best place to start is health care:  Slow down Medicare and Medicaid cost increases with much stricter and more comprehensive versions of the cost-containment measures already enacted in the President’s health care reforms.

That would be a real program that the parties could debate in the fall campaigns – and if the Democrats prevail, they could run on its results in 2012.