There is a growing consensus among progressives that a crucial problem in the American economy comes from the flat wages of American workers over the last generation. It plays a major part in the New Democratic Network's report on the Bush economic record. It is a lens for looking at the politics of poverty and the health of the economy.

It's part of a larger question, however, and that is do Americans own America? Or do we just rent the right to be here from someone with more money?

I think the most important graph in Robert Shapiro's earlier NDN post is the one which matchs GDP to employment. It shows that while GDP has gone up, employment has stayed flat. This when combined with flat wages means that the bottom 99% of the economy has less and less to say about the future of the country. Because they make fewer of the investment choices, they have less control over investment results.

There are, in the end, two ways to look at the business cycle. One is to argue that real interest rates became too low, and there was too much investment. This view has been held by liberals and conservatives alike, by Austrian economists praying for the return of the gold standard, and by New Dealers arguing against speculation. The other view turns this on its head. It argues not that there was too much money invested, but too few places that could make a return on that investment. It isn't that there is too much investment demand, but too little investment supply. This subtle turn is one of the features of John Maynard Keynes' view on economics, and it is all the difference in the world. The first view says we are trying to do too much, the second says that we are trying to do too little. The first advises depression and retrenchment, the second advises better use of the efforts being made.

The idea that the response to a downturn was to do more, that is run a budget deficit and address otherwise unfilled needs, was what startled and shocked economic orthodoxy, including some of the economic orthodoxy in side the FDR White House. But the 1937 recession, and the Second World War convinced most that being "liberal" was better than being "conservative" in the face of problems.

Keynesian economics ran up against the problem of oil in the late 1960's and early 1970's. The problem then was that every attempt to rev up the economy required importing more oil, exporting gold or printing more dollars. What was broken was the Keynesian assumption that no one commodity matters. Liberalism got a bad name, primarily because those who had oil were in no mood to be liberal with it.

Americans fell into a trap, they thought because we were short on oil, that the road was to pay themselves less and less, and have government do less and less. This trap worked because Americans became convinced that paying taxes was "taking" money from "us" and giving it to "them". This is how a strange alliance formed between libertarians and dixecrat racists - because the way that people became convinced that the government was "taking" from "us" and "giving" to "them" was by playing on racial fears and stereotypes.

With this the stage was set for a downward spiral. The more money that was pushed up the economic scale, the less powering ordinary Americans had to direct the investment efforts of the society as a whole. The people who benefited were not interested in changing the basis of the economy, but rather, interested in avoiding disruptive changes that were beyond their control. It wasn't a conspiracy, merely the results of many vested interests investing in keeping those interests vested. In many short term actors trying to make money in the short term.

This is why wages need to be turned around - so that Americans can begin invest and saving, as opposed to speculating on houses - and create a pressure to guide the economy forward. The best economy allows people to get rich, but only by bringing happiness to a large number of other people. When this fundamental connection is broken, the incentives to invest become warped. Over the last 25 years, this process has pushed Americans to put more and more of their investment eggs in their houses, because that was the one place that they felt they had some control. This process led them to push more and more of the tax burden on regressive taxes and property taxes, or distributing more and more "aid" to localties, which, since they could not generate economies of scale, had to pay higher and higher costs for services and education.

In otherwords, at each step along the spiral down, people did what seemed best at in that instant, but at each step, it produced more and more pressure to spiral down even farther. The road to changing this, however, is open. 25 years ago Americans decided that we would be better off if the rich ran the country. 25 years later on, the rich are better off. 25 years ago Americans came to belive the Republicans who told them that government doesn't work, and now see that it is Republican government that doesn't work.

This slow realization, that it isn't government that is the problem, but Republican mismanagement of government, is becoming coupled to an understanding of what the road out of this quagmire is. Rob Shapiro, James Crabtree and Simon Rosenberg lay out the case for how current policies haven't merely failed because of people who failed, but because the policies were failures in themselves. This is the first fundamental point that Americans need to grasp, it won't be any better electing someone else to hold wages down, there isn't a better Republican Party out there to choose.

The second one is responsibility. If Americans simply want more money to buy more things, then inflation will appear again, and the lid will have to be put on growth to keep it down. My friend Hale Stewart has been on this topic for over two years now, pounding home relentlessly that Americans can't hope to save for the future by spending on housing, because housing isn't investment, it is consumption. He keeps pointing out that we can no more consume our way to fiscal balance, than an alcoholic can drink his way to sobriety. With the housing crash already coming, with realtors and home builders both issuing warnings, this post-bubble hangover may well be the moment to get people to get this particular message.

And now let me tackle the emotionally contentious issue that is skulking around the edges of the debate: trade. Note I haven't really mentioned trade in all of this. This is because in reality, trade isn't a free variable. Americans need to import less, and export more, they need to spend less on domestic consumption, and more on international production. There isn't really a choice here. You participate in globalization every time you fill up your car or truck. And while the most recent oil run up is falling down - as they always do in speculative waves - the dynamics that made it happen are still in place, waiting to wake up the next time there is an unsustainable spike in economic activity. Since the last one was caused by Katrina, and wasn't planned, this isn't something that can be managed or avoided.

Americans need higher wages, and they need to compete globally. Both of these come attached to the need to get control of how money is invested again. And to get control of that investment future means adhering to a very old school belief in responsibility and discipline.

Your choice America - is the next generation going to be like the last one, only worse - or is it going to be fundamentally different. NDN documents how conservatism has peaked, that there are no more cupboards to raid, no more asset bubbles to ride, no more gains to be made from simply offshoring jobs.