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Recently I debated a conservative Republican who insisted the best way to revive the American economy was to shrink the size of government. When I asked him to explain his logic he said, simply, "government is the source of all our problems." When I noted government spending had brought the economy out of the previous eight economic downturns, including the Great Depression, he disagreed. "The Depression ended because of World War Two," he pronounced, as if government had played no part in it.

A new study by Northwestern University economists, called The "Jobless and Wageless" Recovery from the Great Recession of 2007-2009," found that the economic recovery is highly uneven: corporate profits captured 88 percent of the growth in real national income while aggregate wages and salaries accounted for only slightly more than one percent. In other words, the average American worker has been left behind by the recovery, which officially began in June 2009. "The economic recovery through 2011 I has failed to create any net new jobs since the quarter marking the end of the recession in 2009 II

Faces from the Great Crash of 1929 and its aftermath are haunting the 21st century. Wall Street brokers fleeing the trading floor in panic, or putting their cars on sale because they are suddenly broke, appear in old black-and-white photographs beside analyses of the current state of the markets composed by sombre authorities. Not only the collapse of confidence that shattered investors 82 years ago but the long years of misery that followed now seem to call out to us, to warn us, to show us a truth that is urgent and immediate. Can this really be so? Can that nightmare history be repeating itself?

The current high debt can only be resolved through a properly timed debt default, controlled bankruptcy, and mass restructuring in order to create: 1) an industrial base for post-default recovery2) aggressive drive to court foreign investment It is highly unlikely that American power elites will be able to successfully restructure while preserving large parts of both the political and economic architecture. That is due to 2009 economic foundations being drastically different than in 1870s, 1930s, or 1950s.

By next Wednesday, the so-called supercommittee, a bipartisan group of legislators, is supposed to reach an agreement on how to reduce future deficits. Barring an evil miracle - I'll explain the evil part later - the committee will fail to meet that deadline. If this news surprises you, you haven't been paying attention. If it depresses you, cheer up: In this case, failure is good.

The Great Recession could have spawned another era of fundamental reform, just as the Great Depression did. But the financial rescue reduced immediate demands for broader reform. Obama might still have succeeded had he framed the challenge accurately. Yet in reassuring the public that the economy would return to normal, he missed a key opportunity to expose the longer-term scourge of widening inequality and its dangers. Containing the immediate financial crisis and then claiming the economy was on the mend left the public with a diffuse set of economic problems that seemed unrelated and inexplicable, as if a town's fire chief dealt with a conflagration by protecting the biggest office buildings but leaving smaller fires simmering all over town: housing foreclosures, job losses, lower earnings, less economic security, soaring pay on Wall Street and in executive suites.

Economics: I'm going to discuss trillions of dollars in a moment. As an economics teacher, I understand numbers this large are extremely difficult to imagine. If you are among the majority with this difficulty, I recommend that you follow the expert testimony that paints the picture, and know that success in this area of public education transformation that unleashes trillions of our dollars for human creative capacity in unimaginable power is sufficient to end the current economic crisis. This is the longest section of my briefing. If you tire in reading, please consider that at trillions of dollars of annual public benefits, you literally have nothing more valuable to do than understand the following facts and ideas. Harvard's Linda Bilmes co-authored a paper with Nobel Prize winner Joseph Stiglitz estimating the long-term costs of current US wars at now $3 to $5 trillion ($30-$50,000 per US household of $50,000/year income), with total debt increase since 2001 of over $10 trillion. Remember, as demonstrated by the evidence disclosed by our own government, all the reasons Americans were told to go to war were known to be lies as they were told and applicable law proves these wars Orwellian unlawful. Just down the Charles River from Harvard, MIT's Simon Johnson (and former Chief Economist of the International Monetary Fund) describes our economy being lead by gambling oligarchs who have captured government as in banana republics (his words), and might plunge the US into an economy worse than the Great Depression. From his article under the telling title, The Quiet Coup: "Elite business interests-financiers, in the case of the U.S.-played a central role in creating the crisis, making ever-larger gambles, with the implicit backing of the government, until the inevitable collapse. More alarming, they are now using their influence to prevent precisely the sorts of reforms that are needed, and fast, to pull the economy out of its nosedive. The govern

Democrat or Republican, Libertarian or Socialist, politically active and not we are reaping the bitter reward of a political and legal system designed to maximize corporate profits at the expense of our environment, our livelihood, and our very lives. Our society is unraveling. We all know this. This is not idle conspiracy theory. These are well established facts. We are ruled by a headless beast that is no longer accountable to us. That it is headless makes it no less beastly. But there is a silver bullet. It's within our power to restore a functioning free market; to take back our democracy. We must end limited liability for corporations. Only when wealthy investors are no longer shielded from the costs that we collectively bear in their stead, only when they can no longer hide from the burden they have placed on us, only then can we expect the end of corporate plunder.   We are running out of time. Millions of Germans lost faith in the free market and capitalism during the Great Depression, and "with the failure of the left to provide a viable alternative, they became vulnerable to the rhetoric of a party that, once it came to power, combined Keynesian pump-priming measures that brought unemployment down to 3 percent with a devastating counterrevolutionary social and cultural program."

Optimism is so deeply embedded in the American national psyche that it withstood the Great Depression in the 1930s and a string of recessions since then. But in the era some economists call "the new normal" in America, optimism is fading.

(Part 2 of 2 - see first part below) What impact do the incredible salaries of superstars have on the rest of us? What has changed, technologically and socially, to precipitate these inequities? This article also offers a brief look at the relationship between income inequality and economic growth, comparing the US throughout its history and the US vis a vis several European countries.

The U.S. economy continues to stagnate. It's growing at the rate of 1.8 percent, which is barely growing at all. Consumer spending is down. Home prices are down. Jobs and wages are going nowhere. It's vital that we understand the truth about the American economy. How did we go from the Great Depression to 30 years of Great Prosperity? And from there, to 30 years of stagnant incomes and widening inequality, culminating in the Great Recession? And from the Great Recession into such an anemic recovery?

Earlier this week, the Federal Reserve Bank of New York published a blog post about the "mistake of 1937," the premature fiscal and monetary pullback that aborted an ongoing economic recovery and prolonged the Great Depression. As Gauti Eggertsson, the post's author (with whom I have done research) points out, economic conditions today - with output growing, some prices rising, but unemployment still very high - bear a strong resemblance to those in 1936-37. So are modern policy makers going to make the same mistake?

Democrat or Republican, Libertarian or Socialist, politically active and not we are reaping the bitter reward of a political and legal system designed to maximize corporate profits at the expense of our environment, our livelihood, and our very lives. Our society is unraveling. We all know this. This is not idle conspiracy theory. These are well established facts. We are ruled by a headless beast that is no longer accountable to us. That it is headless makes it no less beastly. But there is a silver bullet. It's within our power to restore a functioning free market; to take back our democracy. We must end limited liability for corporations. Only when wealthy investors are no longer shielded from the costs that we collectively bear in their stead, only when they can no longer hide from the burden they have placed on us, only then can we expect the end of corporate plunder.   We are running out of time. Millions of Germans lost faith in the free market and capitalism during the Great Depression, and "with the failure of the left to provide a viable alternative, they became vulnerable to the rhetoric of a party that, once it came to power, combined Keynesian pump-priming measures that brought unemployment down to 3 percent with a devastating counterrevolutionary social and cultural program."

Since Reagan, Republicans have been on a "starve the beast" campaign - by which they mean eviscerate the government by taking away as much revenue as they can.

The Bureau of Labor Statistics reports today no jobs were created in August. Zero. Nada. Well, not quite. The strike at Verizon reduced the labor force by 45,000. Minnesota government employees returned to work, adding 22,000. So in reality, America added 23,000 jobs. Almost zero. In reality, worse than zero. We need 125,000 a month merely to keep up with population growth. So the hole continues to deepen. Since this Depression began at the end of 2007, America's potential labor force - working-age people who want jobs - has grown by over 7 million. But since then the number of Americans with jobs has shrunk by more than 300,000.

The crash has laid bare many unpleasant truths about the United States. One of the most alarming, says a former chief economist of the International Monetary Fund, is that the finance industry has effectively captured our government-a state of affairs that more typically describes emerging markets, and is at the center of many emerging-market crises. If the IMF's staff could speak freely about the U.S., it would tell us what it tells all countries in this situation: recovery will fail unless we break the financial oligarchy that is blocking essential reform. And if we are to prevent a true depression, we're running out of time.

At an extravagant hotel gilded just before the Great Depression, corporate executives from the tobacco giant R.J. Reynolds, State Farm Insurance, and other corporations were joined by their "task force" co-chairs -- all Republican state legislators -- to approve "model" legislation. They jointly head task forces of what is called the "American Legislative Exchange Council" (ALEC).

One of the most fascinating things to come out of the current We Are 99%/Occupy Wall Street protests is the We Are 99% Tumblr.  At the site, people hold up signs that explain their current circumstances, and it tells the story of a whole range of Americans struggling in the Lesser Depression.  It is highly recommended. DATA The site features pictures of individuals holding their signs, and occasionally the tumblr reproduces the text of the signs themselves underneath the image as html text.  Sometimes the text under the image is blank, sometimes it is a different message, but often it is the sign itself. In order to get a slightly better empirical handle on this important tumblr, I created a script designed to read all of the pages and parse out the html text on the site.  It doesn't read the images (can anyone in the audience automate calls to an OCR?), just the html text.  After collecting all the text on all the pages, the code then goes through it to try to find interesting points. It's a fun exercise, pointing out things I wouldn't have seen otherwise.  For instance, I found this adorable little rascal, pictured below, mucking up the algorithm, as the first version of the code assumed all the ages would have two digits.  I found that he, and the sign his mom made for him as a confessional to her son, hit me a ton harder than any of the more direct signs of despair in this economy:

Just a few months ago, I wrote a piece for Adbusters that started with a conversation I'd had with an Egyptian activist friend named Dina: All these years," she said, "we've been organizing marches, rallies… And if only 45 people show up, you're depressed, if you get 300, you're happy. Then one day, 200,000 people show up. And you're incredulous: on some level, even though you didn't realize it, you'd given up thinking that you could actually win. As the Occupy Wall Street movement spreads across America, and even the world, I am suddenly beginning to understand a little of how she felt.