06/20/2013 10:39 am ET Updated Aug 20, 2013

The Economy Is Recovering, But the People Aren't

"Even pessimists feel optimistic about the American economy," the New York Times reports, one of a flood of articles touting economic recovery. Yesterday, Federal Reserve Chair Ben Bernanke suggested that if growth continued, the Fed might be able to ease back on its extraordinary bond purchases later this year, and end them next year.

The Fed's monthly report concluded that the "downside risks" were reduced. Housing is coming back. The stock market is up. Profits are at record levels. The sequester cuts haven't sabotaged growth. Consumers feel more confidence.

Only one problem with all this. The economy can't recover if the people don't. Official unemployment has drifted down to an abysmal 7.6 percent but largely because people are dropping out of the workforce.

There are still over 20 million people in need of full time work. The employment rate -- the percentage of the population in the workforce -- hasn't budged from recession levels. At current rates, the U.S. won't return to the pre-recession 5 percent unemployment rate until 2022 -- and even at that level, American families were losing ground.

Corporate profits are up, but wages aren't. Wages are now at the lowest percent of the economy on record. The median wage hasn't budged this century. College and non-college grads are now losing ground. The good jobs that were lost are being replaced by low wage and part-time jobs. Young people are starting out behind, unemployed or underemployed at ruinous high rates. Our Gilded Age inequality is getting worse, with the top 1 percent pocketing all of the rewards of growth.

In fact, growth this year is slated to be slower than last. The IMF predicts it will drop below 2 percent over the last half of the year, in part because of the inane austerity adopted by the Congress, or in the IMF's words deficit reduction that is "excessively rapid and ill-designed." The IMF, institutional guardian of fiscal probity, calls on the Congress to repeal the destructive sequester cuts.

Investors have been touting recovery and warning about potential inflation for weeks. But when Fed Chair Bernanke intimated that the Fed might consider slowly reducing, sometime in the future, if things keep getting better, the $85 billion a month it is pumping into the bonds, the stock and the bond market plummeted even before he finished the sentence.

We need dramatic reforms to make this economy work for working people. That requires major long-term investments to rebuild the country and renovate education and training, from pre-K to affordable college, putting people to work. We need a sensible strategy for balancing our trade and reviving manufacturing, capturing the lead in the green industrial revolution that is already sweeping the world. It requires empowering workers to gain a fair share of the profits and productivity they are helping to generate, raising the minimum wage, and bringing millions of undocumented workers out of the shadows. And it requires curbing the perverse executive compensation policies that give CEOs million dollar incentives to plunder their own companies. Progressive tax reform that shuts down tax havens abroad and requires the wealthy to pay their fair share can cover the bill.

Without fundamental reforms, Americans are at best treading water. The Fed's extraordinary measures -- keeping short-term interest rates near zero, pumping money into the bond and mortgage markets -- have helped to keep the economy afloat. Repealing the Congress' perverse austerity cuts would make it more buoyant.

But Americans won't recover without a dramatic change in course. And that will require the Republicans who control the Congress to get out of the way and the Democrats who control the Senate to get better vision and stronger backbones. That's not about to happen unless Americans make it clear -- loudly and insistently -- that the new normal is not acceptable.