From 1945-1973 we had a high wage economy which gave working families a lager percentage of the profits that were made off their backs. In short, working Americans were given skin in the game; they participated more fully in economic growth (rather than seeing their wages and benefits driven down by having to compete with Chinese labor markets). And to bolster upward mobility, the government poured money into public universities so that middle class families could send their children to school without assuming paralyzing debt. During this period American built the most robust consumption economy in world history, supported by the most solvent middle class the world has ever seen.
Point is: when middle class families have more disposable income with which to consume, the capitalist has a greater incentive to expand production, which includes the addition of more workers, who themselves increase aggregate demand on main street, which thrives when Americans can afford to buy their goods and services. It's called a virtuous cycle.
But then, in 1973, postwar Keynesianism broke down. We experienced inflation and unemployment (stagflation). The virtuous cycle stopped working. Our global competitors (Japan and Germany) re-industrialized, which meant they were taking an increasing share of the manufacturing profits which were so crucial to our postwar economic growth.
As a result of stagflation and the slow down in profits, Reaganomics gained traction. Movement Conservatism convinced the country that our suppliers needed lower taxes, lower labor costs and fewer regulations to spur investment and return to the pattern of economic growth that so abruptly broke down in 1973. In short, we were told that workers had to make less money so that suppliers could rebuild profit margins. And this is exactly what happened: trade was liberalized so that our large corporations could shift production to communist China, which allowed them drive down labor costs and restore profits.
As jobs were sent to ultra cheap labor markets, the American worker suffered through lost wages and disappearing benefits. Consequently, hard working American families had to borrow more and more money just to stay a float (i.e., they had to replace the lost wages, lost jobs and disappearing benefits).
Put another way: Americans went into crippling debt to make up for the money that never trickled down.
