The truth is our economic problems stem from the biggest concentration of income and wealth at the top since 1928, combined with stagnant incomes for most of the rest of us. The result: Americans no longer have the purchasing power to keep the economy going at full capacity. Since the debt bubble burst, most Americans have had to reduce their spending; they need to repay their debts, can’t borrow as before, and must save for retirement.

The short-term solution is for government to counteract this shortfall by spending more, not less. The long-term solution is to spread the benefits of economic growth more widely (for example, through a more progressive income tax, a larger EITC, an exemption on the first $20K of income from payroll taxes and application of payroll taxes to incomes over $250K, stronger unions, and more and better investments in education and infrastructure.)

But instead of telling the truth, Obama has legitimized the Big Lie by freezing non-defense discretionary spending, freezing federal pay, touting his deficit commission co-chairs’ recommended $3 of spending cuts for every dollar of tax increase, and agreeing to extending the Bush tax cuts for the wealthy.

Will Obama stand up to the Big Lie? Will he use his State of the Union address to rebut it and tell the truth? Maybe, but so far there’s no evidence.

In his weekly address this weekend, the President restated his “commitment” for 2011 “to do everything I can to make sure our economy is growing, creating jobs, and strengthening our middle class.” He added that it’s important “to look ahead – not just to this year, but to the next 10 years, and the next 20 years” to find ways to stimulate the economy through innovation. And that it is critical that the U.S. discover ways to “out-compete other countries around the world.”

Become more innovative? Out-compete? Who or what is he talking about? Big American corporations are innovating like mad all over the world, with research and development centers in China and India. And their profits are soaring. They’re sitting on almost $1 trillion of cash. But they won’t create jobs in America because there’s not enough demand here to justify them.

In the Republican address in response, U.S. Senator-elect Kelly Ayotte (R-N.H.) restated the Big Lie. “The American people sent us to Congress with clear instructions: make government smaller, not bigger,” she said. Deficit reduction “isn’t a Republican problem or a Democrat problem — it’s an American problem that will require tough decision-making from both parties.” And the way to shrink the deficit is to cut government. The extension of the 2001 and 2003 tax cuts over the next two years, she said, was an “important first step” to jump-start the economy.

Starting Wednesday, when the 112th Congress convenes with a Republican majority in the House, we’ll be hearing far more of the Big Lie.

George Orwell once explained that when a public is stressed and confused, a Big Lie told repeatedly can become the accepted truth. Adolph Hitler wrote in Mein Kampf that “the size of the lie is a definite factor in causing it to be believed” and that members of the public are “more easily prey to a big lie than a small one, for they themselves often tell little lies but would be ashamed to tell big ones.”

Only the President has the bully pulpit. But will he use it to tell the Big Truth?

Robert Reich

Republished with permission from Robert Reich’s Blog.