Fee-for-service is the single largest financial support for non-profits – about half of all revenue. Government grants provide another 30 percent. Charitable contributions are just 12 percent, with investment income accounting for the remainder.

Steuerle called for prohibiting deductions for the first $500 for individuals and $1,000 for families, since most economists believe this would not affect giving; better policing of in-kind contributions, since the value deducted often far exceeds the actual cash delivered to charities; and adjusting the foundation pay-out rules to even out giving over the business cycle.

The CBO report, which used data from the 2006 tax year, said adopting a floor before the deduction kicked in, if coupled with limiting the deduction to a 25 percent refundable tax credit (which would lessen its value for filers in higher tax brackets), would generate an additional $1.5 billion a year for charity. At the same time, it would cut the $1.3 trillion budget deficit by $2.4 billion a year.

As we've written before (article, white paper), the 11 states that the Republicans took over during the 2010 midterm elections – Alabama, Indiana, Maine, Michigan, Minnesota, Montana, New Hampshire, North Carolina, Ohio, Pennsylvania, and Wisconsin – account for 40.5 percent of the total losses. By itself, Texas accounts for an additional 31 percent of the total losses. So these 12 states account for over 70 percent of total public sector job losses in 2011. This is even more important because there was a continued decline in public sector workers in 2011 even though the economy was no longer in free fall.

Can I say this any more simply? The earnings of the great American middle class fueled the great American expansion for three decades after World War II. Their relative lack of earnings in more recent years set us up for the great American bust.

Get it? We won't get out of first gear until the middle class regains the bargaining power it had in the first three decades after World War II to claim a much larger share of the gains from productivity growth.