ROBERT B. REICH, Chancellor’s Professor of Public Policy at the University of California at Berkeley and Senior Fellow at the Blum Center for Developing Economies, was Secretary of Labor in the Clinton administration. Time Magazine named him one of the ten most effective cabinet secretaries of the twentieth century. He has written thirteen books, including the best sellers “Aftershock" and “The Work of Nations." His latest, "Beyond Outrage," is now out in paperback. He is also a founding editor of the American Prospect magazine and chairman of Common Cause. His new film, "Inequality for All," is now available on Netflix, iTunes, DVD, and On Demand.

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COLBERT REPORT, NOVEMBER, 2013

WITH BILL MOYERS, SEPT. 2013

DAILY SHOW, SEPTEMBER 2013, PART 1

DAILY SHOW, SEPTEMBER 2013, PART 2

DEMOCRACY NOW, SEPTEMBER 2013

INTELLIGENCE SQUARED DEBATES, SEPTEMBER 2012

DAILY SHOW, APRIL 2012, PART 1

DAILY SHOW, APRIL 2012, PART 2

COLBERT REPORT, OCTOBER, 2010

WITH CONAN OBRIEN, JANUARY, 2010

DEBATING RON PAUL, JANUARY, 2010

  • Tuesday, April 15, 2014

    HAPPY TAX DAY, AND WHY THE TOP 1% PAY A MUCH LOWER TAX RATE THAN YOU

    It’s tax time again, April 15, when our minds turn toward paying the taxes we owe or possibly getting a tax refund. But what we don’t think about enough is whether our tax system is fair. The richest 1 percent of Americans are now getting the largest percent of total national income in almost a century. So you might think they’d pay a much higher tax rate than everyone else. 

    But you’d be wrong. Many millionaires pay a lower federal tax rate than many middle-class Americans.

    Some don’t pay any federal taxes at all. That’s because they‘re allowed to deduct from their taxable income such things as large interest payments on mortgages for huge homes, also the costs of business entertainment and conferences  (aka vacations at golf resorts), and gold plated health care plans.

    Some also take advantage of tax loopholes that let them park some of their earnings in offshore tax havens like the Bahamas or the Netherlands Antilles.

    And other loopholes that allow them to treat some income as capital gains – subject to a much lower tax rate than ordinary income. If you happen to be a hedge-fund or private-equity manager, there’s a capital gains loophole designed especially for you.

    Consider the Social Security payroll tax and the situation is even more lopsided. That tax applies to every dollar of income up to a cap — which this year is $117,000. Anything earned above the cap is not subject to Social Security taxes at all – meaning anyone with a high income pays a much smaller percentage of it in Social Security taxes than most people do.

    Put these all together and you see why Warren Buffet, the second richest person in America, pays a lower tax rate than his secretary, as he readily admits.

    State and local taxes are even more regressive. The poorest fifth of Americans pay an average state and local tax rate of over 11 percent, while the richest fifth pay only 5.6 percent. This isn’t small change. State and local taxes account for about 40 percent of all government revenues. 

    Believe it or not, Republicans want to make all this worse by cutting taxes on the wealthy even more. Paul Ryan’s new budget doesn’t just slice Medicare, education, and food stamps. It also lowers the top federal tax rate to 25 percent. 

    When the rich are let off the hook in all these ways, the rest of America has to pay more in taxes to make up the difference – or have services cut because government doesn’t have the funds.

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  • Tuesday, April 8, 2014

    WHY THE MINIMUM WAGE SHOULD REALLY BE RAISED TO $15 AN HOUR

    Momentum is building to raise the minimum wage. Several states have already taken action  — Connecticut has boosted it to $10.10 by 2017, the Maryland legislature just approved a similar measure, Minnesota lawmakers just reached a deal to hike it to $9.50. A few cities have been more ambitious — Washington, D.C. and its surrounding counties raised it to $11.50, Seattle is considering $15.00

    Senate Democrats will soon introduce legislation raising it nationally to $10.10, from the current $7.25 an hour.

    All this is fine as far as it goes. But we need to be more ambitious. We should be raising the federal minimum to $15 an hour.

    Here are seven reasons why:

    1. Had the minimum wage of 1968 simply stayed even with inflation, it would be more than $10 an hour today. But the typical worker is also about twice as productive as then. Some of those productivity gains should go to workers at the bottom.

    2. $10.10 isn’t enough to lift all workers and their families out of poverty. Most low-wage workers aren’t young teenagers; they’re major breadwinners for their families, and many are women. And they and their families need a higher minimum.

    3. For this reason, a $10.10 minimum would also still require the rest of us to pay Medicaid, food-stamps, and other programs necessary to get poor families out of poverty — thereby indirectly subsidizing employers who refuse to pay more. Bloomberg View describes McDonalds and Walmart as “America’s biggest welfare queens” because their employees receive so much public assistance. (Some, like McDonalds, even advise their employees to use public programs because their pay is so low.)

    4. A $15/hour minimum won’t result in major job losses because it would put money in the pockets of millions of low-wage workers who will spend it — thereby giving working families and the overall economy a boost, and creating jobs. (When I was Labor Secretary in 1996 and we raised the minimum wage, business predicted millions of job losses; in fact, we had more job gains over the next four years than in any comparable period in American history.)

    5. A $15/hour minimum is unlikely to result in higher prices because most businesses directly affected by it are in intense competition for consumers, and will take the raise out of profits rather than raise their prices. But because the higher minimum will also attract more workers into the job market, employers will have more choice of whom to hire, and thereby have more reliable employees — resulting in lower turnover costs and higher productivity.

    6. Since Republicans will push Democrats to go even lower than $10.10, it’s doubly important to be clear about what’s right in the first place. Democrats should be going for a higher minimum rather than listening to Republican demands for a smaller one.

    7. At a time in our history when 95 percent of all economic gains are going to the top 1 percent, raising the minimum wage to $15 an hour isn’t just smart economics and good politics. It’s also the morally right thing to do.

    Call your senators and members of congress today to tell them $15 an hour is the least American workers deserve. You can reach them at 202-224-3121.


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  • Today’s Jobs Report and the Supreme Court’s “McCutcheon” Debacle


    Friday, April 4, 2014

    What does the Supreme Court’s “McCutcheon” decision this week have to do with today’s jobs report, showing 192,000 new jobs for March?

    Connect the dots. More than five years after Wall Street’s near meltdown the number of full-time workers is still less than it was in December 2007, yet the working-age population of the U.S. has increased by 13 million since then.

    This explains why so many people are still getting nowhere. Unemployment among those 18 to 29 is 11.4 percent, nearly double the national rate.

    Most companies continue to shed workers, cut wages, and horde their cash because they don’t have enough customers to warrant expansion. Why? The vast middle class and poor don’t have enough purchasing power, as 95 percent of the economy’s gains go to the top 1 percent.

    That’s why we need to (1) cut taxes on average people (say, exempting the first $15,000 of income from Social Security taxes and making up the shortfall by taking the cap off income subject to it), (2) raise the minimum wage, (3) create jobs by repairing roads, bridges, ports, and much of the rest of our crumbling infrastructure, (4) add teachers and teacher’s aides to now over-crowded classrooms, and (5) create “green” jobs and a new WPA for the long-term unemployed.

    And pay for much of this by raising taxes on the top, closing tax loopholes for the rich, and ending corporate welfare.

    But none of this can be done because some wealthy people and big corporations have a strangle-hold on our politics. “McCutcheon” makes that strangle-hold even tighter.

    Connect the dots and you see how the big-money takeover of our democracy has lead to an economy that’s barely functioning for most Americans.

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  • McCutcheon, and the Vicious Cycle of Concentrated Wealth and Political Power


    Thursday, April 3, 2014
    If wealth and income weren’t already so concentrated in the hands of a few, the shameful “McCutcheon” decision by the five Republican appointees to the Supreme Court wouldn’t be as dangerous. But by taking “Citizen’s United” one step further and effectively eviscerating campaign finance laws, the Court has issued an invitation to oligarchy.
    Almost limitless political donations coupled with America’s dramatically widening inequality create a vicious cycle in which the wealthy buy votes that lower their taxes, give them bailouts and subsidies, and deregulate their businesses – thereby making them even wealthier and capable of buying even more votes. Corruption breeds more corruption.
    That the richest four hundred Americans now have more wealth than the poorest 150 million Americans put together, the wealthiest 1 percent own over 35 percent of the nation’s private assets, and 95 percent of all the economic gains since the start of the recovery in 2009 have gone to the top 1 percent — all of this is cause for worry, and not just because it means the middle class lacks the purchasing power necessary to get the economy out of first gear.
    It is also worrisome because such great concentrations of wealth so readily compound themselves through politics, rigging the game in their favor and against everyone else. “McCutcheon” merely accelerates this vicious cycle. 
    As Thomas Piketty shows in his monumental “Capital in the Twenty-First Century,” this was the pattern in advanced economies through much of the 17th, 18th, and 19th centuries. And it is coming to be the pattern once again.
    Picketty is pessimistic that much can be done to reverse it (his sweeping economic data suggest that slow growth will almost automatically concentrate great wealth in a relatively few hands). But he disregards the political upheavals and reforms that such wealth concentrations often inspire — such as America’s populist revolts of the 1890s followed by the progressive era, or the German socialist movement in the 1870s followed by Otto von Bismarck’s creation of the first welfare state.

    In America of the late nineteenth century, the lackeys of robber barons literally deposited sacks of money on the desks of pliant legislators, prompting the great jurist Louis Brandeis to note that the nation had a choice: “We can have a democracy or we can have great wealth in the hands of a few,” he said. “But we cannot have both.”
    Soon thereafter America made the choice. Public outrage gave birth to the nation’s first campaign finance laws, along with the first progressive income tax. The trusts were broken up and regulations imposed to bar impure food and drugs. Several states enacted America’s first labor protections, including the 40-hour workweek.

    The question is when do we reach another tipping point, and what happens then?
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  • The Distributional Games


    Monday, March 31, 2014

    Every year I ask my class on “Wealth and Poverty” to play a simple game. I have them split up into pairs, and imagine I’m giving one of them $1,000. They can keep some of the money only on condition they reach a deal with their partner on how it’s to be divided up between them. I explain they’re strangers who will never see one other again, can only make one offer and respond with one acceptance (or decline), and can only communicate by the initial recipient writing on a piece of paper how much he’ll share with the other, who must then either accept (writing “deal” on the paper) or decline (“no deal”). 

    You might think many initial recipients of the imaginary $1,000 would offer $1 or even less, which their partner would gladly accept. After all, even one dollar is better than ending up with nothing at all. 

    But that’s not what happens. Most of the $1,000 recipients are far more generous, offering their partners at least $250. And most of partners decline any offer under $250, even though “no deal” means neither of them will get to keep anything. 

    This game, or variations of it, have been played by social scientists thousands of times with different groups and pairings, with surprisingly similar results. 

    A far bigger version of the game is now being played on the national stage. But it’s for real — as a relative handful of Americans receive ever bigger slices of the total national income while most average Americans, working harder than ever, receive smaller ones. And just as in the simulations, the losers are starting to say “no deal.” 

    According to polls, they’ve said no deal to the pending Trans Pacific Trade Agreement, for example, and Congress is on the way to killing it. 

    It’s true that history and policy point to overall benefits from expanded trade because all of us gain access to cheaper goods and services. But in recent years the biggest gains from trade have gone to investors and executives while the burdens have fallen disproportionately on those in the middle and below who have lost good-paying jobs.

    By the same token, most Americans are saying “no deal” to further tax cuts for the wealthy and corporations. In fact, some are now voting to raise taxes on the rich in order to pay for such things as better schools, as evidenced by the election of Bill de Blasio as mayor of New York.

    Conservatives say higher taxes on the rich will slow economic growth. But even if this argument contains a grain of truth, it’s a non-starter as long as 95 percent of the gains from growth continue to go to the top 1 percent – as they have since the start of the recovery in 2009.

    Why would people turn down a deal that made them better off simply because it made someone else far, far better off?

    Some might call this attitude envy or spite. That’s the conclusion of Arthur Brooks, president of the American Enterprise Institute, in a recent oped column for the New York Times. But he’s dead wrong.

    It’s true that people sometimes feel worse off when others do better. There’s an old Russian story about a suffering peasant whose neighbor is rich and well-connected. In time, the rich neighbor obtains a cow, something the peasant could never afford. The peasant prays to God for help. When God asks the peasant what he wants God to do, the peasant replies, “Kill the cow.” 

    But Americans have never been prone to “kill the cow” type envy. When our neighbor gets the equivalent of new cow (or new car), we want one, too.

    Yet we are sensitive to perceived unfairness. When I ask those of my students who refuse to accept even $200 in the distribution game why they did so, they rarely mention feelings of envy or spite. They talk instead about unfairness. “Why should she get so much?” they ask. “It’s unfair.”

    Remember, I gave out the $1,000 arbitrarily. The initial recipients didn’t have to work for it or be outstanding in any way.

    When a game seems rigged, losers may be willing to sacrifice some gains in order to prevent winners from walking away with far more — a result that might feel fundamentally unfair.  

    To many Americans, the U.S. economy of recent years has become a vast casino in which too many decks are stacked and too many dice are loaded. I hear it all the time: The titans of Wall Street made unfathomable amounts gambling with our money, and when their bets went bad in 2008 we had to bail them out. Yet although millions of Americans are still underwater and many remain unemployed, not a single top Wall Street banker has been indicted. In fact, they’re making more money now than ever before. 

    Top hedge-fund managers pocketed more than a billion dollars each last year, and the stock market is higher than it was before the crash. But the typical American home is worth less than before, and most Americans can’t save a thing. CEOs are now earning more than 300 times the pay of the typical worker yet the most workers are earning less, and many are barely holding on. 

    In 2001, a Gallup poll found 76 percent of Americans satisfied with opportunities to get ahead by working hard, and only 22 percent were dissatisfied. But since then, the apparent arbitrariness and unfairness of the economy have taken a toll. Satisfaction has steadily declined and dissatisfaction increased. Only 54 percent are now satisfied, 45 percent dissatisfied.

    According to Pew, the percentage of Americans who feel most people who want to get ahead can do so through hard work has dropped by 14 points since about 2000.

    Another related explanation I get from students who refuse $200 or more in the distribution game: They worry that if the other guy ends up with most of the money, he’ll also end up with most of the power. That will rig the game even more. So they’re willing to sacrifice some gain in order to avoid a steadily more lopsided and ever more corrupt politics. 

    Here again, the evidence is all around us. Big money had already started inundating our democracy before “Citizens United vs. Federal Election Commission” opened the sluice gates, but now our democracy is drowning. Only the terminally naive would believe this money is intended to foster the public interest. 

    What to do? Improving our schools is critically important. Making work pay by raising the minimum wage and expanding the Earned Income Tax Credit would also be helpful. 

    But these are only a start. In order to ensure that future productivity gains don’t go overwhelmingly to a small sliver at the top, we’ll need a mechanism to give the middle class and the poor a share in future growth. 

    One possibility: A trust fund for every child at birth, composed of an index of stocks and bonds whose value is inversely related to family income, which becomes available to them when they turn eighteen. Through the magic of compounded interest, this could be a considerable sum. The funds would be financed by a small surtax on capital gains and a tax on all financial transactions. 

    We must also get big money out of politics — reversing “Citizens United” by constitutional amendment if necessary, financing campaigns by matching the contributions of small donors with public dollars, and requiring full disclosure of everyone and every corporation contributing to (or against) a candidate. 

    If America’s distributional game continues to create a few big winners and many who consider themselves losers by comparison, the losers will try to stop the game — not out of envy but out of a deep-seated sense of unfairness and a fear of unchecked power and privilege. Then we all lose. 

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  • The New Billionaire Political Bosses


    Tuesday, March 25, 2014

    Charles and David Koch should not be blamed for having more wealth than the bottom 40 percent of Americans put together. Nor should they be condemned for their petrochemical empire. As far as I know, they’ve played by the rules and obeyed the laws.

    They’re also entitled to their own right-wing political views. It’s a free country.  

    But in using their vast wealth to change those rules and laws in order to fit their political views, the Koch brothers are undermining our democracy. That’s a betrayal of the most precious thing Americans share.

    The Kochs exemplify a new reality that strikes at the heart of America. The vast wealth that has accumulated at the top of the American economy is not itself the problem. The problem is that political power tends to rise to where the money is. And this combination of great wealth with political power leads to greater and greater accumulations and concentrations of both — tilting the playing field in favor of the Kochs and their ilk, and against the rest of us.

    America is not yet an oligarchy, but that’s where the Koch’s and a few other billionaires are taking us.   

    American democracy used to depend on political parties that more or less represented most of us. Political scientists of the 1950s and 1960s marveled at American “pluralism,” by which they meant the capacities of parties and other membership groups to reflect the preferences of the vast majority of citizens.

    Then around a quarter century ago, as income and wealth began concentrating at the top, the Republican and Democratic Parties started to morph into mechanisms for extracting money, mostly from wealthy people.

    Finally, after the Supreme Court’s “Citizen’s United” decision in 2010, billionaires began creating their own political mechanisms, separate from the political parties. They started providing big money directly to political candidates of their choice, and creating their own media campaigns to sway public opinion toward their own views.

    So far in the 2014 election cycle, “Americans for Prosperity,” the Koch brother’s political front group, has aired more than 17,000 broadcast TV commercials, compared with only 2,100 aired by Republican Party groups.

    "Americans for Prosperity" has also been outspending top Democratic super PACs in nearly all of the Senate races Republicans are targeting this year. In seven of the nine races the difference in total spending is at least two-to-one and Democratic super PACs have had virtually no air presence in five of the nine states.

    The Kochs have spawned several imitators. Through the end of February, four of the top five contributors to 2014 super-PACs are now giving money to political operations they themselves created, according to the Center for Responsive Politics.

    For example, billionaire TD Ameritrade founder Joe Ricketts and his son, Todd, co-owner of the Chicago Cubs, have their own $25 million political operation called “Ending Spending.” The group is now investing heavily in TV ads against Republican Representative Walter Jones in a North Carolina primary (they blame Jones for too often voting with Obama).

    Their ad attacking Democratic New Hampshire Senator Jeanne Shaheen for supporting Obama’s health-care law has become a template for similar ads funded by the Koch’s “Americans for Prosperity” in Senate races across the country.

    When billionaires supplant political parties, candidates are beholden directly to the billionaires. And if and when those candidates win election, the billionaires will be completely in charge. 

    At this very moment, Casino magnate Sheldon Adelson (worth an estimated $37.9 billion) is busy interviewing potential Republican candidates whom he might fund, in what’s being called the “Sheldon Primary.”

    “Certainly the ‘Sheldon Primary’ is an important primary for any Republican running for president,” says Ari Fleischer, former White House press secretary under President George W. Bush. “It goes without saying that anybody running for the Republican nomination would want to have Sheldon at his side.”

    The new billionaire political bosses aren’t limited to Republicans. Democratic-leaning billionaires Tom Steyer, a former hedge-fund manager, and former New York Mayor Michael Bloomberg, have also created their own political groups. But even if the two sides were equal, billionaires squaring off against each other isn’t remotely a democracy.

    In his much-talked-about new book, “Capital in the Twenty-First Century,” economist Thomas Piketty explains why the rich have become steadily richer while the share of national income going to wages continues to drop. He shows that when wealth is concentrated in relatively few hands, and the income generated by that wealth grows more rapidly than the overall economy – as has been the case in the United States and many other advanced economies for years – the richest receive almost all the income growth.

    Logically, this leads to greater and greater concentrations of income and wealth in the future – dynastic fortunes that are handed down from generation to generation, as they were prior to the twentieth century in much of the world.  

    The trend was reversed temporarily in the twentieth century by the Great Depression, two terrible wars, the development of the modern welfare state, and strong labor unions. But Piketty is justifiably concerned about the future.

    A new gilded age is starting to look a lot like the old one. The only way to stop this is through concerted political action. Yet the only large-scale political action we’re witnessing is that of Charles and David Koch, and their billionaire imitators.

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  • The New Tribalism and the Decline of the Nation State


    Sunday, March 23, 2014

    We are witnessing a reversion to tribalism around the world, away from nation states. The the same pattern can be seen even in America – especially in American politics.

    Before the rise of the nation-state, between the eighteenth and twentieth centuries, the world was mostly tribal. Tribes were united by language, religion, blood, and belief. They feared other tribes and often warred against them. Kings and emperors imposed temporary truces, at most.

    But in the past three hundred years the idea of nationhood took root in most of the world. Members of tribes started to become citizens, viewing themselves as a single people with patriotic sentiments and duties toward their homeland. Although nationalism never fully supplanted tribalism in some former colonial territories, the transition from tribe to nation was mostly completed by the mid twentieth century.

    Over the last several decades, though, technology has whittled away the underpinnings of the nation state. National economies have become so intertwined that economic security depends less on national armies than on financial transactions around the world. Global corporations play nations off against each other to get the best deals on taxes and regulations.

    News and images move so easily across borders that attitudes and aspirations are no longer especially national. Cyber-weapons, no longer the exclusive province of national governments, can originate in a hacker’s garage.

    Nations are becoming less relevant in a world where everyone and everything is interconnected. The connections that matter most are again becoming more personal. Religious beliefs and affiliations, the nuances of one’s own language and culture, the daily realities of class, and the extensions of one’s family and its values – all are providing people with ever greater senses of identity.

    The nation state, meanwhile, is coming apart. A single Europe – which seemed within reach a few years ago – is now succumbing to the centrifugal forces of its different languages and cultures. The Soviet Union is gone, replaced by nations split along tribal lines. Vladimir Putin can’t easily annex the whole of Ukraine, only the Russian-speaking part. The Balkans have been Balkanized.

    Separatist movements have broken out all over — Czechs separating from Slovaks; Kurds wanting to separate from Iraq, Syria, and Turkey; even the Scots seeking separation from England.

    The turmoil now consuming much of the Middle East stems less from democratic movements trying to topple dictatorships than from ancient tribal conflicts between the two major denominations of Isam – Sunni and Shia.

    And what about America? The world’s “melting pot” is changing color. Between the 2000 and 2010 census the share of the U.S. population calling itself white dropped from 69 to 64 percent, and more than half of the nation’s population growth came from Hispanics.

    It’s also becoming more divided by economic class. Increasingly, the rich seem to inhabit a different country than the rest.

    But America’s new tribalism can be seen most distinctly in its politics. Nowadays the members of one tribe (calling themselves liberals, progressives, and Democrats) hold sharply different views and values than the members of the other (conservatives, Tea Partiers, and Republicans).

    Each tribe has contrasting ideas about rights and freedoms (for liberals, reproductive rights and equal marriage rights; for conservatives, the right to own a gun and do what you want with your property).

    Each has its own totems (social insurance versus smaller government) and taboos (cutting entitlements or raising taxes). Each, its own demons (the Tea Party and Ted Cruz; the Affordable Care Act and Barack Obama); its own version of truth (one believes in climate change and evolution; the other doesn’t); and its own media that confirm its beliefs.

    The tribes even look different. One is becoming blacker, browner, and more feminine. The other, whiter and more male. (Only 2 percent of Mitt Romney’s voters were African-American, for example.)

    Each tribe is headed by rival warlords whose fighting has almost brought the national government in Washington to a halt. Increasingly, the two tribes live separately in their own regions – blue or red state, coastal or mid-section, urban or rural – with state or local governments reflecting their contrasting values.

    I’m not making a claim of moral equivalence. Personally, I think the Republican right has gone off the deep end, and if polls are to be believed a majority of Americans agree with me.

    But the fact is, the two tribes are pulling America apart, often putting tribal goals over the national interest – which is not that different from what’s happening in the rest of the world.

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  • The Real Truth About ObamaCare


    Saturday, March 22, 2014

    Despite the worst roll-out conceivable, the Affordable Care Act seems to be working. With less than two weeks remaining before the March 31 deadline for coverage this year, five million people have already signed up. After decades of rising percentages of Americans’ lacking health insurance, the uninsured rate has dropped to its lowest levels since 2008.

    Meanwhile, the rise in health care costs has slowed drastically. No one knows exactly why, but the new law may well be contributing to this slowdown by reducing Medicare overpayments to medical providers and private insurers, and creating incentives for hospitals and doctors to improve quality of care.

    But a lot about the Affordable Care Act needs fixing — especially the widespread misinformation that continues to surround it. For example, a majority of business owners with fewer than 50 workers still think they’re required to offer insurance or pay a penalty. In fact, the law applies only to businesses with 50 or more employees who work more than 30 hours a week. And many companies with fewer than 25 workers still don’t realize that if they offer plans they can qualify for subsidies in the form of tax credits.

    Many individuals remain confused and frightened. Forty-one percent of Americans who are still uninsured say they plan to remain that way. They believe it will be cheaper to pay a penalty than buy insurance. Many of these people are unaware of the subsidies available to them. Sign-ups have been particularly disappointing among Hispanics.

    Some of this confusion has been deliberately sown by outside groups that, in the wake of the Supreme Court’s “Citizens United” decision, have been free to spend large amounts of money to undermine the law. For example, Gov. Rick Scott,  Republican of Florida, told Fox News that the Affordable Care Act was “the biggest job killer ever,” citing a Florida company with 20 employees that expected to go out of business because it couldn’t afford coverage.

    None of this is beyond repair, though. As more Americans sign up and see the benefits, others will take note and do the same.

    The biggest problem on the horizon that may be beyond repair — because it reflects a core feature of the law — is the public’s understandable reluctance to be forced to buy insurance from private, for-profit insurers that aren’t under enough competitive pressure to keep premiums low.

    But even here, remedies could evolve. States might use their state-run exchanges to funnel so many applicants to a single, low-cost insurer that the insurer becomes, in effect, a single payer. Vermont is already moving in this direction. In this way, the Affordable Care Act could become a back door to a single-payer system — every conservative’s worst nightmare.

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  • The “Paid-What-You’re-Worth” Myth


    Thursday, March 13, 2014

    It’s often assumed that people are paid what they’re worth. According to this logic, minimum wage workers aren’t worth more than the $7.25 an hour they now receive. If they were worth more, they’d earn more. Any attempt to force employers to pay them more will only kill jobs. 

    According to this same logic, CEOs of big companies are worth their giant compensation packages, now averaging 300 times pay of the typical American worker. They must be worth it or they wouldn’t be paid this much. Any attempt to limit their pay is fruitless because their pay will only take some other form. 

    "Paid-what-you’re-worth" is a dangerous myth.  

    Fifty years ago, when General Motors was the largest employer in America, the typical GM worker got paid $35 an hour in today’s dollars. Today, America’s largest employer is Walmart, and the typical Walmart workers earns $8.80 an hour. 

    Does this mean the typical GM employee a half-century ago was worth four times what today’s typical Walmart employee is worth? Not at all. Yes, that GM worker helped produce cars rather than retail sales. But he wasn’t much better educated or even that much more productive. He often hadn’t graduated from high school. And he worked on a slow-moving assembly line. Today’s Walmart worker is surrounded by digital gadgets — mobile inventory controls, instant checkout devices, retail search engines — making him or her quite productive. 

    The real difference is the GM worker a half-century ago had a strong union behind him that summoned the collective bargaining power of all autoworkers to get a substantial share of company revenues for its members. And because more than a third of workers across America belonged to a labor union, the bargains those unions struck with employers raised the wages and benefits of non-unionized workers as well. Non-union firms knew they’d be unionized if they didn’t come close to matching the union contracts.

    Today’s Walmart workers don’t have a union to negotiate a better deal. They’re on their own. And because fewer than 7 percent of today’s private-sector workers are unionized, non-union employers across America don’t have to match union contracts. This puts unionized firms at a competitive disadvantage. The result has been a race to the bottom. 

    By the same token, today’s CEOs don’t rake in 300 times the pay of average workers because they’re “worth” it. They get these humongous pay packages because they appoint the compensation committees on their boards that decide executive pay. Or their boards don’t want to be seen by investors as having hired a “second-string” CEO who’s paid less than the CEOs of their major competitors. Either way, the result has been a race to the top. 

    If you still believe people are paid what they’re worth, take a look at Wall Street bonuses. Last year’s average bonus was up 15 percent over the year before, to more than $164,000. It was the largest average Wall Street bonus since the 2008 financial crisis and the third highest on record, according to New York’s state comptroller. Remember, we’re talking bonuses, above and beyond salaries.

    All told, the Street paid out a whopping $26.7 billion in bonuses last year. 

    Are Wall Street bankers really worth it? Not if you figure in the hidden subsidy flowing to the big Wall Street banks that ever since the bailout of 2008 have been considered too big to fail. 

    People who park their savings in these banks accept a lower interest rate on deposits or loans than they require from America’s smaller banks. That’s because smaller banks are riskier places to park money. Unlike the big banks, the smaller ones won’t be bailed out if they get into trouble.

    This hidden subsidy gives Wall Street banks a competitive advantage over the smaller banks, which means Wall Street makes more money. And as their profits grow, the big banks keep getting bigger. 

    How large is this hidden subsidy? Two researchers, Kenichi Ueda of the International Monetary Fund and Beatrice Weder di Mauro of the University of Mainz, have calculated it’s about eight tenths of a percentage point. 

    This may not sound like much but multiply it by the total amount of money parked in the ten biggest Wall Street banks and you get a huge amount — roughly $83 billion a year.  

    Recall that the Street paid out $26.7 billion in bonuses last year. You don’t have to be a rocket scientist or even a Wall Street banker to see that the hidden subsidy the Wall Street banks enjoy because they’re  too big to fail is about three times what Wall Street paid out in bonuses.

    Without the subsidy, no bonus pool. 

    By the way, the lion’s share of that subsidy ($64 billion a year) goes to the top five banks — JPMorgan, Bank of America, Citigroup, Wells Fargo. and Goldman Sachs. This amount just about equals these banks’ typical annual profits. In other words, take away the subsidy and not only does the bonus pool disappear, but so do all the profits.  

    The reason Wall Street bankers got fat paychecks plus a total of $26.7 billion in bonuses last year wasn’t because they worked so much harder or were so much more clever or insightful than most other Americans. They cleaned up because they happen to work in institutions — big Wall Street banks — that hold a privileged place in the American political economy. 

    And why, exactly, do these institutions continue to have such privileges? Why hasn’t Congress used the antitrust laws to cut them down to size so they’re not too big to fail, or at least taxed away their hidden subsidy (which, after all, results from their taxpayer-financed bailout)? 

    Perhaps it’s because Wall Street also accounts for a large proportion of campaign donations to major candidates for Congress and the presidency of both parties. 

    America’s low-wage workers don’t have privileged positions. They work very hard — many holding down two or more jobs. But they can’t afford to make major campaign contributions and they have no political clout. 

    According to the Institute for Policy Studies, the $26.7 billion of bonuses Wall Street banks paid out last year would be enough to more than double the pay of every one of America’s 1,085,000 full-time minimum wage workers. 

    The remainder of the $83 billion of hidden subsidy going to those same banks would almost be enough to double what the government now provides low-wage workers in the form of wage subsidies under the Earned Income Tax Credit.

    But I don’t expect Congress to make these sorts of adjustments any time soon. 

    The “paid-what-your-worth” argument is fundamentally misleading because it ignores power, overlooks institutions, and disregards politics. As such, it lures the unsuspecting into thinking nothing whatever should be done to change what people are paid, because nothing can be done. 

    Don’t buy it. 

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  • The Great U-Turn


    Thursday, March 6, 2014

    Do you recall a time in America when the income of a single school teacher or baker or salesman or mechanic was enough to buy a home, have two cars, and raise a family? 

    I remember. My father (who just celebrated his 100th birthday) earned enough for the rest of us to live comfortably. We weren’t rich but never felt poor, and our standard of living rose steadily through the 1950s and 1960s. 

    That used to be the norm. For three decades after World War II, America created the largest middle class the world had ever seen. During those years the earnings of the typical American worker doubled, just as the size of the American economy doubled. (Over the last thirty years, by contrast, the size of the economy doubled again but the earnings of the typical American went nowhere.)  

    In that earlier period, more than a third of all workers belonged to a trade union — giving average workers the bargaining power necessary to get a large and growing share of the large and growing economic pie. (Now, fewer than 7 percent of private-sector workers are unionized.) 

    Then, CEO pay then averaged about 20 times the pay of their typical worker (now it’s over 200 times). 

    In those years, the richest 1 percent took home 9 to 10 percent of total income (today the top 1 percent gets more than 20 percent). 

    Then, the tax rate on highest-income Americans never fell below 70 percent; under Dwight Eisenhower, a Republican, it was 91 percent. (Today the top tax rate is 39.6 percent.)

    In those decades, tax revenues from the wealthy and the growing middle class were used to build the largest infrastructure project in our history, the Interstate Highway system. And to build the world’s largest and best system of free public education, and dramatically expand public higher education. (Since then, our infrastructure has been collapsing from deferred maintenance, our public schools have deteriorated, and higher education has become unaffordable to many.)

    We didn’t stop there. We enacted the Civil Rights Act and Voting Rights Act to extend prosperity and participation to African-Americans; Medicare and Medicaid to provide health care to the poor and reduce poverty among America’s seniors; and the Environmental Protection Act to help save our planet. 

    And we made sure banking was boring. 

    It was a virtuous cycle. As the economy grew, we prospered together. And that broad-based prosperity enabled us to invest in our future, creating more and better jobs and a higher standard of living.  

    Then came the great U-turn, and for the last thirty years we’ve been heading in the opposite direction. 

    Why?

    Some blame globalization and the loss of America’s  manufacturing core. Others point to new technologies that replaced routine jobs with automated machinery, software, and robotics. 

    But if these were the culprits, they only raise a deeper question: Why didn’t we share the gains from globalization and technological advances more broadly? Why didn’t we invest them in superb schools, higher skills, a world-class infrastructure?

    Others blame Ronald Reagan’s worship of the so-called “free market,” supply-side economics, and deregulation. But if these were responsible, why did we cling to these ideas for so long? Why are so many people still clinging to them? 

    Some others believe Americans became greedier and more selfish. But if that’s the explanation, why did our national character change so dramatically? 

    Perhaps the real problem is we forgot what we once achieved together. 

    The collective erasure of the memory of that prior system of broad-based prosperity is due partly to the failure of my generation to retain and pass on the values on which that system was based. It can also be understood as the greatest propaganda victory radical conservatism ever won.

    We must restore our recollection. In seeking to repair what is broken, we don’t have to emulate another nation. We have only to emulate what we once had.

    That we once achieved broad-based prosperity means we can achieve it again — not exactly the same way, of course, but in a new way fit for the twenty-first century and for future generations of Americans. 

    America’s great U-turn can be reversed. It is worth the fight.

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