Robert Reich

The deal emerging from the Senate is a lousy one. Let me count the ways:

1. Republicans haven’t conceded anything on the debt ceiling, so over the next two months – as the Treasury runs out of tricks to avoid a default – Republicans are likely to do exactly what they did before, which is to hold their votes on raising the ceiling hostage to major cuts in programs for the poor and in Medicare and Social Security.

2. The deal makes tax cuts for the rich permanent (extending the Bush tax cuts for incomes up to $400,000 if filing singly and $450,000 if jointly) while extending refundable tax credits for the poor (child tax credit, enlarged EITC, and tuition tax credit) for only five years. There’s absolutely no justification for this asymmetry.

3. It doesn’t get nearly enough revenue from the wealthiest 2 percent — only $600 billion over the next decade, which is half of what the President called for, and a small fraction of the White House’s goal of more than $4 trillion in deficit reduction. That means more of the burden of tax hikes and spending cuts in future years will fall on the middle class and the poor.

4. It continues to exempt the first $5 million of inherited wealth from the estate tax (the exemption used to be $1 million). This is a huge gift to the heirs of the wealthy, perpetuating family dynasties of the idle rich.

Yes, the deal finally gets Republicans to accept a tax increase on the wealthy, but this is an inside-the-Beltway symbolic victory. If anyone believes this will make the GOP more amenable to future tax increases, they don’t know how rabidly extremist the GOP has become.

The deal also extends unemployment insurance for more than 2 million long-term unemployed. That’s important.

But I can’t help believe the President could have done better than this. After all, public opinion is overwhelmingly on his side. Republicans would have been blamed had no deal been achieved.

More importantly, the fiscal cliff is on the President’s side as well. If we go over it, he and the Democrats in the next Congress that starts later this week can quickly offer legislation that grants a middle-class tax cut and restores most military spending. Even rabid Republicans would be hard-pressed not to sign on.

Are House Republicans – now summoned back to Washington by Speaker John Boehner — about to succumb to public pressure and save the nation from the fiscal cliff?

Don’t bet on it.

Even if Senate Minority Leader Mitch McConnell cooperates by not mounting a filibuster and allows the Senate to pass a bill extending the Bush tax cuts to the first $250,000 of everyone’s income, Boehner may not bring it to the House floor.

On a Thursday conference call with House Republicans he assured conservatives he was “not interested” in allowing such a vote if most House Republicans would reject the bill, according to a source on the call.

Democrats are confident that even if the nation technically goes over the cliff January 1, Boehner will bring such a bill to the floor soon after January 3 — once House Republicans have re-elected him Speaker – and it will get passed.

But this assumes Boehner and the GOP will be any more swayed by public opinion than they are now.

Public opinion is already running strongly in favor of President Obama and the Democrats, and against the GOP. In the latest CNN/ORC poll, 48 percent say they’ll blame Republicans if no deal is reached while 37 percent blame Obama. Confidence in congressional Republicans is hovering at about 30 percent; Obama is enjoying the confidence of 46 percent. And over half of all Americans think the GOP is too extreme.

Yet Republicans haven’t budged. The fact is, they may not care a hoot about the opinions of most Americans.

That’s because the national party is in disarray. Boehner isn’t worried about a challenge to his leadership; no challenger has emerged. The real issue is neither he nor anyone else is in charge of the GOP. Romney’s loss, along with the erosion of their majority in the House and Democratic gains in the Senate, has left a vacuum at the top.

House Republicans don’t run nationally. They run only in their own districts — which, because of gerrymandering, are growing even more purely Republican. Their major concern is being reelected in 2014, and their biggest potential obstacle in their way is a primary challenge from the right.

The combination of a weakened national party and more intense competition in primaries is making the Republican Party relatively impervious to national opinion.

This poses a large strategic problem for the Democrats. It could be an even bigger problem for the nation.

President Obama is cutting his Christmas holiday short, returning to Washington for a last attempt at avoiding the fiscal cliff. But he’s running headlong into the Republican strategy of fanaticism.

It’s a long-established principle of game theory (see Thomas Schelling’s classic 1956 essay in the American Economic Review) that a fanatic who restricts his freedom to avert a disaster puts maximum pressure on his opponent to give ground.

In a game of highway chicken, for example, the driver that can’t swerve because he’s tied his hands to the steering wheel and chained his foot to the accelerator forces the other to swerve in order to avoid crashing.

The trick is for the first driver to convince the second that he’s crazy enough to have committed himself to instant death if the second doesn’t act rationally.

House Speaker John Boehner’s failure to persuade rank-and-file House Republicans to raise taxes even on millionaires fits the fanatic’s strategy exactly. Boehner can now credibly claim he has no choice in the matter – Republican fanatics in the House have tied his hands and manacled his feet — so the only way to avoid going over the cliff is for Obama and the Democrats to make more concessions.

The White House’s hope of getting the Senate to pass legislation that raises taxes on the wealthy in order to pressure Boehner won’t work because the legislation can’t possibly get through the House. That’s the point: Boehner has demonstrated he has no choice; the fanatics are in charge there.

Obama could decide going over the cliff isn’t so bad after all – as long as he and congressional Democrats introduce legislation early in the 2013 that gives a tax cut to the middle class retroactively to January 1^st (extending the Bush tax cut to the first $250,000 of income) and restores most spending — and Republicans feel compelled to go along.

But with Boehner’s hands tied and the fanatics in charge, this gambit becomes far riskier. What if we go over the cliff and House Republicans continue to hold out against any tax increases on the rich while demanding major cuts in Medicare and Social Security?

The path of least resistance is for Obama and the Democrats to offer to keep everything as is, through 2013 – extend all the Bush tax cuts and continue all current spending (lifting the debt limit along the way) – unless or until a “grand bargain” on the budget is agreed to before the end of next year.

This is likely to satisfy enough Republican fanatics to gain a majority in the House. And it would avoid the fiscal cliff, kicking the can down the road and giving everyone more time.

Deficit hawks in both parties won’t like it, but that’s okay. Unemployment is still way too high and growth too meager to justify trimming the deficit any time soon.

The real problem with this gambit is it doesn’t change the game. Even down the road, Boehner’s hands will still be tied and the fanatics will remain in charge — which will give Republicans the stronger position in negotiations leading to a “grand bargain.” Compromise would have to be almost entirely on the Democrats’ side. 

That’s why I’d recommend going over the cliff and forcing the Republicans’ hand. It’s a risky strategy but it would at least expose the Republican tactic and put public pressure squarely on rank-and-file Republicans, where it belongs.

The fanatics in the GOP have to be held accountable or they’ll continue to hold the nation hostage to their extremism. Even if it takes until the 2014 midterms to loosen their hold, the cost is worth it.

It’s easy to feel discouraged about the bullying by right-wing Republicans and their patrons over everything from gun control to taxes and social safety nets to trade unions and jobs.

Every year about now I watch “It’s a Wonderful Life” again to remind myself what Frank Capra understood about America — its essential decency and common sense.

In many ways the nation is better than it was in 1946 when the movie first appeared. Women have gained economic power and reproductive rights; we enacted Civil Rights and Voting Rights and, through Medicare and Medicaid, dramatically reduced poverty among the elderly; we began to tackle environmental devastation; we stopped treating gays as criminals and have even started to recognize equal marriage rights. We elected and then re-elected the first black president of the United States. We have enacted the bare beginnings of universal healthcare.

But we are still in danger of the “Pottersville” Capra saw as the consequence of what happens when Americans fail to join together and forget the meaning of the public good.

If Lionel Barrymore’s “Mr. Potter” were alive today he’d call himself a “job creator” and condemn George Bailey as a socialist. He’d be financing a fleet of lobbyists to get lower taxes on multi-millionaires like himself, overturn environmental laws, trample on workers’ rights, and shred social safety nets. He’d fight any form of gun control. He’d want the citizens of Pottersville to be economically insecure – living paycheck to paycheck and worried about losing their jobs – so they’d be dependent on his good graces.

The Mr. Potters are still alive and well in America, threatening our democracy with their money and our common morality with their greed.

Call me naive or sentimental but I still believe the George Baileys will continue to win this contest. They know we’re all in it together, and that if we succumb to the bullying selfishness of the Potters we lose America and relinquish the future.

Happy holidays.

Remarkably, John Boehner couldn’t get enough House Republicans to vote in favor of his proposal to keep the Bush tax cuts in place on the first million dollars of everyone’s income and apply the old Clinton rates only to dollars over and above a million.

What? Even Grover Norquist blessed Boehner’s proposal, saying it wasn’t really a tax increase. Even Paul Ryan supported it.

What does Boehner’s failure tell us about the modern Republican party?

That it has become a party of hypocrisy masquerading as principled ideology. The GOP talks endlessly about the importance of reducing the budget deficit. But it isn’t even willing to raise revenues from the richest three-tenths of one percent of Americans to help with the task. We’re talking about 400,000 people, for crying out loud.

It has become a party that routinely shills for its super-wealthy patrons at a time in our nation’s history when the middle class is shrinking, the median wage is dropping, and the share of Americans in poverty is rising. 

It has become a party of spineless legislators more afraid of facing primary challenges from right-wing kooks than of standing up for what’s right for America.

For all these reasons it has become irrelevant to the problems America faces.

No wonder a majority of Americans now say the Republican Party is too extreme, according to a poll released Thursday by CNN/ORC.

53 percent — including 22 percent of Republicans themselves — say the GOP’s views and policies have pushed them out of the mainstream. That’s significantly higher than in 2010, when fewer than 40 percent thought the GOP too extreme.

Meanwhile, 57 percent now say Democrats are “generally mainstream.”

The Republican Party in the process of marginalizing itself out of existence. I am tempted to say good riddance, but that would be premature.

Why is the President back to making premature and unnecessary concessions to Republicans?

Two central issues in the 2012 presidential election were whether the Bush tax cuts should be ended for people earning over $250,000, and whether Social Security and Medicare should be protected from future budget cuts.

The President said yes to both. Republicans said no.  Obama won.

But apparently the President is now offering to continue the Bush tax cuts for people earning between $250,000 and $400,000, and to cut Social Security by reducing annual cost-of-living adjustments.

These concessions aren’t necessary. If the nation goes over the so-called “fiscal cliff” and tax rates return to what they were under Bill Clinton, Democrats can then introduce a tax cut for everyone earning under $250,000 and make it retroactive to the start of the year.

They can combine it with a spending bill that makes up for most of the cuts scheduled to go into effect in January. Republicans would be hard-pressed not to sign on.

Social Security should not be part of any such deal anyway. By law, it can’t contribute to the budget deficit. It’s only permitted to spend money from the Social Security trust fund.

Besides, the President’s proposed reduction in annual Social Security cost-of-living adjustments would save only $122 billion over ten years. Yet it would significantly harm the elderly.

It defies logic and fairness to give more tax cuts to the wealthy while cutting benefits for the near-poor.

The median income of Americans over 65 is less than $20,000 a year. Nearly 70 percent of them depend on Social Security for more than half of this. The average Social Security benefit is less than $15,000 a year.

Even Social Security’s current cost-of-living adjustment understates the true impact of inflation on elderly recipients, who spend far more on health care than anyone else – including annual increases in Medicare premiums.

Hands off Social Security. If the Republicans are willing to raise tax rates on high earners but demand more spending cuts in return, the President should offer larger cuts in defense spending and corporate welfare.

America’s children seem to be shortchanged on almost every issue we face as a society.

Not only are we failing to protect our children from deranged people wielding semi-automatic guns.

We’re not protecting them from poverty. The rate of child poverty keeps rising – even faster than the rate of adult poverty. We now have the highest rate of child poverty in the developed world.

And we’re not protecting their health. Rates of child diabetes and asthma continue to climb. America has the third-worst rate of infant mortality among 30 industrialized nations and the second-highest rate of teenage pregnancy, after Mexico.

If we go over the “fiscal cliff” without a budget deal, several programs focused on the well-being of children will be axed — education, child nutrition, school lunches, children’s health, Head Start.  Even if we avoid the cliff, any “grand bargain” to tame to deficit is likely to jeopardize them.

The Urban Institute projects the share of federal spending on children (outlays and tax expenditures) will drop from 15 percent last year to 12 percent in 2022.

At the same time, states and localities have been slashing preschool and after-school programs, child care, family services, recreation, and mental-health services.

Why?

Conservatives want to blame parents for not doing their job. But this ignores politics.

The NRA, for example, is one of the most powerful lobbies in America – so powerful, in fact, that our leaders rarely have the courage even to utter the words gun control.

A few come forth after a massacre such as occurred in Connecticut to suggest that maybe we could make it slightly more difficult for the mentally ill to obtain assault weapons. But the gun lobby and gun manufacturers routinely count on America’s (and media’s) short attention span to prevent even modest reform.

The AARP is also among the most powerful lobbies, especially when it comes to preserving programs that benefit seniors.

We shouldn’t have to choose between our seniors and children — I’d rather focus on jobs and growth rather deficit reduction, and sooner cut corporate welfare and defense spending than anything else. But the brute fact is America’s seniors have political clout that matters when spending is being cut, while children don’t.  

At the same time, big corporations and the wealthy know how to get and keep tax cuts that are starving federal and state budgets of revenues needed to finance what our children need. Corporations systematically play off one state or city against another for tax concessions and subsidies to stay or move elsewhere, further shrinking revenues available for education, recreation, mental health, and family services.

Meanwhile, advertisers and marketers of junk foods and violent video games have the political heft to ward off regulations designed to protect children from their depredations. The result is an epidemic of childhood diabetes, as well as video mayhem that may harm young minds.

Most parents can’t protect their children from all this. They have all they can do to pay the bills. The median wage keeps falling (adjusted for inflation), benefits are evaporating, job security has disappeared, and even work hours are less predictable.

It seems as if every major interest has political clout – except children. They can’t vote. They don’t make major campaign donations. They can’t hire fleets of lobbyists.

Yet they’re America’s future.

Their parents and grandparents care, of course, as do many other private citizens. But we’re no match for the entrenched interests that dominate American politics.

Whether it’s fighting for reasonable gun regulation, child health and safety overall, or good schools and family services – we can’t have a fair fight as long as special-interest money continues to poison our politics.

It was the centerpiece of the President’s reelection campaign. Every time Republicans complained about trillion-dollar deficits, he and other Democrats would talk jobs.

That’s what Americans care about — jobs with good wages.

And that’s part of why Obama and the Democrats were victorious on Election Day. 

It seems forever ago, but it’s worth recalling that President Obama won reelection by more than 4 million votes, a million more than George W. Bush when he was reelected — and an electoral college majority of 332 to Romney’s 206, again larger than Bush’s electoral majority over Kerry in 2004 (286 to 251). The Democratic caucus in the Senate now has 55 members (up from 53 before Election Day), and Republicans have 8 fewer seats in the House than before.

So why, exactly, is Washington back to obsessing about budget deficits? Why is almost all the news coming out of our nation’s capital about whether the Democrats or Republicans have the best plan to reduce the budget deficit? Why are we back to showdowns over the deficit?

It makes no sense economically. Cutting the budget deficit — either by reducing public spending or raising taxes on the middle class, or both — will slow the economy and increase unemployment. That’s why the so-called “fiscal cliff” is so dangerous.

In the foreseeable future our government has to spend more rather than less. Businesses won’t hire because they still don’t have enough consumers to justify additional hires.  So to get jobs back at the rate and scale needed, government has to be the spender of last resort.

The job situation is still horrendous. Twenty-three million Americans can’t find full-time work. Less than 59 percent of the working-age population of the nation is employed, almost the lowest percent in three decades. 4.8 million Americans have been out of work for more than six months. The 40-week average spell of joblessness is almost three times the post-1948 average.

And even those who have jobs are finding it harder to make ends meet. Jobs created since the trough of the recession pay less than jobs that were lost. The median wage is 8 percent below what it was in 2000, adjusted for inflation. And wages are still heading downward: Average hourly earnings in October were 3.1 percent below what they were in October, 2010.

This isn’t just an ongoing tragedy for 23 million Americans and their families. It also robs all of us of what these people would produce if they were fully employed – roughly $2 trillion worth of goods and services that won’t be created this year.

These folks would also be paying taxes — and they’d require less unemployment insurance, fewer food stamps, and less public assistance than they do now. According to estimates by Bloomberg News, the total cost of those lost tax revenues and the extra social spending is more than twice what taxpayers will shell out this year to pay interest on the federal debt.

In other words, unemployment is hugely expensive. Debt, by contrast, is relatively cheap. The yield on the 10-year Treasury is only about 1.7 percent. Creditors worldwide are willing to lend America money that won’t be repaid for a decade at the lowest rate in living memory.  

So why are we debating how to cut the deficit when we should be debating how best to use the cheap money we can borrow from the rest of the world to put more Americans to work?

Because too many Democrats inside and outside the Beltway have ingested the deficit cool-aide that the “serious people” on Wall Street have serving for two decades.

And the President has been all too willing to legitimize their deficit obsession by freezing federal salaries, appointing a deficit commission, and, now that the election is over, going back to deficit-speak.

A month after the election Obama was on Bloomberg Television saying business leaders need “a deal on long-term deficit reduction” before they’ll increase hiring.

That’s just not true. Before they’ll increase hiring they need customers.

For the first time, the Federal Reserve has explicitly linked interest rates to unemployment.

Rates will remain near zero “at least as long” as unemployment remains above 6.5 percent and if inflation is projected to be no more than 2.5 percent, said the Federal Open Market Committee in a statement Wednesday.

Put to one side the question now obsessing stock and bond traders — whether the new standard means higher interest rates will kick in sooner than the middle of 2015, which had been the Fed’s previous position.

By linking interest rates directly to the rate of unemployment, Bernanke is explicitly acknowledging that the Federal Reserve Board has two mandates — not just price but also employment. “The conditions now prevailing in the job market represent an enormous waste of human and economic potential,” said Fed Chairman Ben S. Bernanke.

These are refreshing words at a time when Congress and the White House seem more concerned about reducing the federal budget deficit than generating more jobs.

But the sad fact is near-zero interest rates won’t do much for jobs because banks aren’t allowing many people to take advantage of them. If you’ve tried lately to refinance your home or get a home equity loan you know what I mean.

Banks don’t need to lend to homeowners. They can get a higher return on the almost-free money they borrow from the Fed by betting on derivatives in the vast casino called the global capital market.

Besides, they’ve still got a lot of junk mortgage loans on their books and don’t want to risk adding more.

Low interest rates also lower the cost of capital, which in theory should encourage companies to borrow for expansion and more hiring. But companies won’t expand or hire until they have more customers. And they won’t have more customers as long as most people don’t have additional money to spend.

And here we come to the crux of the problem. Consumers don’t have additional money. The median wage keeps dropping, adjusted for inflation. Most of the new jobs in the economy pay less than the jobs they replaced.

Corporate profits are taking a higher share of the total economy than they have since World War II, but wages are taking the smallest share since then (see graph).

PROFITS

WAGES

Globalization and technological changes continue to eat away at the American middle class. Yet we’ve done nothing to stop the erosion.

To the contrary, as in Michigan, we continue to undercut labor unions — which for three decades after World War II had been the principal bargaining agents for the working middle class.

Moreover, instead of creating easy paths for people to gain the skills they need for higher wages, we’re doing the opposite. We’re firing teachers and squeezing 30 kids into K-12 classrooms, defunding job training programs and reducing support for public higher education.

Instead of encouraging profit-sharing, we’re facilitating the Walmartization of America — the lowest possible wages along with the fattest possible corporate profits. (Walmart, which directly employs almost one percent of the entire workforce at near-poverty wages, made $27 billion in operating profits last year.)

Republicans want to make corporations and the wealthy even richer — demanding tax cuts and roll-backs of regulations on the pretense that companies and the wealthy are the “job creators.”

But the real job creators are America’s middle class and all those aspiring to join it, whose purchases propel the economy forward. And whose declining earnings are holding the economy back.

So two cheers for Ben Bernanke and the Fed. They’re doing what they can. The failure is in the rest of the government — at both the federal and state levels — still dominated by deficit hawks, supply-siders, and witting and unwitting lackeys of big corporations and the wealthy.

I keep hearing that the billionaires and big corporations that poured all that money into the 2012 election learned their lesson. They lost their shirts and won’t do it again.

Don’t believe that for an instant.

It’s true their political investments didn’t exactly pay off this time around.

“Right now there is stunned disbelief that Republicans fared so poorly after all the money they invested,” said Brent Bozell, president of For America, an Alexandria-based nonprofit that advocates for Christian values in politics.

“Congrats to @KarlRove on blowing $400 million this cycle,” Donald Trump tweeted. “Every race @CrossroadsGPS ran ads in, the Republicans lost. What a waste of money.”

Rove’s two giant political funds — American Crossroads (a Super PAC) and Crossroads Grassroots Policy Strategies (a so-called nonprofit “social welfare organization” that doesn’t have to report its donors) — backed Mitt Romney with $127 million spent on more than 82,000 television spots. Rove’s groups spent another $51 million on House and Senate races. Ten of the 12 Senate candidates they supported lost.

The return on investment for American Crossroads donors turned out to be just 1 percent, according to any analysis by the Sunlight Foundation, a Washington-based group that advocates for open government.

Among Rove’s investors was Sheldon Adelson, the billionaire who owns the Las Vegas Sands Corporation.

Adelson invested more than $100 million in the election, mostly on Republicans who lost – including $20 million that went to Romney’s super PAC “Restore Our Future,” $15 million to another super PAC that almost single-handedly kept Newt Gingrich’s Republican primary campaign going, and about $50 million to nonprofit Republican fronts such as Rove’s Crossroads GPS.

Adelson wasn’t alone, of course. Texas industrialist Harold Simmons invested $26.9 million; Chicago Cubs owner Joe Ricketts invested close to $13 million; a network organized by billionaire industrialists Charles and David Koch invested $400 million.

But if you think these losses mean the end of high-stakes political investing, you don’t know how these people work.

You see, if and when they eventually win, these billionaires will clean up. Their taxes will plummet, many of laws constraining their profits (such environmental laws preventing the Koch brothers from more depredations, and the anti-bribery Foreign Corrupt Practices Act that Adelson is being investigated for violating) will disappear, and what’s left of labor unions will no longer intrude on their bottom lines.

And they have enough dough to keep betting until they eventually win. That’s what it means to be a billionaire political investor: You’re able to keep playing the odds until you get the golden ring.

Looking ahead, Adelson tells the Wall Street Journal he’s ready to double his 2012 investment next time around. “I happen to be in a unique business where winning and losing is the basis of the entire business,” he says, “so I don’t cry when I lose. There’s always a new hand coming up.” He isn’t looking back at his losses. “I know in the long run we’re going to win.”

Exactly. Adelson, Simmons, the Koch brothers, and other billionaires will keep pouring in as much money as it takes to eventually win — unless they’re stopped. And procurers like Karl Rove will make sure they’re at the gaming table.

Relative to their net worth, the billionaire investors have been playing for a pittance. Forbes magazine estimates Adelson’s net worth at $21.5 billion. His Las Vegas Sands Corporation just approved a special dividend paying him about $1.2 billion this year, ahead of any possible tax increases that might emerge from congressional budget negotiations.

In the meantime, he and other billionaire political investors are profiting from their reputations as high-stakes players.

Adelson says he has many friends in Washington, “but the reasons aren’t my good looks and charm. It’s my pocket personality,” referring to his political investments. And his determination to keep playing the odds ensures his Washington friends will continue to pay attention.

POLITICO reports Adelson recently met with three GOP governors said to be eying the 2016 presidential race.

This week he met separately with House Speaker John Boehner and Majority Leader Eric Cantor (the Adelsons invested $10 million in super PACs affiliated with Boehner and Cantor), possibly to discuss changes to the Foreign Corrupt Practices Act.

As income and wealth become ever more concentrated in America, the nation’s billionaire political investors will invest even more.

A record $6 billion was spent on the 2012 campaign, and outside groups poured $1.3 billion into political races, according to data from the Federal Election Commission and the Center for Responsive Politics.

That’s why Citizens United v. the Federal Election Commission has to be reversed – either by a Supreme Court that becomes aware of the poison it’s unleashed into our democracy, or by constitutional amendment.

It’s also why we need full disclosure of who contributes what to whom.

And public financing that matches public money to contributions from small donors.

Most fundamentally, it’s why America’s widening inequality must be reversed.

Washington has a way of focusing the nation’s attention on tactical games over partisan maneuvers that are symptoms of a few really big problems. But we almost never get to debate or even discuss the big problems because the tactical games overwhelm everything else.

The debate over the fiscal cliff, for example, is really about tactical maneuvers preceding a negotiation about how best to reduce the federal budget deficit. This, in turn, is a fragment of a bigger debate over whether we should be embracing austerity economics and reducing the budget deficit in the next few years or, alternatively, using public spending and investing to grow the economy and increase the number of jobs.

Even this larger debate is just one part of what should be the central debate of our time — why median wages continue to drop and poverty to increase at the same time income and wealth are becoming ever more concentrated at the top, and what should be done to counter the trend.

With a shrinking share of total income and wealth, the middle class and poor simply don’t have the purchasing power to get the economy back on solid footing. (The wealthy don’t spend enough of their income or assets to make up for this shortfall, and they invest their savings wherever around the world they can get the highest return.)

As a result, consumer spending — fully 70 percent of economic activity — isn’t up to the task of keeping the economy going. This puts greater pressure on government to be purchaser of last resort.

The dilemma isn’t just economic. It’s also political. As money concentrates at the top, so does power. That concentrated power generates even more entrenched wealth at the top, and less for the middle class and the poor.

A case in point is what’s now happening in Michigan. In the state where the American labor movement was born – and where, because of labor unions, the American middle class once had the bargaining power to gain a significant portion of the nation’s total income – Republicans and big money are striking back.

Legislators in the Michigan state House, followed almost immediately by Republicans who dominate the state Senate, voted Thursday afternoon to eliminate basic union organizing and workplace protections for both public and private-sector workers. Michigan Republican Governor Rick Snyder says he’ll sign the measure.

This anti-labor blitzkreig was launched and coordinated by “Americans for Prosperity” – a group developed and funded by the right-wing industrialists and billionaire campaign donors Charles and David Koch, to “pave the way for right to work in states across our nation.”

The Koch brothers are the same ones, not incidentally, who several years ago backed a group called “Citizen’s United,” on its way to the Supreme Court for an opinion by the Court’s Republican majority that opened the floodgates to big money corrupting our federal and state governments. (The brothers Koch have also entertained Justices Scalia and Thomas at strategy meetings they’ve organized of Republican donors.)

Connect the dots: As unions have withered, the middle class’s share of total income and wealth has dropped. The decline of the median wage in America over the last three decades correlates exactly with the declining percentage of American workers who are unionized.

And as the super-rich have grown even wealthier, they’ve been able to extend their power through the Supreme Court and the Republican Party – advancing a war on the middle class.

These moneyed interests may lose a skirmish or two, particularly at the federal level when the public’s attention is focused there (Michigan voters went overwhelmingly for President Obama and Democratic Senator Debbie Stabenow on November 6). But the moneyed interests are patient and relentless and, as is evident in Michigan, able to strike suddenly with extraordinary organization and precision.

They’ve taken on our tax system, successfully raising taxes on the middle class and the poor (Social Security payroll taxes, sales taxes, and user fees) while reducing their own top marginal tax rates. They’ve attacked public spending — cutting government workers and programs the poor and middle class depend on (teachers and school budgets, social workers and family support services, job training and unemployment insurance, to name only a few).They’ve set their sights on regulations designed to protect consumers, workers, small investors, and the environment. 

And they’ve taken on the unions that once negotiated good wages on behalf of the middle class and of those who aspired to join it.

The result has been a degree of inequality this nation hasn’t witnessed since the days of the robber barons of the late nineteenth century – an inequality that’s harming our economy as much as it’s undermining our democracy.

As Washington fiddles over the fiscal cliff, a larger battle over inequality is being waged all over America.

Today’s jobs report shows an economy that’s still moving in the right direction but way too slowly, which is why Washington’s continuing obsession with the federal budget deficit is insane. Jobs and growth must come first.

The cost of borrowing is so low — the yield on the ten-year Treasury is near historic lows — and the need for more jobs and better wages so high, and our infrastructure so neglected, that a reasonable government would borrow more to put more Americans to work rebuilding the nation.

Yes, unemployment is down slightly and 146,000 new jobs were created in November. That’s some progress. But don’t be overwhelmed by the hype coming out of Wall Street and the White House, both of which would like the public to believe things are going quite well.

The fact is some 350,000 more people stopped looking for jobs in November, and the percent of the working-age population currently employed continues to drop — now at 63.6%, almost the lowest in 30 years. Meanwhile, the average workweek is stuck at 34.4 hours.

The slowness of the jobs recovery isn’t because of Hurricane Sandy, which it turns out had very little impact on November’s job numbers (the hurricane’s negative effects were more than offset by a Thanksgiving earlier than normal, and an early start to the Christmas buying season). And it’s not because of any uncertainty over the looming “fiscal cliff.” Most consumers in November remained oblivious about any pending cliff.

The reason the economy is still under-performing is overall demand is inadequate. Businesses won’t create more jobs without enough customers. But consumers can’t and won’t spend because they don’t have the money. Unless or until the private sector — businesses and consumers — are able to boost the economy, government must be the spender of last resort.

But the nation has bought into the Republican frame of thinking that we have to “get our fiscal house in order” before the economy can get back on track. Although Barack Obama was reelected and Democrats gained seats in the House and Senate, that frame is still dominating debate.

And even though we’re near a fiscal cliff that illustrates how dangerous deficit reduction can be when so many people are still unemployed, the White House and the Democrats seem incapable of changing the frame of debate.

But remember: Jobs must come first. Job creation must be our first priority.

The “fiscal cliff” is a a metaphor for a government that no longer responds to the biggest challenges we face because it’s paralyzed by intransigent Republicans, obsessed by the federal budget deficit, and overwhelmed by big money from corporations, Wall Street, and billionaires.

If we had a functional government America would address three “cliffs” posing far larger dangers to us than the fiscal one:

The child poverty cliff.

Between 2007 and 2011, the percentage of American school-age children living in poor households grew from 17 to 21%. Last year, according to the Agriculture Department, nearly 1 in 4 young children lived in a family that had difficulty affording sufficient food at some point in the year.

Yet federal programs to help children and lower-income families – food stamps, aid for poor school districts, Pell grants, child health care, child nutrition, pre- and post-natal care, and Medicaid – are being targeted by the Republican right. Over 60 percent of the cuts in the GOP’s most recent budget came out of these programs.

Even if these programs are preserved, they don’t go nearly far enough. But the Obama Administration doesn’t talk about reducing poverty in America. It talks only about preserving the middle class.

Yet unless we focus on better schools, better health, and improved conditions for these poor kids and their families, in a few years America will have a significant population of under-educated and desperate adults.

The baby-boomer healthcare cliff.

Healthcare costs are already 18% of GDP. Between now and 2030, when 76 million boomers join the ranks of the elderly, those costs will soar. This is the principal reason why the federal budget deficit is projected to grow.

The Affordable Care Act offers a start but it isn’t nearly adequate to limit these rising costs. The President and the Democrats have to lead the way in using Medicare and Medicaid’s bargaining power over providers to get lower costs and to move from a fee-for-service system to a fee-for-healthy outcomes system of healthcare.

But we can’t avoid the fact we have the most expensive and least effective system of health care in the world that’s spending 30 percent more on paperwork and administration than on keeping people healthy. The real healthcare cliff can only be avoided if we adopt a single-payer healthcare system.

The environmental cliff.

Global emissions of carbon dioxide jumped 3 percent in 2011 and are expected to jump another 2.6 percent this year according to scientists, putting the human race perilously close to the tipping point when ice caps irretrievably melt, sea-levels rise, and amount of available cropland in the world becomes dangerously small.

Yet Republicans (and their patrons, such as Charles and David Koch) continue to deny climate change. And the Administration is no longer pushing for a cap-and-trade system or a carbon tax.

Yet unless we act to reduce carbon emissions, other major emitters won’t do so. The only binding pact so far is the Kyoto Protocol, which the U.S. never joined. And we’re taking no leadership at the international climate talks now taking place in Qatar.

Yes, America does face a cliff — not a fiscal cliff but a set of precipices we’ll tumble over because the GOP’s obsession over government’s size and spending has obscured them. And Democrats so far haven’t been able or willing to sound the real alarms.