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

  • 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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  • The Real Job Killers


    Friday, February 28, 2014

    House Speaker John Boehner says raising the minimum wage is “bad policy” because it will cause job losses.  

    The U.S. Chamber of Commerce says a minimum wage increase would be a job killer. Republicans and the Chamber also say unions are job killers, workplace safety regulations are job killers, environmental regulations are job killers, and the Affordable Care Act is a job killer. The California Chamber of Commerce even publishes an annual list of “job killers,” including almost any measures that lift wages or protect workers and the environment.

    Most of this is bunk.

    When in 1996 I recommended the minimum wage be raised, Republicans and the Chamber screamed it would “kill jobs.” In fact, in the four years after it was raised, the U.S. economy created more jobs than were ever created in any four-year period.

    For one thing, a higher minimum wage doesn’t necessarily increase business costs. It draws more job applicants into the labor market, giving employers more choice of whom to hire. As a result, employers often get more reliable workers who remain longer – thereby saving employers at least as much money as they spend on higher wages.

    A higher wage can also help build employee morale, resulting in better performance. Gap, America’s largest clothing retailer, recently announced it would boost its hourly wage to $10. Wall Street approved. “You treat people well, they’ll treat your customers well,” said Dorothy Lakner, a Wall Street analyst. “Gap had a strong year last year compared to a lot of their peers. That sends a pretty strong message to employees that, ‘we had a good year, but you’re going to be rewarded too.’”

    Even when raising the minimum wage — or bargaining for higher wages and better working conditions, or requiring businesses to provide safer workplaces or a cleaner environment — increases  the cost of business, this doesn’t necessarily kill jobs.

    Most companies today can easily absorb such costs without reducing payrolls. Corporate profits now account for the largest percentage of the economy on record.  Large companies are sitting on more than $1.5 trillion in cash they don’t even know what to do with. Many are using their cash to buy back their own shares of stock – artificially increasing share value by reducing the number of shares traded on the market.

    Walmart spent $7.6 billion last year buying back shares of its own stock — a move that papered over its falling profits. Had it used that money on wages instead, it could have given its workers a raise from around $9 an hour to almost $15. Arguably, that would have been a better use of the money over the long-term – not only improving worker loyalty and morale but also giving workers enough to buy more goods from Walmart (reminiscent of Henry Ford’s pay strategy a century ago).

    There’s also a deeper issue here.  Even assuming some of these measures might cause some job losses, does that mean we shouldn’t proceed with them?  

    Americans need jobs, but we also need minimally decent jobs. The nation could create millions of jobs tomorrow if we eliminated the minimum wage altogether and allowed employers to pay workers $1 an hour or less. But do we really want to do that?

    Likewise, America could create lots of jobs if all health and safety regulations were repealed, but that would subject millions of workers to severe illness and injury.

    Lots of jobs could be added if all environmental rules were eliminated, but that would result in the kind of air and water pollution that many people in poor nations have to contend with daily.

    If the Affordable Care Act were repealed, hundreds of thousands of Americans would have to go back to working at jobs they don’t want but feel compelled to do in order to get health insurance.

    We’d create jobs, but not progress. Progress requires creating more jobs that pay well, are safe, sustain the environment, and provide a modicum of security. If seeking to achieve a minimum level of decency ends up “killing” some jobs, then maybe those aren’t the kind of jobs we ought to try to preserve in the first place.

    Finally, it’s important to remember the real source of job creation. Businesses hire more workers only when they have more customers. When they have fewer customers, they lay off workers. So the real job creators are consumers with enough money to buy.

    Even Walmart may be starting to understand this. The company is “looking at” whether to support a minimum wage increase. David Tovar, a Walmart spokesman, noted that such a move would increase the company’s payroll costs but would also put more money in the pockets of some of Walmart’s customers.  

    In other words, forget what you’re hearing from the Republicans and the Chamber of Commerce. The real job killers in America are lousy jobs at lousy wages.   

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  • Inequality, Productivity, and WhatsApp


    Thursday, February 20, 2014

    If you ever wonder what’s fueling America’s staggering inequality, ponder Facebook’s acquisition of the mobile messaging company WhatsApp .

    According to news reports today, Facebook has agreed to buy WhatsApp for $19 billion.

    That’s the highest price paid for a startup in history. It’s $3 billion more than Facebook raised when it was first listed, and more than twice what Microsoft paid for Skype.

    (To be precise, $12 billion of the $19 billion will be in the form of shares in Facebook, $4 billion will be in cash, and $3 billion in restricted stock to WhatsApp staff, which will vest in four years.)

    Given that gargantuan amount, you might think Whatsapp is a big company. You’d be wrong. It has 55 employees, including its two young founders, Jan Koum and Brian Acton.

    Whatsapp’s value doesn’t come from making anything. It doesn’t need a large organization to distribute its services or implement its strategy.

    It value comes instead from two other things that require only a handful of people. First is its technology — a simple but powerful app that allows users to send and receive text, image, audio and video messages through the Internet.

    The second is its network effect: The more people use it, the more other people want and need to use it in order to be connected. To that extent, it’s like Facebook — driven by connectivity.  

    Whatsapp’s worldwide usage has more than doubled in the past nine months, to 450 million people — and it’s growing by around a million users every day. On December 31, 2013, it handled 54 billion messages (making its service more popular than Twitter, now valued at about $30 billion.)

    How does it make money? The first year of usage is free. After that, customers pay a small fee. At the scale it’s already achieved, even a small fee generates big bucks. And if it gets into advertising it could reach more eyeballs than any other medium in history. It already has a database that could be mined in ways that reveal huge amounts of information about a significant percentage of the world’s population.

    The winners here are truly big winners. WhatsApp’s fifty-five employees are now enormously rich. Its two founders are now billionaires. And the partners of the venture capital firm that financed it have also reaped a fortune.

    And the rest of us? We’re winners in the sense that we have an even more efficient way to connect with each other.

    But we’re not getting more jobs.

    In the emerging economy, there’s no longer any correlation between the size of a customer base and the number of employees necessary to serve them. In fact, the combination of digital technologies with huge network effects is pushing the ratio of employees to customers to new lows (WhatsApp’s 55 employees are all its 450 million customers need).

    Meanwhile, the ranks of postal workers, call-center operators, telephone installers, the people who lay and service miles of cable, and the millions of other communication workers, are dwindling — just as retail workers are succumbing to Amazon, office clerks and secretaries to Microsoft, and librarians and encyclopedia editors to Google.   

    Productivity keeps growing, as do corporate profits. But jobs and wages are not growing. Unless we figure out how to bring all of them back into line – or spread the gains more widely – our economy cannot generate enough demand to sustain itself, and our society cannot maintain enough cohesion to keep us together.

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  • America’s “We” Problem


    Friday, February 14, 2014

    America has a serious “We” problem — as in “Why should we pay for them?”

    The question is popping up all over the place. It underlies the debate over extending unemployment benefits to the long-term unemployed and providing food stamps to the poor. 

    It’s found in the resistance of some young and healthy people to being required to buy health insurance in order to help pay for people with preexisting health problems. 

    It can be heard among the residents of upscale neighborhoods who don’t want their tax dollars going to the inhabitants of poorer neighborhoods nearby.  

    The pronouns “we” and “they” are the most important of all political words. They demarcate who’s within the sphere of mutual responsibility, and who’s not. Someone within that sphere who’s needy is one of “us” — an extension of our family, friends, community, tribe – and deserving of help. But needy people outside that sphere are “them,” presumed undeserving unless proved otherwise.

    The central political question faced by any nation or group is where the borders of this sphere of mutual responsibility are drawn.

    Why in recent years have so many middle-class and wealthy Americans pulled the borders in closer?

    The middle-class and wealthy citizens of East Baton Rouge Parish, Louisiana, for example, are trying to secede from the school district they now share with poorer residents of town, and set up their own district funded by property taxes from their higher-valued homes. 

    Similar efforts are underway in Memphis, Atlanta, and Dallas. Over the past two years, two wealthy suburbs of Birmingham, Alabama, have left the countywide school system in order to set up their own.

    Elsewhere, upscale school districts are voting down state plans to raise their taxes in order to provide more money to poor districts, as they did recently in Colorado. 

    "Why should we pay for them?" is also reverberating in wealthy places like Oakland County, Michigan, that border devastatingly poor places like Detroit.

    "Now, all of a sudden, they’re having problems and they want to give part of the responsibility to the suburbs?" says L. Brooks Paterson, the Oakland County executive. “They’re not gonna talk me into being the good guy. ‘Pick up your share?’ Ha ha.”

    But had the official boundary been drawn differently so that it encompassed both Oakland County and Detroit – say, to create a Greater Detroit region – the two places would form a “we” whose problems Oakland’s more affluent citizens would have some responsibility to address.

    What’s going on?

    One obvious explanation involves race. Detroit is mostly black; Oakland County, mostly white. The secessionist school districts in the South are almost entirely white; the neighborhoods they’re leaving behind, mostly black.

    But racisim has been with us from the start. Although some southern school districts are seceding in the wake of the ending of court-ordered desegregation, race alone can’t explain the broader national pattern. According to Census Bureau numbers, two-thirds of Americans below the poverty line at any given point identify themselves as white.

    Another culprit is the increasing economic stress felt by most middle-class Americans. Median household incomes are dropping and over three-quarters of Americans report they’re living paycheck to paycheck. 

    It’s easier to be generous and expansive about the sphere of ”we” when incomes are rising and future prospects seem even better, as during the first three decades after World War II when America declared war on poverty and expanded civil rights. But since the late 1970s, as most paychecks have flattened or declined, adjusted for inflation, many in the stressed middle no longer want to pay for “them.”

    Yet this doesn’t explain why so many wealthy Americans are also exiting. They’ve never been richer. Surely they can afford a larger “we.” But most of today’s rich adamantly refuse to pay anything close to the tax rate America’s wealthy accepted forty years ago. 

    Perhaps it’s because, as inequality has widened and class divisions have hardened, America’s wealthy no longer have any idea how the other half lives. 

    Being rich in today’s America means not having to come across anyone who isn’t. Exclusive prep schools, elite colleges, private jets, gated communities, tony resorts, symphony halls and opera houses, and vacation homes in the Hamptons and other exclusive vacation sites all insulate them from the rabble. 

    America’s wealthy increasingly inhabit a different country from the one “they” inhabit, and America’s less fortunate seem as foreign as do the needy inhabitants of another country. 

    The first step in widening the sphere of “we” is to break down the barriers — not just of race, but also, increasingly, of class, and of geographical segregation by income — that are pushing “we Americans” further and further apart.

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  • Why The Three Biggest Economic Lessons Were Forgotten


    Tuesday, February 11, 2014
    Why has America forgotten the three most important economic lessons we learned in the thirty years following World War II?

    Before I answer that question, let me remind you what those lessons were:

    First, America’s real job creators are consumers, whose rising wages generate jobs and growth. If average people don’t have decent wages there can be no real recovery and no sustained growth.

    In those years, business boomed because American workers were getting raises, and had enough purchasing power to buy what expanding businesses had to offer. Strong labor unions ensured American workers got a fair share of the economy’s gains. It was a virtuous cycle.

    Second, the rich do better with a smaller share of a rapidly-growing economy than they do with a large share of an economy that’s barely growing at all.

    Between 1946 and 1974, the economy grew faster than it’s grown since, on average, because the nation was creating the largest middle class in history. The overall size of the economy doubled, as did the earnings of almost everyone. CEOs rarely took home more than forty times the average worker’s wage, yet were riding high.

    Third, higher taxes on the wealthy to finance public investments — better roads, bridges, public transportation, basic research, world-class K-12 education, and affordable higher education – improve the future productivity of America. All of us gain from these investments, including the wealthy.

    In those years, the top marginal tax rate on America’s highest earners never fell below 70 percent. Under Republican President Dwight Eisenhower the tax rate was 91 percent. Combined with tax revenues from a growing middle class, these were enough to build the Interstate Highway system, dramatically expand public higher education, and make American public education the envy of the world.

    We learned, in other words, that broadly-shared prosperity isn’t just compatible with a healthy economy that benefits everyone — it’s essential to it.

    But then we forgot these lessons. For the last three decades the American economy has continued to grow but most peoples’ earnings have gone nowhere. Since the start of the recovery in 2009, 95 percent of the gains have gone to the top 1 percent.
     
    What happened?

    For starters, too many of us bought the snake oil of “supply-side” economics, which said big corporations and the wealthy are the job creators – and if we cut their taxes the benefits will trickle down to everyone else. Of course, nothing trickled down.

    Meanwhile, big corporations were allowed to bust labor unions, whose membership dropped from over a third of all private-sector workers in the 1950s to under 7 percent today.

    Our roads, bridges, and public-transit systems were allowed to crumble under the weight of deferred maintenance. Our public schools deteriorated. And public higher education became so starved for funds that tuition rose to make up for shortfalls, making college unaffordable to many working families.

    And Wall Street was deregulated — creating a casino capitalism that caused a near meltdown of the economy six years ago and continues to burden millions of homeowners. CEOs began taking home 300 times the earnings of the average worker.

    Part of the reason for this extraordinary U-turn had to do with politics. As income and wealth concentrated at the top, so did political power. The captains of industry and of Wall Street knew what was happening, and some played leading roles in this transformation.

    But why didn’t they remember the lessons learned in the thirty years after World War II – that widely-shared prosperity is good for everyone, including them?

    Perhaps because they didn’t care to remember. They discovered that wealth is also relative: How rich they feel depends not just on how much money they have, but also how they live in comparison to most other people.

    As the gap between America’s wealthy and the middle has widened, those at the top have felt even richer by comparison. Although a rising tide would lift all boats, many of America’s richest prefer a lower tide and bigger yachts.
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  • Why the Lousy Jobs Report Boosted Wall Street


    Saturday, February 8, 2014

    The stock market surged yesterday after the lousy jobs report. The Dow soared 160 points Friday, while the S&P 500, and Nasdaq also rose.

    How can bad news on Main Street (only 113,000 jobs were created in January, on top of a meager 74,000 in December) cause good news on Wall Street?

    Because investors assume:

    (1) The Fed will now continue to keep interest rates low. Yes, it has announced its intention of tapering off its so-called “quantitative easing” by buying fewer long-term bonds in the months ahead. But it will likely slow down the tapering. Instead of going down to $55 billion a month of bond-buying by April, it will stay at around $60 billion to $70 billion.

    (2) The slowdown in the Fed’s tapering will continue to make buying shares of stock a better deal than buying bonds – thereby pushing investors toward the stock market.

    (3) Continued low interest rates will also continue to make it profitable for big investors (including corporations) to borrow money to buy back their own shares of stock, thereby pushing up their values. Apple and other companies that used to spend their spare cash and whatever they could borrow on new inventions are now focusing on short-term stock performance.

    (4) With the job situation so poor, most workers will be so desperate to keep their jobs, or land one, that they will work for even less. This will keep profits high, make balance sheets look good, fuel higher stock prices.

    But what’s bad for Main Street and good for Wall Street in the short term is bad for both in the long term. The American economy is at a crawl. Median household incomes are dropping. The American middle class doesn’t have the purchasing power to keep the economy going. And as companies focus ever more on short-term share prices at the expense of long-term growth, we’re in for years of sluggish performance.

    When, if ever, will Wall Street learn?

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  • a:2:{i:0;a:0:{}s:2:"o1";a:1:{s:9:"downloads";i:5739;}} Friday, February 7, 2014

    THE WAR ON THE POOR AND MIDDLE-CLASS FAMILIES

    Most Americans are on a downward escalator. Median household pay is dropping, adjusted for inflation. A smaller share of working-age Americans are in jobs than at any time in the last three decades.

    Only 113,000 jobs were added to the U.S. economy in January, on top of a paltry 75,000 in December.

    We need a new WPA to rebuild the nation’s crumbling infrastructure, a higher minimum wage, strong unions, investments in education, and extended unemployment benefits for those who still can’t find a job. When 95% of the economic gains go to the top 1%, the middle class and poor don’t have the purchasing power to keep it going.

    Yet too many still believe in trickle-down economics — that the wealthy are the job creators, and tax cuts for big corporations and the rich will boost the economy. The real job creators are the vast middle class and the poor — when they have enough money in their pockets. That’s the only way out of the vicious cycle we’re now in.

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  • Why Widening Inequality is Hobbling Equal Opportunity


    Wednesday, February 5, 2014

    Is it to be inequality or equal opportunity? 

    Under a headline “Obama Moves to the Right in a Partisan War of Words,” The New York Times’ Jackie Calmes notes Democratic operatives have been hitting back hard against the President or any other Democratic politician talking about income inequality, preferring that the Democrats talk about equality of opportunity instead.

    "However salient reducing inequality may be," writes Democratic pollster Mark Mellman, “it is demonstrably less important to voters than any other number of priorities, incudlng reducing poverty.”

    The President may be listening. Wags noticed that in his State of the Union, Obama spoke ten times of increasing “opportunity” and only twice of income inequality, while in a December speech he spoke of income inequality two dozen times. 

    But the President and other Democrats — and even Republicans, for that matter — should focus on the facts, not the polls, and not try to dress up what’s been happening with more soothing words and phrases. 

    In fact, America’s savage inequality is the main reason equal opportunity is fading and poverty is growing. Since the “recovery” began, 95% of the gains have gone to the top 1 percent, and median incomes have dropped. This is a continuation of the trend we’ve seen for decades. As a result:

    (1) The sinking middle class no longer has enough purchasing power to keep the economy growing and creating sufficient jobs. The share of working-age Americans still in the labor force is the lowest in more than thirty years. 

    (2) The shrinking middle isn’t generating enough tax revenue for adequate education, training, safety nets, and family services. And when they’re barely holding on, they can’t afford to — and don’t want to — pay more.

    (3) Meanwhile, America’s rich are accumulating not just more of the country’s total income and wealth, but also the political power that accompanies money. And they’re using that power to reduce their own taxes, and get corporate welfare (subsidies, bailouts, tax cuts) for their businesses.

    All this means less equality of opportunity in America. 

    Obama was correct in December when he called widening inequality “the defining challenge of our time.” He mustn’t back down now even if Democratic pollsters tell him to. If we’re ever to reverse this noxious trend, Americans have to hear the truth. 

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  • Why There’s No Outcry


    Saturday, January 25, 2014

    People ask me all the time why we don’t have a revolution in America, or at least a major wave of reform similar to that of the Progressive Era or the New Deal or the Great Society.

    Middle incomes are sinking, the ranks of the poor are swelling, almost all the economic gains are going to the top, and big money is corrupting our democracy. So why isn’t there more of a ruckus?

    The answer is complex, but three reasons stand out.

    First, the working class is paralyzed with fear it will lose the jobs and wages it already has.

    In earlier decades, the working class fomented reform. The labor movement led the charge for a minimum wage, 40-hour workweek, unemployment insurance, and Social Security.

    No longer. Working people don’t dare. The share of working-age Americans holding jobs is now lower than at any time in the last three decades and 76 percent of them are living paycheck to paycheck.

    No one has any job security. The last thing they want to do is make a fuss and risk losing the little they have.

    Besides, their major means of organizing and protecting themselves — labor unions — have been decimated. Four decades ago more than a third of private-sector workers were unionized. Now, fewer than 7 percent belong to a union.

    Second, students don’t dare rock the boat.

    In prior decades students were a major force for social change. They played an active role in the Civil Rights movement, the Free Speech movement, and against the Vietnam War.

    But today’s students don’t want to make a ruckus. They’re laden with debt. Since 1999, student debt has increased more than 500 percent, yet the average starting salary for graduates has dropped 10 percent, adjusted for inflation. Student debts can’t be cancelled in bankruptcy. A default brings penalties and ruins a credit rating.

    To make matters worse, the job market for new graduates remains lousy. Which is why record numbers are still living at home.

    Reformers and revolutionaries don’t look forward to living with mom and dad or worrying about credit ratings and job recommendations.

    Third and finally, the American public has become so cynical about government that many no longer think reform is possible.

    When asked if they believe government will do the right thing most of the time, fewer than 20 percent of Americans agree. Fifty years ago, when that question was first asked on standard surveys, more than 75 percent agreed.

    It’s hard to get people worked up to change society or even to change a few laws when they don’t believe government can possibly work.

    You’d have to posit a giant conspiracy in order to believe all this was the doing of the forces in America most resistant to positive social change.

    It’s possible. of course, that rightwing Republicans, corporate executives, and Wall Street moguls intentionally cut jobs and wages in order to cow average workers, buried students under so much debt they’d never take to the streets, and made most Americans so cynical about government they wouldn’t even try for change. 

    But it’s more likely they merely allowed all this to unfold, like a giant wet blanket over the outrage and indignation most Americans feel but don’t express. 

    Change is coming anyway. We cannot abide an ever-greater share of the nation’s income and wealth going to the top while median household incomes continue too drop, one out of five of our children living in dire poverty, and big money taking over our democracy.

    At some point, working people, students, and the broad public will have had enough. They will reclaim our economy and our democracy. This has been the central lesson of American history.

    Reform is less risky than revolution, but the longer we wait the more likely it will be the latter.





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