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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  • How the Right Wing is Killing Women


    Monday, May 12, 2014

    According to a report released last week in the widely-respected health research journal, The Lancet, the United States now ranks 60th out of 180 countries on maternal deaths occurring during pregnancy and childbirth.

    To put it bluntly, for every 100,000 births in America last year, 18.5 women died. That’s compared to 8.2 women who died during pregnancy and birth in Canada, 6.1 in Britain, and only 2.4 in Iceland.

    A woman giving birth in America is more than twice as likely to die as a woman in Saudi Arabia or China.

    You might say international comparisons should be taken with a grain of salt because of difficulties of getting accurate measurements across nations. Maybe China hides the true extent of its maternal deaths. But Canada and Britain?

    Even if you’re still skeptical, consider that our rate of maternal death is heading in the wrong direction. It’s risen over the past decade and is now nearly the highest in a quarter century.

    In 1990, the maternal mortality rate in America was 12.4 women per 100,000 births. In 2003, it was 17.6. Now it’s 18.5.

    That’s not a measurement error because we’ve been measuring the rate of maternal death in the United States the same way for decades.

    By contrast, the rate has been dropping in most other nations. In fact, we’re one of just eight nations in which it’s been rising.  The others that are heading in the wrong direction with us are not exactly a league we should be proud to be a member of. They include Afghanistan, El Salvador, Belize, and South Sudan.

    China was ranked 116 in 1990. Now it’s moved up to 57. Even if China’s way of measuring maternal mortality isn’t to be trusted, China is going in the right direction. We ranked 22 in 1990. Now, as I’ve said, we’re down to 60th place.

    Something’s clearly wrong.

    Some say more American women are dying in pregnancy and childbirth because American girls are becoming pregnant at younger and younger ages, where pregnancy and birth can pose greater dangers.

    This theory might be convincing if it had data to support it. But contrary to the stereotype of the pregnant young teenager, the biggest rise in pregnancy-related deaths in America has occurred in women 20-24 years old.

    Consider that in 1990, 7.2 women in this age group died for every 100,000 live births. By 2013, the rate was 14 deaths in this same age group – almost double the earlier rate.

    Researchers aren’t sure what’s happening but they’re almost unanimous in pointing to a lack of access to health care, coupled with rising levels of poverty.

    Some American women are dying during pregnancy and childbirth from health problems they had before they became pregnant but worsened because of the pregnancies — such as diabetes, kidney disease, and heart disease.

    The real problem, in other words, was they didn’t get adequate health care before they became pregnant.

    Other women are dying because they didn’t have the means to prevent a pregnancy they shouldn’t have had, or they didn’t get the prenatal care they needed during their pregnancies. In other words, a different sort of inadequate health care.

    One clue: African-American mothers are more than three times as likely to die as a result of pregnancy and childbirth than their white counterparts.

    The data tell the story: A study by the Roosevelt Institute shows that U.S. states with high poverty rates have maternal death rates 77 percent higher than states with lower levels of poverty. Women with no health insurance are four times more likely to die during pregnancy or in childbirth than women who are insured.

    What do we do about this? Yes, of course, poor women (and the men who made them pregnant) have to take more personal responsibility for their behavior.

    But this tragic trend is also a clear matter of public choice.

    Many of these high-poverty states are among the twenty-one that have so far refused to expand Medicaid, even though the federal government will cover 100 percent of the cost for the first three years and at least 90 percent thereafter.

    So as the sputtering economy casts more and more women into near poverty, they can’t get the health care they need.

    Several of these same states have also cut family planning, restricted abortions, and shuttered women’s health clinics.

    Right-wing ideology is trumping the health needs of millions of Americans.

    Let’s be perfectly clear: These policies are literally killing women.

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  • How to Shrink Inequality


    Monday, May 12, 2014

    Some inequality of income and wealth is inevitable, if not necessary. If an economy is to function well, people need incentives to work hard and innovate.

    The pertinent question is not whether income and wealth inequality is good or bad. It is at what point do these inequalities become so great as to pose a serious threat to our economy, our ideal of equal opportunity and our democracy.

    We are near or have already reached that tipping point. As French economist Thomas Piketty shows beyond doubt in his “Capital in the Twenty-First Century,” we are heading back to levels of inequality not seen since the Gilded Age of the late 19th century. The dysfunctions of our economy and politics are not self-correcting when it comes to inequality.

    But a return to the Gilded Age is not inevitable. It is incumbent on us to dedicate ourselves to reversing this diabolical trend. But in order to reform the system, we need a political movement for shared prosperity.

    Herewith a short summary of what has happened, how it threatens the foundations of our society, why it has happened, and what we must do to reverse it.

    What has Happened

    The data on widening inequality are remarkably and disturbingly clear. The Congressional Budget Office has found that between 1979 and 2007, the onset of the Great Recession, the gap in income—after federal taxes and transfer payments—more than tripled between the top 1 percent of the population and everyone else. The after-tax, after-transfer income of the top 1 percent increased by 275 percent, while it increased less than 40 percent for the middle three quintiles of the population and only 18 percent for the bottom quintile.

    The gap has continued to widen in the recovery. According to the Census Bureau, median family and median household incomes have been falling, adjusted for inflation; while according to the data gathered by my colleague Emmanuel Saez, the income of the wealthiest 1 percent has soared by 31 percent. In fact, Saez has calculated that 95 percent of all economic gains since the recovery began have gone to the top 1 percent.

    Wealth has become even more concentrated than income. An April 2013 Pew Research Center report found that from 2009 to 2011, “the mean net worth of households in the upper 7 percent of wealth distribution rose by an estimated 28 percent, while the mean net worth of households in the lower 93 percent dropped by 4 percent.”

    Why It Threatens Our Society

    This trend is now threatening the three foundation stones of our society: our economy, our ideal of equal opportunity and our democracy.

    The economy. In the United States, consumer spending accounts for approximately 70 percent of economic activity. If consumers don’t have adequate purchasing power, businesses have no incentive to expand or hire additional workers. Because the rich spend a smaller proportion of their incomes than the middle class and the poor, it stands to reason that as a larger and larger share of the nation’s total income goes to the top, consumer demand is dampened. If the middle class is forced to borrow in order to maintain its standard of living, that dampening may come suddenly—when debt bubbles burst.

    Consider that the two peak years of inequality over the past century—when the top 1 percent garnered more than 23 percent of total income—were 1928 and 2007. Each of these periods was preceded by substantial increases in borrowing, which ended notoriously in the Great Crash of 1929 and the near-meltdown of 2008.

    The anemic recovery we are now experiencing is directly related to the decline in median household incomes after 2009, coupled with the inability or unwillingness of consumers to take on additional debt and of banks to finance that debt—wisely, given the damage wrought by the bursting debt bubble. We cannot have a growing economy without a growing and buoyant middle class. We cannot have a growing middle class if almost all of the economic gains go to the top 1 percent.

    Equal opportunity. Widening inequality also challenges the nation’s core ideal of equal opportunity, because it hampers upward mobility. High inequality correlates with low upward mobility. Studies are not conclusive because the speed of upward mobility is difficult to measure.

    But even under the unrealistic assumption that its velocity is no different today than it was thirty years ago—that someone born into a poor or lower-middle-class family today can move upward at the same rate as three decades ago—widening inequality still hampers upward mobility. That’s simply because the ladder is far longer now. The distance between its bottom and top rungs, and between every rung along the way, is far greater. Anyone ascending it at the same speed as before will necessarily make less progress upward.

    In addition, when the middle class is in decline and median household incomes are dropping, there are fewer possibilities for upward mobility. A stressed middle class is also less willing to share the ladder of opportunity with those below it. For this reason, the issue of widening inequality cannot be separated from the problems of poverty and diminishing opportunities for those near the bottom. They are one and the same.

    Democracy. The connection between widening inequality and the undermining of democracy has long been understood. As former Supreme Court Justice Louis Brandeis is famously alleged to have said in the early years of the last century, an era when robber barons dumped sacks of money on legislators’ desks, “We may have a democracy, or we may have great wealth concentrated in the hands of a few, but we cannot have both.”

    As income and wealth flow upward, political power follows. Money flowing to political campaigns, lobbyists, think tanks, “expert” witnesses and media campaigns buys disproportionate influence. With all that money, no legislative bulwark can be high enough or strong enough to protect the democratic process.

    The threat to our democracy also comes from the polarization that accompanies high levels of inequality. Partisanship—measured by some political scientists as the distance between median Republican and Democratic roll-call votes on key economic issues—almost directly tracks with the level of inequality. It reached high levels in the first decades of the twentieth century when inequality soared, and has reached similar levels in recent years.

    When large numbers of Americans are working harder than ever but getting nowhere, and see most of the economic gains going to a small group at the top, they suspect the game is rigged. Some of these people can be persuaded that the culprit is big government; others, that the blame falls on the wealthy and big corporations. The result is fierce partisanship, fueled by anti-establishment populism on both the right and the left of the political spectrum.

    Why It Has Happened

    Between the end of World War II and the early 1970s, the median wage grew in tandem with productivity. Both roughly doubled in those years, adjusted for inflation. But after the 1970s, productivity continued to rise at roughly the same pace as before, while wages began to flatten. In part, this was due to the twin forces of globalization and labor-replacing technologies that began to hit the American workforce like strong winds—accelerating into massive storms in the 1980s and ’90s, and hurricanes since then.

    Containers, satellite communication technologies, and cargo ships and planes radically reduced the cost of producing goods anywhere around the globe, thereby eliminating many manufacturing jobs or putting downward pressure on other wages. Automation, followed by computers, software, robotics, computer-controlled machine tools and widespread digitization, further eroded jobs and wages. These forces simultaneously undermined organized labor. Unionized companies faced increasing competitive pressures to outsource, automate or move to nonunion states.

    These forces didn’t erode all incomes, however. In fact, they added to the value of complex work done by those who were well educated, well connected and fortunate enough to have chosen the right professions. Those lucky few who were perceived to be the most valuable saw their pay skyrocket.

    But that’s only part of the story. Instead of responding to these gale-force winds with policies designed to upgrade the skills of Americans, modernize our infrastructure, strengthen our safety net and adapt the workforce—and pay for much of this with higher taxes on the wealthy—we did the reverse. We began disinvesting in education, job training and infrastructure. We began shredding our safety net. We made it harder for many Americans to join unions. (The decline in unionization directly correlates with the decline of the portion of income going to the middle class.) And we reduced taxes on the wealthy.

    We also deregulated. Financial deregulation in particular made finance the most lucrative industry in America, as it had been in the 1920s. Here again, the parallels between the 1920s and recent years are striking, reflecting the same pattern of inequality.

    Other advanced economies have faced the same gale-force winds but have not suffered the same inequalities as we have because they have helped their workforces adapt to the new economic realities—leaving the United States the most unequal of all advanced nations by far.

    What We Must Do

    There is no single solution for reversing widening inequality. Thomas Piketty’s monumental book “Capital in the Twenty-First Century” paints a troubling picture of societies dominated by a comparative few, whose cumulative wealth and unearned income overshadow the majority who rely on jobs and earned income. But our future is not set in stone, and Piketty’s description of past and current trends need not determine our path in the future. Here are ten initiatives that could reverse the trends described above:

    1) Make work pay. The fastest-growing categories of work are retail, restaurant (including fast food), hospital (especially orderlies and staff), hotel, childcare and eldercare. But these jobs tend to pay very little. A first step toward making work pay is to raise the federal minimum wage to $15 an hour, pegging it to inflation; abolish the tipped minimum wage; and expand the Earned Income Tax Credit. No American who works full time should be in poverty.

    2) Unionize low-wage workers. The rise and fall of the American middle class correlates almost exactly with the rise and fall of private-sector unions, because unions gave the middle class the bargaining power it needed to secure a fair share of the gains from economic growth. We need to reinvigorate unions, beginning with low-wage service occupations that are sheltered from global competition and from labor-replacing technologies. Lower-wage Americans deserve more bargaining power.

    3) Invest in education. This investment should extend from early childhood through world-class primary and secondary schools, affordable public higher education, good technical education and lifelong learning. Education should not be thought of as a private investment; it is a public good that helps both individuals and the economy. Yet for too many Americans, high-quality education is unaffordable and unattainable. Every American should have an equal opportunity to make the most of herself or himself. High-quality education should be freely available to all, starting at the age of 3 and extending through four years of university or technical education.

    4) Invest in infrastructure. Many working Americans—especially those on the lower rungs of the income ladder—are hobbled by an obsolete infrastructure that generates long commutes to work, excessively high home and rental prices, inadequate Internet access, insufficient power and water sources, and unnecessary environmental degradation. Every American should have access to an infrastructure suitable to the richest nation in the world.

    5) Pay for these investments with higher taxes on the wealthy. Between the end of World War II and 1981 (when the wealthiest were getting paid a far lower share of total national income), the highest marginal federal income tax rate never fell below 70 percent, and the effective rate (including tax deductions and credits) hovered around 50 percent. But with Ronald Reagan’s tax cut of 1981, followed by George W. Bush’s tax cuts of 2001 and 2003, the taxes on top incomes were slashed, and tax loopholes favoring the wealthy were widened. The implicit promise—sometimes made explicit—was that the benefits from such cuts would trickle down to the broad middle class and even to the poor. As I’ve shown, however, nothing trickled down. At a time in American history when the after-tax incomes of the wealthy continue to soar, while median household incomes are falling, and when we must invest far more in education and infrastructure, it seems appropriate to raise the top marginal tax rate and close tax loopholes that disproportionately favor the wealthy.

    6) Make the payroll tax progressive. Payroll taxes account for 40 percent of government revenues, yet they are not nearly as progressive as income taxes. One way to make the payroll tax more progressive would be to exempt the first $15,000 of wages and make up the difference by removing the cap on the portion of income subject to Social Security payroll taxes.

    7) Raise the estate tax and eliminate the “stepped-up basis” for determining capital gains at death. As Piketty warns, the United States, like other rich nations, could be moving toward an oligarchy of inherited wealth and away from a meritocracy based on labor income. The most direct way to reduce the dominance of inherited wealth is to raise the estate tax by triggering it at $1 million of wealth per person rather than its current $5.34 million (and thereafter peg those levels to inflation). We should also eliminate the “stepped-up basis” rule that lets heirs avoid capital gains taxes on the appreciation of assets that occurred before the death of their benefactors.

    8) Constrain Wall Street. The financial sector has added to the burdens of the middle class and the poor through excesses that were the proximate cause of an economic crisis in 2008, similar to the crisis of 1929. Even though capital requirements have been tightened and oversight strengthened, the biggest banks are still too big to fail, jail or curtail—and therefore capable of generating another crisis. The Glass-Steagall Act, which separated commercial- and investment-banking functions, should be resurrected in full, and the size of the nation’s biggest banks should be capped.

    9) Give all Americans a share in future economic gains. The richest 10 percent of Americans own roughly 80 percent of the value of the nation’s capital stock; the richest 1 percent own about 35 percent. As the returns to capital continue to outpace the returns to labor, this allocation of ownership further aggravates inequality. Ownership should be broadened through a plan that would give every newborn American an “opportunity share” worth, say, $5,000 in a diversified index of stocks and bonds—which, compounded over time, would be worth considerably more. The share could be cashed in gradually starting at the age of 18.

    10) Get big money out of politics. Last, but certainly not least, we must limit the political influence of the great accumulations of wealth that are threatening our democracy and drowning out the voices of average Americans. The Supreme Court’s 2010 Citizens United decision must be reversed—either by the Court itself, or by constitutional amendment. In the meantime, we must move toward the public financing of elections—for example, with the federal government giving presidential candidates, as well as House and Senate candidates in general elections, $2 for every $1 raised from small donors.

    Building a Movement

    It’s doubtful that these and other measures designed to reverse widening inequality will be enacted anytime soon. Having served in Washington, I know how difficult it is to get anything done unless the broad public understands what’s at stake and actively pushes for reform.

    That’s why we need a movement for shared prosperity—a movement on a scale similar to the Progressive movement at the turn of the last century, which fueled the first progressive income tax and antitrust laws; the suffrage movement, which won women the vote; the labor movement, which helped animate the New Deal and fueled the great prosperity of the first three decades after World War II; the civil rights movement, which achieved the landmark Civil Rights and Voting Rights acts; and the environmental movement, which spawned the National Environmental Policy Act and other critical legislation.

    Time and again, when the situation demands it, America has saved capitalism from its own excesses. We put ideology aside and do what’s necessary. No other nation is as fundamentally pragmatic. We will reverse the trend toward widening inequality eventually. We have no choice. But we must organize and mobilize in order that it be done.

    [This essay appears in the current edition of “The Nation.”]

     

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  • The Six Principles of the New Populism (and the Establishment’s Nightmare)


    Tuesday, May 6, 2014

    More Americans than ever believe the economy is rigged in favor of Wall Street and big business and their enablers in Washington. We’re five years into a so-called recovery that’s been a bonanza for the rich but a bust for the middle class. “The game is rigged and the American people know that. They get it right down to their toes,” says Senator Elizabeth Warren.

    Which is fueling a new populism on both the left and the right. While still far apart, neo-populists on both sides are bending toward one another and against the establishment.

    Who made the following comments? (Hint: Not Warren, and not Bernie Sanders.)

    A. We “cannot be the party of fat cats, rich people, and Wall Street.”

    B. “The rich and powerful, those who walk the corridors of power, are getting fat and happy…”

    C. “If you come to Washington and serve in Congress, there should be a lifetime ban on lobbying.”

    D. “Washington promoted moral hazard by protecting Fannie Mae and Freddie Mac, which privatized profits and socialized losses.”

    E. “When you had the chance to stand up for Americans’ privacy, did you?”

    F. “The people who wake up at night thinking of which new country they want to bomb, which new country they want to be involved in, they don’t like restraint. They don’t like reluctance to go to war.”

    (Answers: A. Rand Paul, B. Ted Cruz, C. Ted Cruz, D. House Republican Joe Hensarling, E. House Republican Justin Amash, F. Rand Paul )

    You might doubt the sincerity behind some of these statements, but they wouldn’t have been uttered if the crowds didn’t respond enthusiastically – and that’s the point. Republican populism is growing, as is the Democratic version, because the public wants it.

    And it’s not only the rhetoric that’s converging. Populists on the right and left are also coming together around six principles:

    1. Cut the biggest Wall Street banks down to a size where they’re no longer too big to fail. Left populists have been advocating this since the Street’s bailout now they’re being joined by populists on the right. David Camp, House Ways and Means Committee chair, recently proposed an extra 3.5 percent quarterly tax on the assets of the biggest Wall Street banks (giving them an incentive to trim down). Louisiana Republican Senator David Vitter wants to break up the big banks, as does conservative pundit George Will. “There is nothing conservative about bailing out Wall Street,” says Rand Paul.

    2. Resurrect the Glass-Steagall Act, separating investment from commercial banking and thereby preventing companies from gambling with their depositors’ money. Elizabeth Warren has introduced such legislation, and John McCain co-sponsored it. Tea Partiers are strongly supportive, and critical of establishment Republicans for not getting behind  it. “It is disappointing that progressive collectivists are leading the effort for a return to a law that served well for decades,” writes the Tea Party Tribune. “Of course, the establishment political class would never admit that their financial donors and patrons must hinder their unbridled trading strategies.”

    3. End corporate welfare – including subsidies to big oil, big agribusiness, big pharma, Wall Street, and the Ex-Im Bank. Populists on the left have long been urging this; right-wing populists are joining in. Republican David Camp’s proposed tax reforms would kill dozens of targeted tax breaks. Says Ted Cruz: “We need to eliminate corporate welfare and crony capitalism.” 

    4. Stop the National Security Agency from spying on Americans. Bernie Sanders and other populists on the left have led this charge but right-wing populists are close behind. House Republican Justin Amash’s amendment, that would have defunded NSA programs engaging in bulk-data collection, garnered 111 Democrats and 94 Republicans last year, highlighting the new populist divide in both parties. Rand Paul could be channeling Sanders when he warns: “Your rights, especially your right to privacy, is under assault… if you own a cellphone, you’re under surveillance.”

    5. Scale back American interventions overseas. Populists on the left have long been uncomfortable with American forays overseas. Rand Paul is leaning in the same direction. Paul also tends toward conspiratorial views about American interventionism. Shortly before he took office he was caught on video claiming that former vice president Dick Cheney pushed the Iraq War because of his ties to Halliburton.

    6. Oppose trade agreements crafted by big corporations. Two decades ago Democrats and Republicans enacted the North American Free Trade Agreement. Since then populists in both parties have mounted increasing opposition to such agreements. The Trans-Pacific Partnership, drafted in secret by a handful of major corporations, is facing so strong a backlash from both Democrats and tea party Republicans that it’s nearly dead. “The Tea Party movement does not support the Trans-Pacific Partnership,” says Judson Philips, president of Tea Party Nation. “Special interest and big corporations are being given a seat at the table” while average Americans are excluded.

    Left and right-wing populists remain deeply divided over the role of government. Even so, the major fault line in American politics seems to be shifting, from Democrat versus Republican, to populist versus establishment — those who think the game is rigged versus those who do the rigging.

    In this month’s Republican primaries, tea partiers continue their battle against establishment Republicans. But the major test will be 2016 when both parties pick their presidential candidates.

    Ted Cruz and Rand Paul are already vying to take on Republican establishment favorites Jeb Bush or Chris Christie. Elizabeth Warren says she won’t run in the Democratic primaries, presumably against Hillary Clinton, but rumors abound. Bernie Sanders hints he might.

    Wall Street and big business Republicans are already signaling they’d prefer a Democratic establishment candidate over a Republican populist.

    Dozens of major GOP donors, Wall Street Republicans, and corporate lobbyists have told Politico that if Jeb Bush decides against running and Chris Christie doesn’t recover politically, they’ll support Hillary Clinton. “The darkest secret in the big money world of the Republican coastal elite is that the most palatable alternative to a nominee such as Senator Ted Cruz of Texas or Senator Rand Paul of Kentucky would be Clinton,” concludes Politico

    Says a top Republican-leaning Wall Street lawyer, “it’s Rand Paul or Ted Cruz versus someone like Elizabeth Warren that would be everybody’s worst nightmare.” 

    Everybody on Wall Street and in corporate suites, that is. And the “nightmare” may not occur in 2016. But if current trends continue, some similar “nightmare” is likely within the decade. If the American establishment wants to remain the establishment it will need to respond to the anxiety that’s fueling the new populism rather than fight it.

     

     

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  • The Four Biggest Right-Wing Lies About Inequality


    Monday, May 5, 2014

    Even though French economist Thomas Piketty has made an air-tight case that we’re heading toward levels of inequality not seen since the days of the nineteenth-century robber barons, right-wing conservatives haven’t stopped lying about what’s happening and what to do about it.

    Herewith, the four biggest right-wing lies about inequality, followed by the truth.

    Lie number one: The rich and CEOs are America’s job creators. So we dare not tax them.

    The truth is the middle class and poor are the job-creators through their purchases of goods and services. If they don’t have enough purchasing power because they’re not paid enough, companies won’t create more jobs and economy won’t grow.

    We’ve endured the most anemic recovery on record because most Americans don’t have enough money to get the economy out of first gear. The economy is barely growing and real wages continue to drop.

    We keep having false dawns. An average of 200,000 jobs were created in the United States over the last three months, but huge numbers of Americans continue to drop out of the labor force.

    Lie number two: People are paid what they’re worth in the market. So we shouldn’t tamper with pay.

    The facts contradict this. CEOs who got 30 times the pay of typical workers forty years ago now get 300 times their pay not because they’ve done such a great job but because they control their compensation committees and their stock options have ballooned.

    Meanwhile, most American workers earn less today than they did forty years ago, adjusted for inflation, not because they’re working less hard now but because they don’t have strong unions bargaining for them.

    More than a third of all workers in the private sector were unionized forty years ago; now, fewer than 7 percent belong to a union. 

    Lie number three: Anyone can make it in America with enough guts, gumption, and intelligence. So we don’t need to do anything for poor and lower-middle class kids.

    The truth is we do less than nothing for poor and lower-middle class  kids. Their schools don’t have enough teachers or staff, their textbooks are outdated, they lack science labs, their school buildings are falling apart.

    We’re the only rich nation to spend less educating poor kids than we do educating kids from wealthy families. 

    All told, 42 percent of children born to poor families will still be in poverty as adults – a higher percent than in any other advanced nation. 

    Lie number four: Increasing the minimum wage will result in fewer jobs. So we shouldn’t raise it.

    In fact, studies show that increases in the minimum wage put more money in the pockets of people who will spend it – resulting in more jobs, and counteracting any negative employment effects of an increase in the minimum. 

    Three of my colleagues here at the University of California at Berkeley — Arindrajit Dube, T. William Lester, and Michael Reich – have compared adjacent counties and communities across the United States, some with higher minimum wages than others but similar in every other way.

    They found no loss of jobs in those with the higher minimums.

    The truth is, America’s lurch toward widening inequality can be reversed. But doing so will require bold political steps.

    At the least, the rich must pay higher taxes in order to pay for better-quality education for kids from poor and middle-class families. Labor unions must be strengthened, especially in lower-wage occupations, in order to give workers the bargaining power they need to get better pay. And the minimum wage must be raised. 

    Don’t listen to the right-wing lies about inequality. Know the truth, and act on it. 

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  • Raising Taxes on Corporations that Pay Their CEOs Royally and Treat Their Workers Like Serfs


    Monday, April 21, 2014

    Until the 1980s, corporate CEOs were paid, on average, 30 times what their typical worker was paid. Since then, CEO pay has skyrocketed to 280 times the pay of a typical worker; in big companies, to 354 times.

    Meanwhile, over the same thirty-year time span the median American worker has seen no pay increase at all, adjusted for inflation. Even though the pay of male workers continues to outpace that of females, the typical male worker between the ages of 25 and 44 peaked in 1973 and has been dropping ever since. Since 2000, wages of the median male worker across all age brackets has dropped 10 percent, after inflation.

    This growing divergence between CEO pay and that of the typical American worker isn’t just wildly unfair. It’s also bad for the economy. It means most workers these days lack the purchasing power to buy what the economy is capable of producing — contributing to the slowest recovery on record. Meanwhile, CEOs and other top executives use their fortunes to fuel speculative booms followed by busts.

    Anyone who believes CEOs deserve this astronomical pay hasn’t been paying attention. The entire stock market has risen to record highs. Most CEOs have done little more than ride the wave.

    There’s no easy answer for reversing this trend, but this week I’ll be testifying in favor of a bill introduced in the California legislature that at least creates the right incentives. Other states would do well to take a close look.

    The proposed legislation, SB 1372, sets corporate taxes according to the ratio of CEO pay to the pay of the company’s typical worker. Corporations with low pay ratios get a tax break.Those with high ratios get a tax increase.

    For example, if the CEO makes 100 times the median worker in the company, the company’s tax rate drops from the current 8.8 percent down to 8 percent. If the CEO makes 25 times the pay of the typical worker, the tax rate goes down to 7 percent.

    On the other hand, corporations with big disparities face higher taxes. If the CEO makes 200 times the typical employee, the tax rate goes to 9.5 percent; 400 times, to 13 percent.

    The California Chamber of Commerce has dubbed this bill a “job killer,” but the reality is the opposite. CEOs don’t create jobs.Their customers create jobs by buying more of what their companies have to sell — giving the companies cause to expand and hire.

    So pushing companies to put less money into the hands of their CEOs and more into the hands of average employees creates more buying power among people who will buy, and therefore more jobs.

    The other argument against the bill is it’s too complicated. Wrong again. The Dodd-Frank Act already requires companies to publish the ratios of CEO pay to the pay of the company’s median worker (the Securities and Exchange Commission is now weighing a proposal to implement this). So the California bill doesn’t require companies to do anything more than they’ll have to do under federal law. And the tax brackets in the bill are wide enough to make the computation easy.

    What about CEO’s gaming the system? Can’t they simply eliminate low-paying jobs by subcontracting them to another company – thereby avoiding large pay disparities while keeping their own compensation in the stratosphere?

    No. The proposed law controls for that. Corporations that begin subcontracting more of their low-paying jobs will have to pay a higher tax.  

    For the last thirty years, almost all the incentives operating on companies have been to lower the pay of their workers while increasing the pay of their CEOs and other top executives. It’s about time some incentives were applied in the other direction.

    The law isn’t perfect, but it’s a start. That the largest state in America is seriously considering it tells you something about how top heavy American business has become, and why it’s time to do something serious about it.

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  • Antitrust in the New Gilded Age


    Wednesday, April 16, 2014

    We’re in a new gilded age of wealth and power similar to the first gilded age when the nation’s antitrust laws were enacted. Those laws should prevent or bust up concentrations of economic power that not only harm consumers but also undermine our democracy — such as the pending Comcast acquisition of Time-Warner. 

    In 1890, when Republican Senator John Sherman of Ohio urged his congressional colleagues to act against the centralized industrial powers that threatened America, he did not distinguish between economic and political power because they were one and the same. The field of economics was then called “political economy,” and inordinate power could undermine both. “If we will not endure a king as a political power,” Sherman thundered, “we should not endure a king over the production, transportation, and sale of any of the necessaries of life.”

    Shortly thereafter, the Sherman Antitrust Act was passed by the Senate 52 to 1, and moved quickly through the House without dissent. President Harrison signed it into law July 2, 1890.

    In many respects America is back to the same giant concentrations of wealth and economic power that endangered democracy a century ago. The floodgates of big money have been opened even wider in the wake of the Supreme Court’s 2010 decision in “Citizen’s United vs. FEC” and its recent “McCutcheon" decision.

    Seen in this light, Comcast’s proposed acquisition of Time-Warner for $45 billion is especially troublesome — and not just because it may be bad for consumers. Comcast is the nation’s biggest provider of cable television and high-speed Internet service; Time Warner is the second biggest.

    Last week, Comcast’s executives descended on Washington to persuade regulators and elected officials that the combination will be good for consumers. They say it will allow Comcast to increase its investments in cable and high-speed Internet, and encourage rivals to do so as well. 

    Opponents argue the combination will give consumers fewer choices, resulting in higher cable and Internet bills. And any company relying on Comcast’s pipes to get its content to consumers (think Netflix, Amazon, YouTube, or any distributor competing with Comcast’s own television network, NBCUniversal) also will have to pay more — charges that will also be passed on to consumers.

    I think the opponents have the better argument. Internet service providers in America are already too concentrated, which is why Americans pay more for Internet access than the citizens of almost any other advanced nation. 

    Some argue that the broadband market already has been carved up into a cartel, so blocking the acquisition would do little to bring down prices. One response would be for the Federal Communications Commission to declare broadband service a public utility and regulate prices. 

    But Washington should also examine a larger question beyond whether the deal is good or bad for consumers: Is it good for our democracy?

    We haven’t needed to ask this question for more than a century because America hasn’t experienced the present concentration of economic wealth and power in more than a century.

    But were Senator John Sherman were alive today he’d note that Comcast is already is a huge political player, contributing $1,822,395 so far in the 2013-2014 election cycle, according to data collected by the Center for Responsive Politics — ranking it 18th of all 13,457 corporations and organizations that have donated to campaigns since the cycle began. 

    Of that total, $1,346,410 has gone individual candidates, including John Boehner, Mitch McConnell, and Harry Reid; $323,000 to Leadership PACs; $278,235 to party organizations; and $261,250 to super PACs.

    Last year, Comcast also spent $18,810,000 on lobbying, the seventh highest amount of any corporation or organization reporting lobbying expenditures, as required by law.

    Comcast is also one of the nation’s biggest revolving doors. Of its 107 lobbyists, 86 worked in government before lobbying for Comcast. Its in-house lobbyists include several former chiefs of staff  to Senate and House Democrats and Republicans as well as a former commissioner of the Federal Communications Commission.

    Nor is Time-Warner a slouch when it comes to political donations, lobbyists, and revolving doors. It also ranks near the top.

    When any large corporation wields this degree of political influence it drowns out the voices of the rest of us, including small businesses. The danger is greater when such power is wielded by media giants because they can potentially control the marketplace of ideas on which a democracy is based.

    When two such media giants merge, the threat is extreme. If film-makers, television producers, directors, and news organizations have to rely on Comcast to get their content to the public, Comcast is able to exercise a stranglehold on what Americans see and hear. 

    Remember, this is occurring in America’s new gilded age — similar to the first one in which a young Teddy Roosevelt castigated the “malefactors of great wealth, who were “equally careless of the working men, whom they oppress, and of the State, whose existence they imperil.”

    It’s that same equal carelessness toward average Americans and toward our democracy that ought to be of primary concern to us now. Big money that engulfs government makes government incapable of protecting the rest of us against the further depredations of big money.

    After becoming President in 1901, Roosevelt used the Sherman Act against forty-five giant companies, including the giant Northern Securities Company that threatened to dominate transportation in the Northwest. William Howard Taft continued to use it, busting up the Standard Oil Trust in 1911. 

    In this new gilded age, we should remind ourselves of a central guiding purpose of America’s original antitrust law, and use it no less boldly. 

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  • 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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