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

DAILY SHOW, OCTOBER 2008

DAILY SHOW, APRIL 2005

DAILY SHOW, JUNE 2004

  • Seattle is Right


    Thursday, June 5, 2014

    By raising its minimum wage to $15, Seattle is leading a long-overdue movement toward a living wage. Most minimum wage workers aren’t teenagers these days. They’re major breadwinners who need a higher minimum wage in order to keep their families out of poverty.

    Across America, the ranks of the working poor are growing. While low-paying industries such as retail and food preparation accounted for 22 percent of the jobs lost in the Great Recession, they’ve generated 44 percent of the jobs added since then, according to a recent report from the National Employment Law Project. Last February, the Congressional Budget Office estimated that raising the national minimum wage from $7.25 to $10.10 would lift 900,000 people out of poverty.

    Seattle estimates almost a fourth of its workers now earn below $15 an hour. That translates into about $31,000 a year for a full-time worker. In a high-cost city like Seattle, that’s barely enough to support a family.

    The gains from a higher minimum wage extend beyond those who receive it. More money in the pockets of low-wage workers means more sales, especially in the locales they live in – which in turn creates faster growth and more jobs. A major reason the current economic recovery is anemic is that so many Americans lack the purchasing power to get the economy moving again.

    With a higher minimum wage, moreover, we’d all end up paying less for Medicaid, food stamps and other assistance the working poor now need in order to have a minimally decent standard of living.

    Some worry about job losses accompanying a higher minimum wage. I wouldn’t advise any place to raise its minimum wage immediately from the current federal minimum of $7.25 an hour to $15. That would be too big a leap all at once. Employers – especially small ones – need time to adapt.

    But this isn’t what Seattle is doing. It’s raising its minimum from $9.32 (Washington State’s current statewide minimum) to $15 incrementally over several years. Large employers (with over 500 workers) that don’t offer employer-sponsored health insurance have three years to comply; those that offer health insurance have four; smaller employers, up to seven. (That may be too long a phase-in.)

    My guess is Seattle’s businesses will adapt without any net loss of employment. Seattle’s employers will also have more employees to choose from – as the $15 minimum attracts into the labor force some people who otherwise haven’t been interested. That means they’ll end up with workers who are highly reliable and likely to stay longer, resulting in real savings.

    Research by Michael Reich (no relation) and Arindrajit Dube confirms these results. They examined employment in several hundred pairs of adjacent counties lying on opposite sides of state borders, each with different minimum wages, and found no statistically significant increase in unemployment in the higher-minimum counties, even after four years. (Other researchers who found contrary results failed to control for counties where unemployment was already growing before the minimum wage was increased.) They also found that employee turnover was lower where the minimum was higher.

    Not every city or state can meet the bar Seattle has just set. But many can – and should.

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  • The Way to Stop Corporate Lawbreaking is to Prosecute the People Who Break the Law


    Wednesday, June 4, 2014

    Today General Motors announced that it has fired 15 employees and disciplined five others in the wake of an internal investigation into the company’s handling of defective ignition switches, which lead to at least 13 fatalities.

    But who’s legally responsible when a big corporation breaks the law? The government thinks it’s the corporation itself.

    Wrong.

    "What GM did was break the law … They failed to meet their public safety obligations,” scolded Sec of Transportation Anthony Foxx a few weeks ago after imposing the largest possible penalty on the giant automaker.

    Attorney General Eric Holder was even more adamant recently when he announced the guilty plea of giant bank Credit Suisse to criminal charges for aiding rich Americans avoid paying taxes. “This case shows that no financial institution, no matter its size or global reach, is above the law.” 

    Tough words. But they rest on a bizarre premise. GM didn’t break the law, and Credit Suisse never acted above it. Corporations don’t do things. People do.

    For a decade GM had been receiving complaints about the ignition switch but chose to do nothing. Who was at fault? Look toward the top. David Friedman, acting head of the National Highway Traffic Safety Administration, says those aware of the problem had ranged from engineers “all the way up through executives.”

    Credit Suisse employees followed a carefully-crafted plan, even sending private bankers to visit their American clients on tourist visas to avoid detection. According to the head of New York State’s Department of Financial Services, Credit Suisse’s crime was “decidedly not the result of the conduct of just a few bad apples.”

    Yet in neither of these cases have any executives been charged with violating the law. No top guns are going to jail. No one is even being fired.

    Instead, the government is imposing corporate fines. The logic is that since the corporation as whole benefited from these illegal acts, the corporation as a whole should pay.

    But the logic is flawed. Such fines are often treated by corporations as costs of doing business. GM was fined $35 million. That’s peanuts to a hundred-billion-dollar corporation.

    Credit Suisse was fined considerably more — $2.8 billion. But even this amount was shrugged off by financial markets. In fact, the bank’s shares rose the day the plea was announced – the only big financial institution to show gains that day. Its CEO even sounded upbeat: “Our discussions with clients have been very reassuring and we haven’t seen very many issues at all.” (Credit Suisse wasn’t even required to turn over its list of tax-avoiding clients.)

    Fines have no deterrent value unless the amount of the penalty multiplied by the risk of being caught is greater than the profits earned by the illegal behavior. In reality, the penalty-risk calculus rarely comes close.

    Even when it does, the people hurt aren’t the shareholders who profited years before when the crimes were committed. Most current shareholders weren’t even around then.

    Calling a corporation a criminal is even more absurd. Credit Suisse pleaded guilty to criminal conduct. GM may also face a criminal indictment. But what does this mean? A corporation can’t be put behind bars.

    To be sure, corporations can effectively be executed. In 2002, the giant accounting firm Arthur Andersen was found guilty of obstructing justice when certain partners destroyed records of the auditing work they did for Enron. As a result, Andersen’s clients abandoned it and the firm collapsed. (Andersen’s conviction was later overturned on appeal). 

    But here again, the wrong people are harmed. The vast majority of Andersen’s 28,000 employees had nothing to do with the wrongdoing yet they lost their jobs, while most of its senior partners slid easily into other accounting or consulting work.

    The truth is, corporations aren’t people — despite what the Supreme Court says. Corporations don’t break laws; specific people do. In the cases of GM and Credit Suisse, the evidence points to executives at or near the top.

    Conservatives are fond of talking about personal responsibility. But when it comes to white-collar crime, I haven’t heard them demand that individuals be prosecuted.

    Yet the only way to deter giant corporations from harming the public is to go after people who cause the harm.

     

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  • Freedom Summer II


    Saturday, May 31, 2014

    I spent several days in New York last week with students from around the country who were preparing to head into the heartland to help organize Walmart workers for better jobs and wages. (Full familial disclosure: My son Adam is one of the leaders.)

    Almost exactly fifty years ago a similar group headed to Mississippi to register African-Americans to vote, in what came to be known as Freedom Summer.

    Call this Freedom Summer II.

    The current struggle of low-wage workers across America echoes the civil rights struggle of the 1960s.

    Today, as then, a group of Americans is denied the dignity of decent wages and working conditions. Today, just as then, powerful forces are threatening and intimidating vulnerable people for exercising their legal rights. Today, just like fifty years ago, people who have been treated as voiceless and disposable are standing up and demanding change.

    Although Walmart is no Bull Connor, it’s the poster child for keeping low-wage workers down. America’s largest employer, with 1.4 million workers, refuses to provide most of them with an income they can live on. The vast majority earns under $25,000 a year, with an average hourly wage of about $8.80.

    You and I and other taxpayers shell out for these workers’ Medicaid and food stamps because they and their families can’t stay afloat on what Walmart pays. (I’ve often thought Walmart and other big employers should have to pay a tax equal to the public assistance their workers receive because the companies don’t pay them enough to stay out of poverty.)

    Walmart won’t even allow workers to organize for better jobs and wages. In January, the National Labor Relations Board issued a complaint accusing it of unlawfully threatening or retaliating against workers who have taken part in strikes and protests. 

    The firm says it can’t afford to give its workers a raise or better hours and working conditions. Baloney. Walmart is America’s biggest retailer. Its policies are pulling every other major retailer into the same race to the bottom. If Walmart halted the race, the race would stop.

    Don’t worry about its investors. Its largest is the Walton family, whose combined wealth is greater than the combined wealth of the bottom 42 percent of the entire American population.

    This week, Walmart employees will go on strike in dozens of cities. A group of “Walmart Moms” is also marching for better hours and better treatment of pregnant women employees. And an employee group has sent a letter and voting guide to shareholders asking that they vote against Rob Walton’s re-election as chair.

    Walmart isn’t the only place where low-wage workers are on the move. Two weeks ago, 2,000 protesters gathered at McDonald’s corporate headquarters in suburban Chicago to demand a hike in the minimum wage and the right to form a union without retaliation. More than 100 were arrested.

    Giant fast-food companies have the largest gap between the pay of CEOs and workers of any industry, with a CEO-to-worker compensation ratio of more than 1,000-to-one.

    Meanwhile, across America, low-wage workers are demanding – and in many cases getting – increases in the minimum wage. Despite Washington’s gridlock, seven states have raised their own minimums so far this year. A number of cities have also voted in minimum-wage increases.

    On Monday, Seattle’s city council approved a minimum wage hike to $15 an hour, the highest in the nation, to take effect over the next few years.

    The movement of low-wage workers for decent pay and working conditions is partly a reflection of America’s emerging low-wage economy. While low-wage industries such as retail and restaurant accounted for 22 percent of the jobs lost in the Great Recession, they’ve generated 44 percent of the jobs added since then, according to a recent report from the National Employment Law Project. 

    But the movement is also a moral struggle for decency and respect, and full participation in our economy and society. In these ways, it’s the civil rights struggle of our time.

    It took guts to take on the power structure of Mississippi a half-century ago. It takes guts to take on the power structure of giant companies like Walmart and McDonalds now.

    But confronting such powerful bastions is a vital step toward fundamental social change. Freedom Summer II is just the start.

     

     


     

     

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  • The Practical Choice: Not American Capitalism or “Welfare State Socialism” but an Economy That’s Working for a Few or Many


    Tuesday, May 20, 2014

    For years Americans have assumed that our hard-charging capitalism  is better than the soft-hearted version found in Canada and Europe. American capitalism might be a bit crueler but it generates faster growth and higher living standards overall. Canada’s and Europe’s “welfare-state socialism” is doomed.  

    It was a questionable assumption to begin with, relying to some extent on our collective amnesia about the first three decades after World War II, when tax rates on top incomes in the U.S. never fell below 70 percent, a larger portion of our economy was invested in education than before or since, over a third of our private-sector workers were unionized, we came up with Medicare for the elderly and Medicaid for the poor, and built the biggest infrastructure project in history, known as the interstate highway system.

    But then came America’s big U-turn, when we deregulated, de-unionized, lowered taxes on the top, ended welfare, and stopped investing as much of the economy in education and infrastructure.

    Meanwhile, Canada and Europe continued on as before. Soviet communism went bust, and many of us assumed European and Canadian “socialism” would as well.

    That’s why recent data from the Luxembourg Income Study Database  is so shocking.

    The fact is, we’re falling behind. While median per capita income in the United States has stagnated since 2000, it’s up significantly in Canada and Northern Europe. Their typical worker’s income is now higher than ours, and their disposable income – after taxes – higher still.

    It’s difficult to make exact comparisons of income across national borders because real purchasing power is hard to measure. But even if we assume Canadians and the citizens of several European nations have simply drawn even with the American middle class, they’re doing better in many other ways.

    Most of them get free health care and subsidized child care. And if they lose their jobs, they get far more generous unemployment benefits than we do. (In fact, right now 75 percent of jobless Americans lack any unemployment benefits.)

    If you think we make up for it by working less and getting paid more on an hourly basis, think again. There, at least three weeks paid vacation as the norm, along with paid sick leave, and paid parental leave.

    We’re working an average of 4.6 percent more hours more than the typical Canadian worker, 21 percent more than the typical French worker, and a whopping 28 percent more than your typical German worker, according to data compiled by New York Times columnist Nicholas Kristof.

    But at least Americans are more satisfied, aren’t we? Not really. According to opinion surveys and interviews, Canadians and Northern Europeans are.

    They also live longer, their rate of infant mortality is lower, and women in these countries are far less likely to die as result of complications in pregnancy or childbirth.

    But at least we’re the land of more equal opportunity, right? Wrong. Their poor kids have a better chance of getting ahead. While 42 percent of American kids born into poor families remain poor through their adult lives, only 30 percent of Britain’s poor kids remain impoverished – and even smaller percentages in other rich countries.

    Yes, the American economy continues to grow faster than the economies of Canada and Europe. But faster growth hasn’t translated into higher living standards for most Americans.

    Almost all our economic gains have been going to the top – into corporate profits and the stock market (more than a third of whose value is owned by the richest 1 percent). And into executive pay (European CEOs take home far less than their American counterparts).

    America’s rich also pay much lower taxes than do the rich in Canada and Europe.

    But surely Europe can’t go on like this. You hear it all the time: They can no longer afford their welfare state.

    That depends on what’s meant by “welfare state.” If high-quality education is included, we’d do well to emulate them. Americans between the ages of 16 and 24 rank near the bottom among rich countries in literacy and numeracy. That spells trouble for the U.S. economy in the future.

    They’re also doing more workforce training, and doing it better, than we are. The result is more skilled workers.  

    Universal health care is another part of their “welfare state” that saves them money because healthier workers are more productive.

    So let’s put ideology aside. The practical choice isn’t between capitalism and “welfare-state socialism.” It’s between a system that’s working for a few at the top, or one that’s working for just about everyone. Which would you prefer?

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  • Tim Geithner and the Wall Street Bailout Redux


    Tuesday, May 13, 2014

    Timothy Geithner’s new book about the financial crisis, “Stress Test,” is basically an argument that the Wall Street bailout succeeded. That’s hardly surprising, given that Geithner was in charge of the bailout when Treasury Secretary (as was his predecessor at Treasury, Hank Paulson), and so has an inherent interest in telling the public it succeeded.

    Even so, the bailout clearly did succeed, if success means avoiding another Great Depression.

    But another Great Depression might have been avoided if the crisis had been handled differently — for example, by allowing the bankruptcy laws to do what they were intended to do, and forcing the big Wall Street banks to reorganize under them.

    In fact, the bailout was a colossal failure in several respects Geithner barely mentions in his book, or avoids completely:  

    (1) The biggest Wall Street banks are now bigger than ever, and no sane person on or off the Street now believes Washington will ever allow them to fail – which means they’ll continue to make big, risky bets because they know they can’t fail. And they’ll get even bigger because big depositors and lenders know they’ll never fail and therefore demand lower interest rates than demanded from smaller banks.

    (2) No Wall Street executives have ever been prosecuted for what they did to the country, which means even more rampant irresponsibility in executive suites as well as even deeper cynicism in the public about the political power of Wall Street.

    (3) The bailout helped the banks but did little or nothing for the tens of millions of Americans who lost billions of dollars in home equity and savings, and the millions more who lost their jobs. The toll was greatest on the poor and the middle class, who still haven’t recovered their losses, even though Wall Street has fully recovered (and then some). Nor have reforms been enacted that will help the middle class and the poor the next time Wall Street implodes.

    So pardon me if I take issue with Tim Geithner. The bailout was a success in the narrowest terms. Seen more broadly it was a terrible failure.

    We’d  have done better had we forced the biggest Wall Street banks, including the giant insurer AIG, to reorganize under bankruptcy rather than bail them out.

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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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