As Justice Oliver Wendell Holmes, Jr., wrote in 1904, “taxes are the price we pay for a civilized society.”

But the wealthiest Americans, who haven’t raked in as much of America’s income and wealth since the 1920s, are today paying a lower tax rate than they have in over thirty years. Even though America faces a mammoth federal budget deficit. Even though public services at all levels of government continue to be slashed. Even though the median wage is still dropping, adjusted for inflation. Even though the typical American is paying more of his or her earnings in taxes – including payroll taxes, sales taxes, and property taxes – than ever before.

I’m not a class warrior. I’m a class worrier. And my worries go to why all this has happened. 

I worry about the political power that comes with great wealth – such as the power of the wealthy to reduce their taxes, cut the public services most other Americans depend on, while at the same time garnering special subsidies and tax breaks for their businesses – big oil, big pharma, big agriculture, military contractors, big insurance, Wall Street. 

I worry about the well-financed big lies that the very rich are the nation’s “job creators,” that the benefits from tax cuts on the rich “trickle down” to everyone else, that American corporations will create more jobs if only their taxes are lowered and if regulations protecting health, safety, and the environment were jettisoned.

I worry about the increasing dominance of Wall Street over our economy and democracy, and the near political impossibilities of closing the “carried interest” loophole that allows private-equity and hedge-fund managers to treat their income as capital gains subject to only 15% tax; of resurrecting the Glass-Steagall Act separating investment from commercial banking, and of breaking up the big banks to protect against another financial crash and bailout of the Street.

You and I have every right to be class worriers – and to be outraged at what has occurred. But we have to get beyond worry and outrage, and do everything in our power to take back our economy and reclaim our democracy.

It was another justice of the Supreme Court, Louis Brandeis, who wrote in 1897, “we may have a democracy or we may have great wealth concentrated in the hands of a few, but we cannot have both.” 

Robert Reich on Beyond Outrage: Stopping the Cycle of Political Cynicism

“The first thing is to connect the dots, to see how one frustrating or outrageous thing is connected to all the other frustrating and outrageous things. If we’re going to make progress on this, we’ve got to see the big picture.”

Share your thoughts and ideas for getting #BeyondOutrage.

Details on the e-original.

Robert Reich explains his new e-original, BEYOND OUTRAGE: “You need to be outraged, but you also need to move beyond outrage, and take action.”

More details about Beyond Outrage.

One of the most pernicious falsehoods you’ll hear during the next seven months of political campaigning is there’s a necessary tradeoff between fairness and economic growth. By this view, if we raise taxes on the wealthy the economy can’t grow as fast.

Wrong. Taxes were far higher on top incomes in the three decades after World War II than they’ve been since. And the distribution of income was far more equal. Yet the American economy grew faster in those years than it’s grown since tax rates on the top were slashed in 1981.

This wasn’t a post-war aberration. Bill Clinton raised taxes on the wealthy in the 1990s, and the economy produced faster job growth and higher wages than it did after George W. Bush slashed taxes on the rich in his first term.

If you need more evidence, consider modern Germany, where taxes on the wealthy are much higher than they are here and the distribution of income is far more equal. But Germany’s average annual growth has been faster than that in the United States.

You see, higher taxes on the wealthy can finance more investments in infrastructure, education, and health care – which are vital to a productive workforce and to the economic prospects of the middle class. 

Higher taxes on the wealthy also allow for lower taxes on the middle – potentially restoring enough middle-class purchasing power to keep the economy growing. As we’ve seen in recent years, when disposable income is concentrated at the top, the middle class doesn’t have enough money to boost the economy.

Finally, concentrated wealth can lead to speculative bubbles as the rich in the same limited class of assets – whether gold, dotcoms, or real estate. And when these bubbles pop the entire economy suffers.

What we should have learned over the last half century is that growth doesn’t trickle down from the top. It percolates upward from working people who are adequately educated, healthy, sufficiently rewarded, and who feel they have a fair chance to make it in America.

Fairness isn’t incompatible with growth. It’s necessary for it. 

How Did Mitt Make So Much Money And Pay So Little in Taxes?

Now that Mitt Romney is the presumed Republican candidate, it’s fair to ask how he made so much money ($21 million in 2010 alone) and paid such a low rate of taxes (only 13.9 percent).

Not only fair to ask, but instructive to know. Because the magic of private equity reveals a lot about how and why our economic system has become so distorted and lopsided – why all the gains are going to the very top while the rest of us aren’t going anywhere.

The magic of private equity isn’t really magic at all. It’s a magic trick – and it’s played on you and me.

Jake Kornbluth and I have made this 2 minute video that explains it all in eight simple steps. (Thanks to MoveOn.org for staking us.)

By the way, the “other people’s money” that private equity fund managers (as well as other so-called “hedge” fund managers) play with often comes from pension funds that contain the savings of millions of average Americans.

The pension fund managers who dole out our savings to private equity and hedge-fund guys also take a hefty slice in bonuses. And like the others, they bear no risk if their bets later turn bad. They get their bonuses regardless.

Nor are any of them — private-equity, hedge-fund, or pension-fund managers — personally liable for doing adequate due diligence. They can bet our money on the basis of no more information than what they had for breakfast.

But if these funds lose, you lose. That’s what happened in 2008 and 2009. Some of the losses are also shifted to the government’s Pension Benefit Guaranty Corporation – which means taxpayers lose.

It’s a giant con game, and it continues to this day.

Here’s what has to be done to stop it:

1. End the “carried interest” loophole that allows private-equity managers like Mitt Romney to treat their income as capital gains, taxed at 15 percent, even though they don’t risk a dime of their own income. Their earnings should be treated as ordinary income.

2. Hold the managers of private-equity funds, hedge funds, and pension funds to a “due diligence” standard. So if the funds lose money and these managers didn’t exercise due diligence, the Pension Guaranty Corporation can claw back their bonuses.

3. Raise the capital-gains rate to match the tax rate on ordinary income – especially for short-term investments. Give a tax preference only to “patient capital” – that is, for investments held for, say, five years or more.

4. Resurrect Glass-Steagall.

Mitt and others like him won’t like any of these reforms. They’d eliminate the humongous profits they’ve enjoyed at the expense of the rest of us.

But these reforms are necessary if we’re to take back our economy.

Get #BeyondOutrage.

BEYOND OUTRAGE: THE GENERAL ELECTION OF 2012 STARTS TODAY

The general election of 2012 starts today. 

We need to do everything we can to make sure Barack Obama is reelected president. But we also need to mobilize for the long haul — beyond Election Day. We need to fuel a movement to take back our economy and our democracy.

Presidential elections can draw peoples’ attention to larger challenges facing our nation, but they can also be distracting. The media focus on the game — who’s up and who’s down, and which political strategies are winning or losing — rather than on the big issues. Campaigns are also geared to winning on Election Day, not to building long-term strategies and movements for fundamental change.

I’ve been involved in public life, off and on, for over forty years. I’ve served under three presidents. When not in office I’ve done my share of organizing and rabble-rousing, along with teaching, speaking, and writing about what I know and what I believe. I have never been as concerned as I am now about the future of our democracy, the corrupting effects of big money in our politics, the stridency and demagoguery of the regressive right, and the accumulation of wealth and power at the very top.

We are perilously close to losing an economy and a democracy that work for everyone, and replacing them with an economy and government that exist mainly for a few wealthy and powerful people.

That’s why I’ve written an ebook called “Beyond Outrage” (see the attached video). You have every reason to be outraged. Moral outrage is the prerequisite for social change. But you also need to move beyond outrage and take action. The regressive forces seeking to move our nation backwards must not be allowed to triumph.

The point of “Beyond Outrage” is to help you focus on what needs to be done and how you can do it, and to encourage you not to feel bound by what’s politically possible this year or next. You need to understand why the stakes are so high, and why your participation – now and in the future – is so important.

In my experience, nothing good happens in Washington unless good people outside Washington become mobilized, organized, and energized to make it happen. Nothing worth changing in America will actually change unless you and others like you are committed to achieving that change.

Next Monday most Americans will be filing their income taxes for tax year 2011. This year, though, tax day has special significance. If there’s one clear policy contrast between Democrats and Republicans in the 2012 election, it’s whether America’s richest citizens should be paying more.

Senate Democrats have scheduled a vote Monday on a minimum 30 percent overall federal tax rate for everyone earning more than $1 million a year. It’s nicknamed the “Buffett Rule” in honor of billionaire Warren Buffett who has publicly complained that he pays a lower tax rate than his secretary.

No one in Washington believes the Buffett Rule has any hope of passage this year. It’s largely symbolic. The vote will mark a sharp contrast with Republican Paul Ryan’s plan (enthusiastically endorsed by Mitt Romney) to cut the tax rate on the super rich from 35 percent to 25 percent – rewarding millionaires with a tax cut of at least $150,000 a year. The vote will also serve to highlight that Romney himself paid less than 14 percent on a 2010 income of $21.7 million because so much of his income was in capital gains, taxed at 15 percent. 

Hopefully in the weeks and months ahead the White House and the Democrats will emphasize three key realities:

1. The richest 1 percent of Americans are now taking in over 20 percent of total national income, and so far have raked in almost all the gains from this recovery. Thirty years ago, the richest 1 percent got 9 percent of total income. Income and wealth are now more concentrated at the top than they’ve been since the 1920s. 

2. The richest 1 percent are paying a lower tax rate than they’ve paid since 1980. For three decades after World War II, their tax rate never dropped below 70 percent. Even considering all deductions and tax credits, they paid close to 55 percent. Under Eisenhower, the top rate was 91 percent and the effective rate was 58 percent.

3. Right now the nation faces two yawning deficits – an investment deficit and a federal budget deficit. The investment deficit includes deferred maintenance on America’s infrastructure – roads, bridges, public transit, water and sewer systems that are all crumbling – and an educational system that’s being starved for resources (the federal government pays for 8 percent of K-12 education and about 5 percent of public higher education, but could do much more). The federal budget deficit is projected to mushroom to $6.4 trillion over the next ten years, mostly because of aging boomers and soaring healthcare costs.

Any serious person looking at these three realities would conclude that the rich should be paying far more. It’s not just a matter of fairness; it’s also a matter of patriotism. 

In fact, given these realities, the Buffett Rule sets the bar too low. For most Americans, wages and benefits are declining (adjusted for inflation), net worth has been plummeting (their only asset is their homes), and the public services they rely on have been disappearing. For the top, it’s just the opposite: Their incomes are rising, their stock-market portfolios have been growing, and a growing portion of their earnings has been subject to a capital-gains tax of just 15 percent. 

The Buffett Rule would generate only about $47 billion in extra revenues over the next decade, according to congressional estimates. Why not restore top rates to what they were before 1980, and match the capital-gains rate to the income-tax rate?  

The economy added only 120,000 jobs in March – down from the rate of more than 200,000 in each of the preceding three months. The rate of unemployment dropped from 8.3 to 8.2 percent mainly because fewer people were searching for jobs – and that rate depends on how many people are actively looking.

It’s way too early to conclude the jobs recovery is stalling, but there’s reason for concern.

Remember: Consumer spending is 70 percent of the economy. Employers won’t hire without enough sales to justify the additional hires. It’s up to consumers to make it worth their while.

But real spending (adjusted to remove price changes) this year hasn’t been going anywhere. It increased just .5 percent in February after an anemic .2 percent increase in January.

The reason consumers aren’t spending more is they don’t have the money. Personal income was up just .2 percent in February – barely enough to keep up with inflation. As a result, personal saving as a percent of disposable income tumbled to 3.7 percent in February from 4.3 percent in January.

Personal saving is now at its lowest level since March 2009.

American consumers, in short, are hitting a wall. They don’t dare save much less because their jobs are still insecure. They can’t borrow much more. Their home values are still dropping, and many are underwater – owing more on their homes than the homes are worth.

The economy has been growing but almost all the gains have gone to the very top. As I’ve noted, this is the most lopsided recovery on record.

You will hear other theories about the hiring slowdown, but they don’t wash.

It’s not due to “uncertainty” about the economy. That’s a tautology – the economy’s future is always uncertain, especially when consumers don’t have the dough to keep it going.

It’s not because of fears about a European recession. Europe has been in the skids for some time now. Besides, the American economy doesn’t really depend on exports to Europe.

And it’s not about gas prices or the rise in healthcare insurance premiums. Both are up, but they’ve been trending up for many months.

It’s because consumers’ pockets are almost empty.

We’ll avoid a double-dip, but the most likely scenario in coming months is a continuation of the same – an anemic jobs recovery.

President Obama will claim the economy is improving – and, technically, it is. Growth this year will most likely average around 2 percent. The problem is, most Americans aren’t feeling it in their paychecks.

Mitt Romney will claim the economy is in terrible shape – and there will be enough evidence to justify his “cup-half-empty” rhetoric.

But when it comes to explaining what’s really wrong with the economy, Romney is the perfect foil for Obama because Romney represents the richest of the rich – a man who raked in more than $20 million last year, and paid a tax rate of just 13.9 percent (lower than much of the middle class).

He made that money by buying up “under-performing” companies – that is, companies that employed more people than they needed to, and carried less debt than was necessary to show big profits (interest on debt is deductible from company income). Romney’s firm, Bain Capital, made him and his colleagues fortunes by firing workers and loading companies up with debt.

And there’s America’s economic problem in a nutshell.

Romney and his ilk are doing wonderfully well, but the rest of the nation is still in deep trouble. Yet the U.S. economy can’t fully recover on the spending of millionaires.

The President has already announced that this election is about America’s surge toward ever-greater inequality. He’s right. And this painful recovery shows it.

It would be sadly ironic if Obama lost the election because the economy responded to widening inequality exactly as expected.