Robert Reich

America's Jobs Deficit, and Why It's Still More Important than the Budget Deficit

Fri, 03 Feb 2012 14:05:34 -0500

The most significant aspect of January’s jobs report is political. The fact that America’s labor market continues to improve is good news for the White House. But as a practical matter the improvement is less significant for the American work force.

President Obama’s only chance for rebutting Republican claims that he’s responsible for a bad economy is to point to a positive trend. Voters respond to economic trends as much as they respond to absolute levels of economic activity. Under ordinary circumstances January’s unemployment rate of 8.3 percent would be terrible. But compared to September’s 9.1 percent, it looks quite good. And the trend line – 9 percent in October, 8.6 percent in November, 8.5 percent in December, and now 8.3 percent – is enough to make Democrats gleeful.

But the U.S. labor market is far from healthy. America’s job deficit is still mammoth. Our working-age population has grown by nearly 10 million since the recession officially began in December 2007 but many of these people never entered the workforce. Millions of others are still too discouraged to look for work.

The most direct way of measuring the jobs deficit is to look at the share of the working-age population in jobs. Before the recession, 63.3 percent of working-age Americans had jobs. That employment-to-population ratio reached a low last summer of 58.2 percent. Now it’s 58.5 percent. That’s better than it was, but not by much. The trend line here isn’t quite as encouraging.

Given how many people have lost their jobs and how much larger the total working-age population is now, we’ve got a long road ahead. At January’s rate of job gains – 243,000 – the nation wouldn’t return to full employment for another seven years.

When they’re not blaming Obama for a bad economy, Republicans are decrying the federal budget deficit and demanding more cuts. But America’s jobs deficit continues to be a much larger problem than the budget deficit.

In fact, we can’t possibly achieve the growth needed to reduce the budget deficit as a proportion of the total economy unless far more people are employed. Workers are consumers, and consumer spending is 70 percent of economic activity. And cutting the budget means fewer workers, directly (as government continues to shed workers) and indirectly (as government contractors have to lay off workers) and therefore fewer consumers.

Yet deficit hawks continue to circle. State and local budgets are still being slashed. The federal government is scheduled to begin major spending cuts less than a year from now. Republicans are calling for more cuts in the short term. Austerity economics continues to gain traction.

Meanwhile Congress is debating whether to renew extended unemployment benefits. This should be a no-brainer. The long-term unemployed, who have been jobless for more than six months, comprise a growing share of the unemployed. (In January they rose from 42.5 percent to 42.9 percent).

Republicans say unemployment benefits are prolonging unemployment, that people won’t get jobs if they get unemployment checks from the government. That’s claptrap, especially when there’s only 1 job opening for every 4 people who need a job. Republicans also say we can’t afford to extend jobless benefits. Also untrue. Jobless workers spend whatever money they get, and their spending keeps other people in jobs.

Government should extend unemployment benefits, and not cut spending until the nation’s rate of unemployment is down to 5 percent. Then, and only then, should we move toward budget austerity.

The job situation is better than it was but it’s still awful. The jobs deficit is still our number one economic problem. Forget the budget deficit until we tame it.

The Republican Myth of Obama's "Entitlement Society"

Wed, 01 Feb 2012 19:06:00 -0500

One of the few things Mitt Romney and Newt Gingrich agree on is that President Obama is turning America into “European-style welfare culture.”

In his standard stump speech Romney charges Obama with creating a nation of dependents. “Over the past three years Barack Obama has been replacing our merit-based society with an entitlement society.”

Gingrich calls Obama “the best food-stamp president in American history.”

What’s their evidence? Both rely on federal budget data showing direct payments to individuals shot up by almost $600 billion, a 32 percent increase, since the start of 2009.

They also point to Census data showing that 49 percent of Americans now live in homes where at least one person is collecting a federal benefit – Social Security, food stamps, unemployment insurance, worker’s compensation, or subsidized housing. That’s up from 44 percent in 2008.

Finally, they trumpet Social Security Administration figures showing that the number of people on Social Security disability jumped 10 percent in Obama’s first two years in office.

They argue our economic problems stem from this sharp rise in “dependency.” Get rid of these benefits and people will work harder.

But they have cause and effect backwards. The reason for the rise in food stamps, unemployment insurance, and other safety-net programs is Americans got clobbered in 2008 with the worst economic catastrophe since the Great Depression. They and their families have needed whatever helping hands they could get.

If anything, America’s safety nets have been too small and shot through with holes. That’s why the number and percentage of Americans in poverty has increased dramatically over the past three years. According to a study by Northeastern University, a third of families with young children are now in poverty.

This is the real scandal. For example, only 40 percent of the unemployed qualify for unemployment benefits because they weren’t working full time or long enough on a single job before they were canned. The unemployment system doesn’t take account of the fact that a large portion of the workforce typically works part time on several jobs, and moves from job to job.

Republicans also object to Obama’s health care law, which covers 30 million more Americans than were covered before. That law still leaves over 20 million without health insurance. They’ll get emergency care when they’re in dire straights — hospitals won’t refuse them — but we all end up paying indirectly.

Regressive Republicans pretend they’re about opportunity. In reality they’re back at what they’ve been doing for years — promoting Social Darwinism.

The Biggest Risk to the Economy in 2012, and What's the Economy For Anyway?

Mon, 30 Jan 2012 15:26:00 -0500

Treasury Secretary Tim Geithner, speaking at the World Economic Forum in Davos a few days ago, said the “critical risks” facing the American economy this year were a worsening of Europe’s chronic sovereign debt crisis and a rise in tensions with Iran that could stoke global oil prices.

What about jobs and wages here at home?

As the Commerce Department reported Friday, the U.S. economy grew 2.8 percent between October and December – the fastest pace in 18 months and the first time growth exceeded 2 percent all year. Many bigger American companies have been reporting strong profits in recent months. GE and Lockheed Martin closed the year with record order backlogs.

Yet the percent of working-age Americans in jobs isn’t much different than what it was three years ago. Yes, America now produces more than it did when the recession began. But it does so with 6 million fewer workers.

Average after-tax incomes adjusted for inflation are moving up a bit. (They increased at an annual rate of .8 percent in the last three months of 2011 after falling 1.9 percent in prior three-month period. For all of 2011, incomes fell .1 percent.)

But beware averages. Shaquille O’Neal and I have an average height of six feet. Exclude Mitt Romney’s $20 million last year — along with everyone else securely in the top 1 percent — and the incomes of most Americans are continuing to slip.

Consumer spending picked up slightly in the fourth quarter mainly because consumers drew down their savings. Obviously, this can’t last.

Meanwhile, government is spending less on schools, roads, bridges, parks, defense, and social services. Government spending at all levels dropped at an annual rate of 4.6 percent in the last quarter – and that’s likely to continue.

Some economists worry this drop is a drag on the economy. But it also means fewer public goods available to all Americans regardless of income.

Congress still hasn’t decided whether to renew the temporary payroll tax cut and extend unemployment benefits past February. If it doesn’t, expect another 1 percent slice off GDP growth this year.

Tim Geithner is surely correct that the European debt crisis and Iran pose risks to the American economy in 2012. But they aren’t the biggest risk. The biggest risk is right here at home – that most Americans will continue to languish.

All of which raises a basic question: Who or what is the economy for? Surely not just for a few at the top, and not just big corporations and their CEOs. Nor can the success of the economy be measured by how fast the GDP is growing, or how high the Dow Jones Industrial Average is rising, or whether average incomes are turning upward.

The crisis of American capitalism marks the triumph of consumers and investors over workers and citizens. And since most of us occupy all four roles – even though the lion’s share of consuming and investing is done by the wealthy – the real crisis centers on the increasing efficiency by which all of us as consumers and investors can get great deals, and our declining capacity to be heard as workers and citizens.

Modern technologies allow us to shop in real time, often worldwide, for the lowest prices, highest quality, and best returns. Through the Internet and advanced software we can now get relevant information instantaneously, compare deals, and move our money at the speed of electronic impulses. We can buy goods over the Internet that are delivered right to our homes. Never before in history have consumers and investors been so empowered.

Yet these great deals increasingly come at the expense of our own and our compatriots’ jobs and wages, and widening inequality. The goods we want or the returns we seek can often be produced more efficiently elsewhere around the world by companies offering lower pay, fewer benefits, and inferior working conditions.

They also come at the expense of our Main Streets – the hubs of our communities – when we get the great deals through the Internet or at big-box retailers that scan the world for great deals on our behalf.

Some great deals have devastating environmental consequences. Technology allows us to efficiently buy low-priced items from poor nations with scant environmental standards, sometimes made in factories that spill toxic chemicals into water supplies or pollutants into the air. We shop for great deals in cars that spew carbon into the air and for airline tickets in jet planes that do even worse.

Other great deals offend common decency. We may get a great price or high return because a producer has cut costs by hiring children in South Asia or Africa who work twelve hours a day, seven days a week. Or by subjecting people to death-defying working conditions.

As workers or as citizens most of us would not intentionally choose these outcomes but as seekers after great deals we are indirectly responsible for them. Companies know that if they fail to offer us the best deals we will take our money elsewhere – which we can do with ever-greater speed and efficiency.

The best means of balancing the demands of consumers and investors against those of workers and citizens has been through democratic institutions that shape and constrain markets.

Laws and rules offer some protection for jobs and wages, communities, and the environment. Although such rules are likely to be costly to us as consumers and investors because they stand in the way of the very best deals, they are intended to approximate what we as members of a society are willing to sacrifice for these other values.

But technologies for getting great deals are outpacing the capacities of democratic institutions to counterbalance them. For one thing, national rules intended to protect workers, communities, and the environment typically extend only to a nation’s borders. Yet technologies for getting great deals enable buyers and investors to transcend borders with increasing ease, at the same time making it harder for nations to monitor or regulate such transactions.

For another, goals other than the best deals are less easily achieved within the confines of a single nation. The most obvious example is the environment, whose fragility is worldwide. In addition, corporations now routinely threaten to move jobs and businesses away from places that impose higher costs on them – and therefore, indirectly, on their consumers and investors – to more “business friendly” jurisdictions. The Internet and software have made companies sufficiently nimble to render such threats credible.

But the biggest problem is that corporate money is undermining democratic institutions in the name of better deals for consumers and investors. Campaign contributions, fleets of well-paid corporate lobbyists, and corporate-financed PR campaigns about public issues are overwhelming the capacities of Congress, state legislatures, regulatory agencies, and the courts to reflect the values of workers and citizens.

As a result, consumers and investors are doing increasingly well but job insecurity is on the rise, inequality is widening, communities are becoming less stable, and climate change is worsening. None of this is sustainable over the long term.

Blame global finance and worldwide corporations all you want. But save some blame for the insatiable consumers and investors inhabiting almost every one of us, who are entirely complicit. And blame our inability as workers and citizens to reclaim our democracy.

Why No Responsible Democrat Should Want Newt Gingrich to Get the GOP Nomination

Thu, 26 Jan 2012 13:18:00 -0500

Republicans are worried sick about Newt Gingrich’s ascendance, while Democrats are tickled pink.

Yet no responsible Democrat should be pleased at the prospect that Gingrich could get the GOP nomination. The future of America is too important to accept even a small risk of a Gingrich presidency.

The Republican worry is understandable. “The possibility of Newt Gingrich being our nominee against Barack Obama I think is essentially handling the election over to Obama,” says former Minnesota Governor Tom Pawlenty, a leading GOP conservative. “I think that’s shared by a lot of folks in the Republican party.”

Pawlenty’s views are indeed widely shared in Republican circles. “He’s not a conservative – he’s an opportunist,” says pundit Joe Scarborough, a member of the Republican Class of 1994 who came to Washington under Gingrich’s banner. Gingrich doesn’t “have the temperament, intellectual discipline or ego control to be either a successful nominee or president,”says New York Republican representative Peter King, who hasn’t endorsed any candidate. “Basically, Newt can’t control himself.”

Gingrich is “an embarrassment to the party,” says New Jersey Republican Governor Chris Christie, and “was run out of the speakership” on ethics violations. Republican strategist Mike Murphy says “Newt Cingrich could not carry a swing state in the general election if it was made of feathers.”

“Weird” is the word I hear most from Republicans who have worked with him. Scott Klug, a former Republican House member from Wisconsin, who hasn’t endorsed anyone yet, says “Newt has ten ideas a day – two of them are good, six are weird and two are very weird.”

Newt’s latest idea, for example – to colonize the moon – is typically whacky.

The Republican establishment also points to polls showing Gingrich’s supporters to be enthusiastic but his detractors even more fired up. In the latest ABC News/ Washington Post poll, 29 percent view Gingrich favorably while 51 percent have an unfavorable view of him. (Obama, by contrast, draws a 53 percent favorable and 43 percent unfavorable.)

Independents, who will be key to the general election, are especially alarmed by Gingrich.

As they should be. It’s not just Newt’s weirdness. It’s also the stunning hypocrisy. His personal life makes a mockery of his moralistic bromides. He condemns Washington insiders but had a forty-year Washington career that ended with ethic violations. He fulminates against finance yet drew fat checks from Freddie Mac. He poses as a populist but has had a $500,000 revolving charge at Tiffany’s.

And it’s the flagrant irresponsibility of many of his propositions – for example, that presidents are not bound by Supreme Court rulings, that the liberal Ninth Circuit court of appeals should be abolished, that capital gains should not be taxed, that the First Amendment guarantees freedom “of” religion but not “from” religion.

It’s also Gingrich’s eagerness to channel the public’s frustrations into resentments against immigrants, blacks, the poor, Muslims, “liberal elites,” the mainstream media, and any other group that’s an easy target of white middle-class and working-class anger.

These are all the hallmarks of a demagogue.

Yet Democratic pundits, political advisers, officials and former officials are salivating over the possibility of a Gingrich candidacy. They agree with key Republicans that Newt would dramatically increase the odds of Obama’s reelection and would also improve the chances of Democrats taking control over the House and retaining control over the Senate.

I warn you. It’s not worth the risk.

Even if the odds that Gingrich as GOP presidential candidate would win the general election are 10 percent, that’s too much of a risk to the nation. No responsible American should accept a 10 percent risk of a President Gingrich.

I’d take a 49 percent odds of a Mitt Romney win – who in my view would make a terrible president – over a 10 percent possibility that Newt Gingrich would become the next president – who would be an unmitigated disaster for America and the world.

Best wishes from Saul Alinsky, radical left-wingers, and people...

Tue, 24 Jan 2012 11:05:52 -0500

Best wishes from Saul Alinsky, radical left-wingers, and people who don’t like the classical America.

Who is Sheldon Adelson and What Has Newt Promised Him?

Tue, 24 Jan 2012 10:58:52 -0500

Sheldon Adelson, the billionaire casino owner, is now the poster boy for what’s terribly wrong with our campaign-finance system. Adelson, you may recall, had, before the South Carolina Republican primary, donated $5 million to the pro-Gingrich Super Pac “Winning Our Future” – giving Newt a pile of money for negative advertising against Mitt Romney in South Carolina.

Adelson has done it again. He and his wife Marian have cut another $5 million check for Gingrich to go negative on Romney in Florida. The money won’t go as far as it did in South Carolina – TV ads cost a lot more in Florida – but it’s enough to give the Grinch a solid footing.

And, who knows? The Adelsons are billionaires. They might decide to put in another $5 million or perhaps $20 million into Gingrich’s Super Pac. The point is, there’s no limit.

Do you know who Sheldon and Marian Adelson are? Do you know what Gingrich has promised them, or what they think they’ll get out of a Grinch presidency? I don’t. But if Newt becomes President of the United States, they’ll be singularly responsible. And we better find out, because Newt will owe them big time.

Forget the Lincoln Bedroom. The Adelsons and their kids will have the run of the White House, including the Oval Office. Hey, they’ll take over the Old Executive Building next door and turn it into a casino.

Never before in the history of American politics has a single couple given more money to a single candidate and had a bigger impact – all courtesy of the Supreme Court and its grotesque decisions that speech is money and corporations are people under the First Amendment.

The State of Our Disunion: A Globalizing Private Sector, A Government Overwhelmed by Corporate Money

Mon, 23 Jan 2012 14:59:33 -0500

Who should have the primary strategic responsibility for making American workers globally competitive – the private sector or government? This will be a defining issue in the 2012 campaign.

In his State of the Union address, President Obama will make the case that government has a vital role. His Republican rivals disagree. Mitt Romney charges the President is putting “free enterprise on trial,” while Newt Gingrich merely fulminates about “liberal elites.”

American business won’t and can’t lead the way to more and better jobs in the United States. First, the private sector is increasingly global, with less and less stake in America. Second, it’s driven by the necessity of creating profits, not better jobs.

The National Science Foundation has just released its biennial report on global investment in science, engineering and technology. The NSF warns that the United States is quickly losing ground to Asia, especially to China. America’s share of global R&D spending is tumbling. In the decade to 2009, it dropped from 38 percent to 31 percent, while Asia’s share rose from 24 to 35 percent.

One big reason: According to the NSF, American firms nearly doubled their R&D investment in Asia over these years, to over $7.5 billion.

GE recently announced a $500 million expansion of its R&D facilities in China. The firm has already invested $2 billion.

GE’s CEO Jeffrey Immelt chairs Obama’s council on work and competitiveness. I’d wager that as an American citizen, Immelt is concerned about working Americans. But as CEO of GE, Immelt’s job is to be concerned about GE’s shareholders. They aren’t the same.

GE has also been creating more jobs outside the United States than in it. A decade ago, fewer than half of GE’s employees were non-American; today, 54 percent are.

This is all good for GE and its shareholders, but it’s not necessarily good for America or American workers. The Commerce Department says U.S. based global corporations added 2.4 million workers abroad in first decade of 21^stcentury, while cutting their US workforce by 2.9 million.

According to the New York Times, Apple Computer employs 43,000 people in the United States but contracts with over 700,000 workers abroad. It makes iPhones in China not only because of low wages there but also the ease and speed with which its Chinese contractor can mobilize their workers – from company dormitories at almost any hour of the day or night.

An Apple executive says “We don’t have an obligation to solve America’s problems. Our only obligation is making the best product possible.” He might have added “and showing a big enough profits to continually increase our share price.”

Most executives of American companies agree. If they can make it best and cheapest in China, or anywhere else, that’s where it will be made. Don’t blame them. That’s what they’re getting paid to do.

What they want in America is lower corporate taxes, less regulation, and fewer unionized workers. But none of these will bring good jobs to America. These steps may lower the costs of production here, but global companies can always find even lower costs abroad.

Global corporations — wherever they’re based — will create good jobs for Americans only if Americans are productive enough to summon them. Problem is, a large and growing portion of our workforce isn’t equipped to be productive.

Put simply, American workers are hobbled by deteriorating schools, unaffordable college tuitions, decaying infrastructure, and declining basic R&D. All of this is putting us on a glide path toward even lousier jobs and lower wages.

Get it? The strategic responsibility for making Americans more globally competitive can’t be centered in the private sector because the private sector is rapidly going global, and it’s designed to make profits rather than good jobs. The core responsibility has to be in government because government is supposed to be looking out for the public, and investing in public schools, colleges, infrastructure, and basic R&D.

But here’s the political problem. American firms have huge clout in Washington. They maintain legions of lobbyists and are pouring boatloads of money into political campaigns. After the Supreme Court’s Citizen’s United decision, there’s no limit.

Who represents the American workforce? Organized labor represents fewer than 7 percent of private-sector workers and has all it can do to protect a dwindling number of unionized jobs.

Republicans like it this way, and for three decades have been trying to convince average working Americans government is their enemy. Yet corporate America isn’t their friend. Without bold government action on behalf of our workforce, good American jobs will continue to disappear.

Amend2012

Thu, 19 Jan 2012 13:31:21 -0500

Amend2012

The Romney Tax Loophole

Tue, 17 Jan 2012 18:03:00 -0500

After refusing for weeks to release his taxes, Mitt Romney now says he’ll do so — by tax day, April 15. But the real news is what Romney has now admitted about his taxes.

It’s not how much Romney earns. Everyone knows he’s comfortably in the top one-tenth of one percent.

It’s how much he pays of it in taxes. Romney says he pays a tax rate of “about 15 percent.”

That’s lower than the tax rate most of America’s middle class face and far lower than the 35 percent top rate after the Bush tax cut. (To put this in perspective, recall that the top income tax rate under Dwight Eisenhower was 91 percent.)

Newt Gingrich immediately pounced on Mitt’s admission as evidence that Newt’s proposed flat 15 percent tax is ideal, and wants to call it the “Romney tax.” Newt’s flat tax is a fraud. It would dramatically lower the taxes of most of the top 1 percenters and increase the taxes of most of the rest of us.

The real smoking gun is how Romney manages to pay only 15 percent on what’s been his money-gusher of compensation from Bain Capital. Romney hasn’t released his tax returns yet, but the most obvious answer is he treats his Bain income as capital gains — subject to the current capital gains rate of only 15 percent.

A loophole in the tax laws allows private-equity managers like Romney to treat their compensation as capital gains. It’s legal but it’s a scandal. Income from employment is employment income, period.

Private-equity managers cling to the technicality that the money they take out of their companies comes from the appreciation of assets they own and sell. That may be true, but it’s still income they get from their jobs. Common sense would dictate it be treated as ordinary income.

Congress has vowed for years to close this loophole. But somehow it persists. Even when Democrats have been in charge, they haven’t been able to close it.

Guess why. The managers and executives of private-equity funds are big donors to Republicans and Democrats alike.

Don’t call it the Romney tax, as Newt wants to do. Call it the Romney tax loophole. And let him explain why he thinks it’s justified.

Free Enterprise on Trial

Mon, 16 Jan 2012 19:26:00 -0500

Mitt Romney is casting the 2012 campaign as “free enterprise on trial” – defining free enterprise as achieving success through “hard work and risking-taking.” Tea-Party favorite Senator Jim DeMint of South Carolina says he’s supporting Romney because “we really need someone who understands how risk, taking risk … is the way we create jobs, create choices, expand freedom.” Chamber of Commerce President Tom Donahue, defending Romney, explains “this economy is about risk. If you don’t take risk, you can’t have success.”

Wait a minute. Who do they think are bearing the risks? Their blather about free enterprise risk-taking has it upside down. The higher you go in the economy, the easier it is to make money without taking any personal financial risk at all. The lower you go, the bigger the risks.

Wall Street has become the center of riskless free enterprise. Bankers risk other peoples’ money. If deals turn bad, they collect their fees in any event. The entire hedge-fund industry is designed to hedge bets so big investors can make money whether the price of assets they bet on rises or falls. And if the worst happens, the biggest bankers and investors now know they’ll be bailed out by taxpayers because they’re too big to fail.

But the worst examples of riskless free enteprise are the CEOs who rake in millions after they screw up royally.

Near the end of 2007, Charles Prince resigned as CEO of Citgroup after announcing the bank would need an additional $8 billion to $11 billion in write-downs related to sub-prime mortgages gone bad. Prince left with a princely $30 million in pension, stock awards, and stock options, along with an office, car, and a driver for five years.

Stanley O’Neal’s five-year tenure as CEO of Merrill Lynch ended about the same time, when it became clear Merrill would have to take tens of billions in write-downs on bad sub-prime mortgages and be bought up at a fire-sale price by Bank of America. O’Neal got a payout worth $162 million.

Philip Purcell, who left Morgan Stanley in 2005 after a shareholder revolt against him, took away $43.9 million plus $250,000 a year for life.

Pay-for-failure extends far beyond Wall Street. In a study released last week, GMI, a well-regarded research firm that monitors executive pay, analyzed the largest severance packages received by ex-CEOs since 2000.

On the list: Thomas E. Freston, who lasted just nine months as CEO of Viacom before being terminated, and left with a walk-away package of $101 million.

Also William D. McGuire, who in 2006 was forced to resign as CEO of UnitedHealth over a stock-options scandal, and for his troubles got pay package worth $286 million.

And Hank A. McKinnell, Jr.’s, whose five-year tenure as CEO of Pfizer was marked by a $140 billion drop in Pfizer’s stock market value. Notwithstanding, McKinnell walked away with a payout of nearly $200 million, free lifetime medical coverage, and an annual pension of $6.5 million. (At Pfizer’s 2006 annual meeting a plane flew overhead towing a banner reading “Give it back, Hank!”)

Not to forget Douglas Ivester of Coca Cola, who stepped down as CEO in 2000 after a period of stagnant growth and declining earnings, with an exit package worth $120 million.

If anything, pay for failure is on the rise. Last September, Leo Apotheker was shown the door at Hewlett-Packard, with an exit package worth $13 million. Stephen Hilbert left Conseco with an estimated $72 million even though value of Conseco’s stock during his tenure sank from $57 to $5 a share on its way to bankruptcy.

But as economic risk-taking has declined at the top, it’s been increasing at the middle and below. More than 20 percent of the American workforce is now “contingent” – temporary workers, contractors, independent consultants – with no security at all.

Even full-time workers who have put in decades with a company can now find themselves without a job overnight – with no parachute, no help finding another job, and no health insurance.

Meanwhile the proportion of large and medium-sized companies (200 or more workers) offering full health care coverage continues to drop – from 74 percent in 1980 to under 10 percent today. Twenty-five years ago, two-thirds of large and medium-sized employers also provided health insurance to their retirees. Now, fewer than 15 percent do.

The risk of getting old with no pension is also rising. In 1980, more than 80 percent of large and medium-sized firms gave their workers “defined-benefit” pensions that guaranteed a fixed amount of money every month after they retired. Now it’s down to under 10 percent. Instead, they offer “defined contribution” plans where the risk is on the workers. When the stock market tanks, as it did in 2008, the 401(k) plan tanks along with it. Today, a third of all workers with defined-benefit plans contribute nothing, which means their employers don’t either.

And the risk of losing earnings continues to grow. Even before the crash of 2008, the Panel Study of Income Dynamics at University of Michigan found that over any given two-year stretch about half of all families experienced some decline in income. And the downturns were becoming progressively larger. In the 1970s, the typical drop was about 25 percent. By late 1990s, it was 40 percent. By the mid-2000s, family incomes rose and fell twice as much as they did in the mid-1970s, on average.

What Romney and the cheerleaders of risk-taking free enterprise don’t want you to know is the risks of the economy have been shifting steadily away from CEOs and Wall Street – and on to average working people. It’s not just income and wealth that are surging to the top. Economic security is moving there as well, leaving the rest of us stranded.

To the extent free enterprise is on trial, the real question is whether the system is rigged in favor of those at the top who get rewarded no matter how badly they screw up, while the rest of us get screwed no matter how hard we work.

The jury will report back Election Day. In the meantime, Obama and the Democrats shouldn’t allow Romney and the Republicans to act as defenders of risk-taking free enterprise. Americans need to know the truth. The only way the economy can thrive is if we have more risk-taking at the top, and more economic security below.

The Youthful Magic of Ron Paul

Wed, 11 Jan 2012 20:37:00 -0500

South Carolina Republican Senator Jim DeMint, the darling of the Tea Party wing nuts of the GOP, is urging Republican candidates to listen to Ron Paul. “One of the things that’s hurt the so-called conservative alternative is saying negative things about Ron Paul,” DeMint told conservative radio host Laura Ingraham. “I’d like to see a Republican Party that embraces a lot of the libertarian ideas.”

Why the sudden enthusiasm of Republican leaders for Ron Paul? Credit his surprisingly strong showing in New Hampshire, where 47 percent of primary voters between the ages of 18 and 29 voted for him.

No other Republican candidate has come nearly as close to winning over young voters – and the GOP desperately needs young voters. The median age of registered Republicans is rising faster than the median age of America.

The Republican right thinks Paul’s views on the economy are responsible for this fire among the young. Yesterday evening, on Larry Kudlow’s CNBC program, I squared off with Larry and the Wall Street Journal’s Steve Moore. Both are convinced young people are attracted by Paul’s strict adherence to the views of Austrian economist Ludwig von Mises, and Paul’s desire to move America back to the gold standard.

Baloney. The young are flocking to Ron Paul because he wants to slice military spending, bring our troops home, stop government from spying on American citizens, and legalize pot.

So do I, but I somehow doubt Jim DeMint would advise Republican candidates to listen to me, even if I were a Republican candidate for President.

Paul is attractive to younger voters precisely because of positions he takes that are anathema to the vast majority of the Republican base, including almost all Tea Party Republicans.

If other Republican candidates want to cozy up to him, fine. But if they do, they’ll have a lot of explaining to do in Bluffton, South Carolina.

On the other hand, if Republicans — or Democrats, for that matter — want to win over much of the nation’s young next November, they’d do well to listen carefully to Paul’s positions on national defense and civil liberties.

The Bain of Capitalism

Tue, 10 Jan 2012 13:59:00 -0500

It’s one thing to criticize Mitt Romney for being a businessman with the wrong values. It’s quite another to accuse him and his former company, Bain Capital, of doing bad things. If what Bain Capital did under Romney was bad for society, the burden shifts to Romney’s critics to propose laws that would prevent Bain and other companies from doing such bad things in the future.

Don’t hold your breath.

Newt Gingrich says Bain under Romney carried out “clever legal ways to loot a company.” Gingrich calls it the “Wall Street model” where “you can basically take out all the money, leaving behind the workers,” and charges that “if someone comes in, takes all the money out of your company and then leaves you bankrupt while they go off with millions, that’s not traditional capitalism.”

Where has Newt been for the last thirty years? Leveraged buyouts became part of traditional capitalism in the 1980s when enterprising financiers began borrowing piles of money, often at high interest rates, to buy up the stock of ongoing companies they believe undervalued. They’d back the loans with the company assets, then typically sell off divisions and slim payrolls, and resell the company to the public at a higher share price – pocketing the gains.

It’s a good deal for the financiers (the $25 billion buyout of RJR-Nabisco in 1988 netted the partners of Kohlberg, Kravis, and Roberts around $70 million each – and most of Mitt Romney’s estimated $200 million fortune comes from the same maneuvers), but not always for the company or its workers.

Some workers lose their jobs when the company downsizes. Others, when the company, now laden with debt, can’t meet its payments to creditors and has to go into bankruptcy. According to the Wall Street Journal, of 77 companies Bain invested in during Romney’s tenure there, 22 percent either filed for bankruptcy or closed their doors by end of eighth year after Bain’s investment.

But, hey, this is American capitalism – at least as it’s been practiced for the past three decades. Is Newt proposing to ban leveraged buyouts? Or limit the amount of debt a company can take on? Or prevent financiers – or even CEOs and management teams – from taking a public company private and then reselling it to the public at a higher price?

None of the above.

Rick Perry criticizes Romney and Bain pushing the quest for profits too far. “There is nothing wrong with being successful and making money,” says Perry. “But getting rich off failure and sticking someone else with the bill is indefensible.”

Yet getting rich off failure and sticking someone else with the bill is what Wall Street financiers try to do every day. It’s called speculation – and at least since the demise of the Glass-Steagall Act, investment bankers have been allowed to gamble with commercial bank deposits, other people’s money.

So is Perry proposing to resurrect Glass-Steagall? Not a chance.

Gingrich, Perry, and others are putting particular focus on the people who lost their jobs as a result of Romney’s Bain Capital. Gingrich’s Super PAC will be running $3.5 million of ads featuring emotional interviews with some of them.

But what, exactly, are Romney’s opponents proposing to do about layoffs that harm so many people? Millions of Americans have lost their jobs over the last four years – and as a result have often lost their health insurance, their homes, and their savings.

Are Gingrich, Perry, and others proposing to expand health insurance coverage for jobless Americans and their families? All I hear from the Republicans is their determination to repeal the law that President Obama championed – which still leaves millions of Americans uninsured. Do Romney’s opponents have plans to keep people in their homes even when they’ve lost their jobs and can’t pay their mortgages? No. Do they propose expanding unemployment insurance? If memory serves, most of them were opposed to the last extension.

I’m all in favor of reforming capitalism, but you’ll permit me some skepticism when it comes to criticisms of Bain Capital coming from Romney’s Republican opponents. None of these Republican candidates has exactly distinguished himself with new ideas for giving Americans more economic security. To the contrary — until the assault on Romney and Bain Capital — every one of them has been a cheerleader for financial capitalism of the most brutal sort.

The party that has repeatedly saved capitalism from its own excesses and thereby preserved capitalism is the Democratic Party. So the only serious question here is what kind of serious reforms Obama will propose when, assuming Romney becomes the Republican nominee, Obama also criticizes Bain Capitalism.

How a Little Bit of Good Economic News Can Be Bad for the President

Mon, 09 Jan 2012 14:22:00 -0500

Two years ago the unemployment rate was 9.9 percent. Now it’s 8.5 percent. At first blush that’s good news for the President. Actually it may not be.

Voters pay more attention to the direction the economy is moving than to how bad or good it is. So if the positive trend continues in the months leading up to Election Day, Obama’s prospects of being reelected improve.

But if you consider the number of working-age Americans who have stopped looking for work over the past two years because they couldn’t find a job, and young people too discouraged even to start looking, you might worry.

The Bureau of Labor Statistics, which measures the unemployment rate every month, counts people as unemployed only if they’re looking for work. If they’re too discouraged even to enter the job market, they’re not counted.

If all the potential workers who have dropped out of the job market over the past two years were counted, today’s unemployment rate wouldn’t be 8.5 percent. It would be 9.5 percent. That’s only a bit down from the 9.9 percent unemployment rate two years ago.

The genuinely good news, though, is the Bureau of Labor Statistics also tells us 200,000 new jobs were added in December. Granted, this doesn’t put much of a dent in the 10 million jobs we’ve either lost since the recession began or needed to keep up with the growth of the working-age population (at this rate we won’t return to our pre-recession level of employment until 2019) but, hey, it’s at least the right direction.

But here’s the political irony. This little bit of good news is likely to raise the hopes of the great army of the discouraged – many of whom will now start looking for work.

And what happens when they start looking? If they don’t find a job (and, let’s face it, the chances are still slim) they’ll be counted as unemployed.

Which means the unemployment rate will very likely edge upward in coming months. This will be bad for the President because it will look as though the trend is in the wrong direction again.

Mitt, Son of "Citizen's United"

Thu, 05 Jan 2012 17:27:00 -0500

First, a confession. If Mitt Romney becomes president I’m partly to blame.

Ten years ago I ran for the Democratic nomination for governor of Massachusetts — which would have given me the opportunity to whip Mitt Romney’s ass in the general election,

I blew it. In the final week of the primary I was neck and neck with the state treasurer, but then my money ran out, which meant my TV ads stopped. Declining the suggestion of my campaign manager to take out a second mortgage on my home, I frantically phoned anyone I could find who hadn’t yet contributed $500, the maximum state law allowed. I didn’t raise beans. In the end, the treasurer won the primary, Romney won the general election and became governor, and I went back to being a professor.

But my fantasy of beating Romney may be nothing more than a fantasy because Romney had — and still has — something I never did (and I’m not referring to his gleaming white teeth, carefully-coiffed hairline, or height). He has money, and he has connections to much more money.

Mitt Romney was then and still is the candidate of big money.

In the last weeks before the just-completed Iowa caucuses, Romney spent over $3 million relentlessly torpedoing Newt Gingrich with negative ads — cutting Gingrich’s support by half and hurtling him from first place to fourth. But Romney kept his fingerprints off the torpedo. Technically the money didn’t even come from his campaign.

It came from a Super PAC called “Restore Our Future,” which can sop up unlimited amounts from a few hugely wealthy donors without even disclosing their names. That’s because “Restore Our Future” is officially independent of the Romney campaign — although its chief fundraiser comes out of Romney’s finance team, its key political strategist was political director of Romney’s 2008 presidential campaign, its treasurer is Romney’s former chief counsel, and its media whiz had been part of Romney’s media team.

“Restore Our Future” is to Mitt Romney’s campaign as the dark side of the moon is to the moon. And it reveals the grotesque result of the Supreme Court’s decision a year ago in Citizen United vs the Federal Election Commission, which reversed more than a century of efforts to curb the influence of big money on politics.

If income and wealth in America were as widely shared as in the first three decades after World War II, we’d have less reason to worry. But now, with an almost unprecedented concentration of money at the very top, Citizens United invites the worst corruption our democracy has witnessed since the Gilded Age.

And Romney and Citizens United were made for each other. Other candidates have quietly set up Super PACs of their own, and President Obama has his Super PAC already busily tapping into whatever reservoirs of big money it can find. But Mitt’s unique ties to the biggest money pits enable him to take unique advantage of the Court’s scurrilous invitation.

The New York Times reports that New York hedge-fund managers and Boston financiers contributed almost $30 million to “Restore Our Future” before the Iowa caucuses. And “Restore Our Future“‘s faux independence has allowed Romney to publicly distance himself from them, their money, and the dirty work that their money has bought.

More than anyone else running for president, Mitt Romney personifies the top 1 percent in America — actually, the top one-tenth of one percent. It’s not just his four homes and estimated $200 million fortune, not just his wheeling and dealing in leveraged-buyouts and private equity, not even the jobless refugees of his financial maneuvers that makes him the Gordon Gekko of presidential aspirants.

It’s his connections to the epicenters of big money in America — especially to top executives and financiers in the habit of investing for handsome returns. And there are almost no better returns than those found in tax benefits, government subsidies, loan guarantees, bailouts, regulatory exemptions, federal contracts, and trade deals generating hundreds of millions if not billions of dollars a year.

Romney, in other words, is the candidate Citizens United created, the creature given life by Scalia, Roberts, Kennedy, Thomas, and Alito all playing Dr. Frankenstein.

Given what the Court has wrought, my conscience is less burdened. Had I whipped Romney’s ass ten years ago I might only have delayed his awakening. But I fear for the country.

The Decline of the Public Good

Wed, 04 Jan 2012 23:56:00 -0500

Meryl Streep’s eery reincarnation of Margaret Thatcher in “The Iron Lady” brings to mind Thatcher’s most famous quip, “there is no such thing as ‘society.’” None of the dwindling herd of Republican candidates has quoted her yet but they might as well considering their unremitting bashing of everything public.

What defines a society is a set of mutual benefits and duties embodied most visibly in public institutions — public schools, public libraries, public transportation, public hospitals, public parks, public museums, public recreation, public universities, and so on.

Public institutions are supported by all taxpayers, and are available to all. If the tax system is progressive, those who better off (and who, presumably, have benefitted from many of these same public institutions) help pay for everyone else.

“Privatiize” means pay-for-it-yourself. The practical consequence of this in an economy whose wealth and income are now more concentrated than any time in 90 years is to make high-quality public goods available to fewer and fewer.

In fact, much of what’s called “public” is increasingly a private good paid for by users — ever-higher tolls on public highways and public bridges, higher tuitions at so-called public universities, higher admission fees at public parks and public museums.

Much of the rest of what’s considered “public” has become so shoddy that those who can afford to do so find private alternatives. As public schools deteriorate, the upper-middle class and wealthy send their kids to private ones. As public pools and playgrounds decay, the better off buy memberships in private tennis and swimming clubs. As public hospitals decline, they pay premium rates for private care.

Gated communities and office parks now come with their own manicured lawns and walkways, security guards, and backup power systems.

Why the decline of public institutions? The financial squeeze on government at all levels since 2008 explains only part of it. The slide really started more than three decades ago with so-called “tax revolts” by a middle class whose earnings had stopped advancing even though the economy continued to grow. Most families still wanted good public services and institutions but could no longer afford the tab.

Since the late 1970s, almost all the gains from growth have gone to the top. But as the upper middle class and the rich began shifting to private institutions, they withdrew political support for public ones. In consequence, their marginal tax rates dropped — setting off a vicious cycle of diminishing revenues and deteriorating quality, spurring more flight from public institutions. Tax revenues from corporations also dropped as big companies went global — keeping their profits overseas and their tax bills to a minimum.

But that’s not the whole story. America no longer values public goods as we did decades ago.

The great expansion of public institutions in America began in the early years of 20th century when progressive reformers championed the idea that we all benefit from public goods. Excellent schools, roads, parks, playgrounds, and transit systems would knit the new industrial society together, create better citizens, and generate widespread prosperity. Education, for example, was less a personal investment than a public good — improving the entire community and ultimately the nation.

In subsequent decades — through the Great Depression, World War II, and the Cold War — this logic was expanded upon. Strong public institutions were seen as bulwarks against, in turn, mass poverty, fascism, and then communism. The public good was palpable: We were very much a society bound together by mutual needs and common threats. (It was no coincidence that the greatest extensions of higher education after World War II were the GI Bill and the National Defense Education Act, and the largest public works project in history called the National Defense Interstate Highway Act.)

But in a post-Cold War America distended by global capital, distorted by concentrated income and wealth, undermined by unlimited campaign donations, and rocked by a wave of new immigrants easily cast by demagogues as “them,” the notion of the public good has faded. Not even Democrats any longer use the phrase “the public good.” Public goods are now, at best, “public investments.” Public institutions have morphed into “public-private partnerships;” or, for Republicans, simply “vouchers.”

Mitt Romney’s speaks derisively of what he terms the Democrats’ “entitlement” society in contrast to his “opportunity” society. At least he still envisions a society. But he hasn’t explained how ordinary Americans will be able to take advantage of good opportunities without good public schools, affordable higher education, good roads, and adequate health care.

His “entitlements” are mostly a mirage anyway. Medicare is the only entitlement growing faster than the GDP but that’s because the costs of health care are growing faster than the economy. That means any attempt to turn Medicare into a voucher — without either raising the voucher in tandem with those costs or somehow taming them — will just reduce the elderly’s access to health care. Social Security hasn’t contributed to the budget deficit; it’s had surpluses for years.

Other safety nets are in tatters. Unemployment insurance reaches just 40 percent of the jobless these days (largely because eligibility requires having had a steady full-time job for a number of years rather than, as with most people, a string of jobs or part-time work).

What could Mitt be talking about? Outside of defense, domestic discretionary spending is down sharply as a percent of the economy. Add in declines in state and local spending, and total public spending on education, infrastructure, and basic research has dropped from 12 percent of GDP in the 1970s to less than 3 percent by 2011.

Only in one respect is Romney right. America has created a whopping entitlement for the biggest Wall Street banks and their top executives — who, unlike most of the rest of us, are no longer allowed to fail. They can also borrow from the Fed at almost no cost, then lend the money out at 3 to 6 percent.

All told, Wall Street’s entitlement is the biggest offered by the federal government, even though it doesn’t show up in the budget. And it’s not even a public good. It’s just private gain.

We’re losing public goods available to all, supported by the tax payments of all and especially the better off. In its place we have private goods available to the very rich, supported by the rest of us.

Even Lady Thatcher would have been appalled.

The GOP Ticket in 2012: Romney-Rubio

Mon, 02 Jan 2012 15:17:00 -0500

Since my New Year’s prediction that Obama would select Hillary Clinton for his running mate in 2012 (and Joe Biden would become Secretary of State), I’ve been swamped by requests for my GOP prediction. Here goes.

You can forget the caucuses and early primaries. Mitt Romney will be the nominee. Republicans may be stupid but the GOP isn’t about to commit suicide. The other candidates are all weighed down by enough baggage to keep a 747 on the tarmac indefinitely.

For his running mate, Romney will choose Marco Rubio, the junior senator from Florida. Why do I say this?

First, Romney will need a right-winger to calm and woo the Republican right. Tea Partiers are attracted to Rubio – an evangelical Christian committed to reducing taxes and shrinking government. Rubio’s meteoric rise in the Florida House before coming to Congress was based on a string of conservative stances on state issues.

Rubio is also a proven campaigner, handily winning several Florida House elections and then, in 2010, running for the U.S. Senate and pulling in more votes than even popular incumbent Republican governor Charlie Crist (who ran for the Senate as an independent). Rubio had the help of Tea Partiers.

Moreover, he’s only 40, thereby giving the GOP ticket some youthful vigor.

And he’s Hispanic – a Cuban-American – at a time when the GOP needs to court the Hispanic vote.

Rubio’s only baggage is the “son of exiles” controversy – his suggestion that his parents were refugees forced out of Cuba by Castro when in fact they moved to the United States before the Cuban revolution.

But this isn’t the sort of slip that would keep him off the ticket. In fact, Romney has defended Rubio, saying “I think the world of Marco Rubio, support him entirely and think that the effort to try to smear him was unfortunate and bogus.”

Finally, and most critically, Florida is a crucial swing state. Rubio would help deliver it.

So it will be Obama-Clinton versus Romney-Rubio.

And what’s my prediction for Election Day? Obama-Clinton hands down.

I warn you, though. Political predictions, economic forecasts, and astrology differ in only one respect. Astrology has a fairly good record of being correct.

My Political Prediction for 2012: It's Obama-Clinton

Wed, 28 Dec 2011 15:35:00 -0500

My political prediction for 2012 (based on absolutely no inside information): Hillary Clinton and Joe Biden swap places. Biden becomes Secretary of State — a position he’s apparently coveted for years. And Hillary Clinton, Vice President.

So the Democratic ticket for 2012 is Obama-Clinton.

Why do I say this? Because Obama needs to stir the passions and enthusiasms of a Democratic base that’s been disillusioned with his cave-ins to regressive Republicans. Hillary Clinton on the ticket can do that.

Moreover, the economy won’t be in superb shape in the months leading up to Election Day. Indeed, if the European debt crisis grows worse and if China’s economy continues to slow, there’s a better than even chance we’ll be back in a recession. Clinton would help deflect attention from the bad economy and put it on foreign policy, where she and Obama have shined.

The deal would also make Clinton the obvious Democratic presidential candidate in 2016 — offering the Democrats a shot at twelve (or more) years in the White House, something the Republicans had with Ronald Reagan and the first George Bush but which the Democrats haven’t had since FDR. Twelve years gives the party in power a chance to reshape the Supreme Court as well as put an indelible stamp on America.

According to the latest Gallup poll, the duo are this year’s most admired man and woman This marks the fourth consecutive win for Obama while Clinton has been the most admired woman in each of the last 10 years. She’a topped the list 16 times since 1993, exceeding the record held by former First Lady Eleanor Roosevelt, who topped the list 13 times.

Obama-Clinton in 2012. It’s a natural.

Why the Republican Crackup is Bad For America

Tue, 20 Dec 2011 19:31:19 -0500

Two weeks before the Iowa caucuses, the Republican crackup threatens the future of the Grand Old Party more profoundly than at any time since the GOP’s eclipse in 1932. That’s bad for America.

The crackup isn’t just Romney the smooth versus Gingrich the bomb-thrower.

Not just House Republicans who just scotched the deal to continue payroll tax relief and extended unemployment insurance benefits beyond the end of the year, versus Senate Republicans who voted overwhelmingly for it.

Not just Speaker John Boehner, who keeps making agreements he can’t keep, versus Majority Leader Eric Cantor, who keeps making trouble he can’t control.

And not just venerable Republican senators like Indiana’s Richard Lugar, a giant of foreign policy for more than three decades, versus primary challenger state treasurer Richard Mourdock, who apparently misplaced and then rediscovered $320 million in state tax revenues.

Some describe the underlying conflict as Tea Partiers versus the Republican establishment. But this just begs the question of who the Tea Partiers really are and where they came from.

The underlying conflict lies deep into the nature and structure of the Republican Party. And its roots are very old.

As Michael Lind has noted, today’s Tea Party is less an ideological movement than the latest incarnation of an angry white minority – predominantly Southern, and mainly rural – that has repeatedly attacked American democracy in order to get its way.

It’s no mere coincidence that the states responsible for putting the most Tea Party representatives in the House are all former members of the Confederacy. Of the Tea Party caucus, twelve hail from Texas, seven from Florida, five from Louisiana, and five from Georgia, and three each from South Carolina, Tennessee, and border-state Missouri.

Others are from border states with significant Southern populations and Southern ties. The four Californians in the caucus are from the inland part of the state or Orange County, whose political culture has was shaped by Oklahomans and Southerners who migrated there during the Great Depression.

This isn’t to say all Tea Partiers are white, Southern or rural Republicans – only that these characteristics define the epicenter of Tea Party Land.

And the views separating these Republicans from Republicans elsewhere mirror the split between self-described Tea Partiers and other Republicans.

In a poll of Republicans conducted for CNN last September, nearly six in ten who identified themselves with the Tea Party say global warming isn’t a proven fact; most other Republicans say it is.

Six in ten Tea Partiers say evolution is wrong; other Republicans are split on the issue. Tea Party Republicans are twice as likely as other Republicans to say abortion should be illegal in all circumstances, and half as likely to support gay marriage.

Tea Partiers are more vehement advocates of states’ rights than other Republicans. Six in ten Tea Partiers want to abolish the Department of Education; only one in five other Republicans do. And Tea Party Republicans worry more about the federal deficit than jobs, while other Republicans say reducing unemployment is more important than reducing the deficit.

In other words, the radical right wing of today’s GOP isn’t that much different from the social conservatives who began asserting themselves in the Party during the 1990s, and, before them, the “Willie Horton” conservatives of the 1980s, and, before them, Richard Nixon’s “silent majority.”

Through most of these years, though, the GOP managed to contain these white, mainly rural and mostly Southern, radicals. After all, many of them were still Democrats. The conservative mantle of the GOP remained in the West and Midwest – with the libertarian legacies of Ohio Senator Robert A. Taft and Barry Goldwater, neither of whom was a barn-burner – while the epicenter of the Party remained in New York and the East.

But after the Civil Rights Act of 1964, as the South began its long shift toward the Republican Party and New York and the East became ever more solidly Democratic, it was only a matter of time. The GOP’s dominant coalition of big business, Wall Street, and Midwest and Western libertarians was losing its grip.

The watershed event was Newt Gingrich’s takeover of the House, in 1995. Suddenly, it seemed, the GOP had a personality transplant. The gentlemanly conservatism of House Minority Leader Bob Michel was replaced by the bomb-throwing antics of Gingrich, Dick Armey, and Tom DeLay.

Almost overnight Washington was transformed from a place where legislators tried to find common ground to a war zone. Compromise was replaced by brinkmanship, bargaining by obstructionism, normal legislative maneuvering by threats to close down government – which occurred at the end of 1995.

Before then, when I’d testified on the Hill as Secretary of Labor, I had come in for tough questioning from Republican senators and representatives – which was their job. After January 1995, I was verbally assaulted. “Mr. Secretary, are you a socialist?” I recall one of them asking.

But the first concrete sign that white, Southern radicals might take over the Republican Party came in the vote to impeach Bill Clinton, when two-thirds of senators from the South voted for impeachment. (A majority of the Senate, you may recall, voted to acquit.)

America has had a long history of white Southern radicals who will stop at nothing to get their way – seceding from the Union in 1861, refusing to obey Civil Rights legislation in the 1960s, shutting the government in 1995, and risking the full faith and credit of the United States in 2010.

Newt Gingrich’s recent assertion that public officials aren’t bound to follow the decisions of federal courts derives from the same tradition.

This stop-at-nothing radicalism is dangerous for the GOP because most Americans recoil from it. Gingrich himself became an object of ridicule in the late 1990s, and many Republicans today worry that if he heads the ticket the Party will suffer large losses.

It’s also dangerous for America. We need two political parties solidly grounded in the realities of governing. Our democracy can’t work any other way.

The Defining Issue: Not Government's Size, but Who It's For

Mon, 19 Dec 2011 19:01:00 -0500

The defining political issue of 2012 won’t be the government’s size. It will be who government is for.

Americans have never much liked government. After all, the nation was conceived in a revolution against government.

But the surge of cynicism now engulfing America isn’t about government’s size. The cynicism comes from a growing perception that government isn’t working for average people. It’s for big business, Wall Street, and the very rich instead.

In a recent Pew Foundation poll, 77 percent of respondents said too much power is in the hands of a few rich people and corporations.

That’s understandable. To take a few examples:

Wall Street got bailed out but homeowners caught in the fierce downdraft caused by the Street’s excesses have got almost nothing.

Big agribusiness continues to rake in hundreds of billions in price supports and ethanol subsidies. Big pharma gets extended patent protection that drives up everyone’s drug prices. Big oil gets its own federal subsidy. But small businesses on the Main Streets of America are barely making it.

American Airlines uses bankruptcy to ward off debtors and renegotiate labor contracts. Donald Trump’s businesses go bankrupt without impinging on Trump’s own personal fortune. But the law won’t allow you to use personal bankruptcy to renegotiate your home mortgage.

If you run a giant bank that defrauds millions of small investors of their life savings, the bank might pay a small fine but you won’t go to prison. Not a single top Wall Street executive has been prosecuted for Wall Street’s mega-fraud. But if you sell an ounce of marijuana you could be put away for a long time.

Not a day goes by without Republicans decrying the budget deficit. But the biggest single reason for the yawning deficit is big money’s corruption of Washington.

One of the deficit’s biggest drivers — Medicare – would be lower if Medicare could use its bargaining leverage to get drug companies to reduce their prices. Why hasn’t it happened? Big Pharma won’t allow it.

Medicare’s administrative costs are only 3 percent, far below the 10 percent average administrative costs of private insurers. So why not tame rising healthcare costs for all Americans by allowing any family to opt in? That was the idea behind the “public option.” Health insurers stopped it in its tracks.

The other big budgetary expense is national defense. America spends more on our military than do China, Russia, Britain, France, Japan, and Germany combined. The basic defense budget (the portion unrelated to the costs of fighting wars) keeps growing, now about 25 percent higher than it was a decade ago, adjusted for inflation.

That’s because defense contractors have cultivated sponsors on Capitol Hill and located their plants and facilities in politically important congressional districts.

So we keep spending billions on Cold War weapons systems like nuclear attack submarines, aircraft carriers, and manned combat fighters that pump up the bottom lines of Bechtel, Martin-Marietta, and their ilk, but have nothing to do with 21st-century combat.

Declining tax receipts are also driving the deficit. That’s partly because most Americans have less income to tax these days.

Yet the richest Americans are taking home a bigger share of total income than at any time since the 1920s. Their tax payments are down because the Bush tax cuts reduced their top rates to the lowest level in more than half a century, and cut capital gains taxes to 15 percent.

Congress hasn’t even closed a loophole that allows mutual-fund and private-equity managers to treat their incomes as capital gains.

So the four hundred richest Americans, whose total wealth exceeds the combined wealth of the bottom 150 million Americans put together, pay an average of 17 percent of their income in taxes. That’s lower than the tax rates of most day laborers and child-care workers.

Meanwhile, Social Security payroll taxes continue to climb as a share of total tax revenues. Yet the payroll tax is regressive, applying only to yearly income under $106,800.

And the share of revenues coming from corporations has been dropping. The biggest, like GE, find ways to pay no federal taxes at all. Many shelter their income abroad, and every few years Congress grants them a tax amnesty to bring the money home.

Get it? “Big government” isn’t the problem. The problem is big money is taking over government.

Government is doing less of the things most of us want it to do — providing good public schools and affordable access to college, improving our roads and bridges and water systems, and maintaining safety nets to catch average people who fall — and more of the things big corporations, Wall Street, and the wealthy want it to do.

Some conservatives argue we wouldn’t have to worry about big money taking over government if we had a smaller government to begin with.

Here’s what Congressman Paul Ryan told me Sunday morning when we were debating all this on ABC’s “This Week”:

If the power and money are going to be here in Washington, that’s where the influence is going to go … that’s where the powerful are going to go to influence it.

Ryan has it upside down. A smaller government that’s still dominated by money would continue to do the bidding of Wall Street, the pharmaceutical industry, oil companies, big agribusiness, big insurance, military contractors, and rich individuals.

It just wouldn’t do anything else.

If we want to get our democracy back we’ve got to get big money out of politics.

We need real campaign finance reform.

And a constitutional amendment reversing the Supreme Court’s bizarre rulings that under the First Amendment money is speech and corporations are people.

An Offer For President Obama

Wed, 14 Dec 2011 18:39:00 -0500

An Offer For President Obama