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Robert Reich
NationofChange / Op-Ed
Published: Saturday 1 September 2012
“Inequality in America is at record levels. The 400 richest Americans now have more wealth than the bottom 150 million of us put together.”

Labor Day 2012 and the Election of 2012: It’s Inequality, Stupid

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The most troubling economic trend facing America this Labor Day weekend is the increasing concentration of income, wealth, and political power at the very top – among a handful of extraordinarily wealthy people – and the steady decline of the great American middle class.

Inequality in America is at record levels. The 400 richest Americans now have more wealth than the bottom 150 million of us put together.

Republicans claim the rich are job creators. Nothing could be further from the truth. In order to create jobs, businesses need customers. But the rich spend only a small fraction of what they earn. They park most of it wherever around the world they can get the highest return.

The real job creators are the vast middle class, whose spending drives the economy and creates jobs.

But as the middle class’s share of total income continues to drop, it cannot spend as much as before. Nor can most Americans borrow as they did before the crash of 2008 — borrowing that temporarily masked their declining purchasing power.

As a result, businesses are reluctant to hire. This is the main reason why the recovery has been so anemic.

As wealth and income rise to the top, moreover, so does political power. The rich are able to entrench themselves by lowering their taxes, gaining special tax breaks (such as the “carried interest” loophole allowing private equity and hedge fund managers to treat their incomes as capital gains), and ensuring a steady flow of corporate welfare to their businesses (special breaks for oil and gas, big agriculture, big insurance, Big Pharma, and, of course, Wall Street).

All of this squeezes public budgets, corrupts government, and undermines our democracy. The issue isn’t the size of our government; it’s who our government is for. It has become less responsive to the needs of most citizens and more to the demands of a comparative few.

The Republican response – as we saw dramatically articulated this past week in Tampa – is to further reduce taxes on the rich, defund programs for the poor, fight unions, allow the median wage to continue to fall, and oppose any limits on campaign contributions or spending.

It does not take a great deal of brainpower to understand this strategy will lead to an even more lopsided economy, more entrenched wealth, and more corrupt democracy. 

The question of the moment is whether next week President Obama will make a bold and powerful rejoinder. If he and the Democratic Party stand for anything, it must be to reverse this disastrous trend.

This article was originally posted on Robert Reich's blog.



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ABOUT Robert Reich

 

ROBERT B. REICH, one of the nation’s leading experts on work and the economy, is Chancellor’s Professor of Public Policy at the Goldman School of Public Policy at the University of California at Berkeley. He has served in three national administrations, most recently as secretary of labor under President Bill Clinton. Time Magazine has named him one of the ten most effective cabinet secretaries of the last century. He has written thirteen books, including his latest best-seller, “Aftershock: The Next Economy and America’s Future;” “The Work of Nations,” which has been translated into 22 languages; and his newest, an e-book, “Beyond Outrage.” His syndicated columns, television appearances, and public radio commentaries reach millions of people each week. He is also a founding editor of the American Prospect magazine, and Chairman of the citizen’s group Common Cause. His widely-read blog can be found at www.robertreich.org. Robert Reich's new film, "Inequality for All" is available on DVD
and blu-ray, and on Netflix in February.

Mitt Madoff, Crawl Scion.

Mitt Madoff, Crawl Scion. Please just go away. This is like a bad dream.

Often said that the root of

Often said that the root of all evil is money..... But money is simply an abstract concept, ,some paper.... some ink. The root of all evil is ambition. What the hell does it prove to anyone if mitt adds another few mil. to his off-shore accounts? (He's already making $54,000/day. You read that right....per DAY.... for doing essentially nothing. He is exactly what he seems to be; an over coiffed stinking rich dilettante in pursuit of his hobby of running for public office). So what if he's got $250 mil or $265 mil. (after all, he's still giving up a whopping 13% to the government...... maybe), what difference does it make to him? You want to know who else is ambitious?....... Junkies........ They want junk and they can think about little else and when they have their junk, all is right with the world.... until they need some more. And the analogy is not an idle one.

The problem is not the

The problem is not the ambition, but the misplaced ambition morphed into unmitigated greed. That is, if we define 'ambition' more generally as initiative, effort and eagerness toward a specific objective or result. True ambition is a good and necessary thing.

We all want our children to have ambition. We want them to be able to confront whatever appears in their life with open eyes, intelligence, a capacity to make things good and right. We do not want them burdened with hopelessness, as is emerging in recent decades (amazingly, much of the corruption by money correlates with the career actions by Romney and others like him). Nor do we want them to lack the compassion that normally moderates ambition away from greed. I cannot imagine one George Romney would be at all pleased with the path of destruction taken by his son, in accumulating $250M+.

Mitt and Paul (can we use moronii as a plural form of moron?) are seemingly hellbent on verbally promoting liberty, while simultaneously destroying liberty through a systematic dismantling of government. This all benefits the tiniest percentage who can rape the environment and further minimize their costs. The end result will create conditions that make people more dependent on other help-sources, like the churches, Mormon and otherwise.

Now, is it hard to imagine why the one American-soil church that most aggressively proselytizes the world, would value seeing one of their own ascend to the presidency? And if that were to happen, what would the consequences be for globalization (which was primarily jump-started in the eighties, by Bain-style LBO's and PE acquisitions) and the associated widening of wealth inequality? And how will this help with the looming climate change problem, which both major parties are fully ignoring at present?

Professor Reich, Railing

Professor Reich,

Railing against inequality is the wrong position, and falls right into a trap where complaints are dismissed as class warfare. The rich claim that capitalism is the best way of allocating financial resources, so the question becomes, "Is the financial sector worth what we pay it?". http://oecdinsights.org/2012/08/29/is-the-financial-sector-worth-what-we...

Excerpted from the article: "Benjamin Friedman holds, in The Moral Consequences of Economic Growth, that “greater opportunity, tolerance of diversity, social mobility, commitment to fairness and dedication to democracy” derive directly from economic growth. He shows that even during stagnation–let alone recession and depression–those values can vanish easily. Brad Delong observes, in reviewing Friedman, that if the majority of the people do not see an improving future, these values are at risk even in countries where absolute material prosperity remains high. Given rising political intransigence and loss of common social purpose in the U.S., and the rise of nationalistic political sentiments in Europe, the effects of increasing stagnation and inequality are becoming more evident, despite the financial sector’s phenomenal growth.

In a 2006 speech on the growing integration of the financial sector and the broader economy, Rodrigo deRato, Managing Director of the IMF, noted its supposed general stability and growth, and that from 1990-2005 the estimated sum of equity-market capitalization, outstanding total bond issues (sovereign and corporate) and global bank assets rose from 81% to 137% of GDP, while over-the-counter derivatives markets tripled in the latter five years to $285 trillion, six times global GDP, 50 times the U.S. public debt. So if the financial sector has worked, we should see proportional acceleration of growth plus improved consequences for all society.

This is not happening, as Cornia and Court report in Inequality, Growth and Poverty in the Era of Liberalization and Globalization.Global poverty reduction has stalled for 30-40 years, despite an approach to growth based on “…a neo-liberal policy package, [including] stringent focus on macroeconomic stability, liberalization of domestic markets, privatization, market solutions to the provision of public goods, and rapid external trade and financial liberalization.” They reveal that inequality has grown faster during the same period in the majority of countries for which data is available. The paper also shows that increased inequality greatly encumbers the climb from poverty and that excessively low or high levels of inequality impede growth, provoking various ills, including crime, social conflict and uncertain property rights. In the US, bank employees were found to be signing thousands of foreclosure documents without checking the information in them in so-called robo-signings that rendered the documents illegal."

So the answer is a resounding "No" They're not worth it, and our governments should insure that they cannot continue to game the system at our expense.

(Links to all references in OECD article)
See also previous OECD articles relevant to this issue:

http://oecdinsights.org/2012/06/28/what-can-nascar-teach-nasdaq-about-av...

http://oecdinsights.org/2012/06/27/going-with-the-flow-can-analog-simula...

See also regarding governments, financial risk and management: 'Hedging the Apocalypse' at http://somewhatlogically.com/?p=598

JRHULLS, I've read your reply

JRHULLS, I've read your reply to Dr Reich twice now and unless I'm mistaken, you have produced a more academic and wordy synopsis of a situation Dr Reich has "netted out" in more broad and accessible terms and made it easier for us grunts to grasp, get properly pissed about, and to act upon. As my grandson would say... w t f ?

According to recent reports

According to recent reports by the Congressional Budget Office and the OECD, over the past 30 yrs, average tax rates have fallen and income inequality has risen. The average U.S. tax rate in 2009 was 17.4%, the lowest level since 1979.

The CBO report (Distribution of Household Income and Federal Taxes, 2008, 2009, 7/10/12) also shows that since 1979, the share of after-tax income going to the top 20% of income earners has INCREASED 12% while the share going to the bottom 20% has DECREASED 19%.

These trends have given the U.S. the dubious distinction of having just about the most unequal income distribution of any country in the civilized world. Only Chile, Mexico, and Turkey have less income equality (OECD Factbook, 2011-12).

And Romney/Ryan and the Repugnicans want more tax breaks for the wealthy because they pay such a large share of the taxes. Yes, they do, and if income inequality continues to worsen, the rich will pay 100% of the taxes because they will have all the income. Fair is fair, right Romney?

A comparative study of min

A comparative study of min wage & tax impact in OECD countries.. Note the tax impact on full time work at min wage (percentage wise) is higher than the 13% Romney proudly announced as the rate he paid..
http://www.oecd.org/about/39005490.pdf

The paper has data up to 2006.. in some cases (e.g Can $ and Au $) erosion of US$ against those currencies make the picture even more bleak today..

The fact that a majority of

The fact that a majority of people loosing their jobs, their homes and their access to healthcare will vote for Romney points to the real problem leading this nation to ruin. Stupid people too frightened or too lazy to think for themselves.

The Democrats led by Obama

The Democrats led by Obama have to push for more tax brackets. We can keep the existing 6 brackets as are, but we need to extend the current 6 to 10 more for a total of 16 Brackets. The existing 6 brackets only tax the lower 99% of the population, by stopping their progressivism at $380,000. We need Congress to add 10 more tax brackets to reach into the pockets of the rich. I would suggest these simple brackets: 37% over $1Million, 39% over $2Million, 41% over $3Million, 43% over $4Million, 45% over $5Million, 47% over $6Million, 49% over $7Million, 51% over $8Million, 53% over $9Million, and a top marginal rate of 55% for all income over $10Million. Now that is "Fair and Balanced".

It's the Obama-led Democratic

It's the Obama-led Democratic Party and the Republican Party, stupid!
Obama-led Dems have been and will remain a sieve against the the transfer of wealth from the many to the few. The sieve doesn't even slow the flow, much less reverse it. And dammitall, Reich, stop perpetuating the MYTH that we live in a democracy! We don't, neither literally as to form of government nor figuratively as to electoral process.

Greg, man... you have to

Greg, man... you have to admit, at minimum, that in "theory" ours is a democracy and that we have the documentation to reclaim it at ANY TIME we choose to ge off our dead asses, realize our ignorance, get smart on our plight, and ACT TO RECLAIM OUR DEMOCRACY! We actually did that a century ago.

We DO live in a Democracy.

We DO live in a Democracy. BUT... that means nothing, unless we assert our individual responsibility toward that Democracy. We all need to Occupy, Think and Participate.

This is not about Democracy as a technical construct, but Democracy as an ideal wherein every individual has a voice and a value. Where we are all empowered.

Koch Bros. have been Occupying our halls of government for decades, with great success. The neoconservative extremists are finding they can successfully Occupy our Democracy with lies and distortions, money and lobbyists. So, as I see it, Mr. Reich is doing a good service to this Democracy, helping us all to see the growing power imbalance, and nudging us to get off our butts, speak up and act up, to bring it back into balance.

I for one do not intend my children to end up in a new US order where a few filthy rich are insulated, while the troubled masses fight to survive the fallout of climate-change. At present, the system is failed and failing. We need effective government. We need true leaders, in and out of government. We do not need to continue this parade of greedy hacks.

We need to make this Democracy work, and NOW.

Whenever Republicans attack

Whenever Republicans attack Democrats in the many million-dollar attacks on TV, one of their first "points" is "so-and-so (the Democrat) wants to raise taxes," and they feel that's one of their major advantages, because they don't have to admit that the Democrat only wants to raise taxes on the rich, not the middle class.

"Raises taxes, big government," blah-blah-blah. The people expect the FDA and the USDA to ensure that our food is safe to eat, but hmm, that takes big government, doesn't it? And when a hurricane devastates a large portion of the Gulf States, we expect FEMA to be there in a hurry to help out (unlike Bush's disastrous performance with Katrina). And if terrorists plot to attack the U.S., we expect the FBI and the CIA to have good intelligence, share it, and take protective measures to ensure our safety. And we expect our votes to be counted accurately, our fires to be put out, emergencies to be responded to, and criminals to be caught. And bridges to be strengthened and highways to be repaired!

But hey, that takes big government, doesn't it? And guess what? Government needs revenue, and their source of funds is taxes, and since the super-rich got where they are by the graces of government, and they have more wealth to guard than us lowly plebes, why I just think it's only fair that they pay taxes at a rate that at least equals, if not surpasses, the rate that working slobs have to pay.

Somehow the Tea Party screamers don't connect the dots. Ask them which government service they're willing to do without, and they usually say Welfare or Entitlements, presumably because they feel they'll never need either. But that's only a small part of big government. In the final analysis, they don't want any government service cut that affects them in a negative way, and that includes quite a bunch.

So what's all this fight against "Big Government"? It turns out they got their screaming orders from On High, no, not from Heaven, but from the upper reaches of the ruling class in our classless society (snicker-snicker!), so-called.

But those damned Democrats, just want to foster Class Warfare and all that Marxist stuff. We can't listen to those elitist liberals, can we? Some of them are even Godless, according to that brilliant and skinny bottle blonde named Ann.

I guess Willard and the Koch Brothers can giggle to themselves as they count their unearned wealth. All's well in the Plutocratic Republic of America.

(And what the hell, they can buy their own security force to guard themselves and their loot, anyway!)

It's organized crime

It's organized crime stupid!!! The US House of NON-Representatives is owned and operated by Organized Crime!

It's racism, stupid, with the

It's racism, stupid, with the teabaggers.

There's no metric like

There's no metric like economic inequality that so accurately predicts/tracks the happiness of societies. Social mobility--"the American dream" of moving up in the world is less likely in the USA than in almost any other developed Western country. I'm just hoping to work here in Canada to cushion our crash down to the same inequality gap, and I think we all have the same non-violent battle ahead of us. Austerity is not the answer, and deficits are not the problem.

Social mobility is a

Social mobility is a misunderstanding if we consider that the desire of many Americans is to just to pay their bills and have a decent home and hopefully do something for their kids to help them get started.
When Freedom became entitlement to do what one wants, regardless of the needs of the community, and the privilege to take liberties with others, that our society suffers.
The real Americans, the native Indians, thought we were born to be one thing, and the job of the soul was to discover it. They maintained the land collectively, borrowing it and preserving it for future generations.

Now that is a beautiful thought to hold and to live by.

The worst thing that ever

The worst thing that ever happened in the United States was Horatio Alger. The American Dream has driven honest men into oblivion.

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