Robert ReichBack to OpinionRobert Reich

The seven biggest economic lies

The president’s jobs bill doesn’t have a chance in Congress — and the Occupiers on Wall Street and elsewhere can’t become a national movement for a more equitable society – unless more Americans know the truth about the economy. Here’s a short effort to rebut the seven biggest whoppers now being told by those who want to take America backwards. The major points:

1. Tax cuts for the rich trickle down to everyone else. Baloney. Ronald Reagan and George W. Bush both sliced taxes on the rich and what happened? Most Americans’ wages (measured by the real median wage) began flattening under Reagan and have dropped since George W. Bush. Trickle-down economics is a cruel joke.

2. Higher taxes on the rich would hurt the economy and slow job growth. False. From the end of World War II until 1981, the richest Americans faced a top marginal tax rate of 70 percent or above. Under Dwight Eisenhower it was 91 percent. Even after all deductions and credits, the top taxes on the very rich were far higher than they’ve been since. Yet the economy grew faster during those years than it has since. (Don’t believe small businesses would be hurt by a higher marginal tax; fewer than 2 percent of small business owners are in the highest tax bracket.)

3. Shrinking government generates more jobs. Wrong again. It means fewer government workers – everyone from teachers, fire fighters, police officers, and social workers at the state and local levels to safety inspectors and military personnel at the federal. And fewer government contractors, who would employ fewer private-sector workers. According to Moody’s economist Mark Zandi (a campaign advisor to John McCain), the $61 billion in spending cuts proposed by the House GOP will cost the economy 700,000 jobs this year and next.

4. Cutting the budget deficit now is more important than boosting the economy. Untrue. With so many Americans out of work, budget cuts now will shrink the economy. They’ll increase unemployment and reduce tax revenues. That will worsen the ratio of the debt to the total economy. The first priority must be getting jobs and growth back by boosting the economy. Only then, when jobs and growth are returning vigorously, should we turn to cutting the deficit.

5. Medicare and Medicaid are the major drivers of budget deficits. Wrong. Medicare and Medicaid spending is rising quickly, to be sure. But that’s because the nation’s health-care costs are rising so fast. One of the best ways of slowing these costs is to use Medicare and Medicaid’s bargaining power over drug companies and hospitals to reduce costs, and to move from a fee-for-service system to a fee-for-healthy outcomes system. And since Medicare has far lower administrative costs than private health insurers, we should make Medicare available to everyone.

6. Social Security is a Ponzi scheme. Don’t believe it. Social Security is solvent for the next 26 years. It could be solvent for the next century if we raised the ceiling on income subject to the Social Security payroll tax. That ceiling is now $106,800.

7. It’s unfair that lower-income Americans don’t pay income tax. Wrong. There’s nothing unfair about it. Lower-income Americans pay out a larger share of their paychecks in payroll taxes, sales taxes, user fees, and tolls than everyone else.

Demagogues through history have known that big lies, repeated often enough,  start being believed — unless they’re rebutted. These seven economic whoppers are just plain wrong. Make sure you know the truth – and spread it on.

Published by arrangement with RobertReich.org.

Robert Reich is Chancellor’s Professor 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. He has written 11 books (including his most recent, “Supercapitalism,” which is now out in paperback).

 

Comments

  • http://twitter.com/leeand00 leeand00

    Snappy Answers to Stupid #OccupyWallStreet Taunts: http://www.ourfuture.org/blog-entry/2011104110/seven-snappy-comebacks-those-lame-anti-occupy-talking-points

  • Josepho

    This is just plain stupid.  Nothing that was said was supported by economic theory.  It would be nice to once find a so called expert actually know something about what they are talking about.  A first year econ major would be able to produce a more intelegent piece then Riech did.  All he did is take cheap shots at the Republicans.  How about explaining Kaynesian economics.  And then explain the difference between Kaynesiam economics and the theroies of Milton Friedman.  And then close with an explination of Goodheart’s Law.  Reich doesn’t have a clue about any of this.  His opinion isn’t worth the bandwidth to put it on my screen!!

  • Crickethubbs

    R U kiddn me, Josepho???

  • AdamSmith

    It’s Keynesian economics. I don’t know any nicely growing economy now (Singapore, China, Brazil, etc) that isn’t using Reichs’ methods.

  • John Ross

    Unlike so many other economists, Mr. Reich has learned from his years of experience and he writes clearly so everyone can understand exactly what he is saying, and he is right. I just hope enough people think about his warning so we can stop the drive backward to 18th and 19th century economics.

  • http://freeourfreemarkets.org Steve Banicki

    When the consumer is scared he hoards cash. The same is true with business. When they are not sure about the future, they do not invest in new plant and equipment. They stay liquid until they are certain that any money invested will provide a reasonable return in the future. Otherwise, they hang on to cash waiting for a brighter day. It does not matter that interest rates and prices are low; there is fear that they may fall further or worse yet, a major economic calamity may occur. Some call this a liquidity trap

    .Maybe this is the problem many republicans have with the government stepping up and investing in infrastructure, oil exploration, developing other sources of energy, investing in education, implementing high speed internet and other such projects that would increase our future productivity.Maybe they are not sure we have a future. Further, maybe we have a president who refuses to demand congress do the right thing.  If so, we need to replace both the president and congress now. More:  http://bit.ly/pyTUPE

  • Michaelantelope

    Hey Josepho –
      Before you go calling someone stupid perhaps you should learn how to spell, Keynesian… and Reich!  Especially when his name is printed on the same page as your ignorant comments.  The final disgrace to your ill conceived rant is your (I suppose understandable) misspelling of the word
     intelligent!  Which qualifies you for something below just PLAIN stupid.

  • http://Yahoo.com David_henrygsMANN

    Dear Mr. Reich I must take issue with your conventional comments as I did with Madame Christine La Garde.  As A dedicated, and devoted follower of Henry George, I think it’s high time we Georgist’s were not only in the verbal econonomic, social & political conversations both here and in the entire world, that also means someone, (like me, David M. MANN), should be elected to  actually put forth Henry George’s views in MY administration.  I’m actually sick and tired of not being allowed to talk, ether live, or in an editorial/Letter comment, nor see anyone electable as A Bona-Fide follower of Henry George, Mr. Reich!   I dare you to let ME go on local, or national domestic U.S., commercial and PBS T.V., either live or by studio, or by telephone so I can intelligently argue the Henry George SOLUTION for G-D’s, AND the entire planet’s SAKE with YOU!  I want AND NEED to be able to express all my PRO-Georgist views as The Independent Henry George candidacy for President of The U.S., of, & for 2012!   Here’s My Personal/Presidential Web-Site:  https://sites.google.com/davidmmannsplace!  Again, Mr Reich:  Please discuss this with ALL the Producers of the PBS, & commercial P.A. Shows–WTTW-Channel Chicago Tonight, Channel 13, in Washington, D.C,. Channel 28, In L.A., With Tavis Smiley, & Meet The Press on NBC, Face The Nation on CBS, This Week With Christiane Ananpour on ABC, & CNN.  I  NEED to argue my case to the Editorial Boards of The Major Newpapers of Chicago, L.A., Washington, D.C., Philadelphia, N.Y.C., not to mention to Today’s Chicago Woman!  I Am Always, Your Dedicated, Devoted, Henry George Friends In Peace, David M. MANN

  • claudia

    Reich for president! I couldn’t agree with you more,but do you see a way out of this situation? It seems like we’re so deep in this corruption,manipulation,exploitation and brain washing that the “situation” is running itself. If we (the 99%) are supposed to create change and we are so rapidly being stripped of our power,how do you see it happening?

  • slmndr

    Yes, we would like
    to TAX LIKE IKE.
    (Pass it on)

  • Andrew Bassett

    “It would be nice to once find a so called expert actually know something about what they are talking about.”

    Check out “Peter Schiff was right” on Youtube.