Former labor secretary Robert Reich

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Former labor secretary and Aftershock author explains why, economically, America is almost two separate countries.


Tavis: Robert Reich is a former U.S. secretary of labor and now a professor of public policy at Cal Berkeley. He is also the co-founder or The American Prospect and author of a new text. It’s called “Aftershock: The Next Economy and America’s Future.” Mr. Secretary, good to have you back on the program, sir.
Robert Reich: Well, Tavis, good being here.
Tavis: Glad to have you. So many things I want to ask you, and I’m going to get to the book, I promise.
These Bush tax cuts, first of all, though. Democrats have said now that they’re going to delay that vote until after the midterm elections, for whatever reason, whatever political reason. Republicans now want to press that vote on this side of the elections. What do you make of the politics around these Bush tax cuts and what ought to happen to them?
Reich: I think Democrats are making a mistake. I think having a vote before the elections would actually highlight the difference between the parties, because Republicans want to extend the Bush tax cuts to the top 2 percent at a time when so much wealth and income has been going to the top, and those Bush tax cuts were mostly benefitting the top 2 percent to begin with, and the Obama administration and a lot of the other Democrats say, “No, no, no, we want the Bush tax cuts to be extended for the bottom 98 percent.
We can’t afford – the budget deficit is big enough. We can’t afford to give the people at the top another $36 billion next year windfall that they never even expected. So I think it’s a fight, another fight the Democrats should take on. It would illustrate the differences between the parties. But apparently, the Democrats are punting.
Tavis: What do you make, though, of the Republicans now, to your points about Democrats punting, Republicans wanting to force this vote before the elections?
Reich: Well, Republicans think that any tax increase, even on the top 2 percent, can be used to convince the public that the Democrats are in favor of taxing everybody. But you see, that’s why I think it’s good for the Democrats to show the distinction.
The Republicans have been getting away for years by saying that the estate tax is a death tax; any tax on people at the very top is going to be a tax on everybody. Well, that’s just ridiculous. Under Dwight Eisenhower, who nobody would claim is a socialist or a radical back in the 1950s, president of the United States, former general, Republican, the marginal tax rate on people at the very top was 91 percent, Tavis.
It’s ridiculous. We’re now talking about whether to go back to the Clinton marginal tax rate of 39 percent on the top, as scheduled, for the top 2 percent. Well, it’s a no-brainer.
Tavis: There are folk who do believe, as you well know, that we are, in 2010, to your point now, woefully overtaxed.
Reich: Well, the middle class is woefully overtaxed, the working class, poor people, woefully overtaxed. Eighty percent of Americans pay more in payroll taxes than they do in income taxes. Sales taxes take a much bigger chunk out of the pay of average working people than they do out of the pay of people at the top.
As I say in the book, wages have flattened for most people in this country for 30 years, if you adjust for inflation. So obviously, people are overtaxed. But the top is not overtaxed. (Laughs) Last year you had the top 25 hedge fund managers, each of them making an average of $1 billion and paying an average tax of 17 percent. That’s what somebody earning $30,000 pays.
Tavis: I asked this question of someone on this program the other night, but they were not a former U.S. labor secretary, so I’m glad that I can ask you this very same question. Politically, I understand why we talk, why elected officials or those who want to be, talk about the middle class all the time.
What troubles me is that there’s so much conversation about the middle class and nobody ever talks about the weak working class. Nobody talks about those who are in poverty. We don’t even want to say the word “poverty” in our public discourse. The language we use seems to be all wrong.
It’s minimum wage, not a living wage. We are experiencing a “jobless recovery.” The whole language around our discourse troubles me, and we can’t seem to get to a conversation about the very poor in this country. Why is that?
Reich: Well, partly because the very poor very often are regarded as people who are somehow different, either because they’re assumed to be Latin Americans or African Americans, or they are just assumed to be somewhat different.
What a lot of people don’t realize is that your chance, if you are just a typical American, of falling into poverty sometime during your 30 or 40 years of working life is almost one out of three, and the poverty rate keeps on going up. It’s not just them; it’s everybody now after the great recession knows that they have a pretty good chance of falling into poverty.
So when I talk about the middle class and working class, I’m talking about everybody. I’m talking about everybody except the people at the very top. The people at the top – and when I talk like this people say, “You’re a class warrior,” and I say back, “I’m not a class warrior, I’m a class worrier. W-O-R-R-I-E-R.” (Laughter) Because I’m worried about what’s happening in this country.
When so much income and wealth are going to the top, a record amount – we haven’t seen this since 1928, and you know what happened in 1929, with the great crash – we can’t hope to have a good economic recovery.
Tavis: To your point now – let me say this, not you – but I think our arrogance, our hubris as Americans, our false sense of pride, in some ways, doesn’t allow us to ever wrestle with the fact that historically, there is no empire, as you well know, in the world that did not at some point falter or fail. Every empire eventually goes down.
I raise that to ask whether or not it is even possible that we can sustain this country at the rate we’re going, to your point now, where the rich keep getting richer, the poor keep getting poorer, the class divide gets greater. Tell me why I shouldn’t believe that at some point we’re going to absolutely just implode under the weight of extreme poverty in this country.
Reich: Well, we’ve already sort of imploded. The Great Depression marked the end of the time when most Americans could continue to spend by going deeper and deeper into debt. For 30 years the median wage in this country has gone nowhere. The poor have gone down, the working class has gone down, the people in absolutely the middle have seen their wages going absolutely nowhere.
The only reason that they could continue to buy and keep the American economy going was because they went deeper and deeper into debt, but of course that debt bubble burst.
So now we’ve got to face, for the first time in 30 years, that it’s not just the poor who are doing worse, but the typical American worker smack in the middle is doing worse. In fact, I think it’s an opportunity, Tavis, for the middle class and the working class and the poor to get together and to say, “Wait a minute. We need education and job training. We need better infrastructure. We need better opportunities. We need a tax structure that is actually favorable to us instead of favorable to people at the top.”
Tavis: So if these two groups, the weak working class and the middle class, do not come together as you’ve just suggested, to make this argument, what is America’s next economy?
Reich: Well, I worry that it’s going to be years and years and years of high unemployment, which falls particularly hard on the working class and the poor.
Tavis: Have we seen the worst yet, unemployment-wise?
Reich: I hope we’ve seen the worst. My greatest fear, though, is that unemployment keeps on creeping upward. We never get out of the double digits, or 9.6, maybe 10 percent, but of course that hides a lot of additional unemployment, and our politics turns uglier.
Because when people are fearful and angry and anxious, you know what happens – there are demagogues around who want to channel that anger into the politics of resentment, against immigrants, against the poor, against even the rich, if you want to blame.
The politics of blame doesn’t know any boundaries. Or against Muslims, against anybody. You already hear it in politics, you hear this hatefulness, and I think it is absolutely related to the insecurity and fear and kind of frustration that so many Americans feel. It’s fodder for demagogues.
Tavis: Americans keep feeling the aftershocks, to your book’s wonderful title, they keep feeling the aftershocks of this recession, and many believe, as you know, in every poll, survey and study that President Obama, respectfully, is not on the right track, not leading us in the right direction, as it were, on the economy. Your thoughts?
Reich: Well, every president gets either credited or blamed for the economy, and much of it is beyond what a president can do. I’m a huge fan of President Obama. I think that if there’s any criticism to be leveled at all, it’s that he did not anticipate, nor did his economic team anticipate how bad the economy was getting, how bad the economy that he inherited from George W. Bush actually was, and that the actual stimulus probably should have been even bigger.
The bailout of Wall Street should have come with strings attached so that Wall Street had to help Main Street, had to help small businesses, had to help people whose mortgages were underwater.
Tavis: I got 30 seconds here and I don’t want to make you political in this sense, but it is in the news. The president now has a chance to reshape his economic team that you referred to a moment ago. Larry Summers is going back to Harvard, Christina Romer already back out here in California, Peter Orszag now writing for “The New York Times.”
So he gets a chance to reshape his economic team. He should reshape it in what way?
Reich: Well, I don’t want to be presumptuous, but I do think that he could shape it in a way that spoke more to the problems of Main Street rather than Wall Street, in a way that was very sensitive to what average working people, middle class, poor people are going through in this country.
We almost have two countries now, and we’ve got people who are extraordinarily wealthy, and then everybody else. You want an economic team and you want a president to really be fine-tuned, sensitive to what’s going on for average people and working people and the poor.
Tavis: He’s the former U.S. secretary of labor, he is the author the new book “Aftershock: The Next Economy and America’s Future.” Robert Reich, good to have you on the program, Mr. Secretary.
Reich: Tavis, good to see you.
Tavis: Thank you. Good to have you on.
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Last modified: April 26, 2011 at 12:28 pm