The UC Berkeley public policy professor assesses the fallout from sequestration, the most recent jobs report and whether austerity is working.
Former U.S. labor secretary Robert Reich
Tavis: Just how successfully this country is pulling out of the recession depends on which side of the economic divide you’re on, I suspect – Wall Street booming, the housing market rebounding in some areas, the stock market soaring, and the latest jobs numbers are encouraging for some, but maybe not so positive for the rest of us.
The sequestration taking its toll on programs from school lunches to defense contracts to long-time unemployment. It isn’t budging. Joining us to talk about where we are and why we’re here, and for that matter, where we’re headed, Robert Reich, professor of public policy at UC Berkeley and former secretary of Labor under, of course, Bill Clinton. He joins us tonight from the Berkeley campus. Secretary Reich, good to have you back on this program, sir.
Robert Reich: Hi, Tavis. Good to be here, thank you.
Tavis: A lot of copy I just read. The short of it is these job numbers are still anemic, as I see it. How do you see it?
Reich: Yeah, this is one of the most anemic recoveries that we’ve experienced in this country in terms of job growth and wages. In fact, wages continue to drop, adjusted for inflation, and I’m talking about median wage. About half of Americans are, even if they have jobs, are in jobs that pay less than the typical job paid before the recession.
Tavis: Why is this so stubborn?
Reich: I think largely because America is suffering something that people don’t talk enough about in my view, and that is widening inequality. Most of the gains of economic growth – in fact, all of the gains of growth since the recession have gone to the top, the very top, the top 1 percent, the top 1/10th of 1 percent.
The middle class and everybody aspiring to join the middle class, it just doesn’t have the purchasing power to go and keep the economic going. You can’t have a strong economy without a strong and growing middle class.
Tavis: I’m not naïve in asking you this question, but Louis Brandeis once said that you can either have the wealth concentrated in the hands of a few or you can have democracy, but you cannot have both. That’s becoming more and more, to your point, the way this country is run, the way the deck is stacked.
Yet to your point, there isn’t a lot of conversation about it, which leads me to ask what is it going to take for us to have a real conversation about income inequality, because he’s right – you can’t sustain a democracy this way long-term?
Reich: Well, you cannot sustain a democracy, Tavis. You also can’t sustain an economy long-term. Even the rich would do better with a smaller share of a rapidly growing economy in a society that was not as divisive as we have now than they are now with a very large share of an economy that’s barely growing because the middle class doesn’t have the purchasing power, and a society that is increasingly divided.
I think what it takes, and what it took, I think the parallel, the most, I think, revealing parallel is 1901, when we had, again, a wide divide between rich and poor. We had corruption of our politics by big money, and we had suddenly, Teddy Roosevelt became president and we had this great yearning the people showed, almost a kind of a desperation that they needed for progressive reform and they had progressive reform.
They put pressure on politicians, they became organized and mobilized and energized to demand the kind of reforms that were necessary. I think that that will happen. I don’t know what the tipping point is, but we are going to have to reach a tipping point pretty soon because we have not seen inequality to this extent in the United States since the late 19th century.
Tavis: I’ve said consistently, as you know, that poverty is threatening our democracy. When you talk specifically about this growing gap between the have-gots and the have-nots, one out of two Americans either in or near poverty – that is to say in poverty or low income – again, those numbers are unsustainable long-term, so I’ve argued that poverty is threatening our very democracy.
What I love about your book in part is the subtitle “What Has Gone Wrong with Our Economy and Our Democracy and How to Fix It.” That’s a long way of getting to this particular point. How might we advance the cause of this conversation if people saw this not just as an economic conundrum but indeed something that is threatening our democracy long-term?
Because I love the way you’re linking these two. I find that people either want to talk about democracy and however they view it, or they talk about the economy, but the link between the two is not often made. Does that make sense?
Reich: You have to connect the dots, and I think that’s the problem in this country. We aren’t connecting the dots. We’re not seeing that this kind of raging inequality and the shrinkage of the middle class, the difficulties that the poor are having even getting into the middle class, are intimately related to the failures of our democracy, the divisiveness, the bitterness that we’re now experiencing, the inability of Congress to do much of anything.
We have seen historically, Tavis, that times of high inequality are also times of high divisiveness in America, in American politics, high polarization. Why is that the case? Because when so many Americans feel frustrated and angry, when they feel like they’re doing everything they’re supposed to be doing but they can’t get ahead, they are very susceptible to demagogues, on the right or the left, who are basically pointing the finger of blame at scapegoats.
Immigrants or the poor or the rich or the French or anybody else who might be an easy target of blame, instead of looking at the system as a whole.
Tavis: How, then, in the midst of all of that, does austerity become the answer?
Reich: Austerity is not the answer. In fact, austerity economics of the kind we’re practicing right now has shown to be a huge failure. If you look what’s happening in Europe, they are moving into – in fact, most European nations are already into recession because they decided that cutting their budget deficits was more important than creating jobs.
Now when you have a lot of unemployment, that’s the worst time to cut your budget deficit because the government has got to be the spender of last resort. This is something we understood and learned during the 1930s, 1940s. World War II actually got the economy back going.
I don’t want to suggest or have anybody read me as suggesting that we need another war, but that mobilization, that government spending on such a grand scale, got us out of the Depression and finally into prosperity.
Our budget deficit, in fact, our budget debt at the end of World War II as a percentage of the overall economy was much, much greater than it is now. But instead of hunkering down and cutting the budget, what we did in the 1950s was invest in our workforce, invest in college education, invest in retraining.
We created the interstate highway system. We invested in infrastructure. We built the middle class and helped poor people get into the middle class. That’s what we’re not doing now.
Tavis: I’m frustrated consistently by this debate in Washington, this pseudo-debate in Washington, because words matter, words make a difference, and words have meaning, and you keep using the word “investment,” and I agree with you that these kinds of outlays, these kinds of budget priorities, would, in fact, be read by me and many other fellow citizens as investments.
But you have folk on the right who don’t read it as an investment. They read it as trying to spend your way out of the mess that you’re in, and you don’t dig a deeper hole by spending more money that you don’t have. You’ve got to live within your means.
You’ve heard this story time and time again, or this rationale time and time again. But talk to me about the difference between what you see as an investment and what others on Capitol Hill see as throwing money down a black hole.
Reich: Well it’s entirely different. Families understand the difference. A family faced with a choice of borrowing money for a family vacation or borrowing money to send a kid to college understands that sending the kid to college is an investment in the future, because that kid is going to earn more.
That kid is going to be more productive and more of a contributor to society. Taking the family vacation doesn’t do anything. Well, we ought to see the budget in that way, the federal budget. There are things in that budget that are the equivalent of taking a vacation – nice to do, not necessary, possibly not necessary.
We have huge amounts of corporate welfare, bailouts. We have subsidies going to big corporations, to agriculture, to the pharmaceutical industry. We have a giant defense industry. But in terms of productive investment, in terms of making the nation more productive in the future, there is nothing better than education, including early childhood education.
Access to college education for many of our children who can’t afford it, better roads, better bridges, better ports, better sewers. All of this builds up our productive capacity for the future. There is a world of difference between the two kinds of spending.
Tavis: And what are we to make of sequestration at this point? Congress couldn’t find the wherewithal to get anything done a year ago; sequestration becomes the fallback. Now that we are into sequestration, they are now starting to walk it back, at least on certain projects, not on others.
So how do the American people read what this sequestration is or isn’t, is going to be or not going to be in the coming weeks and months?
Reich: Quite frankly, Tavis, I think most Americans don’t really know what sequestration is. It’s a complicated word. It’s a word that causes the eyes to glaze over. What’s actually happening, and it’s important that people see this, what’s actually happening is that we are cutting programs for the most vulnerable people in our society, and for the lower middle class and for much of the middle class.
Programs having to do with education and job training, nutrition assistance for the poor and for the middle class and the working class, women, infants, and children, Head Start programs – all of these things that actually are helping or would otherwise help the poor and lower middle class become more productive citizens, we are basically cutting all of these things out.
By the same token, if you got some upper middle class people or some middle class people that get inconvenienced at the airport, well, then Congress says, of course, those people should not have to deal with sequestration, and we should not have air traffic controllers who are being cut.
Well, look, we’ve got to see the whole ball of wax. Sequestration right now makes no sense at all. It is dangerous for this economy. It’s why the economy is not creating as many jobs as we should be creating.
Tavis: To read more about some of the solutions to the financial quagmire that we find ourselves in, pick up a copy of the new book, now out in paperwork, from former Labor secretary Robert Reich, now at UC Berkeley.
The book is called “Beyond Outrage: What Has Gone Wrong with Our Economy and Our Democracy and How to Fix It.” Secretary Reich, as always, sir, an honor to have you on this program. Thanks for your insights.
Reich: Thanks, Tavis.
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