Robert Reich: Obama Needs To Teach The Public How to Get Out Of The Mess We’re In, But He’s Not

From Robert Reich’s blog:

The President wants businesses that hire new employees this year to get $5,000 per hire, in the form of a tax credit. That will come to about $33 billion. It’s good step. He’s also supporting a cut in the capital gains tax for small businesses. That makes sense; after all, small businesses generate most jobs.

But here’s the problem. Both of these measures, and many of the other tax cuts he’s proposing, give ammunition to supply-siders who think the way out of this awful economy is simply to cut taxes on businesses. If a new jobs tax credit is a good idea, why not a cut corporate in income taxes? If it’s useful to reduce capital gains taxes for small businesses, why isn’t it useful to reduce them for all businesses?

The answer, of course, is that across-the-board supply-side tax cuts for businesses don’t increase the demand for the things businesses produce. They’re useful only to the extent businesses are confident consumers are out there, able and willing to buy. Carefully targeted — as are the cuts the President is proposing — they can give businesses an extra nudge to hire. But without adequate demand, they’re useless.

Read the rest..

Reprinted with permission of the author.

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My Labor Day bitchfest, or salute to the working folks.

The base of my post is filched from Robert Reich’s blog post up today. I never miss a post and I read them over and over again. I use his posts to strengthen my arguments when talking to folks that do not see things as I do, or sadly..buy into the rightwing nutjobs fearmongering.

Labor Day 2009. It’s a sad labor day if you go by ‘the numbers’ of those out of work and/or struggling to make ends meet because they are underemployed. From Mr. Reich’s blogpost on the subject:

The latest employment figures (released this morning) show job losses continuing to grow. According to the payroll survey, job losses are increasing more slowly than in previous months. According to the household survey, they’re accelerating — from 9.4 percent of the workforce in July to 9.7 percent in August. Bottom line: almost one out of six Americans who need a full-time job either can’t find one or is working part-time. Meanwhile, wage growth among people who have jobs has just about stopped. The Economic Policy Institute reports that between 2006 and 2008, wages grew at an annualized rate of 4.0%; by contrast, over the past three months annual wage growth has plummeted to just 0.7%. At the same time, furloughs — requiring workers to take unpaid vacations — are on the rise: recent surveys show 17% of companies imposing them. More than 20% of companies have suspended their contributions to 401(k)s and similar pension plans.

Mr. Reich questions why the ‘media’ isn’t jumping all over these newest numbers. I do too as they seem to only report the numbers and then move on to Micheal Jackson’s funeral or some other bullshit storyline. He has an explanation that will not make anyone feel warm and fuzzy who isn’t among the top one to ten percenter’s. It’s frankly very scary to me when he lays it out in plain english..no spin required:

So why isn’t the media screaming? Partly because these job and wage losses are not, for the most part, falling on the segment of our population most visible to the media. They’re falling overwhelmingly on the middle class and the poor. Unemployment among those who have been in the top 10 percent of earnings is closer to 5 percent, and their earnings continue to climb — although, to be sure, much more slowly than before the meltdown. It’s much the same with health-care and pension benefits. Among people under 65 who are in the bottom 20% of incomes, only 21.9% have employer-sponsored health insurance — if they have a job at all. Half of all people nearing retirement age have a 401(k) balance of less than $40,000.(emphasis mine of course)

I would venture to say that our elite MSM looks down their nose at the middle class and the poor. They don’t count because they are just the ‘working classes’. As Robert Reich points out in his blog post, a report states 42 percent of consumer spending before the meltdown came from the top-earning 10 percent of Americans. This information is from a report authored by Bank of America and Merrill Lynch, not Mr. Reich.

But the middle class and the working poor are the laborers in America. They are the people that work to earn their money for the love of pete! The top one-to-ten percenter’s don’t work, they sit back and let their portfolio’s or the businesses they own do the work and/or earning for them.

Perhaps the middle class and working poor do not spend as much as the top dogs on frivolous crap because their wages have stagnated for over a decade. The cost of keeping health care for their families has gone through the roof. Putting kids through college also takes it’s toll on working Americans.

It’s morally wrong and pure bullshit to say the middle and working poor do not contribute to the economy as much as the top one-to-ten percent does. Let me leave you with Robert Reich’s pov on this:

This logic is morally and economically indefensible. If we’ve learned anything from the Great Recession-Mini Depression of the last 18 months, it’s that the skewing of income and wealth to the top has made our economy far less stable. When the majority of middle-class and poor Americans are either losing their jobs or feel threatened by job loss, and when those who still have jobs are experiencing flat or declining wages, there’s simply no way to get the economy back on track. The track we were on — featuring stagnant median wages, widening inequality, and job insecurity — got us into this mess in the first place.

A-friggin-men to Robert Reich. As an economist and left of center human being, he speaks truth to the powerful. He has plenty of bonafides and frankly he isn’t just a talking head that spews the latest line of bullshit. He is currently Professor of Public Policy at the Goldman School of Public Policy at the University of California, Berkeley. His wikipedia bio is here and his personally penned bio can be read here on his other website.

Sadly, the powerful don’t always listen to him. But I do..and so should you, m’dear reader. He boils down the rhetoric so that we can all understand it and digest it.

So have a good Labor Day Weekend you hard-working people. You have earned it, more than you know.

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Piloting The Bailout: Pirates At The Wheel

Treasury Secretary Henry Paulson has spent his initial allotment of $350 million in bailout funds, and it doesn’t seem as if there has been any impact on the economy.  Banks are still not making loans, businesses large and small have seen revenues decline, Detroit is about to implode, American workers are being layed off, left and right, and everyone is girding for a lean holiday season.

During his testimony before the House Committee on Financial Services yesterday, Secretary Paulson stated:

Recently I’ve been asked two questions. First, Congress gave you the authorities you requested, and the economy has only gotten worse. What went wrong and why won’t you use this authority for other industries? Second, if housing and mortgages are at the root of our economic difficulties, why aren’t you addressing this?

The answer to the first is that the purpose of the financial rescue legislation was to stabilize our financial system and to strengthen it. It is not a panacea for all our economic difficulties. The crisis in our financial system had already spilled over into our economy and hurt it. It will take a while to get lending going and repair our financial system, which is essential to an economic recovery. This won’t happen as fast as any of us would like, but it will happen much, much faster than it would have had we not used the TARP to stabilize our system. Put differently, if Congress had not given us the authority for TARP and the Capital Purchase Program and our financial system had continued to shut down, our economic situation would be far worse today.

The answer to the second question is that the most important thing we can do to mitigate the housing correction and reduce the number of foreclosures is to increase access to lower cost mortgage lending. The actions we have taken to stabilize and strengthen Fannie Mae and Freddie Mac, and through them to increase the flow of mortgage credit, together with our bank capital program, are powerful actions to promote mortgage lending. We are also working actively to reduce preventable foreclosures.

…We have done what was necessary as facts and conditions in the market and economy have changed, adjusting our strategy to most effectively address the urgent crisis and preserving the flexibility of the President-elect and the new Secretary of the Treasury to address the challenges in the economy and capital markets they will face in the coming months.

According to Secretary Paulson he and his crew have stabilized the situation, they have prevented the dominoes of our financial system from all falling.   Stabilizing the situation does not make the problems in the financial houses go away, it only postpones an ultimate reckoning.  It seems that Secretary Paulson, like his boss, is going to blithely walk-away from the mess, and leave it to the Obama administration to figure out how we (ultimately the taxpayers) will prevent any further hemorrhaging and repair our flawed financial system, and apply preventive measures so there is no recurrence.   Thank you George W. Bush for your leadership as you steered our ship in to these financial shoals, have a nice retirement.

While Secretary Paulson claims the situation has been stabilized, perhaps the secretary and his boss should be required to complete a lessons learned exercise.  Never mind a root cause analysis,  we know what caused the problem, a greedy financial sector aided and abetted by an incompetent, and criminally negligent administration.  To help the secretary and the lame duck with their assignment here are a few lessons they can compile for the next administration and Congress:

1. Do not appoint a pirate to regulate the pirates.
2. Study the legacy regulations, many of which were repealed but which had protected American tax payers for generations and bring  back sensible and necessary regulations on any entity engaging in business in the financial sector.
3. When the financial sector dreams up investment “products” that sound too good to be true (e.g. credit default swaps) release the forensic accounting hounds.
4. Aggressively investigate and prosecute systemic financial fraud, holding senior corporate officers personally accountable for the abuses committed  by their institutions.

In terms of the strategy for managing the disbursement of the remaining $350 million of the bailout fund, we can only hope that the Obama administration and the new Congress exercise due dilligence, and not feel constrained to continue any of the strategies or tactics employed by the current administration.  Just as there is more than one way to “skin a cat” there is more than one way stop and repair the damage done by pirates.

Someone who has a strong opinion on all of this is former Secretary of Labor and current professor at the University of California, Berkely, Robert Reich, who thinks the remaining bailout funds should be focussed on bottom-up spending.

I am no economist, no accountant or financial genius, I am just an American tax payer and soon to be beneficiary (hopefully) of Social Security and as far as I am concerned, I expect my government to prevent piracy on Wall Street, after all there are already plenty pirates out and about, we don’t need it at home too.

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My Newest Hero: Robert Reich

In his blog yesterday the former secretary of labor called out the mainstream media and the political establishment (read McCain and Billary spinmeisters) for criticizing Barak Obama’s recent remarks about the bitterness in the heartland.

I was born in Scranton, Pennsylvania, 61 years ago. My father sold $1.98 cotton blouses to blue-collar women and women whose husbands worked in factories. Years later, I was secretary of labor of the United States, and I tried the best I could – which wasn’t nearly good enough – to help reverse one of the most troublesome trends America has faced: The stagnation of middle-class wages and the expansion of povety. Male hourly wages began to drop in the early 1970s, adjusted for inflation. The average man in his 30s is earning less than his father did thirty years ago. Yet America is far richer. Where did the money go? To the top.

Are Americans who have been left behind frustrated? Of course. And their frustrations, their anger and, yes, sometimes their bitterness, have been used since then — by demagogues, by nationalists and xenophobes, by radical conservatives, by political nuts and fanatical fruitcakes – to blame immigrants and foreign traders, to blame blacks and the poor, to blame “liberal elites,” to blame anyone and anything.

Rather than counter all this, the American media have wallowed in it. Some, like Fox News and talk radio, have given the haters and blamers their very own megaphones. The rest have merely “reported on” it. Instead of focusing on how to get Americans good jobs again; instead of admitting too many of our schools are failing and our kids are falling behind their contemporaries in Europe, Japan, and even China; instead of showing why we need a more progressive tax system to finance better schools and access to health care, and green technologies that might create new manufacturing jobs, our national discussion has been mired in the old politics…

Bitter? You ain’t seen nothing yet. And as much as people like Russert, Carville, Matalin, Schrum, and Murphy want to divert our attention from what’s really happening; as much as HRC and McCain seek to make political hay out of choices of words that can be spun cynically by the mindless spinners of the old politics; as much as demagogues on the right and left continue to try to channel the cumulative frustrations of Americans into a politics of resentment – all these attempts will, I hope, prove futile. Eighty percent of Americans know the nation is on the wrong track. The old politics, and the old media that feeds it, are irrelevant now.

I don’t know about anyone else, but I sure don’t trust that McCain or Billary have the best interests of working Americans on their agenda.

It’s nice to see another former member of the Clinton administration demonstrate the character and backbone to stand up and be heard. I’m just waiting for the other shoe to drop… Billary lashing out at Professor Reich like they attacked Governor Richardson, another honorable man.

Cross posted from BFD Blog!

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