Robert B. Reich's Blog, page 133

Healthcare Jujitsu

Not surprisingly, today's debut Supreme Court argument over the so-called "individual mandate" requiring everyone to buy health insurance revolved around epistemological niceties such as the meaning of a "tax," and the question of whether the issue is ripe for review.

Behind this judicial foreplay is the brute political fact that if the Court decides the individual mandate is an unconstitutional extension of federal authority, the entire law starts unraveling.

But with a bit of political jujitsu, the President could turn any such defeat into a victory for a single-payer healthcare system – Medicare for all.

Here's how.

The dilemma at the heart of the new law is that it continues to depend on private health insurers, who have to make a profit or at least pay all their costs including marketing and advertising.

Yet the only way private insurers can afford to cover everyone with pre-existing health problems, as the new law requires, is to have every American buy health insurance – including young and healthier people who are unlikely to rack up large healthcare costs.

This dilemma is the product of political compromise. You'll remember the Administration couldn't get the votes for a single-payer system such as Medicare for all. It hardly tried. Not a single Republican would even agree to a bill giving Americans the option of buying into it.

But don't expect the Supreme Court to address this dilemma. It lies buried under an avalanche of constitutional argument.

Those who are defending the law in Court say the federal government has authority to compel Americans to buy health insurance under the Commerce Clause of the Constitution, which gives Washington the power to regulate interstate commerce. They argue our sprawling health insurance system surely extends beyond an individual state.

Those who are opposing the law say a requirement that individuals contract with private insurance companies isn't regulation of interstate commerce. It's coercion of individuals.

Unhappily for Obama and the Democrats, most Americans don't seem to like the individual mandate very much anyway. Many on the political right believe it a threat to individual liberty. Many on the left object to being required to buy something from a private company.

The President and the Democrats could have avoided this dilemma in the first place if they'd insisted on Medicare for all, or at least a public option.

After all, Social Security and Medicare require every working American to "buy" them. The purchase happens automatically in the form of a deduction from everyone's paychecks. But because Social Security and Medicare are government programs financed by payroll taxes they don't feel like mandatory purchases.

Americans don't mind mandates in the form of payroll taxes for Social Security or Medicare. In fact, both programs are so popular even conservative Republicans were heard to shout "don't take away my Medicare!" at rallies opposed to the new health care law.

There's no question payroll taxes are constitutional, because there's no doubt that the federal government can tax people in order to finance particular public benefits. But requiring citizens to buy something from a private company is different because private companies aren't directly accountable to the public. They're accountable to their owners and their purpose is to maximize profits. What if they monopolize the market and charge humongous premiums? (Some already seem to be doing this.)

Even if private health insurers are organized as not-for-profits, there's still a problem of public accountability. What's to prevent top executives from being paid small fortunes? (In more than a few cases this is already happening.)

Moreover, compared to private insurance, Medicare is a great deal. Its administrative costs are only around 3 percent, while the administrative costs of private insurers eat up 30 to 40 percent of premiums. Medicare's costs are even below the 5 percent to 10 percent administrative costs borne by large companies that self-insure, and under the 11 percent costs of private plans under Medicare Advantage, the current private-insurance option under Medicare.

So why not Medicare for all?

Because Republicans have mastered the art of political jujitsu. Their strategy has been to demonize government and seek to privatize everything that might otherwise be a public program financed by tax dollars (see Paul Ryan's plan for turning Medicare into vouchers). Then they go to court and argue that any mandatory purchase is unconstitutional because it exceeds the government's authority.

Obama and the Democrats should do the reverse. If the Supreme Court strikes down the individual mandate in the new health law, private insurers will swarm Capitol Hill demanding that the law be amended to remove the requirement that they cover people with pre-existing conditions.

When this happens, Obama and the Democrats should say they're willing to remove that requirement – but only if Medicare is available to all, financed by payroll taxes.

If they did this the public will be behind them — as will the Supreme Court.

Why Mitt Won't Be Able to Hide From His Primary Self (We're No Longer In An Etch-A-Sketch World)

Romney spokesman Eric Fehrnstrom couldn't have said it better – or worse. When asked by CNN Wednesday morning whether Mitt was being pushed so far to the right by Rick Santorum and Newt Gingrich that he'd be handicapped in the general election, Fehrnstrom said "you hit a reset button for the fall campaign. Everything changes. It's almost like an Etch-A-Sketch. You kind of shake it up and restart all over again."

An Etch-A-Sketch, for those of you under twenty, is a thick flat gray screen that comes in a plastic frame with two knobs on the front in the lower corners – one left, one right. Twisting the knobs changes the aluminum powder on the back of the screen, creating completely new images. If you twist the left knob, you alter the powder horizontially; twist the right nob, and you alter it vertically.

Remind you of anyone?

When Mitt ran for governor of Massachusetts he twisted the left knob, moving horizontally to the left. (I know first hand because I ran in the Democratic primary that year.) He became a social liberal, tolerant of abortion and willing to entertain the idea that gays and lesbians should be able to form civil unions. He was also an economic moderate interested in seeking ways to expand health-care coverage.

But ever since Mitt left the governor's office, he's been twisting the right nob, moving downward into the muck of regressive Republicanism in pursuit of the Republican nomination.

Etch-A-Sketch was introduced in 1959 near the peak of the baby boom. (It was inducted into the National Toy Hall of Fame in 1998, and in 2003 the Toy Industry Association named it one of the hundred most memorable toys of the twentieth century.)

But Etch-A-Sketch has been replaced by digital toys that have the capacity to play and replay videos. These new video toys aren't just for kids. Almost every voting adult has one, or has easy access to one.

Get it? It won't be nearly as easy for Mitt to "shake it up and start all over again" for the general election of 2012, should he get the nomination. Try as he might, Romney won't be able to twist the knobs and create a brand new picture.

There will be too many videos of him during the primary saying things that were designed to appeal to increasingly far-right, far-out GOP primary voters – but will strike most Americans as bizarre if not despicable.

America has always been the kind of place where people can reinvent themselves, escaping from their pasts by turning the knobs on their own virtual Etch-A-Sketch identities. But the ubiquity of video technology has made this much, much harder to do. Videos have a way of reminding everyone who you are — and were.

If he makes it to the general election, Mitt won't be able to hide his primary self.

　

The Republican's Social-Darwinist Budget Plan

In announcing the Republicans' new budget and tax plan Tuesday, House Budget Committee Chairman Paul Ryan said "We are sharpening the contrast between the path that we're proposing and the path of debt and decline the president has placed us upon."

Ryan is right about sharpening the contrast. But the plan doesn't do much to reduce the debt. Even by its own estimate the deficit would drop to $166 billion in 2018 and then begin growing again.

The real contrast is over what the plan does for the rich and what it does to everyone else. It reduces the top individual and corporate tax rates to 25 percent. This would give the wealthiest Americans an average tax cut of at least $150,000 a year.

The money would come out of programs for the elderly, lower-middle families, and the poor.

Seniors would get subsidies to buy private health insurance or Medicare – but the subsidies would be capped. So as medical costs increased, seniors would fall further and further behind.

Other cuts would come out of food stamps, Pell grants to offset the college tuition of kids from poor families, and scores of other programs that now help middle-income and the poor.

The plan also calls for repealing Obama's health-care overhaul, thereby eliminating healthcare for 30 million Americans and allowing insurers to discriminate against (and drop from coverage) people with pre-existing conditions.

The plan would carve an additional $19 billion out of next year's "discretionary" spending over and above what Democrats agreed to last year. Needless to say, discretionary spending includes most of programs for lower-income families.

Not surprisingly, the Pentagon would be spared.

So what's the guiding principle here? Pure social Darwinism. Reward the rich and cut off the help to anyone who needs it.

Ryan says too many Americans rely on government benefits. "We don't want to turn the safety net into a hammock that lulls able-bodied people into lives of dependency."

Well, I have news for Paul Ryan. Almost 23 million able-bodied people still can't find work. They're not being lulled into dependency. They and their families could use some help. Even if the economy continues to generate new jobs at the rate it's been going the last three months, we wouldn't see normal rates of unemployment until 2017.

And most Americans who do have jobs continue to lose ground. New research by professors EmmanualSaez and Thomas Pikkety show that the average adjusted gross income of the bottom 90 percent was $29,840 in 2010 — down $127 from 2009 and down $4,842 from 2000 — and just slightly higher than it was forty-six years ago in 1966 (all figures adjusted for inflation).

They could use better schools, access to higher education, lower-cost health care, improved public transportation, and lots of other things Ryan and his colleagues are intent on removing.

Meanwhile, America's rich continue to grow richer — and many of them (and their heirs) are being lulled into lives whose hardest task is summoning the help.

Anyone who thought the Great Recession might reduce America's wild lurch toward wild inequality should think again. The most recent data show that just 15,600 super-rich households – the top 1 tenth of 1 percent – pocketed 37 percent of all the economic gains in 2010. The rest of the gains went to others in the top 10 percent.

Republican Social Darwinists are determined that the Bush tax cuts of 2001 and 2003 be made permanent. Those cuts saved the richest 1 percent of taxpayers (roughly 1.4 million people) more money on their taxes last year than the rest of America's 141 million taxpayers received in total income.

Thank you,House Republicans, for "sharpening the contrast" between your radical Social Darwinism and those of us who still cling to the belief that the most fortunate have a responsibility to the rest.

What Republicans Argue When They Have Nothing Left to Say

Republicans are desperate. They can't attack Obama on jobs because the jobs picture is improving.

Their attack on the Administration's rule requiring insurers to cover contraception has backfired, raising hackles even among many Republican women.

Their attack on Obama for raising gas prices has elicited scorn from economists of all persuasions who know oil prices are set in global markets and that demand in the United States has actually fallen.

Their presidential ambitions are being trampled in a furious fraternal war among Republican candidates.

Their Tea Party wing wants to reopen the budget deal forged with Democrats after Republicans got bloodied by threatening to block an increase in the debt limit.

So what are Republicans to do now? What they always do when they have nothing else to say.

Call for a tax cut, of course.

It doesn't matter that their new "tax reform" plan (leaked to the Wall Street Journal late Monday, to be released Tuesday morning) has as much chance of being enacted as Herman Cain has of being elected president.

It doesn't matter than the plan doesn't detail how they plan to pay for the tax cuts. Or whether an even bigger whack would have to be taken out of Medicare than Paul Ryan's original voucher plan – which would drowned many elderly under rising medical costs.

It doesn't even matter that the plan would probably raise taxes on many lower-income Americans,

All that matters is the headlines.

"House Republican Budget to Propose Lower Income Tax Rates," says Bloomberg Businessweek. "Republican Budget Plan Seeks to Play Up Tax Reform," says Reuters. "GOP's Budget Targets Taxes," blares the Wall Street Journal.

Presto. Republicans have gotten what they wanted on the basis of saying absolutely nothing.

If You Took the Greed Out of Wall Street, All You'd Have Left Is Pavement: Why Greg Smith's Critique is Way Too Narrow

Greg Smith, a Goldman Sachs vice president, resigned his post Wednesday with a stinging public rebuke of the firm on the oped page of the New York Times — accusing it of no longer putting its clients before its own pecuniary goals.            

But if Mr. Smith believes his experience at Goldman is something new, he doesn't know history. In 1928, Goldman Sachs and Company created the Goldman Sachs Trading Corporation, which promptly went on a speculative binge, luring innocent investors along the way. In the Great Crash of 1929, Goldman's investors lost their shirts but Goldman kept its hefty fees.

If Mr. Smith believes such disregard of investors is unique to Goldman, he doesn't know the rest of Wall Street. In the late 1920s, National City Bank, which eventually would become Citigroup, repackaged bad Latin American debt as new securities which it then sold to investors no less gullible than Goldman Sachs's. After the Great Crash of 1929, National City's top executives helped themselves to the bank's remaining assets as interest-free loans while their investors and depositors were left with pieces of paper worth a tiny fraction of what they paid for them.

The problem isn't excessive greed. If you took the greed out of Wall Street all you'd have left is pavement. The problem is endemic abuse of power and trust. When bubbles are forming, all but the most sophisticated investors can be easily duped into thinking they'll get rich by putting their money into the hands of brand-named investment bankers.

Moreover, finance has become so complex that investors don't even know when they're being taken for a ride, and so can't possibly hold a brand-name bank responsible for their losses – or for gains that are a fraction of what they might otherwise have been.

That's why we have regulations. After millions of investors lost everything in 1929, the federal government stepped into the breach with the Securities Acts of 1933 and 1934 and the Banking Act of 1933, sponsored by Senator Carter Glass and Congressman Henry Steagall.

But starting in the 1970s and 1980s, Wall Street made sure these and the regulations issued under them were steadily watered down – which contributed to the junk-bond and insider trading scandals of the 1980s, the dot-com scams of the late 1990s and early 2000s, the Wall-Street enablers of Enron and other corporate looters, and the wild excesses that led to the crash of 2008.

Wall Street's shenanigans have convinced a large portion of America that the economic game is rigged. Yet capitalism depends on trust. Without trust, people avoid even sensible economic risks. And when they think the game is rigged, they're easy prey for political demagogues with fast tongues and dumb ideas.

The Street has only itself to blame. It should have welcomed new financial regulation as a means of restoring public trust. Instead, it lobbied intensely against the new Dodd-Frank Act and refused to resurrect Glass-Steagall.

The cost of such cynicism has leached deep into America, finding expression in Tea Partiers and Occupiers and millions of others who think the Street has sold us out.

Why Republicans Aren't Mentioning the Real Cause of Rising Prices at the Gas Pump

Gas prices continue to rise, which is finally giving Republicans an issue. Mitt Romney is demanding the President open up more domestic drilling; the super PAC behind Rick Santorum just released a new ad in Louisiana blasting the President on gas prices; and the GOP is attacking the White House on the Keystone XL Pipeline.   

But the rise in gas prices has almost nothing to do with energy policy. It has everything to do with America's continuing failure to adequately regulate Wall Street. But don't hold your breath waiting for Republicans to tell the truth.

As I've noted before, oil supplies aren't being squeezed. Over 80 percent of America's energy needs are now being satisfied by domestic supplies. In fact, we're starting to become an energy exporter. Demand for oil isn't rising in any event. Demand is down in the U.S. compared to last year at this time, and global demand is still moderate given the economic slowdowns in Europe and China. 

But Wall Street is betting on higher oil prices in the future — and that betting is causing prices to rise. The Street is laying odds that unrest in Syria will spill over into other countries or that tensions with Iran will affect the Persian Gulf, and that global demand will pick up as American consumers bounce back to life.

These bets are pushing up oil prices because Wall Street firms and other big financial players now dominate oil trading.

Financial speculators historically accounted for about 30 percent of oil contracts, producers and end users for about 70 percent. But today speculators account for 64 percent of all contracts.

Bart Chilton, a commissioner at the Commodity Futures Trading Commission — the federal agency that regulates trading in oil futures, among other commodities — warns that too few financial players control too much of the oil market. This allows them to push oil prices higher and higher — not only on the basis of their expectations about the future but also expectations about how high other speculators will drive the price.

In other words, a relatively few players with very deep pockets are placing huge bets on oil — and you're paying.

Chilton estimates that drivers of small cars like Honda Civics are paying an extra $7.30 every time they fill up — and that money is going into the pockets of Wall Street speculators. Drivers of larger vehicles like the Ford Explorer are paying speculators $10.41 when they fill up.

Funny, but I don't hear Republicans rail against Wall Street speculators. Could this have anything to do with the fact that hedge funds and money managers are bankrolling the GOP as never before?

Wall Street isn't bankrolling Democrats nearly as much this time around because the Street is still smarting from the Dodd-Frank Wall Street reform law pushed by the Democrats, and from the president's offhand remark in 2010 calling the denizens of the Street "fat cats."

The Commodity Futures Trading Commission is trying to limit how much speculators can bet in oil futures — a power it was given by Dodd-Frank. It issued a rule in October, but it won't take effect for another year.

Meanwhile, Wall Street has gone to court to stop the rule. It's already won a stay.

As rising gas prices start wagging the election-year dog, the President should let America know what's really causing prices to rise.

The Difference Between Private and Public Morality

Republicans have morality upside down. Santorum, Gingrich, and even Romney are barnstorming across the land condemning gay marriage, abortion, out-of-wedlock births, access to contraception, and the wall separating church and state.

But America's problem isn't a breakdown in private morality. It's a breakdown in public morality. What Americans do in their bedrooms is their own business. What corporate executives and Wall Street financiers do in boardrooms and executive suites affects all of us.

There is moral rot in America but it's not found in the private behavior of ordinary people. It's located in the public behavior of people who control our economy and are turning our democracy into a financial slush pump. It's found in Wall Street fraud, exorbitant pay of top executives, financial conflicts of interest, insider trading, and the outright bribery of public officials through unlimited campaign "donations."

Political scientist James Q. Wilson, who died last week, noted that a broken window left unattended signals that no one cares if windows are broken. It becomes an ongoing invitation to throw more stones at more windows, ultimately undermining moral standards of the entire community

The windows Wall Street broke in the years leading up to the crash of 2008 remain broken. Despite financial fraud on a scale not seen in this country for more than eighty years, not a single executive of a major Wall Street bank has been charged with a crime.

Since 2009, the Securities and Exchange Commission has filed 25 cases against mortgage originators and securities firms. A few are still being litigated but most have been settled. They've generated almost $2 billion in penalties and other forms of monetary relief, according to the Commission. But almost none of this money has come out of the pockets of CEOs or other company officials; it has come out of the companies — or, more accurately, their shareholders. Federal prosecutors are now signaling they won't even bring charges in the brazen case of MF Global, which lost billions of dollars that were supposed to be kept safe.

Nor have any of the lawyers, accountants, auditors, or top executives of credit-rating agencies who aided and abetted Wall Street financiers been charged with doing anything wrong.

And the new Dodd-Frank law that was supposed to prevent this from happening again is now so riddled with loopholes, courtesy of Wall Street lobbyists, that it's almost a sham. The Street prevented the Glass-Steagall Act from being resurrected, and successfully fought against limits on the size of the largest banks.

Windows started breaking years ago. Enron's court-appointed trustee reported that bankers from Citigroup and JP Morgan Chase didn't merely look the other way; they dreamed up and sold Enron financial schemes specifically designed to allow Enron to commit fraud. Arthur Andersen, Enron's auditor, was convicted of obstructing justice by shredding Enron documents, yet most of the Andersen partners who aided and abetted Enron were never punished.

Americans are entitled to their own religious views about gay marriage, contraception, out-of-wedlock births, abortion, and God. We can be truly free only if we're confident we can go about our private lives without being monitored or intruded upon by government, and can practice whatever faith (or lack of faith) we wish regardless of the religious beliefs of others. A society where one set of religious views is imposed on a large number of citizens who disagree with them is not a democracy. It's a theocracy.

But abuses of public trust such as we've witnessed for years on the Street and in the executive suites of our largest corporations are not matters of private morality. They're violations of public morality. They undermine the integrity of our economy and democracy. They've led millions of Americans to conclude the game is rigged.

Regressive Republicans have no problem hurling the epithets "shameful," "disgraceful," and "contemptible" at private moral decisions they disagree with. Rush Limbaugh calls a young woman a "slut" just for standing up for her beliefs about private morality.

Republicans have staked out the moral low ground. It's time for Democrats and progressives to stake out the moral high ground, condemning the abuses of economic power and privilege that characterize this new Gilded Age – business deals that are technically legal but wrong because they exploit the trust that investors or employees have place in those businesses, pay packages that are ludicrously high compared with the pay of average workers, political donations so large as to breed cynicism about the ability of their recipients to represent the public as a whole.

An economy is built on a foundation of shared morality. Adam Smith never called himself an economist. The separate field of economics didn't exist in the eighteenth century. He called himself a moral philosopher. And the book he was proudest of wasn't "The Wealth of Nations," but his "Theory of Moral Sentiments" – about the ties that bind people together into societies.

Twice before progressive have saved capitalism from its own excesses by appealing to public morality and common sense. First in the early 1900s, when the captains for American industry had monopolized the economy into giant trusts, American politics had sunk into a swamp of patronage and corruption, and many factory jobs were unsafe – entailing long hours of work at meager pay and often exploiting children. In response, we enacted antitrust, civil service reforms, and labor protections.

And then again in 1930s after the stock market collapsed and a large portion of American workforce was unemployed. Then we regulated banks and insured deposits, cleaned up stock market, and provided social insurance to the destitute. 

It's time once again to save capitalism from its own excesses — and to base a new era of reform on public morality and common sense.

The Widening Wealth Divide, and Why We Need a Surtax on the Super Wealthy

Let Santorum and Romney duke it out for who will cut taxes on the wealthy the most and shred the public services everyone else depends on.

The rest of us ought to be having a serious discussion about a wealth tax. Because if you really want to know what's happening to the American economy you need to look at household wealth — not just incomes.

The Fed just reported that household wealth increased from October through December. That's the first gain in three quarters.

Good news? Take closer look. The entire gain came from increases in stock prices. Those increases in stock values more than made up for continued losses in home values.

But the vast majority of Americans don't have their wealth in the stock market. Over 90 percent of the nation's financial assets – including stocks and pension-fund holdings – are owned by the richest 10 percent of Americans. The top 1 percent owns 38 percent.

Most Americans have their wealth in their homes – whose prices continue to drop. Housing prices are down by a third from their 2006 peak.

So as the value of financial assets held by American households increased by $1.46 trillion in the fourth quarter, the wealthiest 10 percent of Americans became $1.3 trillion richer, and the wealthiest 1 percent became $554.8 billion richer.

But at the same time, as the value of household real estate fell by $367.4 billion in the fourth quarter, homeowners – mostly middle class – lost over $141 billion (owners' equity is 38.4 percent of total household real estate).

Presto. America's wealth gap – already wider than the nation's income gap – has become even wider. The 400 richest Americans have more wealth than the bottom 150 million Americans put together.

Given this unprecedented concentration of wealth – and considering what the nation needs to do to rebuild our schools and infrastructure while at the same time saving Medicare and reducing the long-term budget deficit – shouldn't we be aiming higher than a "Buffet tax" on the incomes of millionaires?

There should also be a surtax on the super rich.

Yale Professor Bruce Ackerman and Anne Alstott have proposed a 2 percent surtax on the wealth of the richest one-half of 1 percent of Americans owning more than $7.2 million of assets. They figure it would generate $70 billion a year, or $750 billion over the decade. That's half the savings Congress's now defunct Supercommittee was aiming for.

Instead of standing empty-handed while Santorum and Romney dominate the airwaves with their regressive Social Darwinism, Democrats need to be reminding Americans of what's happening in the real economy – and what needs to happen.

The wealth gap is widening into a chasm. A surtax on the super rich is fair — and it's necessary.

The Precarious Jobs Recovery

February's  227,000 net new jobs – the third month in a row of job gains well in excess of 200,000 – is good news for President Obama and bad news for Mitt Romney.

Jobs are coming back fast enough to blunt Republican attacks against Obama on the economy and to rob Romney of the issue he'd prefer to be talking about in his primary battle against social conservatives in the GOP.

But jobs aren't coming back fast enough to significantly reduce the nation's backlog of 10 million jobs. That backlog consists of 5.3 million lost during the recession and another 4.7 million that needed to have been added just to keep up with the growth of the working-age population since the recession began.

If the American economy continues to produce jobs at the good rate it's maintained over the last three months, averaging 245,000 per month, the backlog won't be whittled down for another five years — long after Barack Obama finishes his second term, should voters grant him another.

But whether even that good rate continues depends largely on whether consumer demand can be revived. Spending by American consumers is 70 percent of U.S. economic activity. But so far, spending is anemic.

American consumers have replaced worn-out cars and appliances, but little else. They haven't had the dough. Their wages are still falling, adjusted for inflation. The value of their homes – most consumers' single biggest asset – continues to drop.

Home values are down by an average of a third from their 2006 peak. Consumers understandably feel far poorer as a result. Declining home prices also mean consumers can't use their homes as collateral for new loans, as they did before 2008. And even with low interest rates, refinancing is difficult.

Corporate profits are up but the money isn't flowing to American workers. The ratio of profits to wages is the highest on record – since the government began keeping track in 1947. Not only has the median wage continued to drop, adjusted for inflation, but a far smaller share of working-age Americans is now employed (58.6 percent) than was employed five years ago (63.3 percent). Today's employment-to-population ratio isn't much higher than it was at its lowest point last summer, when it dropped to 58.2 percent.

The major driver of the U.S. economy over the past several months hasn't been consumer spending. It's been businesses rebuilding depleted inventories. Wholesalers increased their stockpiles again in February, bringing them up almost a quarter from their low in September 2009.

But businesses won't continue to rebuild inventories unless consumers start buying again. big-time. And consumers won't resume spending as they did before the recession until they're far better off financially.

Yet how can they be sufficiently better off when their major asset has shrunk so much and when so few of the economic gains are going to them?

This is the central paradox at the heart of the American economy today. If it's not resolved, the jobs recovery will stall, as it did last spring.

A year ago, remember, we had another three-month run of good job numbers. Last February, March, and April saw net gains of more than 200,000 jobs a month. But that job boomlet abruptly ended.

At the time most observers blamed the stall on external events – the Japanese earthquake, Europe's gathering debt woes, and higher gas prices. In reality, it stalled because of the shallow pockets of American consumers.

Another stall this time might be blamed on any number of external events – slower growth in China and India, the unraveling of Europe's debt-crisis deal, and higher gas prices.

But if another stall occurs, the real reason will be Americans once again ran out of money.

　

　

　

　

　

　

　

　

　

　

Bye Bye American Pie: The Challenge of the Productivity Revolution

Here's the good news. The economic pie is growing again. Growth in the 4th quarter last year hit 3 percent on an annualized rate. That's respectable – although still way too slow to get us back on track given how far we plunged.

Here's the bad news. The share of that growth going to American workers is at a record low.

That's largely because far fewer Americans are working. Although the nation is now producing more goods and services than it did before the slump began in 2007, we're doing it with six million fewer people.

Why? Credit technology. Computers, software applications, and the Internet are letting us produce more with fewer people.

In theory, this is a huge plus. We can live better and have more time off.

But as Tonto asked the Lone Ranger, "who's 'we,' kemosabe?"

The challenge at the heart of the productivity revolution – and it is a revolution – is how to distribute the gains. So far, we've been failing miserably to meet that challenge.

True, some of the gains are widely spread in the form of lower prices and higher value. My 3-year-old granddaughter gets more out of an i-Phone in five minutes than my 98-year-old father ever got out of reading the daily paper (putting to one side their relative capacities to process the information).

But many of the gains are distributed narrowly in the form of profits to owners, and fat compensation packages to the "talent."

The share of the gains going to everyone else in the form of wages and salaries has been shrinking. It's now the smallest since the government began keeping track in 1947.

If the trend continues, inequality will become ever more extreme.

We'll also face chronically insufficient demand for all the goods and services the productivity revolution can generate. That's because the rich save more of their earnings than everyone else, while middle and lower-income families – with fewer jobs or lower wages – no longer have the purchasing power to keep the economy going at full tilt. (Before 2008 they kept up their buying by sinking deep into debt. This proved to be an unsustainable strategy.)

Insufficient demand – as everyone but regressive supply-siders now recognize – is a big reason why the current recovery has been so anemic and the pie isn't growing faster.

So while the productivity revolution is indubitably good, the task ahead is to figure out how to distribute more of its gains to more of our people.

One possibility: higher taxes on the rich that go into wage subsidies for lower-income workers, combined with job sharing.

We also need better schools (from early-childhood through young adulthood, followed by systems of lifelong learning) so everyone has a fair shot at a larger share of the gains.

Finally, the benefits of the productivity revolution should be turned into more abundant public goods – cleaner air and water, better parks and recreation, improved public health, and better public transit.

Regressive right wingers want Americans to believe we've been living beyond our means, and can no longer afford it.

The truth is just the reverse. Most Americans' means haven't kept up with what the economy could provide – if the fruits of the productivity revolution were more widely shared.

Regressives growl about America's borrowing and tut-tut about future federal budget deficits. The reality is the world is willing to lend us vast amounts of money because we're so productive. And the productivity revolution is making us ever more so.

Get it? The pie is growing again but most people aren't getting much of a slice. That's bad even for those getting the biggest pieces. They'd do better with smaller slices of a pie that grew much faster.