Robert B. Reich's Blog, page 45

Dimon in the Rough

In his annual letter to shareholders, distributed last week, JPMorgan Chase CEO Jamie Dimon took aim...

Socialism for the Rich, Capitalism for the Rest “We renew our...

Socialism for the Rich, Capitalism for the Rest

“We renew our resolve that America will never be a socialist country,” Donald Trump said recently.

Someone should alert him that America is now a hotbed of socialism. But it’s socialism for the rich. Everyone else is treated to harsh capitalism.

In the conservative mind, socialism means getting something for doing nothing. This pretty much describes General Motors’ receipt of $600 million in federal contracts, plus $500 million in tax breaks, since Trump took office.

Some of this corporate welfare has gone into the pockets of GM executives. Chairman and CEO Mary Barra raked in almost $22 million in total compensation in 2017 alone.

But GM employees are subject to harsh capitalism. GM is planning to lay off more than 14,000 workers and close three assembly plants and two component factories in North America by the end of 2019.

The nation’s largest banks saved $21 billion last year thanks to Trump’s tax cuts, some of which went into massive bonuses for bank executives. On the other hand, thousands of lower-level bank employees got a big dose of harsh capitalism. They lost their jobs.

Banks that are too big to fail – courtesy of the 2008 bank bailout – enjoy a hidden subsidy of some $83 billion a year because they have the backing of the federal government. This hidden subsidy gives Wall Street, giant banks a huge advantage.

In 2017, Wall Street’s bonus pool was $31.4 billion. So, take away the hidden subsidy, and that bonus pool disappears, along with most profits. Trump and his appointees at the Federal Reserve are easing bank requirements put in place after the bailout. But they will make sure the biggest banks remain too big to fail.

When he was in business, Trump perfected the art of using bankruptcy to shield himself from the consequences of bad decisions– socialism for the rich at its worst –while leaving employees twisting in the wind. Now, all over America, executives who run their companies into the ground are getting gold-plated exit packages while their workers get pink slips.

Under socialism for the rich, you can screw up big time and still reap big rewards. Equifax’s Richard Smith retired in 2017 with an $18 million pension in the wake of a security breach that exposed the personal information of 145 million customers to hackers.

Wells Fargo’s Carrie Tolstedt departed with a $125 million exit package after being in charge of the unit that opened more than 2 million unauthorized customer accounts.

Whatever happened to the idea of a meritocracy  – an economic system that allows everyone to get ahead through hard work, and economic gains go only to those who deserve them?  

Around 60 percent of America’s wealth is now inherited. Many of today’s super-rich have never done a day’s work in their lives. Trump’s response has been to expand this divide by cutting the estate tax to apply only to estates valued at over $22 million per couple. Mitch McConnell is now proposing that the estate tax be repealed altogether.

To the conservative mind, the specter of socialism conjures up a society in which no one is held accountable, and no one has to work for what they receive. Yet, that’s exactly the society Trump and the Republicans are promoting for the rich.

Meanwhile, most Americans are subject to an increasingly harsh and arbitrary capitalism.

They need stronger safety nets, and they deserve a bigger piece of the economic pie.

If you want to call this socialism, fine. I call it fair.

The Myth of Meritocracy

Most Americans still cling to the meritocratic notion that people are rewarded according to their...

How Trump is Killing Capitalism

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Everything You Need to Know About the New EconomyThe biggest...

Everything You Need to Know About the New Economy

The biggest economic
story of our times isn’t about supply and demand.  It’s about institutions
and politics.  It’s about power.

The median annual
earnings of full-time wage and salaried workers in 1979, in today’s dollars,
was $43,680. The median earnings in 2018 was $45,708. If between 1979 and 2018,
the American economy
almost tripled in size, so where did the
gains go?  Most went to the top.

Now this is broadly
known, but there is less certainty about why.

1. The
Conventional View  

Conventional wisdom
attributes the widening economic divide to globalization and technological
change – the “inevitable” result of the invisible hand of the so-called “free
market.”

Simply put, as the American economy
merged with the rest of the globe, American workers had to compete with foreign
workers willing to toil for a fraction of American wages. And as technology advanced,
American workers also had to compete with software and robots that were cheaper
to employ than Americans.

So, according to this
conventional view, the only realistic way to raise the wages of most Americans
is to give them more and better education and job training, so they can become
more competitive. They can thereby overcome the so-called “skills gap” that keeps them from taking the jobs of the future – jobs and
opportunities generated by new technologies.

2.  A
Deeper View of the American Political Economy

The conventional
story isn’t completely wrong, and education and training are important. But the
conventional view leaves out some of the largest and most important changes,
and therefore overlooks the most important solutions.

To understand what
really happened, it’s critical to understand that there is no “free market” in
nature. The term “free market” suggests outcomes are objectively fair and that
any “intervention” in the free market is somehow “unnatural.” But in reality,
markets cannot exist without people constructing them. Markets depend on rules,
and rules come out of legislatures, executive agencies, and courts.  The
biggest political change over the last four decades is the overwhelming
dominance of big money in politics – influencing what those rules are to be.

3. The Decline of Countervailing Power

Now, go back to the
first three decades after World War II – a period that coupled
the greatest economic expansion the world has ever seen with the creation of
the largest middle class the world has ever witnessed. The great economic
thinker John Kenneth Galbraith asked at the time: Why is capitalism working so
well for so many?  

His answer was as
surprising as it was obvious: American capitalism contained hidden pools of
what he called “countervailing power” that offset the power of large corporations, Wall Street, and
the wealthy: labor unions, state and local banks, farm cooperatives, and small
retail chains, for example. All of these sources of countervailing power had
been fostered by the New Deal. They balanced the American economic system.

But since the late 1970s,
these sources of countervailing power have been decimated, leading to an unbalanced system and producing widening economic
inequality and stagnating wages. The result has become
a vicious cycle in which big money – emanating from big corporations, Wall
Street, and the wealthy – determine the rules of the economic game, and those
rules generate more money at the top.

Consider, for
example, the ever-expanding tax cuts
or loopholes for large corporations, the financial sector, and the wealthy. Contrast them with
increases in payroll taxes for average workers.

Or look at the bank and
corporate bailouts but little or no help for homeowners caught in the downdraft
of the Great Recession.

Finally, look at the
increasing barriers to labor unions, such as the proliferation
of so-called “right-to-work” laws and the simultaneous erosion of antitrust and the emergence of large concentrations of
corporate power.

The public knows the game
is rigged, which is why almost all the political
energy is now anti-establishment. This is a big reason why
Trump won the 2016 election. Authoritarian populists
through history have used anger and directed it at racial and ethnic minorities
and foreigners.

It’s also a big reason
why the only alternative to authoritarian populism is progressive populism – countervailing the moneyed interests with a democracy that
reorganizes the market to benefit the many rather than a small group at the
top.

How do we build a new
countervailing power and move toward a new progressive
economics?  

4. Economics and Political Power

The choice isn’t
between a free market and government. The question is who has the power to
organize the market, and for whom.

Stagnant wages, job
insecurity, widening inequality, and mounting wealth at the top are the result
of political choices. The system is rigged and must be un-rigged.

Conventional economics
posits that the most important goals are efficiency and economic growth. But
policies can be “efficient” by making the rich even wealthier as long as no one
else is worse off – and that won’t remedy what’s happened. Economic growth is
meaningless if the gains from growth keep going to the top and nothing trickles
down.

Stop assuming that all
that’s needed is better education and job training. Sure, Americans need access
to better schools and skills, but the basic problem isn’t simply a “skills
gap.” It’s a market that’s organized to push more income and wealth toward the
top, rather than distribute it broadly.

Stop aiming to “redistribute” from
richer to poorer after the market has distributed income. Instead, change the
organization of the market so that a fair pre-distribution occurs inside it.  

Stop thinking that the
goal is only to create more jobs. America’s real jobs crisis is a scarcity of good jobs.

The American economy
cannot generate widespread prosperity without a large and growing middle class
whose spending fuels the economy.

5. Building a Multi-racial, Multi-ethnic, Coalition of the Middle Class, Working Class, and Poor.

Don’t let the moneyed
interests divide and conquer along racial and gender lines. Racism and sexism
are very real issues within our economic system, and they are often exploited
to keep us from realizing the power we can have when we stand together. All are
disempowered by the moneyed interests, and all have a stake in rebuilding
countervailing power.

6. Offering a Compelling Set of Ideas about What Should be Done with Countervailing Power.

For example:

— A guaranteed basic income so no one is impoverished,

— A guaranteed job so everyone can get ahead,

— A progressive wealth tax to pay for these and
other basics,

— Stronger unions so workers
have more bargaining power,

— New forms of
corporate organization so workers have more voice,

–  A Green New Deal so workers can get better jobs while fighting climate change. 

— Reinvigorated antitrust so
concentrations of economic power are broken up,

— Election finance reforms
to get big money out of politics and end the revolving door,

— Voting reforms so votes
cannot be suppressed.

7. Building the leadership for this new countervailing power.

You can help lead the way. You can be a leader of this movement. How?

For
one, you can run for office – in your
community, say, city council or school board. Or run for state office. Or even
national office.

Don’t be intimidated
by politics. We need good people to run. And don’t worry that you’ll be
beholden to a handful of rich donors. These days, smaller donors are more
active than ever.

So, what’s the
secret? Tell it like it is and be yourself. And then, as I’ve said, talk about
economics in terms of political power and understand the 7 principles. Build
countervailing power through a multi-racial, multi-ethnic coalition. And offer
a compelling set of ideas about what can and should be done.

But you don’t need to
hold formal office to be a leader.

You
can be a leader by organizing and mobilizing people: Your co-workers – to form a union. Your friends and neighbors
– to push for better roads and schools, and fairer local taxes. People at your
church or synagogue or mosque – to demand better treatment of the poor, the
elderly, children, immigrants. You can link your group up with other groups pursuing
similar ends, and create a movement. That’s how we got the Civil Rights and
Voting Rights Acts. How we got marriage equality. It’s how we get good people
elected.

The key to organizing
and mobilizing is creating a leadership team, and then reaching out
systematically to others, giving them tasks and responsibilities, starting
small and gaining a few victories so people can feel their power, and then
growing from there.

You’ll need to be
patient and steadfast. Keep people together and focused. And be careful not to
burn out. Organizing and mobilizing is hard, but once organized and mobilized,
there’s no end to what people can accomplish.  

You
can also be a leader by uncovering critical information, fighting lies,
spreading the truth. Core responsibilities
of leadership are revealing the facts about widening inequalities of income,
wealth, and political power – and uncovering their consequences.

A century ago they were
called “muckrakers.” More recently,
investigative reporters. I’m talking about courageous journalists who speak
truth to power.

But this form of
leadership isn’t limited to reporters. It includes whistleblowers, who alert
the public to abuses of power. And here courage is also required because when
you blow the whistle on the powerful, the powerful sometimes strike back.

This form of
leadership also includes researchers, who dig up new sources of data and
analyze them in ways that enlighten and motivate.

In other words, there
isn’t just one path to leadership. Whether you seek formal authority by running
and gaining public office, or you organize and mobilize people into being
effective advocates, or you discover and spread the truth – you are creating
and developing countervailing power to spread the gains of the economy and
strengthen our democracy. 

These are worthy and noble objectives. They are worth
your time. They can be worth a lifetime.

Trump's Remorse (on April 1)

Today at a Rose Garden ceremony belatedly celebrating the fiftieth anniversary of the inauguration...

A TALE OF TWO TICKETSRR: Hi, I’m Robert Reich. WKB: And...

A TALE OF TWO TICKETS

RR:  Hi, I’m Robert Reich.  

WKB:
And I’m W. Kamau Bell.  

RR:
We’re teaming up to highlight an issue that matters a lot to both of
us. It starts with what you might call a “tale of two tickets.” Say you
happen to be going for a drive in Oakland and your car has a broken tail
light.  You see the flashing blue lights, and your heart drops. Oh no, you
think, I’m going to get a ticket.

WKB:
Oh c’mon, Robert. You aren’t going to get a ticket.  You’re a white,
former secretary of labor. I’m 6’4’’ black guy! I’m going to get a ticket.  

RR:
6’4”?

WKB:
Gentle Giant.

RR:
You’re too tall.

WKB:
That’s why this is “a tale of two tickets!”  You can have radically
different experiences with getting pulled over depending on your skin color.

Number
one: You’re more likely to get pulled over if you’re black. No surprise. In
2017 in Oakland, California, out of the almost 97,000 black people who live
here, more than 19,000 got pulled over. But of the more than 116,000 white
people who live here, more and more moving in every day, only a few over 2,800
were pulled over. That means you are 10 times more likely to be pulled over
driving while black.  

Number
two: When you get pulled over, if you are black, the officer is more likely to speak to you disrespectfully.
You are much more likely to be searched, handcuffed, arrested, poked, prodded,
and prosecuted. And almost all of what are called “use of force”
incidents are against black people.  

RR:
You know, it’s not just the likelihood of being pulled over. It’s also the
consequences.

Start
with the ticket itself. A broken taillight in California is usually a “fix it”
ticket. If you can fix it, it costs about $35. But if you don’t or can’t
pay, with penalties and assessments, it quickly goes up to $235. And in
a year it can be as high as $835.

WKB:
And for those who have a brush with the criminal justice system as a result of
getting pulled over, who are almost all black, the costs can balloon quickly.

A
so-called free public defender costs, on average, $500.

If
you are convicted and put on probation, you will get a bill for $6,000 just to cover those costs.

RR:
These fines and fees can easily put a family into debt – especially if you are
black.  For example, the average black family as $5 in
savings for every $100 of a typical white family.  

WKB:
What the f***? (bleeped)

RR:
Exactly.

With
debt comes the risk of being hounded by predatory debt collectors.

Also,
the arrest and conviction can result in the loss of a job and
make it harder to get another one.

If
you are on probation for a prior offense, failing to pay the debt can put you
back in prison. In a tragic irony, it can also put pressure on an individual to
commit a crime just to pay the debt.

This
is what people politely call a cascade of consequences.  

WKB:
And what I impolitely call a cascade of s*** (bleeped) on poor communities
generally, and communities of color in particular.  

RR:
It’s known academically as  “The Criminalization of Poverty.” And it
has to be stopped.

WKB:
Ok, you say, that sucks if you are poor and black. But I’m rich and white. Hey,
I’ve got some news: it’s bad for you, too.

RR:
In addition to being a massive drain on the economy, these fees don’t
even help cash-strapped cities. Uncollected court debt for traffic and criminal offenses
totaled $12.3 billion in 2016 in California alone. A lot of the fee revenue that does come in goes to collection
services, that are private and for profit. Which
means very little of the money that is collected winds up going to roads,
bridges, schools, and other good things we all need.

WKB:
That’s why we need to stop the criminalization of poverty. Have you
heard of win-win? Well, this is lose-lose, non-win. It sucks. It’s bad for
EVERYBODY.  

RR:
Bad for poor people, bad for the social fabric, and doesn’t even help the
bottom line for government.

WKB:
Our home state of California is helping to lead the charge to stop the
criminalization of poverty.  Go to CAdebtjustice.org for more
information. Go. Don’t just watch the video. Go.

The Real Scandal of Donald Trump

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Why Unions Matter to You As I travel around the country, I...

Why Unions Matter to You

As I travel around the country, I tell people: if you have a job, join a union. And if you don’t have a union, start one.

You see, it all comes down to the balance of power between business and workers. 

You strengthen the middle class by strengthening unions.

In the mid-1950s, unions were strong, and wages grew in tandem with the economy. Nearly one third of all workers in the United States were unionized.

This gave workers across America – even those who weren’t unionized – significant power to demand and get better wages, hours, benefits, and working conditions. 

Yet starting in the 1980s and with increasing ferocity since then, private-sector employers have fought against unions.

Corporate raiders demanded that companies boost share prices by busting unions or moving to non-union states.

Ronald Reagan’s administration fired the nation’s unionized air traffic controllers and launched an all-out assault on workers’ rights, concentrating even more power in the hands of corporate executives.

In short, anti-worker corporations and politicians joined together to stop workers from joining together. 

We now know that as union membership declined, middle class incomes shrank.

The two trends are the exact mirror images of each other.

The wealthy and big corporations continued to take home a larger share of the nation’s wealth, while workers were left behind.  Unions balance the power of workers with corporations, by allowing workers to join forces to get a fair share.

As an individual your voice is limited, but there is power in numbers.  Today, unions are more important than ever to the survival of the middle class.

Corporations have tremendous power over our lives.

They dictate everything from bathroom breaks to health care for millions of Americans.

In the halls of Washington and state legislatures, their political power has allowed them to block increases in the minimum wage, roll back workplace protections, and deny workers their benefits.

Unless workers balance the power of big corporations, the middle class will continue to get a smaller piece of the pie as more and more wealth goes to those at the top. 

Unions are also essential to the workplace of the future.

Workers must contend with the forces of globalization and technological change. With the stroke of a keyboard, executives can send jobs overseas.

Automated technologies threaten to replace workers in every sector of the economy, making jobs less and less secure. Without unions, workers will be completely at the mercy of these trends. 

But this isn’t just a theoretical argument.

The tangible, real-world examples of how unions make workers’ lives better are everywhere you look. 

Hospitality workers were able to secure raises and job protections from Marriott, the world’s largest hotel chain, because of the power of their union.

Disney employees secured a $15 an hour base-pay after years of opposition from management.

JetBlue’s flight crew have unionized to negotiate better wages and more flexible schedules.  

We must continue to expand unions to restore balance to our economy.

In 2017, more than 250,000 additional American workers joined unions, and research shows almost 60 million more workers would like to join–if they had the opportunity.

Public approval of labor unions is at 62 percent, a 15-year high.

That’s why powerful corporations and their enablers in government are trying to squash workers by pushing so-called “right to work” laws and undermining health care, workplace safety, and retirement protections. 

We have the power to overcome these attacks. If you want a better life for you and your children, join a union. And if you want a better America, support unions.

Trump Cornered

What does a megalomaniacal president of the United States do when he’s cornered? We’ll soon find...