Robert Reich
The Federal Reserve building in Washington is pictured. Trickle-down economics is the first cousin of austerity economics, Reich writes. (Larry Downing/Reuters/File)
Cheap Fed money isn't helping the economy
The Fed’s policy of keeping interest rates near zero is another form of trickle-down economics.
For evidence, look no further than Apple’s decision to borrow a whopping $17 billion and turn it over to its investors in the form of dividends and stock buy-backs.
Apple is already sitting on $145 billion. But with interest rates so low, it’s cheaper to borrow. This also lets Apple avoid U.S. taxes on its cash horde socked away overseas where taxes are lower.
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Other big companies are doing much the same on a smaller scale. ( Continue… )
A clock with the current US national debt is displayed inside the House Committee on Financial Services. As we should have learned from what happened to 'FDR’s debt,' growth is the key, Reich writes. (Larry Downin/Reuters/File)
Public debt and economic growth
In the election of 1952 my father voted for Dwight Eisenhower. When I asked him why he explained that “FDR’s debt” was still burdening the economy — and that I and my children and my grandchildren would be paying it down for as long as we lived.
I was only six years old and had no idea what a “debt” was, let alone FDR’s. But I had nightmares about it for weeks.
Yet as the years went by my father stopped talking about “FDR’s debt,” and since I was old enough to know something about economics I never worried about it. My children have never once mentioned FDR’s debt. My four-year-old grandchild hasn’t uttered a single word about it.
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By the end of World War II, the national debt was 120 percent of the entire economy. But by the mid-1950s, it was half that. ( Continue… )
Jobseekers stand in line around the block to attend the Dr. Martin Luther King Jr. career fair held by the New York State department of Labor in New York. No economy can maintain momentum just on the spending of the richest 10 percent, Reich writes. (Lucas Jackson/Reuters/File)
GDP growth slows: why Washington must repeal the sequester
Economic forecasters exist to make astrologers look good. Most had forecast growth of at least 3 percent (on an annualized basis) in the first quarter. But we learned this morning (in the Commerce Department’s report) it grew only 2.5 percent.
That’s better than the 2 percent growth last year and the slowdown at the end of the year. But it’s still cause for serious concern.
First, consumers won’t keep up the spending. Their savings rate fell sharply — from 4.7% in the last quarter of 2012 to 2.6% from January through March.
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Add in March’s dismal employment report, the lowest percentage of working-age adults in jobs since 1979, and January’s hike in payroll taxes, and consumer spending will almost certainly drop. ( Continue… )
Sen. Dianne Feinstein, D-Calif. is seen in an elevator on Capitol Hill in Washington, Wednesday, after speaking on the Senate floor about gun legislation. If you want to explain what’s happening in America on these non-economic issues you have to understand what’s happening to the nation demographically, Reich writes. (Charles Dharapak/AP)
Senate balks on gun control. Reasons for the division.
My first reaction on hearing of the Senate’s failure to get 60 votes for even modest measures to regulate the flow of guns into the hands of people who shouldn’t have them, such as background checks supported by 90 percent of Americans, was to be furious at the spinelessness of the four Senate Democrats who voted against the measure (Mark Begich, Max Baucus, Mark Pryor, and Heidi Heitkamp), as well as the Republicans. And also with Harry Reid, who wouldn’t lead the fight on changing the filibuster rule when he had the chance.
The deeper message here is that rural, older, white America occupies one land; younger, urban, increasingly non-white America lives in another. And the dividing line on social issues (not just guns, but also abortion, equal marriage rights, and immigration reform) runs between the two.
Yes, I know: Plenty of people who are rural, older, and white aren’t regressives on guns, abortion, equal marriage, and immigration. And plenty who are urban, younger, and non-white are. My point is that if you want to explain what’s happening in America on these non-economic issues you have to understand what’s happening to the nation demographically — and why the demographic split is important.
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Begich, Baucus, Pryor, and Heitkamp may be Democrats but they’re also from rural, older, white America. That land has disproportionate political power in the Senate, and a gerrymandered House — which may not bode well for immigration reform over the next few months, and suggests continuing battles over “state’s rights” to determine who can marry and when human life begins.
Over time, though, older, rural, white America is losing ground to a nation becoming ever younger, more urban, and increasingly non-white — a fact that threatens the former so much that it’s in full backlash against the forces of change.
Participants in Run/Walk for Remembrance take part in a moment of silence Tuesday in Silverdale, Wash. Our thoughts turn to Boston – as they should, Reich writes, but economic inequality across America remains ignored. (Meegan M. Reid/Kitsap Sun/AP)
Boston bombings: A moment of unity amid economic division
We come together as Americans when confronting common disasters and common threats, such as occurred in Boston on Monday, but we continue to split apart economically.
Anyone who wants to understand the dis-uniting of America needs to see how dramatically we’re segregating geographically by income and wealth. Today I’m giving a Town Hall talk in Fresno, in the center of California’s Central Valley, where the official unemployment rate is 15.4 percent and median family earns under $40,000. The so-called “recovery” is barely in evidence.
As the crow flies Fresno is not that far from California’s high-tech enclaves of Google, Intel, Facebook, and Apple, or from the entertainment capital of Hollywood, but they might as well be different worlds.
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Being wealthy in modern America means you don’t come across anyone who isn’t, and being poor and lower-middle class means you’re surrounded by others who are just as hard up. Upward mobility — the old notion that anyone can make it with enough guts and gumption — is less of a reality. ( Continue… )
A man looks over employment opportunities at a jobs center in San Francisco, Calif. Businesses won’t hire and expand unless they have more customers, Reich writes, but most Americans can’t spend more. (Robert Galbraith/Reuters/File)
Why this is the worst economic recovery on record
The biggest economic debate is between Keynesians (who want more government spending and lower interest rates in order to fuel demand) and supply-side “austerics” (who want lower taxes on the wealthy and on corporations to boost incentives to hire and invest, and who see government deficits crowding out private investment).
But both approaches have problems.
George W. Bush tried supply-side tax cuts but nothing trickled down. Jobs and wages declined. And austerity economics has been a disaster for Europe.
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Unfortunately the U.S. is now adopting supply-side austerics by making the Bush tax cuts permanent for 98 percent of taxpayers, hiking Social Security taxes back up, and implementing the sequester. ( Continue… )
President Barack Obama, accompanied by acting Budget Director Jeffrey Zients, speaks in the Rose Garden of the White House in Washington, Wednesday. The president desperately wants a “grand bargain” on the deficit, Reich writes. (J. David Ake/AP)
Obama budget: Why entitlement cuts are a 'grand bargain' we don't need
John Boehner, Speaker of the House, revealed why it’s politically naive for the President to offer up cuts in Social Security in the hope of getting Republicans to close some tax loopholes for the rich. “If the President believes these modest entitlement savings are needed to help shore up these programs, there’s no reason they should be held hostage for more tax hikes,” Boehner said in a statement released Friday.
House Majority Leader Eric Cantor agreed. He said on CNBC he didn’t understand “why we just don’t see the White House come forward and do the things that we agree on” such as cutting Social Security, without additional tax increases.
Get it? The Republican leadership is already salivating over the President’s proposed Social Security cut. They’ve been wanting to cut Social Security for years.
But they won’t agree to close tax loopholes for the rich. ( Continue… )
The US Capitol Building is pictured in Washington. Cuts from the sequester are so particular and localized they don’t feel as if they’re the result of a change in national policy, Reich writes. (Jason Reed/Reuters/File)
The invisible sequester
So far, the much-dreaded “sequester” – some $85 billion in federal spending cuts between March and September 30 – hasn’t been evident to most Americans.
The dire warnings that had issued from the White beforehand – threatening that Social Security checks would be delayed, airport security checks would be clogged, and other federal facilities closed – seem to have been overblown.
Sure, March’s employment report was a big disappointment. But it’s hard to see any direct connection between those poor job numbers and the sequester. The government has been shedding jobs for years. Most of the losses in March were from the Postal Service.
Take a closer look, though, and Americans are starting to feel the pain. They just don’t know it yet. ( Continue… )
A help wanted sign hangs in front of a restaurant in Richmond, Va. Weak March job numbers demonstrate that we’re experiencing the burden of austerity economics and the continued scourge of widening inequality, Reich writes. (Steve Helber/AP/File)
What's behind the bad March job numbers?
Bad news on the economy. It added only 88,000 jobs in March – the slowest pace of job growth in nine months.
While the jobless rate fell to 7.6 percent, much of the drop was due to the labor force shrinking by almost a half million people. If you’re not looking for work, you’re not counted as unemployed.
That means the percentage of working-age Americans either with a job or looking for one dropped to 63.3 percent — its lowest level since 1979.
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The direction isn’t encouraging. The pace of job growth this year is slower than its pace last year. ( Continue… )
Chained CPI for Social Security would hurt seniors
The White House and prominent Democrats are talking about reducing future Social Security payments by using a formula for adjusting for inflation that’s stingier than the current one. It’s called the “Chained CPI.” I did this video so you can understand it — and understand why it’s so wrongheaded.
Even Social Security’s current inflation adjustment understates the true impact of inflation on the elderly. That’s because they spend 20 to 40 percent of their incomes on health care, and health-care costs have been rising faster than inflation. So why adopt a new inflation adjustment that’s even stingier than the current one?
Social Security benefits are already meager for most recipients. The median income of Americans over 65 is less than $20,000 a year. Nearly 70 percent of them depend on Social Security for more than half of this. The average Social Security benefit is less than $15,000 a year.
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Besides, Social Security isn’t in serious trouble. The Social Security trust fund is flush for at least two decades. If we want to ensure it’s there beyond that, there’s an easy fix — just lift the ceiling on income subject to Social Security taxes, which is now $113,700.
Why are Democrats even suggesting the inflation adjustment be reduced? Republicans aren’t asking for it. Not even Paul Ryan’s draconian budget includes it.
Democrats invented Social Security and have been protecting it for almos 80 years.They shouldn’t be leading the charge against it.
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