Robert Reich
Speaker of the House John Boehner, R-Ohio, faces reporters during a news conference following a closed GOP strategy session at the Capitol in Washington Wednesday. The US government no longer responds to the biggest challenges because it’s paralyzed by intransigent Republicans, Reich writes. (J. Scott Applewhite/AP)
America's other cliffs: poverty, healthcare and the environment
The “fiscal cliff” is a a metaphor for a government that no longer responds to the biggest challenges we face because it’s paralyzed by intransigent Republicans, obsessed by the federal budget deficit, and overwhelmed by big money from corporations, Wall Street, and billionaires.
If we had a functional government America would address three “cliffs” posing far larger dangers to us than the fiscal one:
The child poverty cliff.
Between 2007 and 2011, the percentage of American school-age children living in poor households grew from 17 to 21%. Last year, according to the Agriculture Department, nearly 1 in 4 young children lived in a family that had difficulty affording sufficient food at some point in the year.
Yet federal programs to help children and lower-income families – food stamps, aid for poor school districts, Pell grants, child health care, child nutrition, pre- and post-natal care, and Medicaid – are being targeted by the Republican right. Over 60 percent of the cuts in the GOP’s most recent budget came out of these programs. ( Continue… )
In this November 2012 file photo, President Barack Obama speaks at the Rodon Group, which manufactures over 95 percent of the parts for K'NEX Brands toys. Job growth should be Democrats' first priority in the fiscal cliff debate, Reich writes. (Susan Walsh/AP/File)
Fiscal cliff: 8 principles for Democrats
Democrats, here are eight principles to guide you in the coming showdown over the fiscal cliff:
ONE: HOLD YOUR GROUND. The wealthy have to pay their fair share of taxes. That’s what the election was all about, and we won. It’s only fair they pay more. They’re taking home record share of national income and wealth, and have lowest effective tax rate in living memory.
TWO: NO DEAL IS BETTER THAN A BAD DEAL. You’re in a strong bargaining position. If you do nothing, the Bush tax cuts automatically expire in January, and we go back to rates during Clinton administration. Which isn’t such a bad thing. As I recall we had a pretty good economy during the Clinton years.
THREE: MAKE REPUBLICANS VOTE ON EXTENDING THE TAX CUTS JUST FOR THE MIDDLE CLASS. After all the Bush tax cuts expire, have Republicans vote on an extending the Bush tax cut just for the middle-class. If they refuse and try to hold those tax cuts hostage to tax cuts for the wealthy, it will show whose side they’re on. They’ll pay the price in 2014. ( Continue… )
Protesters with signs hold a demonstration outside a Burger King restaurant in support of fast-food employees on strike in New York November 29, 2012. Reich argues that the recent rash of strikes among low wage workers and the 'fiscal cliff' arguments in Washington are interrelated. (Andrew Kelly/Reuters/File)
Fiscal cliff would hurt low-wage workers the most
What does the drama in Washington over the “fiscal cliff” have to do with strikes and work stoppages among America’s lowest-paid workers at Walmart, McDonald’s, Burger King, and Domino’s Pizza?
Everything.
Jobs are slowly returning to America, but most of them pay lousy wages and low if non-existent benefits. The Bureau of Labor Statistics estimates that seven out of 10 growth occupations over the next decade will be low-wage — like serving customers at big-box retailers and fast-food chains. That’s why the median wage keeps dropping, especially for the 80 percent of the workforce that’s paid by the hour.
It also part of the reason why the percent of Americans living below the poverty line has been increasing even as the economy has started to recover — from 12.3 percent in 2006 to 15 percent in 2011. More than 46 million Americans now live below the poverty line.
Many of them have jobs. The problem is these jobs just don’t pay enough to lift their families out of poverty.
So, encouraged by the economic recovery and perhaps also by the election returns, low-wage workers have started to organize.
Yesterday in New York hundreds of workers at dozens of fast-food chain stores went on strike, demanding a raise to $15-an-hour from their current pay of $8 to $10 an hour (the median hourly wage for food service and prep workers in New York is $8.90 an hour).
Last week, Walmart workers staged demonstrations and walkouts at thousands of Walmart stores, also demanding better pay. The average Walmart employee earns $8.81 an hour. A third of Walmart’s employees work less than 28 hours per week and don’t qualify for benefits.
These workers are not teenagers. Most have to support their families. According to the Bureau of Labor Statistics, the median age of fast-food workers is over 28; and women, who comprise two-thirds of the industry, are over 32. The median age of big-box retail workers is over 30.
Organizing makes economic sense.
Unlike industrial jobs, these can’t be outsourced abroad. Nor are they likely to be replaced by automated machinery and computers. The service these workers provide is personal and direct: Someone has to be on hand to help customers and dole out the burgers.
And any wage gains they receive aren’t likely to be passed on to consumers in higher prices because big-box retailers and fast-food chains have to compete intensely for consumers. They have no choice but to keep their prices low.
That means wage gains are likely to come out of profits – which, in turn, would affect the return to shareholders and the total compensation of top executives.
That wouldn’t be such a bad thing.
According to a recent report by the National Employment Law Project, most low-wage workers are employed by large corporations that have been enjoying healthy profits. Three-quarters of these employers (the fifty biggest employers of low-wage workers) are raking in higher revenues now than they did before the recession.
McDonald’s — bellwether for the fast-food industry — posted strong results during the recession by attracting cash-strapped customers, and its sales have continued to rise.
Its CEO, Jim Skinner, got $8.8 million last year. In addition to annual bonuses, McDonald’s also gives its executives a long-term bonus once every three years; Skinner received an $8.3 million long-term bonus in 2009 and is due for another this year. The value of Skinner’s other perks — including personal use of the company aircraft, physical exams and security — rose 19% to $752,000.
Yum!Brands, which operates and licenses Taco Bell, KFC, and Pizza Hut, has also done wonderfully well. Its CEO, David Novak, received $29.67 million in total compensation last year, placing him number 23 on Forbes’ list of highest paid chief executives.
Walmart – the trendsetter for big-box retailers – is also doing well. And it pays its executives handsomely. The total compensation for Walmart’s CEO, Michael Duke, was $18.7 million last year – putting him number 82 on Forbes’ list.
The wealth of the Walton family – which still owns the lion’s share of Walmart stock — now exceeds the wealth of the bottom 40 percent of American families combined, according to an analysis by the Economic Policy Institute.
Last week, Walmart announced that the next Wal-Mart dividend will be issued December 27 instead of January 2, after the Bush tax cut for dividends expires — thereby saving the Walmart family as much as $180 million. (According to the online weekly “Too Much,” this $180 million would be enough to give 72,000 Wal-Mart workers nowmaking $8 an hour a 20 percent annual pay hike. That hike would still leave those workers making under the poverty line for a family of three.)
America is becoming more unequal by the day. So wouldn’t it be sensible to encourage unionization at fast-food and big-box retailers?
Yes, but here’s the problem.
The unemployment rate among people with just a high school degree or less – which describes most (but not all) fast-food and big-box retail workers – is still in the stratosphere. The Bureau of Labor Statistics puts it at 12.2 percent, and that’s conservative estimate. It was 7.7 percent at the start of 2008.
High unemployment makes it much harder to organize a union because workers are even more fearful than usual of losing their jobs. Eight dollars an hour is better than no dollars an hour. And employers at big-box and fast-food chains have not been reluctant to give the boot to employees associated with attempts to organize for higher wages.
Meanwhile, only half of the people who lose their jobs qualify for unemployment insurance these days. Retail workers in big-boxes and fast-food chains rarely qualify because they haven’t been on the job long enough or are there only part-time. This makes the risk of job loss even greater.
Which brings us back to what’s happening in Washington.
Washington’s obsession with deficit reduction makes it all the more likely these workers will face continuing high unemployment – even higher if the nation succumbs to deficit hysteria. That’s because cutting government spending reduces overall demand, which hits low-wage workers hardest. They and their families are the biggest casualties of austerity economics.
And if the spending cuts Washington is contemplating fall on low-wage workers whose families are under the poverty line – reducing not only the availability of unemployment insurance but also food stamps, housing assistance, infant and child nutrition, child health care, and Medicaid – it will be even worse. (It’s worth recalling, in this regard, that 62 percent of the cuts in the Republican budget engineered by Paul Ryan fell on America’s poor.)
By contrast, low levels of unemployment invite wage gains and make it easier to organize unions. The last time America’s low-wage workers got a real raise (apart from the last hike in the minimum wage) was the late 1990s when unemployment dropped to 4 percent nationally – compelling employers to raise wages in order to recruit and retain them, and prompting a round of labor organizing.
That’s one reason why job growth must be the nation’s number one priority. Not deficit reduction.
Yet neither side in the current “fiscal cliff” negotiations is talking about America’s low-wage workers. They’re invisible in official Washington.
Not only are they unorganized for the purpose of getting a larger share of the profits at Walmart, McDonalds, and other giant firms, they’re also unorganized for the purpose of being heard in our nation’s capital. There’s no national association of low-wage workers. They don’t contribute much to political campaigns. They have no Super-PAC. They don’t have Washington lobbyists.
But if this nation is to reverse the scourge of widening inequality, Washington needs to start paying attention to them. And the rest of us should do everything we can to pressure Washington and big-box retailers and fast-food chains to raise their pay.
House Speaker House John Boehner of Ohio, center, leaves a news conference on Capitol Hill in Washington, Thursday. If Republicans push us over the fiscal cliff, the Clinton tax rates become effective January 1, Reich writes, thereby empowering Democrats in the next congress to get a far better deal. (J. Scott Applewhite/AP)
Obama makes opening move in 'fiscal cliff' deal
So the bidding has begun.
According to the Wall Street Journal (which got the information from GOP leaders), the President’s opening bid to Republicans is:
— $1.6 trillion in additional tax revenues over the next decade, from limiting tax deductions on the wealthy and raising tax rates on incomes over $250,000 (although those rates don’t have to rise as high as the top marginal rates under Bill Clinton)
— $50 billion in added economic stimulus next year
— A one-year postponement of pending spending cuts in defense and domestic programs
— $400 billion in savings over the decade from Medicare and other entitlement programs (the same number contained in the President’s 2013 budget proposal, submitted before the election).
— Authority to raise the debt limit without congressional approval.
The $50 billion in added stimulus is welcome. We need more spending in the short term in order to keep the recovery going, particularly in light of economic contractions in Europe and Japan, and slowdowns in China and India. ( Continue… )
President Barack Obama speaks in the Eisenhower Executive Office Building, on the White House campus in Washington, Wednesday about how middle class Americans would see their taxes go up if Congress fails to act to extend the middle class tax cuts. The president, Reich writes, aims to scare average Americans about how much additional taxes they’ll pay if the Bush tax cuts expire. (Pablo Martinez Monsivais/AP)
Bungee jumping over the 'fiscal cliff'
What’s the best way to pressure Republicans into agreeing to extend the Bush tax cuts for the middle class while ending them for the wealthy?
The President evidently believes it’s to scare average Americans about how much additional taxes they’ll pay if the Bush tax cuts expire on schedule at the end of the year. He plans to barnstorm around the country, sounding the alarm.
The White House has even set up a new Twitter hashtag: “My2K,” referring to the extra $2,200 in taxes the average family will pay if all the Bush cuts expire. Earlier this week the Council of Economic Advisers published a report detailing the awful consequences of going over the so-called “fiscal cliff.”
Excuse me for sounding impertinent, but isn’t this fear-mongering likely to buttress Republican arguments that the Bush tax cuts should be extended for everyone — including the rich? Republicans will say (as they have a thousand times before), the rich are the “job creators,” so we should tackle the budget deficit by cutting spending rather than raising anyone’s taxes. ( Continue… )
US Treasury Secretary Timothy Geithner speaks during a panel discussion hosted by the Los Angeles World Affairs Council in Los Angeles, Calif., in this July 2012 file photo. If Geithner believes any fiscal cliff deal with Republicans is better than no deal, and deficit reduction is more important than job creation, we could be in for a difficult December, Reich writes. (Mario Anzuoni/Reuters/File)
Will Timothy Geithner lead us over or around the fiscal cliff?
I’m trying to remain optimistic that the President and congressional Democrats will hold their ground over the next month as we approach the so-called “fiscal cliff.”
But leading those negotiations for the White House is outgoing Secretary of Treasury Tim Geithner, whom Monday’s Wall Street Journal described as a “pragmatic deal maker” because of “his long relationship with former Treasury Secretary Robert Rubin, for whom balancing the budget was a priority over other Democratic touchstones.”
Geithner is indeed a protege of Bob Rubin, for whom he worked when Rubin was Treasury Secretary in the Clinton administration. Rubin then helped arranged for Geithner to become president of the New York Fed, and then pushed for him to become Obama’s Treasury Secretary.
Both Rubin and Geithner are hardworking and decent. But both see the world through the eyes of Wall Street rather than Main Street. ( Continue… )
In this November file photo, President Barack Obama acknowledges House Speaker John Boehner of Ohio while speaking to reporters in the Roosevelt Room of the White House in Washington. A new report by the White House’s Council of Economic Advisers plays into Republican hands by scaring the middle class, Reich writes. (Carolyn Kaster/AP/File )
Fiscal cliff: Why is the White House helping Republicans?
Why is the White House trying to scare average people about the consequences of the “fiscal cliff?”
If the President’s strategy is to hold his ground and demand from Republicans tax increases on the wealthy, presumably his strongest bargaining position would be to allow the Bush tax cuts to expire on schedule come January – causing taxes to rise automatically, especially on the wealthy.
So you’d think part of that strategy would be reassure the rest of the public that the fiscal cliff isn’t so bad or so steep, and that at the start of January Democrats will introduce in Congress a middle-class tax cut whose effect is to prevent taxes from rising for most people (thereby forcing Republicans to vote for a tax cut for the middle class or hold it hostage to a tax cut for the wealthy as well).
But today (Monday) the White House’s Council of Economic Advisers issued a report today warning that if Congress allows the Bush tax cuts to expire January 1and the Alternative Minimum Tax to kick in, the middle class will face sharply-rising taxes. ( Continue… )
This August 2011 file photo shows the US Department of the Treasury with a statue of former Treasury Secretary Albert Gallatin in Washington. The best way to generate jobs and growth is for the government to spend more, not less, Reich writes. (Jacquelyn Martin/AP/File)
Why we should stop obsessing about the deficit
I wish President Obama and the Democrats would explain to the nation that the federal budget deficit isn’t the nation’s major economic problem and deficit reduction shouldn’t be our major goal. Our problem is lack of good jobs and sufficient growth, and our goal must be to revive both.
Deficit reduction leads us in the opposite direction — away from jobs and growth. The reason the “fiscal cliff” is dangerous (and, yes, I know – it’s not really a “cliff” but more like a hill) is because it’s too much deficit reduction, too quickly. It would suck too much demand out of the economy.
But more jobs and growth will help reduce the deficit. With more jobs and faster growth, the deficit will shrink as a proportion of the overall economy. Recall the 1990s when the Clinton administration balanced the budget ahead of the schedule it had set with Congress because of faster job growth than anyone expected — bringing in more tax revenues than anyone had forecast. Europe offers the same lesson in reverse: Their deficits are ballooning because their austerity policies have caused their economies to sink.
The best way to generate jobs and growth is for the government to spend more, not less. And for taxes to stay low – or become even lower – on the middle class. ( Continue… )
In this February 2011 file photo, BP PLC's CEO Bob Dudley pauses during a results media conference at their headquarters in London. When it comes to criminality, corporate executives are the ones who should be punished, Reich writes. (Alastair Grant/AP)
BP oil spill settlement: why BP is not a criminal
Justice Department just entered into the largest criminal settlement in U.S. history with the giant oil company BP. BP plead guilty to 14 criminal counts, including manslaughter, and agreed to pay $4 billion over the next five years.
This is loony.
Mind you, I’m appalled by the carelessness and indifference of the BP executives responsible for the disaster in the Gulf of Mexico that killed eleven people on April 20, 2010, and unleashed the worst oil spill in American history.
But it defies logic to make BP itself the criminal. Corporations aren’t people. They can’t know right from wrong. They’re incapable of criminal intent. They have no brains. They’re legal fictions — pieces of paper filed away in a vault in some bank. ( Continue… )
In this April 2008 file photo, Jackie Doyle, of Greenwood Lake, N.Y., second from left, waits in line to mail her husband's taxes at the James A. Farley Main Post Office in New York.Tthe path of least resistance on the fiscal cliff is for congressional Republicans and the president to agree to kick the can down the road, Reich writes. (Tina Fineberg/AP/File)
A fiscal cliff 'mini-deal'?
Want to know what’s going to happen to January’s fiscal cliff? Just remember: Political deals move the same way water goes down hill — following the path of least resistance.
Here, the path of least resistance is for congressional Republicans and the President to agree to kick the can down the road – keeping everything as it is (current spending, the Bush tax cut) until a date in the not-too-distant future — say, March 15.
As a sweetener, Republicans will have to agree to lift the debt ceiling again when a vote is needed to do so, probably in late January.
This mini-deal will give the new Congress and the White House time to craft a “grand bargain” on deficit reduction without going over the fiscal cliff.
It also enables the White House and Democrats to retain their trump card: The Bush tax cuts will automatically expire at the end of the negotiation period (in my example, March 15) unless an agreement is reached. So the top marginal tax rate automatically rises to 39 percent.
The downside of the mini-deal: Financial markets will remain uncertain about the ultimate deal. That means another several months of Wall Street gyrations. And certain industries – military contractors, drug companies, and other sectors dependent on government spending – may delay expansion or hiring until a grand bargain is struck.
But it’s far better than going over the cliff.
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