Robert Reich
A protester affiliated with the Occupy Wall Street movement bangs on a frying pan outside New York City Mayor Michael Bloomberg's personal home at 17 East 79th Street in New York. Reich argues that in a nation where protesters are treated like nuisances and moneyed interests have the loudest voices, the First Amendment has been turned on its head. (Eduardo Munoz/Reuters/File)
Time to take back the First Amendment
You’ve been seeing this across the country … Americans assaulted, clubbed, dragged, pepper-sprayed … Why? For exercising their right to free speech and assembly — protesting the increasing concentration of income, wealth, and political power at the top.
And what’s Washington’s response? Nothing. In fact, Congress’s so-called “supercommittee” just disbanded because Republicans refuse to raise a penny of taxes on the rich.
Meanwhile, the Supreme Court says money is speech and corporations are people. The Supreme Court’s Citizens United decision last year ended all limits on political spending. Millions of dollars are being funneled to politicians without a trace.
And a revolving door has developed between official Washington and Wall Street – with bank executives becoming public officials who make rules that benefit the banks before heading back to the Street to make money off the rules they created.
Other top officials, including an increasing proportion of former members of congress, are cashing in by joining lobbying power houses and pressuring their former colleagues to do whatever their clients want.
Millionaires and billionaires on Wall Street and in executive suites aren’t contributing all this money out of sheer love of country. Their political spending is analogous to their other investments. Mostly they want low tax rates and friendly regulations.
Why else do you suppose tax rates on the super rich are now lower than they’ve been in three decades, and why – even though the long-term budget deficit is horrendous – those rates aren’t rising? Why else do the 400 richest Americans (whose wealth is larger than the combined wealth of the bottom 150 million Americans) now pay an average tax rate of only 17 percent?
Why do you think Wall Street got bailed without a single string attached – not even being required to help homeowners to whom they sold mortgages, who are now so far under water they’re drowning? And why does the financial reform legislation have loopholes big enough for bankers to drive their Ferrari’s through?
And why else are oil companies, big agribusinesses, military contractors, and the pharmaceutical industry reaping billions of dollars of government subsidies and special tax breaks?
Experts say the 2012 presidential race is likely to be the priciest ever, costing an estimated $6 billion. “It is far worse than it has ever been,” says Republican Senator John McCain.
If there’s a single core message to the Occupier movement it’s that the increasing concentration of income and wealth at the top endangers our democracy. With money comes political power.
Yet when real people without money assemble to express their dissatisfaction with all this, they’re told the First Amendment doesn’t apply. Instead, they’re treated as public nuisances – clubbed, pepper-sprayed, thrown out of public parks and evicted from public spaces.
Across America, public officials are saying Occupiers have to go. Even in universities – where free speech is supposed to be sacrosanct – peaceful assembly is being met with clubs and pepper spray.
The First Amendment is being stood on its head. Money speaks, and an unlimited amount of it can now be spent bribing and cajoling politicians. Yet peaceful assembly is viewed as a public nuisance and removed by force.
This is especially worrisome now that so many Americans are in economic trouble. The jobs recession grinds on, seemingly without end. Homes are being foreclosed upon. Qualified students cannot afford college. Or they’re forced to take on huge debt loads they can’t repay in a jobless economy. Schools are firing teachers. Vital social services are being axed.
How are Americans to be heard about what should be done about any of this if they are not allowed to mobilize and organize? When the freedom of speech goes to the highest bidder, moneyed interests have a disproportionate say.
Now more than ever, the First Amendment needs to be put right side up. Nothing less than the future of our democracy is at stake.
Sen. John Kerry, D-Mass., emerges from a closed-door meeting with fellow Democratic members of the Supercommittee at the Capitol in Washington. Reich argues that Washington needs to find a way to stop devastating budget cuts and pass measures that would boost the economy, not hurt it further. (J. Scott Applewhite/AP/File)
Four ways to restore jobs and prosperity
The biggest question right now on Planet Washington is whether the congressional supercommittee will reach an agreement.
That’s the wrong question. Agreement or not, Washington is on the road to making budget cuts that will slow the economy, increase unemployment, and impose additional hardship on millions of Americans.
The real question is how to stop this austerity train wreck, and substitute the following:
FIRST: no cuts before jobs are back – until unemployment is down to 5 percent. Until then, the economy needs a boost, not a cut. Consumers – whose spending is 70 percent of the economy – don’t have the money to boost the economy on their own. Their pay is dropping and they’re losing jobs.
SECOND: Make the boost big enough. 14 million Americans are out of work, and 10 million are working part time who need full-time jobs. The President’s proposed jobs program is a start but it’s tiny relative to what needs to be done. It would create fewer than 2 million jobs. We need a big jobs program – rebuilding America’s crumbling infrastructure, and including a WPA and Civilian Conservation Corps.
THIRD: To pay for this, raise taxes on the super-rich. It’s only fair. Never before has so much income and wealth been concentrated at the very top, and taxes on the top so low. Go back to the 70 percent marginal tax we had before 1980. And include more tax brackets at the top. It doesn’t make sense that any income over $375,000 is taxed at the same 35 percent, even if it’s a billion dollars. And tax all sources of income at the same rate, including capital gains.
FOURTH: Cut the budget where the real bloat is. Military spending and corporate welfare. End weapons systems that don’t work and stop wars we shouldn’t be fighting to begin with, and we save over $300 billion a year. Cut corporate welfare – subsidies and special tax breaks going to big agribusiness, big oil, big pharma, and big insurance – and we save another $100 billion.
Do you hear me, Washington? Do these four things and restore jobs and prosperity. Fail to do these, and you’ll make things much, much worse.
An almost empty Zuccotti Park is seen where Occupy tents had stood for nearly two months in New York, November 16, 2011. A judge upheld New York City's right to evict Occupy Wall Street protesters from a park on Tuesday after baton-wielding police in riot gear broke up a two-month-old demonstration against economic inequality. (Shannon Stapleton/Reuters)
Occupy tents removed: The hijacking of the First Amendment
A funny thing happened to the First Amendment on its way to the public forum. According to the Supreme Court, money is now speech and corporations are now people. But when real people without money assemble to express their dissatisfaction with the political consequences of this, they’re treated as public nuisances and evicted.
First things first. The Supreme Court’s rulings that money is speech and corporations are people have now opened the floodgates to unlimited (and often secret) political contributions from millionaires and billionaires. Consider the Koch brothers (worth $25 billion each), who are bankrolling the Tea Party and already running millions of dollars worth of ads against Democrats.
Such millionaires and billionaires aren’t contributing their money out of sheer love of country. They have a more self-interested motive. Their political spending is analogous to their other investments. Mostly they want low tax rates and friendly regulations.
Wall Street is punishing Democrats for enacting the Dodd-Frank financial reform legislation (weak as it is) by shifting its money to Republicans. The Koch brothers’ petrochemical empire has financed, among many other things, candidates who will vote against environmental protection.
This tsunami of big money into politics is the real public nuisance. It’s making it almost impossible for the voices of average Americans to be heard because most of us don’t have the dough to break through. By granting First Amendment rights to money and corporations, the First Amendment rights of the rest of us are being trampled on.
This is where the Occupiers come in. If there’s a core message to the Occupier movement it’s that the increasing concentration of income and wealth poses a grave danger to our democracy.
Yet when Occupiers seek to make their voices heard — in one of the few ways average people can still be heard — they’re told their First Amendment rights are limited.
The New York State Court of Appeals along with many mayors and other officials say Occupiers can picket — but they can’t encamp. Yet it’s the encampments themselves that have drawn media attention (along with the police efforts to remove them).
A bunch of people carrying pickets isn’t news. When it comes to making views known, picketing is no competition for big money .
Yet if Occupiers now shift tactics from passive resistance to violence, it would spell the end of the movement. The vast American middle class that now empathizes with the Occupiers would promptly desert them.
But there’s another alternative. If Occupiers are expelled from specific geographic locations the Occupier movement can shift to broad-based organizing around the simple idea at the core of the movement: It’s time to occupy our democracy.
Republican presidential candidate Mitt Romney, Former Governor of Massachusetts, speaks at the CBS News/National Journal foreign policy debate at the Benjamin Johnson Arena in Spartanburg, S.C. Reich argues that a Romney/Obama presidential race will be a passionless one, and that may be dangerous for America. (Richard Shiro/AP)
Get ready for a passionless presidential race
Polls show Americans angrier and more polarized than at any time since the Vietnam War. That’s not surprising. We have the worst economy since the Great Recession and the worst politics in living memory. The rise of the regressive right over the last three decades has finally spurred a progressive reaction. Occupiers and others have had enough.
Yet paradoxically the presidential race that officially begins a few months from now is likely to be as passionless as they come.
President Obama will be supported by progressives and the Democratic base, but without enthusiasm. His notorious caves to Republicans and Wall Street — failing to put conditions on the Street’s bailout (such as demanding the Street help stranded home owners), or to resurrect Glass-Steagall, or include a public option in health care, or assert his constitutional responsibility to raise the debt limit, or protect Medicare and Social Security, or push for cap-and-trade, or close Guantanamo, or, in general, confront the regressive Republican nay-sayers and do-nothings with toughness rather than begin negotiations by giving them much of what they want — are not the stuff that stirs a passionate following.
Mitt Romney will surely be the Republican presidential candidate — and Romney inspires as little enthusiasm among Republicans as Obama does among Democrats. The GOP will support Romney because, frankly, he’s the only major Republican primary candidate who does not appear to the broader public to be nuts.
But Republicans don’t like Romney. His glib, self-serving, say-whatever-it-takes-to-win-the primaries approach strikes almost everyone as contrived and cynical. Moreover, Romney is the establishment personified — a pump-and-dump takeover financier, for crying out loud — at the very time the GOP (and much of the rest of the country) are becoming more anti-establishment by the day.
At this point neither the Republican right nor the mainstream media wants to admit the yawn-inducing truth that Mitt will be the GOP’s candidate. The right doesn’t want to admit it because it will be seen as a repudiation of the Tea Party. The media doesn’t want to because they’d prefer to sell newspapers and attract eyeballs.
The media are keeping the story of Rick Perry’s cringe-inducing implosion going for the same reason they’re keeping the story of Herman Cain’s equally painful decline going — because the public is forever fascinated by the gruesome sight of dying candidacies. With Bachmann, Perry, and Cain gone or disintegrating, the right wing-nuts of the GOP have only one hope left: Newt Gingrich. His star will rise briefly before he, too, is pilloried for the bizarre things he’s uttered in the past and for his equally bizarre private life. His fall will be equally sudden (although I don’t think Gingrich is capable of embarrassment).
And so we’ll be left with two presidential candidates who don’t inspire — at the very time in American history when Americans crave inspiration.
Instead of a big debate about the basics (how to truly restore jobs and wages, financial capitalism versus product capitalism, the place and role of America in the world, how to rescue our democracy), we’re likely to have a superficial debate over symbols (the budget deficit, the size of government, whether we need a “businessman” at the helm).
This means political passions are likely to move elsewhere — finding their voices in grass-roots movements, social media, demonstrations, boycotts, and meet-ups — on the Main Streets and in the backwaters, and only episodically in the mainstream media or in normal election-year events.
In some ways this may not be such a bad thing. The regressive right has had thirty years to build itself into a political power. Newly-energized progressives (Occupiers and others) need enough time to develop concrete proposals and strategies. What’s the rush? If polls are to be believed, most of the nation is progressive, not regressive (witness last Tuesday’s results in Wisconsin and elsewhere). So it is, after all, only a matter of time.
Yet viewed another way, a passionless presidential race may be dangerous for America. The nation’s problems may not wait. They require bold action, and soon.
Supercommittee members, from left, Sen. Jon Kyl, R-Ariz., Sen. Max Baucus, D-Mont., Sen. Rob Portman, R-Ohio, and Sen. John Kerry, D-Mass., take part in a hearing on Capitol Hill in Washington. Reich argues that if the unemployment rate remains above 5 percent, the 1.2 trillion deficit cut that will occur in 2013 if Congress can't come up with the money will do more harm than good. (J. Scott Applewhite/AP/File)
Deficit cuts should be triggered only when unemployment reaches five percent
On planet Washington, where reducing the federal budget deficit continues to be more important than creating jobs, everyone is talking about “triggers” that automatically go into effect if certain other things don’t happen.
Yet no one is talking about the most obvious trigger of all — no budget cuts until the official level of unemployment falls to 5 percent, its level before the Great Recession.
The biggest trigger on the minds of Washington insiders is $1.2 trillion across-the-board cuts that will automatically occur if Congress’s supercommittee doesn’t come up with at least $1.2 trillion of cuts on its own that Congress agrees to by December 23.
That automatic trigger seems likelier by the day because at this point the odds of an agreement are roughly zero.
Here’s the truly insane thing: The triggered cuts start in 2013, a little over a year from now.
Yet no one in their right mind believes unemployment will be lower than 8 percent by then.
The cuts will come on top of the expiration of extended unemployment benefits, the end of a payroll tax cut, and continuing reductions in state and local budgets — all when American consumers (whose spending is 70 percent of the economy) will still be reeling from declining jobs and wages and plunging home prices. Even if Europe’s debt crisis doesn’t by then threaten a global financial meltdown, this rush toward austerity couldn’t come at a worse time.
In other words, what will really be triggered is a deeper recession and higher unemployment.
Democrats on the supercommittee are acting as if they haven’t met an unemployed person. They’re proposing $2.3 trillion in deficit reductions — half from spending cuts (including $350 billion from Medicare), half from tax increases. To make the tax increases palatable to Republicans, Democrats want to give Congress a chance to find the new revenues by overhauling the tax code. If that effort fails, automatic tax increases would be triggered. The top tax rate won’t rise (another bow to Republicans) but top earners’ itemized deductions will be limited.
Oh, and by the way, under the Democrats’ proposal, spending cuts and tax increases, triggered or not, would start in 2013.
The President (remember him?) is still hawking his $450 billion jobs bill, but he’s having a hard time being heard above the deficit-reduction din — in large part because he himself is simultaneously calling for deficit reduction, and most people outside Washington can’t make sense of how we do both.
The public is confused because they don’t get it’s a matter of sequencing. We need to do more spending now in order to bring back jobs and growth, then do less spending in the future — after the economy is once again generating jobs and growth.
That’s why it make more sense for Democrats to propose a deficit reduction plan that goes into effect only when jobs are back. The trigger should be the rate of unemployment — and a 5 percent rate would signal we’re back on track.
True, the unemployment rate is an imperfect measure of how bad things are (it doesn’t include everyone who’s working part-time but needs a full-time job, and those too discouraged to look for work), but at least it’s a useful way of comparing how much worse or better we are than we’ve been. And it can’t be fiddled with (the Bureau of Labor Statistics guards the calculation like gold in Fort Knox).
Deficit hawks in both parties fear if we put off the spending cuts we’ll never do them. But if we cut now, the ratio of deficit to the total economy just gets worse — because the economy stagnates and the swelling ranks of unemployed don’t pay taxes.
So the best of all worlds is to have a big jobs plan now, and also commit to automatic cuts triggered when unemployment falls to 5 percent.
The hawks should find this acceptable. Reasonable Republicans (if any are left) will, too. Democrats, if they still care about jobs, should lead the way.
Protesters from the Occupy Boston movement, students from area colleges, and union workers chant slogans and display placards and the American flag as they march through downtown Boston. Reich argues that, as long as they insist on being treated as persons protected under federal law, corporations should have to demonstrate allegiance to the United States. (Steven Senne/AP)
The corporate Pledge of Allegiance
Despite what the Supreme Court and Mitt Romney say, corporations aren’t people. (I’ll believe they are when Georgia and Texas start executing them.)
The Court thinks corporations have First Amendment rights to spend as much as they want on politics, and Romney (and most of his fellow Regressives) think they need lower taxes and fewer regulations in order to be competitive.
These positions are absurd on their face. By flooding our democracy with their shareholders’ money, big corporations are violating their shareholders’ First Amendment rights because shareholders aren’t consulted. They’re simultaneously suppressing the First Amendment rights of the rest of us because, given how much money they’re throwing around, we don’t have enough money to be heard.
And they’re indirectly giving non-Americans (that is, all their foreign owners, investors, and executives) a say in how Americans are governed. Pardon me for being old-fashioned but I didn’t think foreign money was supposed to be funneled into American elections.
Romney’s belief big corporations need more money and lower costs in order to create jobs is equally baffling. Big corporations are now sitting on $2 trillion of cash and enjoying near-record profits. The ratio of profits to wages is higher than it’s been since before the Great Depression. And a larger and larger portion of those profits are going to top executives. (CEO pay was 40 times the typical worker in the 1980s; it’s now upwards of 300 times.)
But, hey, if the Supreme Court and regressive Republicans insist big corporations are people and want to treat them as American citizens, then why not demand big corporations take a pledge of allegiance to the United States?
And if they don’t take the pledge, we should boycott them. (Occupiers — are you listening?)
Here’s what a Corporate Pledge of Allegiance might look like:
The Corporate Pledge of Allegiance to the United States
The [fill in blank] company pledges allegiance to the United States of America. To that end:
We pledge to create more jobs in the United States than we create outside the United States, either directly or in our foreign subsidiaries and subcontractors.
If we have to lay off American workers, we will give them severance payments equal to their weekly wage times the number of weeks they’ve work for us.
We further pledge that no more than 20 percent of our total labor costs will be outsourced abroad.
We pledge to keep a lid on executive pay so no executive is paid more than 50 times the median pay of American workers. We define “pay” to include salary, bonuses, health benefits, pension benefits, deferred salary, stock options, and every other form of compensation.
We pledge to pay at least 30 percent of money earned in the United States in taxes to the United States. We won’t shift our money to offshore tax havens and won’t use accounting gimmicks to fake how much we earn.
We pledge not to use our money to influence elections.
Companies that make the pledge are free to use it in their ads over the Christmas shopping season.
Jose Briceno, of Cambridge, Mass., center, joins with members of the Occupy Boston movement, students from area colleges, and union workers as they march through downtown Boston to protest growing student debt burden. Reich argues that we won't fix the nation's economy until we buck the trend towards income inequality. (Steven Senne/AP)
Fix income inequality, fix the economy
The biggest question in America these days is how to revive the economy.
The biggest question among activists now occupying Wall Street and dozens of other cities is how to strike back against the nation’s almost unprecedented concentration of income, wealth, and political power in the top 1 percent.
The two questions are related. With so much income and wealth concentrated at the top, the vast middle class no longer has the purchasing power to buy what the economy is capable of producing. (People could pretend otherwise as long as they could treat their homes as ATMs, but those days are now gone.) The result is prolonged stagnation and high unemployment as far as the eye can see.
Until we reverse the trend toward inequality, the economy can’t be revived.
But the biggest question in our nation’s capital right now has nothing to do with any of this. It’s whether Congress’s so-called “Supercommittee” – six Democrats and six Republicans charged with coming up with $1.2 trillion in budget savings — will reach agreement in time for the Congressional Budget Office to score its proposal, which must then be approved by Congress before Christmas recess in order to avoid an automatic $1.5 trillion in budget savings requiring major across-the-board cuts starting in 2013.
Have your eyes already glazed over?
Diffident Democrats on the Supercommittee have already signaled a willingness to cut Medicare, Social Security, and much else that Americans depend on. The deal is being held up by Regressive Republicans who won’t raise taxes on the rich – not even a tiny bit.
President Obama, meanwhile, is out on the stump trying to sell his “jobs bill” – which would, by the White House’s own estimate, create fewer than 2 million jobs. Yet 14 million people are out of work, and another 10 million are working part-time who’d rather have full-time jobs.
Republicans have already voted down his jobs bill anyway.
The disconnect between Washington and the rest of the nation hasn’t been this wide since the late 1960s.
The two worlds are on a collision course: Americans who are losing their jobs or their pay and can’t pay their bills are growing increasingly desperate. Washington insiders, deficit hawks, regressive Republicans, diffident Democrats, well-coiffed lobbyists, and the lobbyists’ wealthy patrons on Wall Street and in corporate suites haven’t a clue or couldn’t care less.
I can’t tell you when the collision will occur but I’d guess 2012.
Look elsewhere around the world and you see a similar collision unfolding. The details differ but the larger forces are similar. You see it in Spain, Greece, and Italy, whose citizens are being squeezed by bankers insisting on austerity. You see it in Chile and Israel, whose young people are in revolt. In the Middle East, whose “Arab spring” is becoming a complex Arab fall and winter. Even in China, whose young and hourly workers are demanding more – and whose surge toward inequality in recent years has been as breathtaking as is its surge toward modern capitalism.
Will 2012 go down in history like other years that shook the foundations of the world’s political economy – 1968 and 1989?
I spent part of yesterday in Oakland, California. The Occupier movement is still in its infancy in the United States, but it cannot be stopped. Here, as elsewhere, people are outraged at what feels like a rigged game – an economy that won’t respond, a democracy that won’t listen, and a financial sector that holds all the cards.
Here, as elsewhere, the people are rising.
Greek Prime Minister George Papandreou addresses Socialist members of parliament in Athens. Greece is holding a referendum on a new European debt deal reached last week. (Thanassis Stavrakis/AP)
Greeks' choice–and ours: Democracy or finance?
Which do you trust more: democracy or financial markets?
Greek Prime Minister George Papandreou decided in favor of democracy yesterday when he announced a national referendum on the draconian budget cuts Europe and the IMF are demanding from Greece in return for bailing it out.
(Or, more accurately, the cuts Europe and the IMF are demanding for bailing out big European banks that have lent Greece lots of money and stand to lose big if Greece defaults on those loans – not to mention Wall Street banks that will also suffer because of their intertwined financial connections with European banks.)
If Greeks accept the bailout terms, unemployment will rise even further in Greece, public services will be cut more than they have already, the Greek economy will contract, and the standard of living of most Greeks will deteriorate further.
If Greeks reject the terms and the nation defaults, it will face far higher borrowing costs in the future. This may reduce the standard of living of most Greeks, too. But it doesn’t have to. Without the austerity measures the rest of Europe and the IMF are demanding, the Greek economy has a better chance of growing and more Greeks are likely to find jobs.
Shouldn’t Greeks be able to make this decision for themselves?
Of course, if Greek defaults on its loans, global investors (fearing that a default in Greece sets a dangerous precedent) may yank their money out of Italy. This would almost certainly bust several big European banks – and generate panic on Wall Street. That’s why Tim Geithner has been pressing Europe to bail out Greece.
We’ve been here before, remember? Here in the United States, at the end of 2008 and start of 2009. Wall Street had made lots of bad loans, and the question we faced then was whether to bail out the Street.
The difference is, we didn’t hold a referendum. Instead, the Bush administration told Congress the nation risked “economic Armageddon” if it didn’t immediately authorize a giant bailout of the Street – with no strings attached. Of course Congress hastily agreed. Hank Paulson, Ben Bernanke, and Tim Geithner (as head of the New York Fed) then doled out the money. And the Obama administration (with Geithner installed as Treasury Secretary) gave out more.
So instead of allowing the Street to live with the consequences of its negligence, we bailed it out – and allowed the Main Streets of America to suffer the consequences.
If Americans had been consulted about the bank bailout, I doubt it would have happened the way it did. At the very least, strict conditions would have been placed on the banks in return for the money. The banks would have had to eat the losses of the predatory mortgages they sold, and help homeowners reduce those mortgages. They’d be required to improve the capitalization of small banks in communities across the country. They’d be forced to accept stringent new regulations, including resurrection of Glass-Steagall.
But Americans weren’t really consulted. It was an inside job.
As a result, Wall Street has prospered but the rest of the nation hasn’t. One out of four homeowners is underwater, owing more on their homes than the homes are worth.
And with the worst economy since the Great Depression, we’re now embarking on fiscal austerity. Either Congress’s super-committee comes up with $1.2 trillion of federal budget cuts that Congress agrees to – going into effect a little over thirteen months from now – or $1.5 trillion of cuts are made across the board. Meanwhile, states and cities have been slashing public services for the past three years.
So which is it? Rule by democracy or by financial markets? Based on what’s happened in America, I’d choose the former.
Occupy Wall Street protesters play drums and other percussion instruments at Zuccotti Park in New York. The Occupy movement is gaining ground because it’s hitting a responsive chord, Reich argues. (Seth Wenig/AP/File)
OWS: Protest movement is growing
A combination of police crackdowns and bad weather are testing the young Occupy movement. But rumors of its demise are premature, to say the least. Although numbers are hard to come by, anecdotal evidence suggests the movement is growing.
As importantly, the movement has already changed the public debate in America.
Consider, for example, last week’s Congressional Budget Office report on widening disparities of income in America. It was hardly news – it’s already well known that the top 1 percent now gets 20 percent of the nation’s income, up from 9 percent in the late 1970s.
But it’s the first time such news made the front page of the nation’s major newspapers.
Why? Because for the first time in more than half a century, a broad cross-section of the American public is talking about the concentration of income, wealth, and political power at the top.
Score a big one for the Occupiers.
Even more startling is the change in public opinion. Not since the 1930s has a majority of Americans called for redistribution of income or wealth. But according to a recent New York Times/CBS News poll, an astounding 66 percent of Americans said the nation’s wealth should be more evenly distributed.
A similar majority believes the rich should pay more in taxes. According to a Wall Street Journal/NBC News poll, even a majority of people who describe themselves as Republicans believe taxes should be increased on the rich.
I remember the days when even raising the subject of inequality made you a “class warrior.” Now, it seems, most Americans have become class warriors.
And they blame Republicans for stacking the deck in favor of the rich. On that New York Times/CBS News poll, 69 percent of respondents said Republican policies favor the rich (28 percent said the same of Obama’s policies).
The old view was anyone could make it in America with enough guts and gumption. We believed in the self-made man (or, more recently, woman) who rose from rags to riches – inventors and entrepreneurs born into poverty, like Benjamin Franklin; generations of young men from humble beginnings who grew up to became president, like Abe Lincoln. We loved the novellas of Horatio Alger, and their more modern equivalents – stories that proved the American dream was open to anyone who worked hard.
In that old view, being rich was proof of hard work, and lack of money proof of indolence or worse. As Herman Cain still says “if you don’t have a job and you’re not rich, blame yourself.”
But Cain’s line isn’t hitting a responsive chord. In fact, he’s backtracked from it (along with much of the rest of what he’s said).
A profound change has come over America. Guts, gumption, and hard work don’t seem to pay off as they once did – or at least as they did in our national morality play. Instead, the game seems rigged in favor of people who are already rich and powerful – as well as their children.
Instead of lionizing the rich, we’re beginning to suspect they gained their wealth by ripping us off.
Mitt Romney is defensive about his vast wealth (reputed to total a quarter of a billion). He’s reverted to scolding his audiences on the campaign trail for “attacking people based on heir success.”
The old view was also that great wealth trickled downward – that the rich made investments in jobs and growth that benefitted all of us. So even if we doubted we’d be wealthy, we still gained from the fortunes made by a few.
But that view, too, has lost its sheen. Nothing has trickled down. The rich have become far richer over the last three decades but the rest of us haven’t. In fact, median incomes are dropping.
Wall Street moguls are doing better than ever – after having been bailed out by the rest of us. But the rest of us are doing worse. CEOs are hauling in more than 300 times the pay of average workers (up from 40 times the pay only three decades ago), as average workers lose jobs, wages, and benefits.
Instead of investing in jobs and growth, the super rich are putting their money into gold or Treasury bills, or investing it in Brazil or South Asia or anywhere else it can reap the highest return.
Meanwhile, it’s dawning on Americans that in the real economy (as opposed to the financial one) our spending is vital. And without enough jobs or wages, that spending is drying up.
The economy is in trouble because so much income and wealth have been going to the top that the rest us no longer have the purchasing power to buy the goods and services we would produce at or near full employment.
The jobs depression shows no sign of ending. Personal disposable income, adjusted for inflation, was down 1.7 percent in the third quarter of this year – the biggest drop since the third quarter of 2009. Housing prices have stalled, home sales are down.
The only reason consumer spending rose in September is because we drew from our meager savings – mostly in order to pay medical bills, health insurance, and utilities. That’s the third month of savings declines, according to the Commerce Department’s report last Friday.
This can’t and won’t continue. Savings are now down to 3.6 percent of personal disposable income, their lowest level since the recession began.
Americans know a rigged game when they see one. They understand how much money is flowing into politics from the super rich, big corporations, and Wall Street — in order to keep their taxes low and entrench their privileged position.
The Occupy movement is gaining ground because it’s hitting a responsive chord. What happens from here on depends on whether other Americans begin to march to the music — and organize.
President Obama concludes his speech about managing student debt during an event at the University of Colorado Denver Downtown Campus in Denver, Wednesday, Oct. 26, 2011. If Obama wants to distance himself from the Republicans, he should toughen up on the big Wall Street banks and call for sweeping reform, Reich argues. (Susan Walsh/AP)
Why Obama should call for a breakup of big banks
Next week President Obama travels to Wall Street where he’ll demand – in light of the Street’s continuing antics since the bailout, as well as its role in watering-down the Volcker rule – that the Glass-Steagall Act be resurrected and big banks be broken up.
I’m kidding. But it would be a smart move — politically and economically.
Politically smart because Mitt Romney is almost sure to be the Republican nominee, and Romney is the poster child for the pump-and-dump mentality that’s infected the financial industry and continues to jeopardize the American economy.
Romney was CEO of Bain & Company – a private-equity fund that bought up companies, fired employees to save money and boost performance, and then resold the firms at a nice markups.
Romney also epitomizes the pump-and-dump culture of America’s super rich. To take one example, he recently purchased a $3 million mansion in La Jolla, California (in addition to his other homes) that he’s razing in order build a brand new one.
What better way for Obama to distinguish himself from Romney than to condemn Wall Street’s antics since the bailout, and call for real reform?
Economically it would be smart for Obama to go after the Street right now because the Street’s lobbying muscle has reduced the Dodd-Frank financial reform law to a pale reflection of its former self. Dodd-Frank is rife with so many loopholes and exemptions that the largest Wall Street banks – larger by far then they were before the bailout – are back to many of their old tricks.
It’s impossible to know, for example, the exposure of the Street to European banks in danger of going under. To stay afloat, Europe’s banks will be forced to sell mountains of assets – among them, derivatives originating on the Street – and may have to reneg on or delay some repayments on loans from Wall Street banks.
The Street says it’s not worried because these assets are insured. But remember AIG? The fact Morgan Stanley and other big U.S. banks are taking a beating in the market suggests investors don’t believe the Street. This itself proves financial reform hasn’t gone far enough.
If you want more evidence, consider the fancy footwork by Bank of America in recent days. Hit by a credit downgrade last month, BofA just moved its riskiest derivatives from its Merrill Lynch unit to a retail subsidiary flush with insured deposits. That unit has a higher credit rating because the Federal Deposit Insurance Corporation (that is, you and me and other taxpayers) are backing the deposits. Result: BofA improves its bottom line at the expense of American taxpayers.
Wasn’t this supposed to be illegal? Keeping risky assets away from insured deposits had been a key principle of U.S. regulation for decades before the repeal of Glass-Steagall.
The so-called “Volcker rule” was supposed to remedy that. But under pressure of Wall Street’s lobbyists, the rule – as officially proposed last week – has morphed into almost 300 pages of regulatory mumbo-jumbo, riddled with exemptions and loopholes.
It would have been far simpler simply to ban proprietary trading from the jump. Why should banks ever be permitted to use peoples’ bank deposits – insured by the federal government – to place risky bets on the banks’ own behalf? Bring back Glass-Steagall.
True, Glass-Steagall wouldn’t have prevented the fall of Lehman Brothers or the squeeze on other investment banks in 2007 and 2008. That’s why it’s also necessary to break up the big banks.
In the wake of the bailout, the biggest banks are bigger than ever. Twenty years ago the ten largest banks on the Street held 10 percent of America’s total bank assets. Now they hold over 70 percent. And the biggest four have a larger market share than ever – so large, in fact, they’ve almost surely been colluding. How else to explain their apparent coordination on charging debit card fees?
The banks aren’t even fulfilling their fiduciary duties to investors. Last summer, after Groupon selected Goldman Sachs, Morgan Stanley, and Credit Suisse to underwrite its initial public offering, the trio valued it at a generous $30 billion. Subsequent accounting and disclosure problems showed this estimate to be absurdly high. Did the banks care? Not a wit. The higher the valuation, the fatter their fees.
Just last week Citigroup settled charges (without admitting or denying guilt) that it defrauded investors by selling them a package of mortgage-backed securities rife with mortgages it knew were likely to default, but didn’t disclose the hazard. It then bet against the package for its own benefit – earning fees of $34 million and net profits of at least $126 million. So what’s Citi paying to settle this outrage? A mere $285 million. Its CEO at time (Charles Prince) doesn’t pay a dime.
I doubt the President will be condemning the Street’s antics, or calling for a resurrection of Glass-Steagall and a breakup of the biggest banks. Democrats are still too dependent on the Street’s campaign money.
That’s too bad. You don’t have to be an occupier of Wall Street to conclude the Street is still out of control. And that’s dangerous for all of us.
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