Quiz: What's responsible for the lousy economy most Americans continue to wallow in?
A. Big government, bureaucrats, and the cultural and intellectual elites who back them.
B. Big business, Wall Street, and the powerful and privileged who represent them.
These are the two competing stories Americans are telling one another.
Yes, I know: It's more complicated than this. In reality, the lousy economy is due to insufficient demand -- the result of the nation's almost unprecedented concentration of income at the top. The very rich don't spend as much of their income as the middle. And since the housing bubble burst, the middle class hasn't had the buying power to keep the economy going. That concentration of income, in turn, is due to globalization and technological change -- along with unprecedented campaign contributions and lobbying designed to make the rich even richer and do nothing to help average Americans, insider trading, and political bribery.
So B is closer to the truth.
But A is the story Republicans and right-wingers tell. It's a dangerous story because it deflects attention from the real problem and makes it harder for America to focus on the real solution -- which is more widely shared prosperity. (I get into how we might do this in my new book, Aftershock.)
A is also the story President Obama is telling, indirectly, through his deficit commission, his freeze on federal pay, his freeze on discretionary spending, and his wavering on extending the Bush tax cuts for the rich.
Most other Washington Democrats are falling into the same trap.
If Obama and the Democrats were serious about story A they'd at least mention it. They'd tell the nation that income and wealth haven't been this concentrated at the top since 1928, the year before the Great Crash. They'd be indignant about the secret money funneled into midterm campaigns. They'd demand Congress pass the Disclose Act so the public would know where the money comes from.
They'd introduce legislation to curb Wall Street bonuses -- exactly what European leaders are doing with their financial firms. They'd demand that the big banks, now profitable after taxpayer bailouts, reorganize the mortgage debt of distressed homeowners. They'd call for a new WPA to put the unemployed back to work, and pay for it with a tax surcharge on incomes over $1 million.
They'd insist on extended unemployment benefits for log-term jobless who are now exhausting their benefits. And they'd hang tough on the Bush tax cuts for the wealthy -- daring Republicans to vote against extending the cuts for everyone else.
But Obama is doing none of this. Instead, he's telling story A.
Making a big deal out of the deficit -- appointing a deficit commission and letting them grandstand with a plan to cut $4 trillion out of the projected deficit over the next ten years -- $3 of government spending for every $1 of tax increase -- is telling story A.
What the public hears is that our economic problems stem from too much government and that if we reduce government spending we'll be fine.
Announcing a two-year freeze on federal salaries - explaining that "I did not reach this decision easily... these are people's lives" -- is also telling story A.
What the public hears is government bureaucrats are being paid too much, and that if we get the federal payroll under control we'll all be better off.
Proposing a freeze on discretionary (non-defense) spending is telling story A. So is signaling a willingness to extend the Bush tax cuts to the top. So is appointing his top economic advisor from Wall Street (as apparently he's about to do).
In fact, the unwillingness of the President and Washington Democrats to tell story B itself promotes story A, because in the absence of an alternative narrative the Republican story is the only one the public hears.
Obama's advisors explain that the president's moves are designed to "preempt" the resurgent Republicans -- just like Bill Clinton preempted the Gingrich crowd by announcing "the era of big government is over" and then tacking right.
They're wrong. By telling story A and burying story B, the president legitimizes everything the right has been saying. He doesn't preempt them; he fuels them. He gives them more grounds for voting against raising the debt ceiling in a few weeks. He strengthens their argument against additional spending for extended unemployment benefits. He legitimizes their argument against additional stimulus spending.
Bill Clinton had a rapidly expanding economy to fall back on, so his appeasement of Republicans didn't legitimize the Republican world view. Obama doesn't have that luxury. The American public is still hurting and they want to know why.
Unless the President and Democrats explain why the economy still stinks for most Americans and offer a plan to fix it, the Republican explanation and solution -- it's big government's fault, and all we need do is shrink it -- will prevail.
That will mean more hardship for tens of millions of Americans. It will make it harder to remedy the bad economy. And it will set Republicans up for bigger wins in the future.
Robert Reich is the author of Aftershock: The Next Economy and America's Future, now in bookstores. This post originally appeared at RobertReich.org.
Richard (RJ) Eskow: A President at the Crossroads (Who Needs a Little Help From His Friends)
Keep talkin'. People will listen to you.
The crooks have seized our homes our jobs but the press doesn't report it. Why do the Democrats and Republicans want to label Julian Assange a terrorist so that they can have him shot? Because they like this state of affairs where the mega-rich suck the wealth and the life out of the middle-class. The mega-rich through the politicians a pittance of the mega-richs' ill-gotten gains to keep the politicians' mouths shut and their hands tied, and it works! Our Democracy is very fragile right now.
Remember the words of our founding fathers:
Outside Independence Hall when
the Constitutional Convention of 1787 ended,
Mrs. Powel of Philadelphia asked Benjamin Franklin,
"Well, Doctor, what have we got, a republic or a monarchy?"
With no hesitation whatsoever, Franklin responded,
"A republic, if you can keep it."
I wouldn't agree with that. The majority of Democrats in the House have been screaming at the top of their lungs about B; but no one listens. The majority of Senate Dems have been doing the same but no one listens.
Instead everyone pays attention to the 6 "moderate" democrats that dominate the Senate -- Nelson, Landreiu, Lincoln, Bayh, Conrad and Bacus. Liberman is another Senator that has bought into A.
Listen to Harkin today or Feingold or Durbin. There are good democrats out there but because they are not the President they don't get the attention. The President is the leader of the party and as he goes, so goes the perception of the party. Because the President seems to care more about getting Republicans to like him, good liberal Democrats get lumped in with him. They get punished when the base stays home, yet Obama gets to go on and continue to cave into the GOP on virtually everything. Pelosi loses her job because of Obama's weakness.
In the beginning of Obama's reign over the US, Robert for the most part wrote interesting and well thought out articles. In the past 6 mos., his articles have declined to partisan sniping and really have a tone of bitterness instead of solution based. It has become US against THEM mentality which is breaking apart the US.
Germany is an exporter. It consistently has trade surpluses. That means it has a manufacturing base in addition to a growing middle class. The German tax rates are higher than those in the US and they are NOT thinking of cutting them. Income tax tops out at around 42%. Corporate taxes are around 33% and they have a 19% VAT. Those that make above $250,000 pay 45% in taxes. In the US we're fighting over paying a paltry 39%. Germany also spends next to nothing on its military, its total size is roughly 250,000 ( that includes army, navy and af). They have a first rate infrastructure that has been maintained and the worlds oldest universal health care system ( government provides basic coverage then additional coverage can be purchased).
The upshot of all of that is that Germany didn't need to have any sort of stimulus since its economy and finances were already in good shape. The remainder of Europe was in trouble which is why we've seen the bailouts of Greece and Ireland, with Spain and Portugal looming. Germany looked out for Germany and allowed the rest of Europe to suffer.
But go right ahead and ignore every detailed difference between the US and Germany, just label them socialist and move along with the mindless Obama/liberal bashing.
Imagine a country with 100 people. One person makes $1,000,000 per year; the other 99 make $1 per year. Being an exceeding Conservative (imaginary) country, there is a flat tax system of, say, 10%.
The republican talking point for this country would be,
“The top 1% of the wage earners pay 99.99% of the taxes!”
In his Cross of Gold speech, Democrat William Jennings Bryan said:
There are those who believe that, if you will only legislate to make the well-to-do prosperous, their prosperity will leak through on those below. The Democratic idea, however, has been that if you legislate to make the masses prosperous, their prosperity will find its way up through every class which rests up on them.
Real wages and wealth have declined for most Americans since the implementation of "trickle-down" policies.
"Trickle down economics 101: They get the golden parachute, we get the golden shower"
It's farcical that middle and working class people think that they are going to strike it rich through "hard work." People have a right to have the opportunity to make a decent living. If they somehow become "rich" that's fine and they need to realise the at they are fortunate. They must remember that the majority of hard working people do not break into that material over abundance. They have that material fortune from many hard working people providing the production of the goods and services that they make profits from.
A lot of Wall Street fortunes are based on gimmicks, vehicals that make money on market movements. That kind of market manipulation does finance or create real investment in businesses that provide jobs and products that people need. We need stocks that create real value. Trading to make money on stock fluctuation is useless.
Obama's selection of Geithner, Summers, Ferrell et. al. as his economic team. A real team would have been long into reversing 30 years of Reaganomics and Government bashing. A real President would not have looked to hold hands with those who destroyed the economy. A real President would have made decisive choices and shoved them down the throats of those who would further the cause of the Plutocracy. A real President would strive for total victory rather than grovel for counterproductive compromises.
so stick with story a) or story b)...............
Current favored tax treatment for wealthy investors started by Reagan 30 years ago led to the the share of the nation's wealth held by the top 1% of households jumping from 22 to 40%. It also led to investment bubbles, a 25% drop in our GDP growth over 30 years, and our last two recessions (in which everyone - except the rich who benefited from the tax breaks - risks losing their jobs, homes and pensions).
I propose that all federal, state, and local government services are funded with a reformed, simplified income tax and a new wealth (about 1% of net worth) tax. Income and net worth are the two true measures of ability to pay and extent to which households have benefited from the economic infrastructure governments provide. Eliminate all other (sales, real estate, social security) taxes. See http://fairsharetaxes.org/ProposedReform.aspx My proposed tax reform would have everyone pay their fair share, cut middle-class taxes, reduce the deficit, improve the economy, and strengthen the nation as a force for good in the world.