Texas Liberal

All People Matter

Robert Reich’s Views On The Economy & Income Inequailty

Former Labor Secretary Robert Reich recently wrote an opinion column in the New York Times about the current recession. He said Americans have over the last three decades sent women into the work place, worked longer hours and borrowed against their homes to make up for an ongoing decline in wages and buying power.

Mr. Reich suggests that this has all finally caught up with us and that steps must be taken now to address permanent declines in wages and purchasing power.

Here is Mr. Reich’s home page.

Mr. Reich proposes changes in the tax code to assist moderate and low income Americans, stronger unions, and better education as possible solutions to these problems.

Here as some excerpts from the column. You can click the link at the top for the full piece—      

WE’RE sliding into recession… and Washington is turning to the normal remedies for economic downturns. But the normal remedies are not likely to work this time, because this isn’t a normal downturn.

The problem lies deeper. It is the culmination of three decades during which American consumers have spent beyond their means…. 

The only lasting remedy, other than for Americans to accept a lower standard of living…, is to give middle- and lower-income Americans more buying power…..

Much of the current debate is irrelevant. Even with more tax breaks for business… companies won’t invest in more factories or equipment when demand is dropping ….temporary fixes like a stimulus package that would give households a one-time cash infusion won’t get consumers back to the malls, because consumers know the assistance is temporary. The problems most consumers face are permanent…

The underlying problem has been building for decades. America’s median hourly wage is barely higher than it was 35 years ago, adjusted for inflation. … Most of what’s been earned in America since then has gone to the richest 5 percent.

The problem has been masked for years as middle- and lower-income Americans found ways to live beyond their paychecks. But now they have run out of ways.

The first way was to send more women into paid work. Most women streamed into the work force in the 1970s less because new professional opportunities opened up to them than because they had to prop up family incomes. 

So Americans turned to a second way of spending beyond their hourly wages. They worked more hours…

But there’s.. a limit to how many hours Americans can put into work, so Americans turned to a third way of spending beyond their wages. They began to borrow….they turned their homes into piggy banks by refinancing home mortgages and taking out home-equity loans…. .

The binge seems to be over. We’re finally reaping the whirlwind of widening inequality and ever more concentrated wealth.

The only way to keep the economy going over the long run is to increase the wages of the bottom two-thirds of Americans. The answer is not to protect jobs through trade protection. That would only drive up the prices of everything purchased from abroad. Most routine jobs are being automated anyway.

A larger earned-income tax credit, financed by a higher marginal income tax on top earners, is required. The tax credit functions like a reverse income tax. Enlarging it would mean giving workers at the bottom a bigger wage supplement, as well as phasing it out at a higher wage. 

We also need stronger unions, especially in the local service sector that’s sheltered from global competition. Employees should be able to form a union without the current protracted certification process that gives employers too much opportunity to intimidate or coerce them.

Over the longer term, inequality can be reversed only through better schools for children in lower- and moderate-income communities. This will require, at the least, good preschools, fewer students per classroom and better pay for teachers in such schools, in order to attract the teaching talent these students need.

These measures are necessary to give Americans enough buying power to keep the American economy going. They are also needed to overcome widening inequality, and thereby keep America in one piece.

February 14, 2008 - Posted by | Politics | , , , , ,


  1. TL,
    thanks for the informative post

    Comment by geo | February 15, 2008

  2. Thanks for the comment.

    Comment by Neil Aquino | February 15, 2008

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