Robert Reich: Soak the rich for their own good

Robert Reich is the point man in economics of the “Democratic wing of the Democratic Party,” as Howard Dean used to say. That is, he’s been the burr under the saddle of the Wall Street wing that chased Reich, as Secretary of Labor, out of Bill Clinton’s Cabinet after the first term. Robert Rubin, imported from Goldman Sachs to reshape Clinton’s thinking and de-regulate finance, used to threaten to quit if Secretary Reich kept railing about “corporate welfare.” But it was Reich who left, and Rubin who stayed in the saddle, burr or no — who became Treasury Secretary and sponsored Larry Summers as his successor; the same Rubin who made Summers president of Harvard and then, after the meltdown, put his own and Wall Street’s stamp on the Obama era, too.

Reich’s new tract Aftershock, neatly coincidental with Larry Summer’s retirement from the White House, is a polite populist’s effort to seize a teachable moment in this season of anger. The disease in the economy and the public mood, he’s arguing, is not debt; it’s not even that we’re living beyond our means. It’s the 30-year trend to an obscene concentration of wealth — one percent of the population reaping more than 20 percent of the income — that has so diminished the means, so drained the purchasing power of the average American. Few politicians and policy wonks are as clear as Reich about the remedy to rebalance and build the whole economy: boost all incomes under $50,000 with direct supplements; and restore real taxes on the biggest earners with a marginal rate of, say, 55 percent. Today’s pattern of concentration, speculation, bust and stagnation recapitulates the crisis of the Great Depression, he’s saying. And it calls again for a Great Teacher:

What Obama needs to do is connect the dots. Americans don’t see the big picture. They don’t see the narrative. They don’t hear the story. They don’t understand that we’ve had three decades of flat wages, that almost a quarter of all income is now going to the top one percent. They don’t understand the connections between all of these issues and problems. They don’t see that there is a large tapestry here. A leader needs to weave that tapestry, show how one thing is related to another. We’ve not had a president who did that since Ronald Reagan. The tapestry he wove was the wrong tapestry; it bore no relation to reality. But at least he explained. He showed how “a” relates to “b” relates to “c”. He did connect the dots…

Robert Reich with Chris Lydon in Cambridge, September 24, 2010

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  • dave bernard

    There seems to be an implication in this thesis that the wealthy are somehow earning my money. Mr Reich wasn’t too worker-friendly as Labor Sec when he said these jobs are gone, and you better just get used to high levels of unemployment as a part of American life. When he put his ideas before the poulation in his run for Mass Governor he was trounced. He was part of the same group of Clinton advisors he criticizes. Why is HE still around?

  • Tom Driscoll

    The wealthy are not earning my money. The question should be: do the wealthy earn the money that they receive? Is a CEO of a major Corporation worth 400 times more than his employees’ wages? Only 30 years ago, the ratio was 40 times the wages of his workers.

    I am a living example of the Middle Class that Mr. Reich describes.

  • nother

    These two articles taken together tell me all I need to know about disparity:

    “In Massachusetts, for instance, all 35 schools the state has declared as underperforming are in urban centers with high black and Latino enrollment and high levels of poverty, while none of the schools are in the largely white suburban or rural towns.”

    “Many people [in the Northeast and Midwest] have the expectation they can buy into a good school district, entitling them to almost a private level of schooling,’’ said Nancy McArdle, a coauthor of the report, in a telephone interview. “It’s antithetical to the idea of public schools.’’

    “Students were first to cross the threshold this morning as the ribbon was cut to the new $197.5 million Newton North High School, the most expensive public school in Massachusetts history.” “featuring two theaters, two gymnasiums, vocational facilities, and a swimming pool.”

  • np0909

    Wonderful interview- articulate, unabashedly earnest (what a rarity these days), and thought-provoking.

  • Potter

    I am buying RR’s argument to the rich ( trickle up?)- but it’s not me that has to buy it. And I disagree, Chris, I think that Obama is NOT politically inclined, though he may be morally and philosophically, to stick his neck out on this to do his bit to change things and then pay the price.

    Reich does not want to blame but I must blame, to begin, Ronald Reagan (Mr. Morning in America) who gave us this candy to eat- his philosophy: its your money, you should keep it. And so the rich indulge themselves obscenely. It’s theirs and they got it all by themselves. That is not to say that some rich don’t do good or pay back. But Reich is correct- the obscenely rich do not need that much money especially if it is at the expense of society as a whole. What is confounding, infuriating, is the anger out there is being promoted funded by the rich (read Frank Rich in this past Sunday’s NYTimes The Very Useful Idiocy of Christine O’Donnell.

    Of course it’s always about campaign finance isn’t it?

    Regarding the first layer of coping mechanism- to the extent that many, maybe most, have not been able to afford to have one parent stay at home to raise children, the children suffer, I think, the most. How many will be able to afford higher education when even public higher education is out of reach?

    I have never had a problem about agreeing with Robert Reich.

  • Glen S.

    I think Robert’s assessment that the “concentration of wealth” is the crux of our problems is spot on. The wording is clunky, it sounds benign or like some kind of passive or natural occurrence. I think we should call it what it is, it’s hoarding. The “super rich”, both individual natural citizens and corporations, have made a conscious decision to separate themselves from society to such an extent that their money doesn’t even circulate with ours. The sad truth is that most powerful people in America have -completely- bought into the notion that our government is hopelessly broken and the solution is to build your own isolated empire with your own money. The irony of course is that the government’s dysfunction is largely a result of this hoarding of capital, that if this money were invested in the country at large rather than these isolated empires it would benefit ALL of us. It’s a stretch to trust that any of our recent or future administrations will spend this money effectively, but I think powerful moneyed interests have shown the power of their influence and could easily turn the ship of state to a more favorable direction. But instead, most of these super rich people feel it’s a safer bet to fiddle away while Rome burns, they can always move to one of their “summer cabins” in another country.

  • Pete Crangle

    Chris, Professor Reich, wonderful conversation. I just gave it a re-listen. Here’s some old wine for a new bottle.

    The open question for me, and not just regarding economic policy, is the classic chicken/egg conundrum: can the situation be improved by making structural changes or by tossing out the people who are the agents for creating and providing maintenance of the problems (the structures are basically sound, but the actors are incompetent). It’s not so easy to figure out, as there will be resistance to making structural changes as long as the policy wonks who are creating/maintaining the problems are in positions of power. Wholesale do-overs come with potential hazards; the corrective may hamstring the economy, especially if the actors involved sabotage the solution (consensus is not agreement, it’s the absence of sabotage).

    On the other hand, the actors keep turning up with repetition, so one can perhaps conclude, the structures are sound, in need of some minor tweaking, but the actors need to be removed from policy positions. Unless it’s the case that the structures breed incompetent policy and malaise in economic activity. It’s a delicate balance to transition from one legacy system of thought/action into a new one. The devil you know … Incremental-ism is usually the crutch leaned upon to soften such blows. Not as sexy as revolutionary thinking, but hopefully less painful.

    Okay Chris, that’s it… hopefully the wine/bottle equation won’t cave in. If it does, I’ll fail better next time!