In an earlier post (here), I reviewed Robert Reich's book After Shock, on the causes (and potential remedies) for the problems in the US economy.
With just a few words--"a perception that the economic game is rigged--that no matter how hard we try we cannot get ahead because those with great wealth and power will block our way", Reich sums up the anger that so many Americans feel about the billions spent on a bailout for banks, perhaps necessary, but with the result that banks are back on easy street, using other people's money, while most of the rest of us are struggling with lost jobs, tanked mortgages or foreclosed homes, and diminished economic prospects. Add to that the worries about furloughs and retirement insecurity that the recent flurry of anti-union legislation in states like Wisconsin and fervor to cut the two programs that provide the only real safety net providing freedom to retire for most Americans, Social Security and Medicare, and there is a general economic malaise today among everybody but the rich.
The game has been "tilted in the direction of big business and the wealthy." And that tilt has left ordinary Americans with few resources to maintain their standard of living. Reich notes that the coping mechanisms that ordinary Americans developed have been used up:
- women moved into the paid workforce in droves, but families have reached the limit of benefit from additional work outside the home when they have to hire someone to take care of their children;
- men and women worked longer hours--350 more hours per year than the average European and more even than the Japanese--but we've reached the limit on that, too, with health and families suffering from the lack of leisure time; and
- we all drew down savings and borrowed more to make ends meet, often using the equity in our homes as our emergency piggy bank, but the housing market bubble has burst and credit is hardly available at all to ordinary Americans, even with banks enjoying easy credit because of the Fed's monetary policies.
The answer, Reich says, is a "new deal for the middle class" in which the lopsided income and political power scale is righted, giving back to ordinary Americans their control over their work lives and their family lives, their freedom to enjoy their leisure, their freedom to dream the American Dream again. He proposes a number of specific remedies, as follows.
- a reverse income tax combined with even lower rates on the lower middle class--Milt Friedman's original idea that we already have in the weak form of the Earned Income Tax Credit, but this would be expanded upward to the middle class. Workers who make $20,000 or less would get $15,000; earn $30,000, get $10,000; earn $40,000, get $5000 but none for those earning $50,000 or more. Tax rates would be the same for capital gains and salaries, with a low rate of 10% for amounts between $50 and 90 thousand and increasing rates thereafter.
- revenues would be raised through a carbon tax on fossil fuels, collected at the point of extraction or point of entry, and it would increase gradually over time from $35 per metric ton to $115 per metric ton, to push energy companies and users to conserve
- higher marginal tax rates on the wealthy--55% for the top 1% (earning over $410,000); 50% for the top 2% (earning over $260,000); 40% for those in the top 5% (earning over $160,000) and, as noted earlier, all income would be treated the same, with no preferential rate for capital gains
- a reemployment system, including wage insurance that would make up most of the difference between former pay and lower pay at a new job for two years or for a period of training for new employment
- universal school vouchers (redeemable at either "charter" schools of public schools)
- college loans linked to subsequent earnings
- medicare for all
- sizable increase in public goods (public transportion, parks, recreational facilities, museums and libraries) that would be free of charge to users
- elimination of money from politics in the aftermath of the Citizens United case, through a requirement that all contributions to campaigns (or issue campaigns?) be made through blind trusts. people can claim to the politico that they contributed thousands to his campaign, but the claim won't be verifiable. So many people who don't contribute will claim to contribute. So the politico won't be able to provide the quid pro quo that underlays the corruption in politics today.
These ideas aren't perfect, but they are worth considering. Somehow, the middle class needs to be re-empowered. These funds would be well spent, and would richochet through the economy providing support for new jobs, and new entrepreneurs, especially in the area of clean energy. Medicare for all is a program we should have adopted 40 years ago. But just as Reagan dumped the solar panels from the White House, Big Business has made sure to dump the possible programs that would free us from allegiance to the Big Power companies, the Big Pharmaceutical companies, and the Big Insurance and Health Care companies. It's time for us to break free, and Reich's proposals sound like one way to do it.
Ultimately, we have to remove the capital gains preference and treat all sources of income the same; we must create a more progressive bracket structure so that the super-rich pay an appropriate tax; we need to make education more accessible to the poor and we must find a way to soften the blow for those who lose their jobs. These programs aren't justs a basic fairness issue, but the necessary lubricant to a thriving economy that will pay us back time and again with jobs and sustainable lifestyles that provide more freedom for everyone.
Recent Comments