Robert Reich writes: "Demagogues through history have known that big lies, repeated often enough, start being believed - unless they're rebutted. These seven economic whoppers are just plain wrong. Make sure you know the truth - and spread it on."
Portrait, Robert Reich, 08/16/09. (photo: Perian Flaherty)
The Seven Biggest Economic Lies
12 October 11
he president's jobs bill doesn't have a chance in Congress - and the occupiers on Wall Street and elsewhere can't become a national movement for a more equitable society - unless more Americans know the truth about the economy.
Here's a short (2 minute 30 second) effort to rebut the seven biggest whoppers now being told by those who want to take America backwards. The major points:
- Tax cuts for the rich trickle down to everyone else. Baloney. Ronald Reagan and George W. Bush both sliced taxes on the rich and what happened? Most Americans' wages (measured by the real median wage) began flattening under Reagan and has dropped since George W. Bush. Trickle-down economics is a cruel joke.
- Higher taxes on the rich would hurt the economy and slow job growth. False. From the end of World War II until 1981, the richest Americans faced a top marginal tax rate of 70 percent or above. Under Dwight Eisenhower it was 91 percent. Even after all deductions and credits, the top taxes on the very rich were far higher than they've been since. Yet the economy grew faster during those years than it has since. (Don't believe small businesses would be hurt by a higher marginal tax; fewer than 2 percent of small business owners are in the highest tax bracket.)
- Shrinking government generates more jobs. Wrong again. It means fewer government workers - everyone from teachers, fire fighters, police officers, and social workers at the state and local levels to safety inspectors and military personnel at the federal. And fewer government contractors, who would employ fewer private-sector workers. According to Moody's economist Mark Zandi (a campaign advisor to John McCain), the $61 billion in spending cuts proposed by the House GOP will cost the economy 700,000 jobs this year and next.
- Cutting the budget deficit now is more important than boosting the economy. Untrue. With so many Americans out of work, budget cuts now will shrink the economy. They'll increase unemployment and reduce tax revenues. That will worsen the ratio of the debt to the total economy. The first priority must be getting jobs and growth back by boosting the economy. Only then, when jobs and growth are returning vigorously, should we turn to cutting the deficit.
- Medicare and Medicaid are the major drivers of budget deficits. Wrong. Medicare and Medicaid spending is rising quickly, to be sure. But that's because the nation's health-care costs are rising so fast. One of the best ways of slowing these costs is to use Medicare and Medicaid's bargaining power over drug companies and hospitals to reduce costs, and to move from a fee-for-service system to a fee-for-healthy outcomes system. And since Medicare has far lower administrative costs than private health insurers, we should make Medicare available to everyone.
- Social Security is a Ponzi scheme. Don't believe it. Social Security is solvent for the next 26 years. It could be solvent for the next century if we raised the ceiling on income subject to the Social Security payroll tax. That ceiling is now $106,800.
- It's unfair that lower-income Americans don't pay income tax. Wrong. There's nothing unfair about it. Lower-income Americans pay out a larger share of their paychecks in payroll taxes, sales taxes, user fees, and tolls than everyone else.
Demagogues through history have known that big lies, repeated often enough, start being believed - unless they're rebutted. These seven economic whoppers are just plain wrong. Make sure you know the truth - and spread it on.
Robert Reich is Chancellor's Professor of Public Policy at the University of California at Berkeley. He has served in three national administrations, most recently as secretary of labor under President Bill Clinton. He has written thirteen books, including "The Work of Nations," "Locked in the Cabinet," "Supercapitalism" and his latest book, "AFTERSHOCK: The Next Economy and America's Future." His 'Marketplace' commentaries can be found on publicradio.com and iTunes.
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Comments
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If only someone would run in the primary! Then we would have someone to vote for!
NO BLOODY WAY!!!!!!!!!!!! !!!
we need both of these paragons of truth to be free to do what they do that no one...NO ONE...ELSE SEEMS TO DO...relentlessly.
find someother puppetry for President and Vice President....the office eats up the Executive Branch like fodder as the military uses volunteer Soldiers for cannon fodder.
KEEP THE SAINTED TRUTHTELLERS FREE FORM THE CORRUPTION OF THE WASHINGTON D.C. BORDELLO AU COURRANT.
Really, all we need to do, to end the madness, and insanity, is
Take care of each other- you know, just be kind, and don't over consume or be greedy
And, don't support or entertain the crazy's.
Too big IS a failure.
Put what money or investments you do have, in local banks, credit unions, and businesses. Do not support any corporate behemouths, or political nutjobs, they are NOT our friends.
We are the power.
We are all a part of nature, which sustains us, and we need to start taking care of it. Nature is not just resources with $ signs on it, to be destroyed for cheap non repairable landfill bound products. It is alive, and supports our life.
Build strong, caring and inclusive local communities, and quit funding wars, waste, and profiteering.
It IS up to us folks.
The folks at the top sure seem to be self serving crooks out for megabucks, at the expense of any livable future, and NONE of them speaks for me,
It is past time to disempower the idiots ru(i)nning the show, and wake up to our power.
No more B.S. No violence, no fear.
Take care of each other, and the environments which sustain us all.
those 2.7 trillion of assets - securities... when they mature exactly where does the money come from ? (hint they are a debt instrument)
Taxing productivity and rewarding non productivity may be very popular but is economic suicide.
The 99% want a seat at the table, not an all-you-can-eat buffet.
so you are correct, although in a way you didn't mean- we currently reward, the non-productive, the financial speculating class of good for nothings and THAT is economic suicide
I have yet to hear any fact based and reasonable explanation by the Right as to how cutting government expenses creates jobs. Or how cutting taxes also cuts the deficit. Or how cutting Medicare / Medicaid from the Fed budget will not transfer those costs to individuals. Individuals who may not be able to afford those costs, especially because the costs are frequently deffered and therefore higher. Or why the simple solution that RR proposes for Social Security is off the table.
So, instead because the right wing idiots can explain their misinformation to sound like common sense, the Robert Reichs and the Paul Krugmans are only allowed on the MSM to get in a mini (very mini) debate about some tiny point and are never allowed to expound on a point.
MSM == Short Attention Span Theater
IF you read history you will see at the end of WW I, over a million troops came home to a wartime economy with no war - initial economic indicators worse then when Hoover and FDR screwed things up.
What happened - Wilson did nothing (stroked out) Harding cut federal spending and the economy rebounded nicely - real wealth for the common man exploded.
Something in Martin's explanation is lacking; can somebody fill in with more detail. How did the jobs get created? Did we have some type of GI bill? I know the GI bill after WW2 was designed as much to reverse the Post War downturn.
Thanks!
some one was selling cars - cheap and people bought them - some one was selling electricity and things that used electricity and people bought them.
People bought things with money they saved not with debt foisted upon others.
So Ken Hall is right, claptrap! (Thanks, Ken).
So you are saying that the reason we are in the economic bind is that the Middle Class has a high debt to income ratio? Lets look at why, and how it could have been prevented.
At the end of WW1, to get a good paying job you needed a High School diploma. This diploma was not something individuals went into debt to obtain. Medical care, while not primitive, did not run one into debt over a single sickness; and if it did there public institutions that helped pay, sometimes, if you were lucky. Otherwise you died or went to debtors prison or both. Just after WW1, the Wall street crooks had just started to dismantle the existing regulations and began creating a bubble economy, that culminated in the Great depression.
Now, if we just consider having strong financial regulations, shared costs of education and medical care; the personal debt problem is solved in the long run. Believe it or not, people still want homes, cars, and electricity, etc. Their jobs have all been downsized or were sent away; at taxpayer expense. Is that an efficient way to spend taxes, give a break to a business that sends it over seas?
Oh, and don't forget, please, all of the hydroelectric projects that provided the necessary power, and the bridges and highways, land conservation that helped with providing FOOD for all of the above, which were bulldogged through - against enormous Republican oppostion (manifestly like your position) - by FDR.
If FDR had failed in his opposition to the Republicans in putting America back to work, we certainly would have lost WWII. But I feel sure YOU would feel more fulfilled if there were shrines to Hitler all over the world, we ALL spoke German, and you got to Seig Heil all over the place.
himself. A REAL man lives to SERVE those who are in a weaker position
than himself.
This, quite simply, is the way that the Cosmos is rigged. To attempt to
circumvent this ultimate Law in the hopes of short term profit, is to
guarantee ultimate failure. Just ask Jesus, or Buddha, or Ghandi, etc,
etc.
The Roaring Twenties roared on credit and speculation. A bubble, a house of cards. When the bills came due, the house of cards came down. As a result, legislation was enacted to strictly limit how and what banks could invest in. As a result of that we had the greatest era of prosperity in our history. Reagan removed those bank regulations,(re member junk bonds?) and here we are again.
So 8 years of G.W.Bush and 6 years of virtual Republican rule and what happened? Near total economic collapse. Not to mention two wars and violation of civil liberties.
FDR did a lot of positive things for this country. One can not be said the same is true of G.W.Bush.
If government spending was a viable solution then the soviet union would not be the FORMER soviet union - contrary to reagan fans it did not fail because it was evil - it failed because the welfare/warfare state is not productive enough to support the welfare/warfare state... a lesson we are learning now.
America is much, much closer to being a fascist state, than it is a socialist state.
Another lie the righties tell us!
We are becoming less and less an individualistic respecting state revering the creators that made and profited handsomely from things we all enjoy the fruits of (Thanks Steve Jobes!!!) and are becoming a bitter uncreative mob thinking every one has a right to live at some one elses expense.
The Occupiers are wonderful and I cheer them on, but when the winter weather comes and they all go home, what then?
We don't need to eliminate debt, just bring it down; and as you know if you ever had bills mount, the best cure for debt is to have more money.
ah... really bad idea.
unless you like prices changing daily, always up, and total uncertainty about things like - will the store have bread today or not.
if you want to bring down debt - a good idea - FIRST stop getting deeper into it.
Why is Robert Reich the only voice of common sense and reason in this sea of deception and lies????
WHERE ARE THE DEMS?????
Those statements are mutually exclusive.
.. exactly where does that money come from?
iT COMES FROM THE FEDERAL RESERVE WHO HAS BORROWED FROM IT TO FINANCE THE WARS OF AGRESSION CONGRESS DID NOT AUTHORIZE AS PER THE U.S.CONSTITUTION
The FED will lend us money (with an interest charge) to cover one "securities" redemption - and kick the can a little further down the road with a slightly larger price later.
That leads to the question why are we borrowing 43 cents of every dollar the federal government spends.(hear the sound of billions of old cans getting kicked down the road?)
But we don't want intelligence in our leaders. We want a "regular guy." "Someone we'd like to have a beer with."
Why anybody would want to be led by "a regular guy" is beyond me. I guess they think we could go down to our local bus stop and find someone who could become the Leader of the world's only remaining superpower.
It looks like that's what the Republicans did for this election.
OK, good. Wealth is created by circulating money. Taking tax dollars from the rich for the government to create jobs will put nearly every penny of that money in circulation. In the USA. That circulating money will be spent so that demand increases, small and large businesses will hire people to meet the demand. Those persons that now have jobs will pay taxes. The employers will make more money and pay higher taxes.
Oh and if the rich keep all their money, they will not circulate it to persons that will spend it locally. For the most part they will use tax dodges and hide it overseas. They will not buy a single additional pizza. The pizza guy won't be hiring another pizza maker. The rate of circulation is significantly less, thus the actual wealth created is much less.
OK back into your silo.
Where was Robert in the '60's when protest did bring change.
Unless it is done Roberts way then nothing.
.This is what Robert should have been writing rather than trying to lamblast the administration every chance he got.
This is constructive and he calls out the republicans like he should have been doing for the last 3 years.
That was an aberration that lasted 1 year. I forget the details exactly, but once the tax from the previously sheltered money was paid after the first year, tax receipts actually dropped.
Discretionary is a subjective term. Undeclared war is discretionary, providing an education from pre-school through college is not.
AMERICA IS FINISHED.
Can you get anything right? That is 200K in taxable income from a small business; another word for that is profit. Salaries to employees are deducted, so that mathematically the impact on hiring is minimal. Essentially the worst case is that it will offset the positive impact of (overall) some of the tax breaks Obama has proposed and implemented.
Try Again! This is fun!!
so $2,000,000 of retirement fund money (some mine) pre-tax yielded 200K -- Of which some ninny pencil pushing tax bureaucrat saw a profit and taxed away 200,000 so retirement fund sees nothing before inflation.... strangely the fund managers are soon begging for a bail out.. who could of seen that coming?
These bastards are anti-business, just like they are anti-America.
According to multiple studies, for every Government dollar spent to create a job, AT BEST 40% of the money being spent by the government directly on that job actually goes to the worker. Whereas in the private sector, that amount is 100%.
So for every job the government "creates", the private sector can afford to create 2.5 jobs.
And where does that money come from? Why, since it's tax money, it comes from those other workers, of course. So you have taxed 2.5 jobs' worth of money to create 1 job.
That's not positive math, Bob. Do the math. It's elementary-school level. And I did not make up the figures; the studies have been reported year after year.
Yes, according to the best economic theory (not Keynesian, by the way, which has been repeatedly and robustly discredited), shrinking the government DOES expand the private sector. And you are in no position to say it doesn't, because IT HAS NEVER BEEN DONE. You have no history to support your position, so you have exactly zero evidence to back that claim. But there is lots of history that gives evidence to the idea that more government means less prosperity. Just about constant evidence under 200+ years of growing government, in fact.
Very simplistic and again silo thinking. The only fact you have that is close to the truth is that 100% of a person's salary in a job created by the private sector goes to the worker.
So if the government pays someone $100/day for a job, their paycheck only shows $40? Where did the other $60 go? Could it be that it was used to pay for the lights and heat and bokks, etc at the school where that teacher works? And how does the private sector get all that stuff for free?
Give me a break.
Oh and the Private Sector will only create jobs when the private sector can create a larger profit than they currently get. No teachers getting hired, no pizzas being sold to the teacher staying up all night correcting papers.
and in the private sector some one could of done the same job for $40 then there is $60 piddled away that could have paid 1.5 other people to do something that was useful and wanted.
That one is the biggest piece of BS yet, because you can't separate the two. Certainly, I would have to agree that it isn't "more important", because at the present time they are almost one and the same thing. You won't improve the economy without reducing the deficit, and any increase in the deficit is going to hurt the economy. Thinking otherwise is trying to have things both ways; that's just not living in the real world.
History has already proved you wrong about Medicare and Medicaid. It's been done, dude, and it didn't work. Pick up a book and read about it. Or learn from someplace. Where did you get this idea? It certainly was not from reading about the history of those very things.
Maybe we can borrow our way out of that nasty debt.
(that savings and productivity stuff sounds like hard work - let some one else do that)
And yes, contrary to what you say, that means it meets every one of the TECHNICAL AND LEGAL definitions of a "Ponzi scheme". It was supposed to be an investment program, but the investment was all usurped for other purposes, and now immediate deposits are being used to pay out immediate liabilities, and there is no actual investment. That, my fuzzy thinker, is exactly the definition of a Ponzi scheme, in every moral, legal, and ethical sense of the phrase. If you can actually refute any of that by all means do so, but I daresay you can't cite any real legal authority that says what I have explained in this paragraph is wrong.
Lonny, I can agree if your point is that these will never be redeemable all at once. I can also agree that many years of raids have brought it to this condition.
The "Ponzi scheme" label's validity depends on a questionable assumption. I'm not sure that SS was strictly and necessarily "supposed to be an investment program." Perhaps it was "supposed to be" an insurance program. It functions that way now and seems to be doing what needs to be done and that private enterprise wasn't doing in 1936 and before.
What is the quality of those notes Phaedrus?
When these "blue" chips notes are to be redeemed - where does that money come from?
(what is money that the government owes to the people... and where will that come from?
As we know all to well, big-time investors have been big-time wrong before, but it's the best information I have.
An it doesn't matter whether SS is supposed to be "an insurance program", because insurance is still an INVESTMENT. Insurance companies are required to have the capital to make good on their obligations. That's the whole point here. There IS nothing in Social Security except Federal promises, which it is proving, more and more every day, that it can't keep.
And yes, the money from Social Security was supposed to have been invested at interest. Instead it was spent by Congress. Look it up.
And as for Ponzi scheme: what defines a Ponzi scheme? (1) It is ostensibly a form of investment with a payout. [check] (2) The funds that were to be invested are instead used for other purposes by the "owner" of the program. [check] (3) So because there is no investment, incoming funds are used to pay off prior "investors". [check]
Yep. It's a Ponzi scheme, all right. If you did exactly the same things Congress did, you would go to prison.
Oh, and if our government is "broke" in any significant way, the global investment community hasn't heard the news. Not that they've been infallible, but ever since we left the gold standard our economy has been based on "the full faith and credit, etc., etc."
Have we needlessly borrowed and spent ourselves into a deep hole? Absolutely and there are no guarantees of when or even if we can climb out.
I have been a conservative since the era that distinguished between "conservative" and "reactionary." Should that distinction return, we might get the badly needed light to see our way out of this. All we seem to have now is heat.
I think you're missing the point here. In order for an investment to be valid, that is to say, in order to pay off an investment properly, there must be assets from which to pay. That is the whole point of an investment: you invest some capital, which is expected to appreciate in value because the investment is expected to gain assets in the form of greater quantity, or higher value for the existing quantity. Those assets can then be liquidated to pay off the investors. The point being that there must be assets that can be liquidated, in order to give the investors a return.
But our government lacks assets that can be liquidated. It has spent itself into a position such that the income is less than the outgo. Its remaining assets are not liquid because they are tied up in the day-to-day operation of the government.
As for Social Security's original purpose and justification, it is perfectly clear from the historical record that it was intended to be a Trust Fund. A trust fund (you can find it in Wikipedia) is a fund in which ASSETS ARE HELD in trust for other parties until the fund (or in some cases, the party) matures. But no assets were in fact held, that is the point. They were used for other purposes by Congress... Congress broke the trust. In more ways that one.
It has been all over the news. I guess you missed it.
As you observe, investment firms' policy adjustments support this view. Preference is given to AAA ratings "OR the US government." Doesn't this clearly express assumed equivalence between AAA and "downgraded" T-Bills?
Furthermore, S&P attributed its negative evaluation to the intransigent behavior of our Congress, not to inherent weakness of Treasury notes. I know, that didn't reach the headlines, but it was clearly in the text of their statement, although not on the front page.
P.S. I like exchanging observations with you. Your comments (aside from some gratuitous condescension) are thought-provoking.
Yep. You're spreading them. I just did some rebutting. Refute what I claim if you can. If you try, be warned: if you just try the same kind of rhetoric I will just laugh. You made the claims; support them. Tell us how much money is "in" Social Security, now. How much investment, how much savings. Cite references. (Really, you probably shouldn't bother, because that information doesn't exist. There isn't any significant amount of either one.)
Explain, if you will, how Medicare and Medicaid's "bargaining powers" are going to gain so much for us now, when they have had that same power, such as it is, for decades, and it hasn't done that for us yet. Huh?
As Albert Einstein once said: continuing to do the same thing repeatedly, and expecting a different outcome, is one definition of insanity. But have at it, man. I don't care if you're crazy. What concerns me is that you're so OBVIOUSLY wrong about that, but you're preaching it from the pulpit anyway. That's a different kind of insanity. That's just my personal opinion, you understand; I'm not making any accusations.
This has been interesting. I can honestly say that you made some good points. Too bad the others were bad enough to far outweigh them.
Was I misinformed?
and many doctors are leaving the system, many of the new young brilliant minds are not going into medicine so they do not have to work 80+ hour weeks to get mediocre pay and sued to debt.
Martintfre's comment is essentially correct. That "bargaining power" is nearly worthless. Medicare won't ever have much "bargaining power" without Congressional initiative (that prescription drug thing, for instance).
I agree with you, Lonny, that "if they could (use their bargaining power), they already would have." So, it's not that they "won't" use that power, but that they can't. ("could--can't; would--won't" Worthwhile distinctions, in my view.)The "whatever reasons" are many, but some of them would no longer pertain if there were political will to change the status quo.
Right... that was basically the point I was making: that Robert's claim that they would use their "bargaining power" to further benefit the populace won't happen. The reason for that, whether it is because they can't or they won't, is less important to my argument: if they were going to do that, they already would have.
My personal opinions about Medicare, Medicaid, and Social Security are really not important in regard to making that point.
Facts are facts, and I do not blindly follow party rhetoric; yours or anyone else's. I make up my own mind about issues, based on what EVIDENCE is available to me.
If that happens to correspond to the views of some conservatives, then so be it. But you have no reason to lay that label on me. It is incorrect. I despise both "sides" approximately equally, for the incessant BS that they both spout.
But this is the part that bugs me: if my statements are so easily refuted, and contrary to obvious facts, why haven't you actually refuted any of them, or presented any of those facts? Why have you instead, so far, done nothing but indulge in name-calling? You have added exactly nothing substantive to the conversation.
If you actually expect to be afforded any credibility, you have to make an argument that is backed by evidence. Or some kind of argument, anyway. Throwing labels around isn't worth much.
But the Biggest Myth/Falsehood ('emperor's new clothes' type deal) today- as its been for centuries- is that "governments have to BORROW money" from the private pro's.
This is also a primary theme running through 3 centuries of American history (and that's history with a small h, [usually] not the oligarchs' officialdom boilerplate).
This is funny... or it would not be if not so tragic: the fact that the banks and financiers CAUSED the bubble by engaging in unwarranted (and dishonest) risk, is followed up by government rewarding them when those risks ended up in disaster. That's kind of like giving a child a new trust fund for burning down the house.
In regard to the "housing bubble" in particular, this is what I wonder: why did they give the money to the lenders directly (in effect bailing them out), when they could have given THE SAME MONEY to the borrowers instead, who could then pay off the lenders with that money? It all ends up in the same place, but everybody would be that much happier. The fact that they didn't is the strongest evidence that this was nothing more than "Crony Capitalism", and the hell with the little guy.
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