Reich writes: "The truth is most Americans have not been living beyond their means. The problem is their means haven't been keeping up with the growth of the economy."
Portrait, Robert Reich, 08/16/09. (photo: Perian Flaherty)
The Myth of Living Beyond Our Means
25 January 13
race yourself. In coming weeks you'll hear there's no serious alternative to cutting Social Security and Medicare, raising taxes on middle class, and decimating what's left of the federal government's discretionary spending on everything from education and job training to highways and basic research.
"We" must make these sacrifices, it will be said, in order to deal with our mushrooming budget deficit and cumulative debt. But most of the people who are making this argument are very wealthy or are sponsored by the very wealthy: Wall Street moguls like Pete Peterson and his "Fix the Debt" brigade, the Business Roundtable, well-appointed think tanks and policy centers along the Potomac, members of the Simpson-Bowles commission.
These regressive sentiments are packaged in a mythology that Americans have been living beyond our means: We've been unwilling to pay for what we want government to do for us, and we are now reaching the day of reckoning.
The truth is most Americans have not been living beyond their means. The problem is their means haven't been keeping up with the growth of the economy - which is why most of us need better education, infrastructure, and healthcare, and stronger safety nets.
The real median wage is only slightly higher now than it was 30 years ago, even though the economy is twice as large.
The only people whose means have soared are at the very top, because they've received almost all the gains from growth. Over the last three decades, the top 1 percent's share of the nation's income has doubled; the top one-tenth of 1 percent's share, tripled. The richest one-tenth of 1 percent is now earning as much as the bottom 120 million Americans put together.
Wealth has become even more concentrated than income (income is a stream of money, wealth is the pool into which it flows).
The richest 1 percent now own more than 35 percent of all of the nation's household wealth, and 38 percent of the nation's financial assets – including stocks and pension funds.
Think about this: The richest 400 Americans have more wealth than the bottom 150 million of us put together. The 6 Walmart heirs have more wealth than bottom 33 million American families combined.
So why are we even contemplating cutting programs the middle class and poor depend on, and raising their taxes?
We should tax the vast accumulations of wealth now in the hands of a relative few.
To the extent they have any wealth at all, most Americans have it in their homes – whose prices have stopped falling in most of the country but are still down almost 30 percent from their 2006 peak.
Yet homes are subject to the only major tax on wealth - property taxes.
Yale Professor Bruce Ackerman and Anne Alstott have proposed a 2 percent surtax on the wealth of the richest one-half of 1 percent of Americans owning more than $7.2 million of assets.
They figure it would generate $70 billion a year, or $750 billion over the decade. That's more than the fiscal cliff deal raises from high-income Americans.
Together, the two sets of taxes on the wealthy - tax increases contained in the fiscal cliff agreement, and a wealth tax such as Ackerman and Alstott have proposed - would just about equal the spending cuts the White House has already agreed to, totaling $1.5 trillion (or $1.7 trillion including interest savings).
That seems about right.
Robert B. Reich, Chancellor's Professor of Public Policy at the University of California at Berkeley, was Secretary of Labor in the Clinton administration. Time Magazine named him one of the ten most effective cabinet secretaries of the last century. He has written thirteen books, including the best sellers "Aftershock" and "The Work of Nations." His latest is an e-book, "Beyond Outrage." He is also a founding editor of the American Prospect magazine and chairman of Common Cause.
|
THE NEW STREAMLINED RSN LOGIN PROCESS: Register once, then login and you are ready to comment. All you need is a Username and a Password of your choosing and you are free to comment whenever you like! Welcome to the Reader Supported News community. |
 15 May 2013
|
 15 May 2013
|
 16 May 2013
|
 18 May 2013
|
 16 May 2013
|
 15 May 2013
|
 17 May 2013
|
 16 May 2013
|
 17 May 2013
|
Comments
We are concerned about a recent drift towards vitriol in the RSN Reader comments section. There is a fine line between moderation and censorship. No one likes a harsh or confrontational forum atmosphere. At the same time everyone wants to be able to express themselves freely. We'll start by encouraging good judgment. If that doesn't work we'll have to ramp up the moderation.
General guidelines: Avoid personal attacks on other forum members; Avoid remarks that are ethnically derogatory; Do not advocate violence, or any illegal activity.
Remember that making the world better begins with responsible action.
- The RSN Team
HEy while they are at it -- why not remove us , that is wee the little people from the loop and end the income tax entirely and have the government simply print what ever money it wants.
But I would suggest looking at America's Past the great war to end all wars was over millions of troops dumped back at home with a war time economy in a tail spin 1919 thru 1921 where we had a stroke of luck with Wilson - he was not up to spending or anything else and Harding who correctly was determined to cut spending - from 18 billion to 6 billion -- once the people were allowed to keep their own money and make their own economic decisions rather then politicians so the market took off as a consequence. The little people advancing mightily with real increases in personal wealth -- indoor plumbing, electricity, refrigeration -- some weird devices from some Edison, Tesla, Marconi and others.
Spending was cut after the military was rearmed to compensate for all that was destroyed in the war. Spending wasn't an economic decision; it wasn't needed after the war was over. But the massive cut in spending created the depression of 1920-21 that was only cured because the American population that couldn't spend during the war except for basic needs of survival had stores of cash socked away that came into the economy to buy houses, furnitures, appliances; that cash kicked off the automobile age with purchases of cars and accessories, taking trips that helped the tourist industry and many other buying sprees.
The same thing happened in the late '40s after WWII.
Both economic disasters were cured with the cash Americans had saved during the wars.
And neither had anything to so with Americans being "allowed to keep their own money" because war-time tax rates remained in place for several years. The 91% rate of WWII for the aristocracy was lowered to 70% in the 1960s.
After Harding got tax cuts for the aristocracy, we had a two-year recession in 1923-4. After Coolidge got cut taxes, we had a 13-month recession in 1926-7. Then came the Great Depression after another tax cut.
Tax cutting doesn't work; never has, never will. We only need to find the proper balance and stick to it.
"Awesome -- we can simply print money spend and borrow like crazy!
HEy while they are at it -- why not remove us , that is wee the little people from the loop and end the income tax entirely and have the government simply print what ever money it wants."
Robert Reich did not say that, Martin.
So why the typical Republican rhetorical side-hop / avoidance of the truth ??
No, Not exactly he titled his article "The Myth of Living Beyond Our Means"
and how can that possibly imply anything else but fiscal irresponsibility?
the content of the article is the same old drool - soak the rich and give it to the little people.
So after we catch, cook and eat the golden goose -- what shale we do for our next meal?
If you would get a fact you might know the answer. Our spending has leveled off since Fool Bush left office. That Bush left a deficit of $1.55 trillion. Off-budget surpluses lowered the spending deficit to $1.412 trillion. Latest estimates call for a deficit of about $920 billion with no off-budget surpluses figured in. We have cut the annual deficit by more than $600 billion, and you bitch about that.
If you would get some other facts you might learn that the economy always performs WORSE under Republican administrations ; the budget deficits are much higher under Republicans; economic growth is way poorer under Republicans. Too many facts to go into but the over-all picture is that economic performance, government financial concerns are ALL worse under GOP management.
now look where we are at: the gop train is finally reaching the station. this is why our political system can't work. it is essentially "the rule of the morons by the evil elites". lets tax stupidity, that might get us out of debt!
btw, knowing they're taking us back to the Gilded Age, they've made plans to take us back to the antebellum south...
these are the absolute worst kind of people in the world & the dems, by & large, have enabled them at every step. it's been nothing but good theater (at best).
Bush's last deficit was left us with a 480 Billion deficit ( I agree too damned much the rest 1.55 trillion 2009, 1.3 trillion 2010, 1.3 trillion 2011, 1.1 trillion 2012 , and projected 0.8 trillion is all OweBama and his house and senate who had it all lock stock and barrel from 2009 - 2010
That was George W. Bush's last budget, not Obama's first.
It went into effect on the first day of October, 2008. Obama hadn't even been elected on that date, so don't try to attribute to him what was in effect long before he became president. Budgets are fiscal-year budgets, not calendar year.
The reason that the deficit was so high was more than $400-billion less in tax revenue because of the millions of jobs lost under Bush, not Obama. but that wouldn't be known until tax revenues were collected in the spring of 2009. A carryover from the Bush presidency.
Then factor in the $700-billion TARP rescue of Wall Street that Bush got before Obama became president, even though some of the spending was done after Obama was sworn in. He has to faithfully execute the laws of the land, you know.
It is tiresome that those on the right continue trying to blame those who inherit a mess rather than the right-wing nuts who created the mess.
But Nope that was the
Democratic CONGRESS and the
Democratic Senate and the
Democratic President that tagged us for an additional 1 trillion in debt their first year in.
Obama as Senator voted for TARP
Thanks for playing though
The point is that we should tax them a bit more to slow the flow of money to the already super rich. To them, it's just a game (if you're not winning, you're loosing); to the rest of us, it is survival or improving our lot and that of the children.
Will you ever post anything resembling honesty or sanity?
Take some courses on international money management to get a handle on how the system really operates. We know the U.S. government can and does print money. Lessons have been learned from the past and that there is only so much the U.S. government can print. And the proof of this limit, when the limit is reached the U.S. government has and does borrow money from China, some other nations.
Actually the money never gets into Social security to be replaced - Once immediate SSA obligations are paid the 'excess' is dumped into the general funds and an IOU ("Special Security") is stored to represent the SSA surplus.
that mountain of IOU's is about 3 trillion.
Under that mindset it only makes sense to use deficits (or is it the debt?) as an excuse to defund the government. And the real problem for them, that the Democrats and Progressives have not really exploited is that the Righties don't have a story that justifies their mindset. So, what do they do? They make one up. And that is how we get to hear about how horrible the debt/deficit is, and it will bankrupt our children. The Democrats and progressives have to not only debunk the story, but create an alternate, true story.
We all know the numbers and the history, but that is not going to convince Joe Sixpack (Who generally does not have any Freudian issues about guns or women) that unless we rest the income equilibrium, spread the cost burden of health care, edication, transportation, and take care of the planet; a balanced budget will not make life any better in the future.
The future is always starting in the next moment, dont let it get away.
And, as many of us here have stated again and again- if we stopped spending so much on making war there would be enough money, no debt crisis. Imagine what we as a country could do if we taxed (not penalized, merely taxed fairly) the wealthy, had big business pay their share, and stopped funding the war machine. Imagine~
Let's see: how many coporations have extracted tax abatements from the localities around the country to "create jobs"? How many actually created jobs? How much of the revenue foregone was made up by higher taxes and fees (i.e. another tax) on the middle and lower classes?
Let's see: GW Bush committed the U.S. to 2 wars. Were taxes (revenue) raised to offset the costs of these incursions? How many businesses made out like bandits as a result of this increased spending - for both military and civil purposes?
Exactly!!! thanks Art947 for some details.
It was the American Labor Movement that gave the worker safety, security and a decent wage to be able to become a member of a true Middle Class. Systematic destruction of organized labor through intensive propaganda over the last 60 years, has given today's worker a feeling of helplessness.
If socialism is such a great idea - why must it be imposed at the end of a gun?
Not only has the American taxpayer pumped up the banks - it has reinforced its game and lavish lifestyle under the false pretense of saving democracy and capitalism.
At a supposed 62% total tax bite on some $60M in earnings last year, the
poor legend of the links will have to scrape by on an after-tax mere $24 million or so.
So sorry for Phil. To maintain his standard of living, he'll have to grind
through yet more gruesome, grueling golfing. Oh, the horror!
I enjoy watching you play golf, Phil, however, I have NO sympathy for your crocodile tears.
I think Phil's reasoning was: 39.6% is now the top bracket federally and California just bumped its top marginal rate from 10.3% to 13.3%.
Only two tax questions are ever posed:
1) What's your tax rate?
2) What's your tax bill?
No one ever asks that third question:
After you've paid your taxes, what do you have left over to live on?
I remember when Bill Gates lost half his worth on the dot com crash. He lost 40 billion but people were horrified as if he must be in poverty now. Ummm, he still is worth 40 billion. Since when is that poor?
I was looking at some blog from 2008 that was talking of Bob Iger's income of something like 30 million and how some justified it because it was ONLY .003 percent or something of Disney's revenue. Like 30 million was chump change or something. One made a comment that if he made ONLY a million that would be LIKE poverty. The all caps are my emphasis.
http://money.cnn.com/2013/01/23/news/economy/mickelson-taxes/
Yea - how dare he!! because he is rich every one else automatically has a right to his life and his earnings.
hell, I should not have to work since my neighbor is 4 times richer then I -- he should be forced to share his wealth with me!
I would examine what we are told, what to expect, and what we are told to expect.
Those asking why, must prepare to scream "Bullshit!", upon receiving their answer.
Sincerely.
"The richest one-tenth of 1 percent is now earning as much as the bottom 120 million Americans put together."
From Solidarity Forever:
"They have taken untold millions that they never toiled to earn"
And they always will unless ordinary people object!
Paid would be more accurate.
Please take this a constructive in nature and keep writing always!
Um, no such thing as "the average American".
Up there in Lake Woebegone, all American children are above average.
Most Americans (at least those who stay in the game) also adopt an economically inflated notion of themselves because of these marketing strategies. The "irresponsible" people who buy what they can't afford are those who accept the commercial image of prosperity that is sold by Madison Avenue-- sold under the pretense that class does not exist. This is how mortgages were sold during the housing crisis-- if you could "fog a mirror, you could get a loan."
We can expect another such collapse in another financial arena, followed by a bailout, possibly a war, and the loss of more social services.
Your point finds strong backing in Robert Sheer's "The Great American Stick-Up: How Reagan Republicans and Clinton Democrats Enriched Wall Street While Mugging Main Street.
Sheer talks of "NINA" loans to borrowers who had no income & no assets.
Throughout human history, manufacturing was propelled by muscle (animal and/or human), wind, or water,
Then came the steam engine and we began tapping energy stored in fossil fuels...
Of course, it should come as no surprise that, as per "cdilpace"s follow-up comment above, EINSTEIN would get it "MORE right"...
Thousands of these are set up annually, they apply for a 501.c.3 designation, solicit funds, or are self funded by the owners who then turn around and spend the money for their "charitable" buildings, travel, hiring of cronies, etc.
Soon they fold, often before they have even submitted a single audited account of the money spent.
The IRS doesn't have the staff to chase all the "donors" and "Boards" down to see if it is all legit. Let alone get the tax deductions clawed back.
We can slow these rackets down ALOT if we get the tax code to not allow a 501.c.3 designation for tax deductions until the organization has:
A. been legally in business asking for a 501.c.3 rating for 2 years
B. has submitted 2 years of audited tax filings
C. shows that 80% of the "charity" funds were used for direct program support (charity navigator can tell you how this is calculated)
Honest people want truthful, vetted, monitored charities. And the wealthy can afford to do things right... IF they really want to.
More regulation will catch the incompetent and the self serving. Before we cut SS, lets catch the tax avoiders!
Therein lies the flaw in Reich's thinking along with most other liberal economists such as Paul Krugman.
They are vastly better than the other side and their ideas MIGHT postpone the economic disaster that is lurking. The right wingers would push us over the cliff quickly and believe that they are the chosen ones to take what is left.
The real problem lies in the income equation. Our incomes have failed to keep pace with the economy. That has necessitated cheaper goods(China, etc.) and that has feed the general reduction of adequate paying jobs and now you have the downward spiral that is continuing despite the best efforts of those who, I believe, really want to fix the mess.
As a society, including the economists, we fail to grasp the definition of wealth, wealth creation, and the value of money(our entire monetary system). No, gold is not the answer. This downward spiral is the mechanism of transfering wealth from the many to the few and increasing the number of us who are or are approaching being impoverished.
China is not the result of our loss of income it is the cause. The same with India, Indonesia, etc. Those companies are not Chinese companies making Chinese products. They are being paid by US companies to make American products at cheaper labor. This is how the transfer of wealth has been taken from us.
Not only that you have a system of outsourcing that is robbing us internally. The above is off-shoring. Outsourcing is a company who takes an entire department and now has it run by an outside company. They effective just lost promotions, pay raises, and any other upward mobility as their department now is pinched to lower labor costs.
What Walmart et al has done is hide how much we are not getting paid.
If income levels has kept the same pace for most of us as they did in the 70s we would have had down payments for houses thus reducing the effect the sub prime market had on the collapse. A lot more people would have kept their homes etc.
RSS feed for comments to this post