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Reich writes: "Some believe the central political issue of our era is the size of the government. They're wrong. The central issue is whom the government is for."

Economist, professor, author and political commentator Robert Reich. (photo: Richard Morgenstein)
Economist, professor, author and political commentator Robert Reich. (photo: Richard Morgenstein)


The Government Problem

By Robert Reich, Robert Reich's Blog

25 December 14

 

ome believe the central political issue of our era is the size of the government. They’re wrong. The central issue is whom the government is for.

Consider the new spending bill Congress and the President agreed to a few weeks ago.

It’s not especially large by historic standards. Under the $1.1 trillion measure, government spending doesn’t rise as a percent of the total economy. In fact, if the economy grows as expected, government spending will actually shrink over the next year.

The problem with the legislation is who gets the goodies and who’s stuck with the tab.

For example, it repeals part of the Dodd-Frank Act designed to stop Wall Street from using other peoples’ money to support its gambling addiction, as the Street did before the near-meltdown of 2008.

Dodd-Frank had barred banks from using commercial deposits that belong to you and me and other people, and which are insured by the government, to make the kind of risky bets that got the Street into trouble and forced taxpayers to bail it out.

But Dodd-Frank put a crimp on Wall Street’s profits. So the Street’s lobbyists have been pushing to roll it back.

The new legislation, incorporating language drafted by lobbyists for Wall Street’s biggest bank, Citigroup, does just this.

It reopens the casino. This increases the likelihood you and I and other taxpayers will once again be left holding the bag.

Wall Street isn’t the only big winner from the new legislation. Health insurance companies get to keep their special tax breaks. Tourist destinations like Las Vegas get their travel promotion subsidies.

In a victory for food companies, the legislation even makes federally subsidized school lunches less healthy by allowing companies that provide them to include fewer whole grains. This boosts their profits because junkier food is less expensive to make.

Major defense contractors also win big. They get tens of billions of dollars for the new warplanes, missiles, and submarines they’ve been lobbying for.

Conservatives like to portray government as a welfare machine doling out benefits to the poor, some of whom are too lazy to work.

In reality, according to the Center for Budget and Policy Priorities, only about 12 percent of federal spending goes to individuals and families, most of whom are in dire need.

An increasing portion goes to corporate welfare.

In addition to the provisions in the recent spending bill that reward Wall Street, health insurers, the travel industry, food companies, and defense contractors, other corporate goodies have been long baked into the federal budget.

Big agribusiness gets price supports. Hedge-fund and private-equity managers get their own special “carried-interest” tax loophole. The oil and gas industry gets its special tax subsidies.

Big Pharma gets a particularly big benefit: a prohibition on government using its vast bargaining power under Medicare and Medicaid to negotiate low drug prices.

Why are politicians doing so much for corporate executives and Wall Street insiders? Follow the money. It’s because they’re flooding Washington with money as never before, financing an increasing portion of politicians’ campaigns.

The Supreme Court’s decision this year in McCutcheon vs. Federal Election Commission, following in the wake of Citizen’s United, already eliminated the $123,200 cap on the amount an individual could contribute to federal candidates.

The new spending legislation, just enacted, makes it easier for wealthy individuals to write big checks to political parties. Before, individuals could donate up to $32,400 to the Democratic or Republican National Committees.

Starting in 2015, they can donate ten times as much. In a two-year election cycle, a couple will be able to give $1,296,000 to a party’s various accounts.

But the only couples capable of giving that much are those that include corporate executives, Wall Street moguls, and other big-moneyed interests.

Which means Washington will be even more attentive to their needs in the next round of legislation.

That’s been the pattern. As wealth continues to concentrate at the top, individuals and entities with lots of money have greater political power to get favors from government – like the rollback of the Dodd-Frank law and the accumulation of additional corporate welfare. These favors, in turn, further entrench and expand the wealth at the top.

The size of government isn’t the problem. That’s a canard used to hide the far larger problem.

The larger problem is that much of government is no longer working for the vast majority it’s intended to serve. It’s working instead for a small minority at the top.

If government were responding to the public’s interest instead of the moneyed interests, it would be smaller and more efficient.

But unless or until we can reverse the vicious cycle of big money getting political favors that makes big money even bigger, we can’t get the government we want and deserve.

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+48 # Activista 2014-12-25 20:16
Oligarchy rules - we are moving to the next stage - feudalism. Paradox is that our neighbors in the south are moving away from the oligarchy. Even now Americans retirees are moving out to afford medical care cost and living expenses...
www.nerdwallet.com
Mar 26, 2014 - In fact, medical bills are the leading cause of personal bankruptcy ...
 
 
+33 # Activista 2014-12-25 20:25
.. until we can reverse the vicious cycle of big money getting political favors that makes big money even bigger .. great article - great analysis
 
 
-68 # skylinefirepest 2014-12-25 23:16
The top twenty percent of wage earners pay sixty nine percent of the taxes and if I remember correctly something like one out of every three people work for some stage of government...ye s, big government is a serious problem.
 
 
+71 # Buddha 2014-12-25 23:49
And the top quintile takes about 52% of total national income. So we have a very marginal, and increasingly less so, progressive tax structure. And no, in 1966, 4% of workers were employed by the federal government, today it is down to 2% of all workers. The only thing "big government" at the federal level is still our globally deployed military, where we spend more than all other nations combined, if you add VA and pension costs. Only in the alternate universe conservatives live in is "big government a serious problem". In reality, Reich is spot on, the problem is little of the federal government exists to serve the people and its needs, it is basically just a tool for the Oligarchs to loot everything not nailed down.
 
 
+13 # tclose 2014-12-26 12:26
Well put, Buddha. As the top twenty percent takes about 52% of the national income, 69% (if that is correct) is hardly progressive, keeping in mind that people on the lower end can hardly afford food, clothing and shelter to pay any significant amount in taxes.

But of course you think it is their fault for being lazy, right skyline?
 
 
-5 # skylinefirepest 2014-12-28 14:05
Buddha...my comment was "some stage of government" wasn't it??? The meter maid who writes you a ticket for parking five minutes longer than you should is a government worker...You'll notice I didn't say "federal".
 
 
-7 # skylinefirepest 2014-12-28 14:07
Tclose, have you ever been to a low income housing area?? Just curious as you'll see a majority of able bodied citizens sitting around watching large screen televisions...t hey won't even pick up the trash in their front yards. So yes, lazy does describe a slew of them.
 
 
-5 # skylinefirepest 2014-12-28 14:04
Buddha...my comment was "some stage of government" wasn't it??? The meter maid who writes you a ticket for parking five minutes longer than you should is a government worker...You'll notice I didn't say "federal".
 
 
+23 # James Marcus 2014-12-25 23:24
For, By and Of.
The 'Bankstas' are commanding All: Our Government (and Others), The Oil and Nuclear Energy production, The Major Media, The Military/Indust rial Complex, and all the Major Financial Institutions. War and Conflict, Their Major Endevor
 
 
+42 # bigkahuna671 2014-12-25 23:31
All of this was predicted by Sen. Warren's book, "A Fighting Chance." In it, she describes the elements that led to the need for Dodd-Frank and the battle to get it. She also predicted what could happen if it ever got dismantled. She laid the blame for the crash and the next potential crash right where it belongs, on the banks and greedy bankers who need those profits to jack up their end-of-year bonuses in the seven and eight figures. Sen. Warren's battles against banks to protect the American people from being foreclosed on has been epic and we need her in the White House, not Hillary, who will only talk the talk but NEVER walk the walk.
 
 
+5 # wantrealdemocracy 2014-12-26 15:58
Warren is not our savior. She is a Democrat. She supports Israel, the true owner of every member of our corrupt government.

The big problem is who is in the government. The 'representative s' in our government represent the interests of the state of Israel, our greatest 'ally'.

The Zionists are not our ally, they are in control of this nation. They own the banks and the "War on Terror" is to benefit Israel by breaking up the Muslim nations one by one. Our nation goes bankrupt and our kids come home from these wars dead or injured for the benefit of Greater Israel. (the only nation with no fixed borders---they just keep growing like a cancer over Arab lands.)
 
 
-1 # Cassandra2012 2014-12-29 11:36
Stuck in a bigot groove, much? [Do come up for air, occasionally.]
 
 
0 # tpmco 2014-12-29 02:31
I think USA needs Warren in the Senate for the next ten years. I will not support Hillary given no other choice.
 
 
+33 # banichi 2014-12-26 00:45
The article is depressingly honest. What it means is that the new spending bill that the Republicans in Congress scrooged the American people to get all their special benefit parts (like the Citigroup section) will be setting in stone the buildup for the 2016 election. It is biased so far in favor of the conservative greed for power and money and control of our electoral process that, sad to say, the American citizenry of all types are going to be utterly screwed. That Obama did not have the courage to veto the bill says everything that needs to be said about his unwillingness to stand for the American people.

Sad to say, but the best chance for change, sick as I feel to say it, is for the banksters to bring about another meltdown in the next year or so, which they most likely will given they once again have no restraints on their gambling on our dollar, euro, pound, etc. One has to wonder if they have pushed the provision through because they know it is coming and don't want to be holding the bag when it occurs.

As Reich points out, this is government for special interests only; anyone who still listens, and votes, for Republicans or TeaPartiers because they think they are right in their ideology, is delusional.
 
 
+32 # lobdillj 2014-12-26 05:49
Isn't it really worse? The banksters are not "gamblers" who used us as unwilling backers. They are criminals who should be stripped of their loot and put in prison for decades. They didn't gamble; they knew what was going to happen and how it would turn out. The bottom line of the banks after the scheme collapsed is what made their plea for a bailout a winner. They profited as they created indefensible debt, and they profited again by the bonuses they got when they engineered the bailout. They knew exactly what they were doing.
 
 
+19 # bigkahuna671 2014-12-26 09:49
When bankers in Iceland did the same things as ours, the government quickly indicted and convicted them of the same kinds of things our bankers are doing. No surprise, the banks in Iceland are now on a firm footing, the corrupt bankers are in prison, and the people are breathing a lot easier knowing their economy is recovering faster than ours and with higher-paying jobs. As long as the Grand Obstructionist Party controls our government and economy, the middle class will continue to shrink, the poor will skid to the point where their children starve, and the rich (including the politicians whose hands are out for their payoffs) will get richer and richer. What kind of a country do we have and what are we going to do about it?
 
 
+7 # Seadog 2014-12-26 14:12
I agree! They want things back the way it was at the beginning of the Republic. In those days only a small minority of mostly white wealthy landholders could vote. That's what the PTB on the GOP want. They actively want to destroy what's left of the democracy here. They want a stakeholders society like it was in 18th Century America. It wasn't till Andrew Jackson's time that the masses of white working men got the vote. We are in a period of our history where a tiny elite is trying its hardest to reverse much of the democratic and social gains of the past 2 Centuries and this elite is smart, rich beyond any need and they have a plan and patience. We have the people, but the people are increasingly poor and desperate. The elites are winning right now and I expect things here to grow far worse before there is a reckoning of some kind or a Global war.
 
 
0 # Vardoz 2014-12-26 17:01
Absolutely - If we can protest about open season on unarmed innocent black American citizens whose killers are given total immunity and if states can implement laws that for example prevent fracking, label GMOs, eliminate e voting machines, vote for more money for better schools, independent committees to review murders of innocent people as Walker was forced to do in Wisconsin states can take more power.

http://www.levin.senate.gov/newsroom/press/release/senators-introduce-legislation-empowering-states-to-protect-consumers-from-abusive-lending/?section=alltypes
 
 
+18 # Art947 2014-12-26 10:31
Just remember all the facts that Robert Reich presents in this and other commentary when you children or grandchildren say that they want to "serve the country" by joining our military (industrial-pol itical) complex. Our men and women in the armed forces may be sold a bill of goods that they are protecting our "democracy" when they are really protecting the interests of the 1%. Do any of the RSN network really believe that the wars that have been fought for the past 30 years are protecting the average American?
 
 
+2 # tpmco 2014-12-29 02:41
No.
 
 
+10 # wrknight 2014-12-26 10:32
Not to mention that the growth in the size of government under Republicans has been more than three times the growth under Democrats.

Most people don't think about how to measure the size of government. The true measure of its size is the amount of money it spends. Now compare the budgets of Republican vs Democratic administrations and observe where the largest post WWII spending spikes occur.
 
 
+9 # wrknight 2014-12-26 10:33
Then look at where the money goes and see who the government is working for.
 
 
+12 # reiverpacific 2014-12-26 10:51
This reminds me of ol' Ronnie Raygun's favorite and famous running slogan of "Government IS the problem" -whereupon the "Gipper" set a still-standing record for government spending and staffing of 189%, sadly a large part being squandered on"Defense" or the already oversized Military, not on Social Programs.
Yet he is still the patron saint of the Reactionary, deluded TeaThugs -some twit even wanted his mug carved into Mt. Rushmore.
Michael Kinsley just wrote a strictly factual and socio-economic revelatory article on this faux-legacy but it'll be scoffed at -if any of them has the bollocks to read it- by the same crowd who are in the pockets of those who really run the government.
 
 
+9 # Seadog 2014-12-26 14:15
Reagan is revered for his style of governing and his phony conservatism. In reality he delivered very little for the social conservs. that worship him. On the other hand He delivered BIG time for his wealthy patrons and their Corp. state.
 
 
+16 # Vardoz 2014-12-26 11:53
When a nation and society are run like a corporation anything that does not create profits like food programs and safety nets like Medicare, Social Security and Medicade, public schools and a multitude of supports and services are considered dead weight and those at the bottom are looked upon a refuse as we all saw when the Romney tape revealed
his real feelings about what he called the 47%. There is no consideration for the health of the people, the economy or
the environment. It's all about profits at all costs to everything. I don't think people realized what the
consequences of not voting would really mean and did not understand how much was at stake.

The EU are also banning those E voting
machines because they lend themselves to corrupting the vote and I'm sure the GOP has been stealing elections right and
left in a number of ways.
 
 
+11 # Roger Kotila 2014-12-26 14:57
I agree with Reich that the issue is not the size of our government, but the fact that it serves Big Money first and foremost.

Indeed, the use of the business model to run government has been a disaster for the citizenry, both in the US and Europe.

For me, the real issue is not big or small government, but GOOD or BAD government. Under FDR, America experienced what I'd call good, big government: Lots of meaningful jobs and public projects that served the public interest.

But under Bush, Jr. and Obama, we have what I would rate as very bad, big government: A war economy based upon America's military ambitions for Empire (e.g., Full Spectrum Dominance), and massive profits for the military/indust rial complex.

If America is in reality being run by an elite shadow government, then one could argue that the oligarchy in power is an example of bad, small government.

Good government does not depend upon its size, it depends upon the philosophy and policies that are implemented.
 
 
+1 # Anarkismo 2014-12-26 19:55
The thought just occurred to me that the one person who has taken direct action to disassemble the power centers of America was Osama Bin Laden. Ironic isn't it? Not sure if I agree with his approach but he certainly threw a wrench into the works.
Too radical perhaps.
 

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