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Reich writes: "The deeper question is what should be done starting in January to boost a recovery that by anyone's measure is still anemic."

Portrait, Robert Reich, 08/16/09. (photo: Perian Flaherty)
Portrait, Robert Reich, 08/16/09. (photo: Perian Flaherty)

Obama's Biggest Economic Challenge

By Robert Reich, Robert Reich's Blog

10 September 12


he question at the core of America's upcoming election isn't merely whose story most voting Americans believe to be true - Mitt Romney's claim that the economy is in a stall and Obama's policies haven't worked, or Barack Obama's that it's slowly mending and his approach is working.

If that were all there was to it, last Friday's report from the Bureau of Labor Statistics showing the economy added only 96,000 jobs in August - below what's needed merely to keep up with the growth in the number of eligible workers - would seem to bolster Romney's claim.

But, of course, congressional Republicans have never even given Obama a chance to try his approach. They've blocked everything he's tried to do - including his proposed Jobs Act that would help state and local governments replace many of the teachers, police officers, social workers, and fire fighters they've had to let go over the last several years.

The deeper question is what should be done starting in January to boost a recovery that by anyone's measure is still anemic. In truth, not even the Jobs Act will be enough.

At the Republican convention in Tampa, Florida, Romney produced the predictable set of Republican bromides: cut taxes on corporations and the already rich, cut government spending (mainly on the lower-middle class and the poor), and gut business regulations.

It's the same supply-side nonsense that got the economy into trouble in the first place.

Corporations won't hire more workers just because their tax bill is lower and they spend less on regulations. In case you hadn't noticed, corporate profits are up. Most companies don't even know what to do with the profits they're already making. Not incidentally, much of those profits have come from replacing jobs with computer software or outsourcing them abroad.

Meanwhile, the wealthy don't create jobs, and giving them additional tax cuts won't bring unemployment down. America's rich are already garnering a bigger share of American income than they have in eighty years. They're using much of it to speculate in the stock market. All this has done is drive stock prices higher.

The way to get jobs back is to get American consumers to spend again. Consumer spending is 70 percent of the nation's economic activity. Most of it comes from the middle class and those aspiring to join the middle class. They're the real job creators.

But here's the problem. Middle-class consumers won't and can't spend because their savings are depleted, their homes are worth a fraction of what they were five years ago, their wages are dropping, and they're worried about keeping their jobs.

And they're no longer able borrow against the rising values of their homes because the housing bubble burst - which means they can no longer pretend they're in better financial shape than they really are.

This is the heart of our economic dilemma.

Last Thursday night at the Democratic convention in Charlotte, North Carolina, President Obama suggested a way to correct this, or at least not make things worse: Raise taxes on the wealthy rather than cut programs the middle class and poor depend on (such as Medicare and Medicaid), give tax incentives to companies that create jobs in the United States, and invest in education.

It's start but America's middle class and poor need far more. They need to be able to refinance their mortgages at today's low interest rates. They need a larger Earned Income Tax Credit - a wage subsidy for lower-paying jobs. And a higher minimum wage that's automatically adjusted for inflation.

They could use a new Works Projects Administration and Civilian Conservation Corps designed to put the long-term unemployed back to work.

They need stronger unions to bargain for a larger share of the gains from economic growth. And a Social Security payroll tax that exempts the first $25,000 of income and eliminates the ceiling (now $110,100) on income subject to it.

And they need an industrial policy designed to create high-wage jobs in America.

In accepting his party's nomination for president, Obama said the "basic bargain" that once rewarded hard work and gave everyone a fair shot had come undone.

He's right. And the U.S. economy won't return to normal until that basic bargain is remade.

If Obama gets a second term, recreating that bargain - and getting enough votes from Congress to do so - will be his central challenge, and America's.

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. your social media marketing partner


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+58 # LeeBlack 2012-09-10 11:09
I agree, what is needed is government investment in infrastructure and education - both will provide jobs in addition to providing us with the basics of a strong country.

Bets on the stock market won't pay off if we continue to rely on passing paper around to make money instead of production of real goods and services.
-86 # edge 2012-09-10 12:42
Quoting LeeBlack:
I agree, what is needed is government investment in infrastructure and education - both will provide jobs in addition to providing us with the basics of a strong country.

Bets on the stock market won't pay off if we continue to rely on passing paper around to make money instead of production of real goods and services.


Hire more government workers paid for by the few people with jobs!


Why not take it to the logical end, and hire everyone into the Government roles... Comrades one and all.
+37 # Reductio Ad Absurdum 2012-09-10 13:00
You misread the very statement YOU quoted. READ IT AGAIN:

"I agree, what is needed is government investment in infrastructure and education..."

Where in that statement does it say anything about creating government jobs?

And for your information, is twas W. BUSH who EXPLODED the size of government, not President Obama.
+21 # mdhome 2012-09-10 13:11
Yes, lets fire every government employee, why do we need teacher, police, firemen, meat inspectors, TSA, national and state park employees, air traffic employees, food and drug employees, pentagon workers, bridge inspectors, IRS employees, and the rest that get a national, state or local government check.
+25 # Independentgal 2012-09-10 13:35
Calm down. Your nightmare about communism, socialism, etc. is only a dream. Wake up.
+11 # bmiluski 2012-09-10 14:13
So you admit that the upper % are not paying their taxes. After all, if they did, then their would be money topay government workers like foundry men, construction workers, etc. who would be re-building our infrastructure.
+17 # LeeBlack 2012-09-10 14:20
Do you consider teachers 'government workers'? If you hire construction workers to build or repair a bridge are they 'government workers'?
+2 # dkonstruction 2012-09-12 10:56
Quoting edge:
Quoting LeeBlack:
I agree, what is needed is government investment in infrastructure and education - both will provide jobs in addition to providing us with the basics of a strong country.

Bets on the stock market won't pay off if we continue to rely on passing paper around to make money instead of production of real goods and services.


Hire more government workers paid for by the few people with jobs!


Why not take it to the logical end, and hire everyone into the Government roles... Comrades one and all.

I agree comrade. Welcome to the revolution. However, since it will probably be a bit chaotic for the gov't to take over all private industries at once i would suggest that we simply start with:

1) the banks -- to create publicly-owned and controlled financial institutions;

2) the oil and natural gas industries -- so we can finally genuinely move to a "green" economy no longer based on fossil fuels; and,

3) the health care industry -- so that we eliminate the 20%+ that private insurers add to the cost of our health care and so that we can finally get single payer "medicare for all".

We can move onto the rest once we get these taken care of.
+11 # brux 2012-09-10 13:19
If these infrastructure investments are kept from working by federal, state and local obstruction by Republicans it just looks like the war on poverty - i.e.. - made to appear to be a failure when it was actually an economically efficient and profitable program.

Corporations do not want a strong national economy anywhere, the small group of corporate capitalists now have the power and the plans to coordinate a global effort to apply private government over democratic or public government.

The whole reason this can even be done in my opinion is that the people are for whatever multiple reasons incapable of knowing how to govern themselves.
+5 # tahoevalleylines 2012-09-10 18:00
Let's give #edge (2012-09-10 10:42)some items he can get his teeth into...

1965 North American Water & Power Alliance- aquifer recharge, hydropower, -alleviate drought- freshen up agriculture from Montana to Mexico. "NAWAPA"

1979 Barry Commoner wrights "The Politics Of Energy" and also see Christopher C. Swan's "ELECTRIC WATER" 2007 update.

1945 Kaiser Engineers plot electrification and re-alignment for mountain railroads in America. See 1995 follow-up by CalTrans, looking at Reno/Tahoe rail lines including new hydropower propelled rail line along US 50 Corridor (already in-situ American river power facilities).

Food. Water. Transport through the Peak Oil impact. Value added employment across the board in agriculture, engineering, manufacturing, transport... Back to you-all, Mssrs. Krugman & Reich-
+1 # tonywicher 2012-09-10 18:35
Yes, and the best way to get the money for such investment is to raise taxes on finance capital so the government can invest the money in infastructure education and jobs instead of letting the finance capitalists invest it in derivatives and asset stripping. Another good idea would be to break the power or the big banks by putting them through bankruptcy as they should be instead of calling them "too big to fail" and bailing them out. But Obama won't do this. In the end he is a Wall Street stooge just as much as Romney.
+38 # Buddha 2012-09-10 11:35
"This is the heart of our economic dilemma" No, the heart of our economic dilemma is that vast amounts of this middle-class and working poor still believe the Trickle-Down and "austerity" snake oil that their party's leadership is selling. These sheep are just to economically ignorant and gullible to even be aware that they are being sheared and turned into cutlets. In a representative democracy, an educated and informed voter base is critical for wise policy to be implemented and for our elected representatives to be forced to work for OUR benefit, and not their own or for the benefit of a thin slice of Plutocrat donors. THAT is our problem today.
+3 # SMoonz 2012-09-10 12:02
I have always liked Robert Reich and he is definitely right on including projects like WPA as well as other infrastructure programs. However, The JOBS Act simply will not work. It won't even fall short as Mr. Reich implies. It just won't work, period.
+22 # barkingcarpet 2012-09-10 12:13
Really, what needs to be done, is for the public, the Yes, WE, can, all of us who wish to see life continue for any species, get involved and make ANY politician PERIOD, enact and follow sane policy, which protects WE, the people, and the commons of Nature, which supports all life.

We need to become better stewards and create a livable future. No more consumer orientated ghosts and profiteers. Demand love and respect for ALL, and boot the crooks back under their rocks, if they can not be salvaged as decent humans.
+28 # Sensible1 2012-09-10 12:17
The Republicans frame our economy in the negative; deny Americans a Jobs Bill because it contains raising taxes for the super wealthy, and continually promote more benefits for the rich rather than an uplifting of our working poor. When are Americans going to get it! President Obama is doing everything that the executive branch of government can, and in the midst of a congress stalled by a Republican grid lock who pledge not to pass any bill which may help our President accomplish goals which will help move us forward. This is outright treasonous, and subversive rebellion within our own government, and must be stopped before we can begin to start improving our economy. It appears that the Republican party has all inclusively violated their oath to uphold and protect the United States.
+9 # DPM 2012-09-10 15:42
I agree. The Republican party is in "rebellion" with the government of The United States. They do not disagree with specifics, they are out to either gain complete control or sabotage everything. All or nothing. That may be legal, but it is not ethical. If they cannot be arrested and tried as conspiring to bring down the government, then they should be ostracized by the citizens of this country, until such time they can participate in our government, as opposed to destroying it.
+8 # doneasley 2012-09-10 17:44
Quoting Sensible1:
... This is outright treasonous, and subversive rebellion within our own government, and must be stopped before we can begin to start improving our economy. It appears that the Republican party has all inclusively violated their oath to uphold and protect the United States.

Pure hatred, Sensible1, PURE HATRED! It's beyond me, that people who claim to be so religious and so patriotic commit acts of TREASON - like for instance exposing the CIA agent wife of the man who countered their lie about an African country providing yellowcake uranium to Saddam Hussein. Oh sure, a guy went to prison, but he took the hit for Cheney and Bush. With the help of the Supreme Court, the Regressives stole an election in 2000, and did things in OH in 2004 that may have stolen that election. And it continues today with VOTER SUPPRESSION campaigns in almost every GOP-controlled state. Oh, these are no saints, and the Dems had better wake up to that fact.

But what I don't understand, Sensible1, is the lemmings who stupidly legislate, argue and vote for policies that funnel all of our wealth to the Rmoney's of the world - as if they're going to get a piece of the action.

+3 # Lolanne 2012-09-11 09:18
Quoting Sensible1:
. . . This is outright treasonous, and subversive rebellion within our own government, and must be stopped before we can begin to start improving our economy. It appears that the Republican party has all inclusively violated their oath to uphold and protect the United States.

Yes, Sensible 1, what the repigs are doing definitely is treason. They are actively working for the destruction of government. It's obvious to anybody bothering to look at it, not to mention that they openly admitted their intention to do when McConnell stated their only goal: to get the President out of office, NOT to work for the good of the country.

I'd like to see the Dems pick up on that in their campaign ads. They need to openly accuse the reps of treason and point to that statement as evidence. Maybe it would open some eyes across the country.
+10 # seeuingoa 2012-09-10 12:33
Economy is important, sure, but how important is money if democracy and human rights are going down the drains?
+23 # VoiceofReason613 2012-09-10 12:47
To combat the Republican lies about the economic conditions, we should stress points like the following:

1. Mitt Romney, Paul Ryan, and other Republicans are promoting policies similar to or often worse than those that had such disastrous results during the George W. Bush administration, including converting a three-year major surplus, which was on track to completely eliminate the total federal debt, into a major deficit, creating very few net jobs (none in the private sector), and leaving the country on the brink of a depression, with an average of 750,000 jobs being lost during its last three months. As Bill Clinton put it, “Romney is Bush on steroids.”

2. Republicans have obstructed efforts to get our country out of the tremendous ditch they left us in by voting no on and sometimes filibustering many Democratic proposals, some of which they previously supported and sometimes even co-sponsored. Hence, it is not surprising that a recent poll showed that 49% of Americans believe that Republican Congress members are purposely sabotaging the U.S. economy in order to defeat Obama and other Democrats, while only 40% disagree.

3. Republicans support continued tax breaks for the wealthiest Americans and highly profitable corporations, while basic social services that middle class and poor people depend on are being cut and teachers, police officers, fire fighters, and others are losing their jobs.
+4 # tswhiskers 2012-09-10 12:58
I hope you right, Mr. Reich. Of course the big IF in all of this is whether or not the Dems can win majorities in both House and Senate. That would help perhaps more than Obama's winning the WH. I also wonder if Obama will have the courage in a 2d term free of reelection pressures to have the courage to do the things necessary to return our economy to the middle class. Granted he has accomplished a great deal (and it needs to be publicized much more than it has been to date), but can he break his bipartisan habits re a noncooperative Congress and work without Republicans? I'd like to hear a bit more from you on that subject, Mr. Reich.
-11 # 2wmcg2 2012-09-10 13:02
Reich's solutions will either aggravate the budget deficit or are questionable. How do we get more Americans to join unions if the unions can't persuade them to join? What does Reich mean by "an industrial policy" - an economy planned by government? What are the plans? More bankrupt ideas!

To be realistic, we need to reevaluate free trade. We're running a $40 billion + monthly trade deficit. We can't compete on cost. Tariffs could be a cost equalizer.

More importantly, government needs to encourage employers to shorten hours of work to preserve jobs as machinery increasingly assumes productive functions. What is needed is amendments to the Fair Labor Standards Act to reduce the standard workweek. A permanent 4-day, 32-hour workweek is long overdue.

Reich used to be labor secretary. Does he have any thoughts on this?
+10 # brux 2012-09-10 13:14
As I heard mentioned this weekend on Washington Week or one of those talking head shows where Republicans spout off ...

Obama's biggest challenge is the Congress - whether and how much it moves into Republican hands - period.

Without a friendly Congress Obama simply cannot be anything but a placeholder President ... the best he will be able to leave us with is some good speeches.

Obama's continued pretend world where he can compromise with the Republicans in Congress will be collapsed, and either he appeals strongly in the media to the American people, and that is questionable, or he just puts things on automatic as much as he can.

This is more gridlock because the government is packed with paid lackeys of business, and now we call a business driven government democracy instead of what we used to call it prior to WWII when we fought and beat it.
+10 # fredboy 2012-09-10 13:17
Biggest challenges:
1. Restore Glass-Steagall (impossible, since the banks and financial houses now own both parties).
2. Burn MBA economics professors at the stake.
3. Find any citizens who understand the economy vs. those that repeatedly support economic policies that lead to collapses.
0 # BradFromSalem 2012-09-11 06:33
Quoting fredboy:
Biggest challenges:
2. Burn MBA economics professors at the stake.

I love it!
+6 # MindDoc 2012-09-10 13:26
Well stated, Dr. Reich - and doubly appreciated after the column which bemoaned the lack of a specific plan but which did not suggest one. It's clear: we're trapped in a cycle of smaller consumer spending, idling sales and thus expansion. Meanwhile the super-wealthy and corporate people are enjoying serious good times and spectacular profits - often without the inconvenience of paying U.S. taxes.

The "basic bargain" is a covenant between citizens supporting the public welfare in exchange for citizenry fairly contributing to keep the infrastructure of our society intact. Correct me if I'm wrong, but wasn't the original Tea Party about taxation imposed on HUMAN people, by government - in that case for the purchase of tea? This 'inconvenient truth' re-purposed to focus only on the word 'taxation' but not 'representation '? In theory 'we' do have representation now. Or do we?

Sadly, I'm thinking as we await the world's most watched and coached debates, that many people are actually tuned out or burnt out. So much daily spin, messages and lies, fact-checks, radioactive hate-mongering on talk-radio and web: There is so much "noise" and so little "signal" - numbing while tending to harden existing opinion and motivate us to listen selectively, to the messaging most consistent with what we *already* believe. (The dynamic is "Cognitive dissonance".)

Hopefully the discussion will turn to "We the People" - our needs, and Congress' deeds.
+5 # mgwmgw 2012-09-10 14:06
While there are many things I might want to change about how our government functions, let's begin with something which I hope is not controversial. Rather than just talking about the number of jobs, let's discuss some statistics about who the people are who want to work and are not working, and what kind of jobs we would need to create in order to employ them. For example, there is much talk of trying to get kids to study science and math, and there are also a whole lot of unemployed technical people, mostly over 45 years old. Creating a whole lot of jobs that require qualifications that can only be met by immigrants, or that do not pay enough to live on, will not solve the problem.
+4 # Griz 2012-09-10 14:52
Mr. Reich, you are one of the few intelligent voices out there on the economy (you and Paul Krugman could have a formidable tag-team). Please make sure to check your articles, words are left out from time to time ie: "It's start but America's" needs an a.
0 # CC1951 2012-09-10 18:30
I saw that, also.
+2 # gdp1 2012-09-10 15:29 derivative transactions, means-test Social Security recipients, apply Social Security payroll tax on ALL income,(not just the first 120thousand), eliminate Congressional Pensions, tax carried-interes t income as wages, re-instate the draft (rich kids only)....I mean just what sacrifices have the rich made in the last two decades?....NON E
+3 # Economic_Justice 2012-09-10 15:42
Automation and outsourcing have changed the economic playing field significantly, to a degree not recognized even among liberals/progre ssives. Each of these problems has a different solution.

Outsourcing: The most direct way to address outsourcing is to make low wages into an unfair trade practice, and to impose on goods or services produced with low-wage labor a compensating tariff.

Automation: The resulting labor surplus can only be addressed by expansion of the public sector, including not only public works (maintenance, repair and new construction as appropriate) but also social services, the arts and environmental protection. This expansion would be financed by eliminating capital gains treatment and other loopholes, and imposing higher rates on higher incomes. A short-term wealth tax might also be needed.
+5 # Economic_Justice 2012-09-10 15:44
To stabilize a new allocation of income and wealth, strong incentives must be put in place to promote employee ownership wherever possible, as well as the organization of unions. Underlying all of these measures must be a new consensus that everyone in our society must participate much more equally in its governance and its economic benefits- which means, at a minimum, full employment at a living wage.

As the work of Marmot (Whitehall Studies) as well as Wilkinson and Pickett (Spirit Level) has demonstrated, our new more equal society will be far healthier in every way. Also, as Gar Alperovitz has discussed in America Beyond Capitalism, we will be better able to deal with the environmental challenges which face us.
+7 # wrknight 2012-09-10 20:21
I have to disagree with the deeper question. The real deeper question is what should be done on Nov. 6, this year. And that is up to you, me and all the voters in this country (not the President). If people don't get off their asses and get rid of the stupid Republicans in Congress, President Obama's hands will be tied for at least another two years. Don't kid yourself. If Obama wins (which I hope he does), Republicans in Congress won't give him the money to do anything except build more death machines for the war department and pay for unnecessary and invasive tests on pregnant ladies' parts.

So, don't worry about January, worry about Nov. 6, 2012.

Spread the word. Get people registered who haven't already registered to vote and get people to vote on Nov. 6.
+1 # Ma Tsu 2012-09-10 23:14
We citizens, called consumers by our 'betters' in business and governance, have done as instructed. We now account for seventy per cent of the economic activity of this country. While this ratio is in no way sustainable, I puts us in the drivers seat, at least insofar as the primary preoccupation of our leaders is concerned -- money. It's time for us to wake up and realize we don't have to go, hat in hand, to our banks, businesses and government asking them for our country back. We own it. We bought it. Just like we were told to do. And now it is our turn to tell Wall Street and Pennsylvania Avenue precisely what they can do with their fractional interest, which amounts, in aggregate, to no more than thirty percent of our wealth. We, not they, control the game. Just imagine, if we were we to actually organize ourselves, that old 'E Plurbus Unum' thing, ours might just be a government of, by and for the people.
+2 # angelfish 2012-09-11 02:28
We are ALL Government Workers! If you Pay Taxes, you work FOR the Government! The only ones who aren't are the One Percenters (1 %-ers) who hide their money in the Caymans and other Off-shore havens ala Romney, the Koch brothers and Sheldon Adelson! Vote the TREASONOUS, Partisan ReTHUGs OUT of Congress so the President will have some HELP in Washington. Bring back the W. P. A. or something similar and WATCH this Country RECOVER! REGISTER, help Friends, Family, and Acquaintances to do the same. GET appropriate I.D. for your State and GET to the Polls on November 6th, and never, EVER vote ReTHUGlican!

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