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Excerpt: "For most of the last century, the basic bargain at the heart of the American economy was that employers paid their workers enough to buy what American employers were selling. That basic bargain created a virtuous cycle of higher living standards, more jobs, and better wages. The basic bargain is over - not only at Ford, but all over the American economy."

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

Restore the Basic Bargain

By Robert Reich, Robert Reich's Blog

29 November 11


or most of the last century, the basic bargain at the heart of the American economy was that employers paid their workers enough to buy what American employers were selling.

That basic bargain created a virtuous cycle of higher living standards, more jobs, and better wages.

Back in 1914, Henry Ford announced he was paying workers on his Model T assembly line $5 a day - three times what the typical factory employee earned at the time. The Wall Street Journal termed his action "an economic crime."

But Ford knew it was a cunning business move. The higher wage turned Ford's auto workers into customers who could afford to buy Model Ts. In two years Ford's profits more than doubled.

That was then. Now, Ford Motor Company is paying its new hires half what it paid new employees a few years ago.

The basic bargain is over - not only at Ford, but all over the American economy.

New data from the Commerce Department shows employee pay is now down to the smallest share of the economy since the government began collecting wage and salary data in 1929.

Meanwhile, corporate profits now constitute the largest share of the economy since 1929.

1929, by the way, was the year of the Great Crash that ushered in the Great Depression.

In the years leading up to the Great Crash, most employers forgot Henry Ford's example. The wages of most American workers remained stagnant. The gains of economic growth went mainly into corporate profits and into the pockets of the very rich. American families maintained their standard of living by going deeper into debt. In 1929 the debt bubble popped.

Sound familiar? It should. The same thing happened in the years leading up to the crash of 2008.

The latest data on corporate profits and wages show we haven't learned the essential lesson of the two big economic crashes of the last seventy-five years: When the economy becomes too lopsided - disproportionately benefitting corporate owners and top executives rather than average workers - it tips over.

In other words, we're in trouble because the basic bargain has been broken.

Yet incredibly, some politicians think the best way to restart the nation's job engine is to make corporations even more profitable and the rich even richer - reducing corporate taxes; cutting back on regulations protecting public health, worker safety, the environment, and small investors; and slashing taxes on the very rich.

These same politicians think average workers should have even less money in their pockets. They don't want to extend the payroll tax cut or unemployment benefits. And they want to make it harder for workers to form unions.

These politicians have reality upside down.

Corporations don't need more money. They have so much money right now they don't even know what to do with all of it. They're even buying back their own shares of stock. This is a bonanza for CEOs whose pay is tied to stock prices and it increases the wealth of other shareholders. But it doesn't create a single new job and it doesn't raise the wages of a single employee.

Nor do the wealthiest Americans need more money. The top 1 percent is already taking in more than 20 percent of total income - the highest since the 1920s.

American businesses, including small-business owners, have no incentive to create new jobs because consumers (whose spending accounts for about 70 percent of the American economy) aren't spending enough. Consumers' after-tax incomes dropped in the second and third quarters of the year, the first back-to-back drops since 2009.

The recent small pickup in consumer spending has come out of their savings. Obviously this can't continue, and corporations know it. Consumer savings are already at their lowest level in four years.

Get it? Corporate profits are up right now largely because pay is down and companies aren't hiring. But this is a losing game even for corporations over the long term. Without enough American consumers, their profitable days are numbered.

After all, there's a limit to how much profit they can get out of cutting American payrolls or even selling abroad. European consumers are in no mood to buy. And most Asian economies, including China, are slowing.

We're in a vicious cycle. The only way out of it is to put more money into the pockets of average Americans. That means extending the payroll tax cut. And extending unemployment benefits.

Don't stop there. Create a WPA to get the long-term unemployed back to work. And a Civilian Conservation Corp to create jobs for young people.

Hire teachers for classrooms now overcrowded, and pay them enough to attract people who are talented as well as dedicated. Rebuild our pot-holed highways. Create a world-class infrastructure.

Pay for this by hiking taxes on millionaires.

A basic bargain was once at the heart of the American economy. It recognized that average workers are also consumers and that their paychecks keep the economy going.

We can't have a healthy economy until that bargain is restored.

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 and iTunes. your social media marketing partner


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+44 # AndreM5 2011-11-29 10:41
This has been the mantra for three years but it still fails to sink in, to reach those most directly affected by these corrupt policies and proposals. How do we regain control of the message machine? It may not even be necessary if we can get the majority to actually vote.

It is shameful that the USA is so blatantly ignorant that something so transparant as CA$H and corporate power grabs can control our votes.
-74 # stonecutter 2011-11-29 10:45
Dr. Reich, you are a broken record. You've been writing the same stuff for months if not years, while the entire system around you goes in the opposite direction. Of course you "mean well", as my dear old mom used to say, but your words fall on the deaf ears of the Boehners, Cantors, Kings and the rest of the thugs in the House. Either you have absolutely no influence on the very small circle of power brokers who decide these matters, or you just can't sleep and spend most of your time blogging. Either way, it's doing about as much good as my blogging, which is nada.
+53 # Reductio Ad Absurdum 2011-11-29 12:48
Dr. Reich is by no means a castaway on an island of economic reason; Paul Krugman has been preaching the same economic wisdom, and rational progressives recognize their essentially shared position as obvious to any American who's lived half a century or read a history book.

What's the answer? Keep playin' that broken record until more and more people hear it and finally start listening to it. That's the only way ANY progress in America has EVER been made.
+13 # hasapiko 2011-11-29 17:19
'If they have no bread - let them eat cake!' That's more or less the message I'm hearing day-in day-out on CNBC and from a lot of people here in the mid-west. Frustrating.
0 # Merschrod 2011-11-29 19:20
Well, now that the you bring up the saying from the beheaded priness, that was probably a misinterpretati on. The princess' nany was a Spanish women and the expression in Spanish refers to "torta" which at that time refered to a food item made from potato, milk and egg. So it was not cake. Modern Ametican Spanish sometimes uses "torta" for cake, but we need to keep an historicla perspective here.

Now where were we?
+3 # RLF 2011-11-30 07:01
The entire system HAS been going the other way since Ronny Raygun and his piss-on-me economics. This so called Austrian school of free trade economics the Rethugs are using now to bolster more might have some relevance but only if we look at ALL of the moral dangers of deregulation. Only when we get rid of the corp. veil allowing bank ceo's to take huge salaries and bonuses while the bank it runs goes bankrupt and not having that be part of any bankruptcy proceeding. The moral hazard of ceo's taking absurd amounts and not having that be taken back for their incompetence in bankruptcy is the broken record and you're damn right I'm sick of listening to it!
+2 # Capn Canard 2011-11-30 12:22
stoncutter0602, it is ridiculous to complain about Robert Reich's views without providing an opposing view.
-64 # Martintfre 2011-11-29 10:54
the basic bargain was fair horse trading

but as soon as politicians are forced into the deal it is not their horses that are being traded.

Tis nice to be liberal with other peoples money
+27 # BradFromSalem 2011-11-29 12:55

Horse Trading?

People's livelihood is not a game of monopoly. The bosses/owners can dictate the terms of employment when the employed have no way to push back. Without unions (which is essentially the case right now) employees are forced to bid down against each other for lower and lower wages. The minimum wage won't even provide food and shelter for one person, let alone a family. Politicians are in on the deal. And in case you have not been paying attention, or am I being redundant, they are on the side of the bosses/corporations/owners.

Just because someone is paid X dollars does not mean it is their money exclusively. They must share it with the people that make it possible to get all that money. They either share by paying taxes at a higher marginal rate or reveal the secret formula for determining the actual value of each person's marginal contribution to the wealth of all.

We must share this ball of mud carousing through space. We do it fairly or we all perish.

+5 # Vardoz 2011-11-29 22:50
No jobs= no food on the table. No jobs =poverty, poverty= social destruction. The bargin is they get rich and we can have a decent standard of living. That's the bargin because we are theoretically human beings with some level of morality, some compassion and a wish for our society as a whole to be good and healthy for as many as possible. The bargin is not that we get poor while they get rich. Are we a society of human beings or ruthless barbarians who have no regard for the state our nation? Do they think they are immortal? It's not just about money. It's about survival and morality and that is what this so called bargin really represents. What we have is a serious and dire social problem where ten's of millions of Americans are being hung out to dry. There are no more checks and balances.This is why we have constitution and declaration of independence. It is about millions and millions of lives. We are now in a strangle hold of total and unfettered Lasse faire capitalism in it's worst form. A beast that takes until there is nothing left. And here we are like deer caught in the head lights.
-1 # Martintfre 2011-12-02 09:58
//The bosses/owners can dictate the terms of employment when the employed have no way to push back. //

Unless government gets in the way and wipes out the free market where people are free to make their own choices
The employed can go some where else if their bosses are jerks,
Customers can go some where else unless government grants some corporation or some union a monopoly.

That is being pro-Choice on economic freedom.
0 # RLF 2011-11-30 07:02
It is how politicians get paid! Gotta fix that!
+30 # Regina 2011-11-29 11:07
There are none so stupid as those who will not learn. How many cycles of boom-and-bust must this country endure before the boomers wake up to the obvious facts instead of pompously denying them? The lessons of the '30s are clear to anyone with an I.Q. above 30. The list of recovery measures enumerated by Reich worked then, and would work again now -- same medicine for the same disease, but we wouldn't have gotten that disease again if the idiots in power hadn't made the same stupid missteps again.
+16 # AndreM5 2011-11-29 14:26
They were NOT "stupid missteps", Regina! The tools of disaster capitalism are well documented. This has been systematic and deliberate over and over again, as you point out.
+3 # Vardoz 2011-11-29 23:19
I think many boomers have woken up because many have no jobs or homes. The question is not when will we wake up, the question is what do we do about this situation. Their must be a moral standard for us to be called a developed nation. They didn't make any mis steps they saw an opportunity. Too many reps for sale, too much cheap labor in China.
-54 # Martintfre 2011-11-29 11:23
//We're in a vicious cycle. The only way out of it is to put more money into the pockets of average Americans. That means extending the payroll tax cut. And extending unemployment benefits.//

Lol - humm pay people a lot to do nothing -- and we will get a lot of nothing and it will be expensive.

Hoover/FDR model of meddling in the minute details of the market decisions (no you cant pick your chickens:Schech ter Poultry Corp. v. United States) stalled the economy and crushed the common man.
The WPA was only sucessfull at buying FDR's re-election with tax payers money.

Harding Coolidge faced harder economic downturn at the end of WWI and they correctly CUT federal spending and got the government OUT OF THE WAY.

The economy rebounded nicely (common people got electricity, cars, refrigerators etc) till 1929 when the meddlers like the little engineer (Hoover)arrogan tly thought they were smarter then the millions of citizens who make up the economy and tried top down control - it was a massive fail that lasted till WW II was over.
+6 # Ken Hall 2011-11-29 16:10
Mf: Your interpretation of US economic cycles can be summarized in two words; revisionist clap-trap. I don't know if you actually believe what you've posted here, but if so, the education system has failed you. It should be pointed out that after sensible gov't regulations were put in place during the FDR administration, there were no banking crises until the Reagan admin, when banking regulations were loosened in the name of "smaller gov't". The result of three decades of "free market" elimination of sensible gov't regulation (Glass-Steagall , for instance) has brought the US to the current economic malaise. And much as you lol at it, gov't spending put a lot of people to work during the depression, enabling them to stay in their homes and feed their families. The infrastructure created by the WPA and CCC is useful in many communities even today.
+1 # Ken Hall 2011-11-30 00:14
Mf: Your summation of the economic history of the US in the 20th century can be dismissed with 2 words: revisionist bull-woofey. WPA and CCC jobs enabled families to stay in their homes and feed their families. The infrastructure created by them is still of use in many communities. The regulation of banks that occurred during the New Deal kept banking safe and crisis-free until regulations were relaxed during the Reagan admin. It is deregulation, under the banner "free markets" and "smaller gov't", the brought about the current economic malaise.
+2 # RLF 2011-11-30 07:04
It is the FOX revision!
+19 # jsheats 2011-11-29 11:24
So why are there not politicians who are interested in telling 80% of the people (never mind 99%) that they would find themselves "better off than they were 4 years ago" (as dear Reagan would have said) if they would vote for these higher taxes on the wealthy and more government employment stimulus? It doesn't seem like rocket science to me.
+24 # Todd Williams 2011-11-29 11:33
Another wise essay from Mr. Reich. I just don't get it, however. Why can't corporations understand these very simple economic principals? After all, when the entire house of cards finally comes down, they will lose all their money as well. Look at how much money has been lost in the stock market during this recession. Wealthy people also lost money.
+4 # Texas Aggie 2011-11-29 20:58
Probably the biggest part of the problem is because of the penchant to take a small immediate benefit rather than a bigger benefit later. The bankers and CEO's get to be rich now, but later their businesses fall apart instead of staying profitable. Also, the tragedy of the commons plays in here. That means that the bankers watch some of their competitors getting rich by selling toxic derivatives, and their choice is to either do it, too, or watch the economy go to hell and get no benefit.

I just read a report on a conference on corruption that was held in England that indicated that the only way to prevent corruption was by actively punishing it and by having countervailing power to ensure that it was punished. With the lack of unions, there is no countervailing power anymore.
+24 # leedeegirl 2011-11-29 11:54
there's only one answer: we have to STOP buying their crap! shop for clothes and other stuff at consignment shops and yard sales (great bargains!) ... buy local produce at farmers' markets or local produce stores (healthier, anyway) ... stop buying more and more toys we don't need that break quickly, anyway ... stuff your excess cash (if you have any) under your mattress (it's not making "interest," anyway) ...
-33 # Martintfre 2011-11-29 12:29
//there's only one answer: we have to STOP buying their crap! shop for clothes and other stuff at consignment shops and yard sales (great bargains!) //

While I am not sure the Only answer is to shop second hand, the virtue of economic freedom - capitalism - that is YOUR CHOICE, Shop away! save your money or buy re-purposed goods or spend your savings some where else - that is freedom of choice.

When the government steps in and FORCES economic decisions that is anti-freedom anti-capitalism and typically politically motivated since not enough people were doing what ever the politicians benefactors were demanding they make the people do.
+21 # BradFromSalem 2011-11-29 13:32
You have it backwards.

Economic freedom does not drive political freedom. Political freedom drives economic freedom.


Glad you asked. You did ask I am sure since you are a typical Right Winger, always questioning and wanting to learn and understand. (sic)

Political freedom allows the people the ability to construct restraints on the economic free for all that is also known as capitalism. To do it the other way around means that capitalism gets to make its own rules. And that is Mussolini's definition of Fascism.

Is that what you want? No, I didn't think so. Aren't you glad you asked?
-13 # Martintfre 2011-11-29 15:29
Political freedom ?
depends upon your definition.

Freedom from others politics - then I am for it.
Legitimate government protects all persons and their property equally.

If it is the freedom to force your views on others then I am opposed. Illegitimate government is the tool of special interest groups like corporations and unions perverting the power of government so they can get special favor they could not otherwise earn in a free market.
+5 # Merschrod 2011-11-29 19:28
Precisely Martin, we have had illegitimate governance as the tool of special capitalist interests (as opposed to free small business and workers) since Uncle Ronny upset the balance of popwer between monopoly capital and unions. All of this led to the accumulation of capital by a small group and that capital is not circulating in the hands of the folks who would be free to make decisions if it weren't for the meddling that shifted the balance toward hose special interest. BTW the perverts in Congress or running for office !
+9 # jon 2011-11-29 21:29
Not to forget Reagan's doing away with the fairness in broadcasting act.

This enabled the Great Fascistic Propaganda Machine: Rupert Murdoch, Fox News, AM Radio's Limbaugh, etc.

The result has been the greatest divide and conquer of a populace in the history of the world.

We have a large portion of our fellow Americans voting against their own interests because they have been easily manipulated by milking their personal mean-spiritdness.

Talk about shooting yourself in the foot!!?!!
+1 # BradFromSalem 2011-11-29 21:46
Political Freedom is exactly that.

Free to speak as you wish. Free to vote as you wish. Equal enforcement of the law regardless of class or any other designation. Free to worship or not worship.

Political Freedom is not ever to be confused with economic freedom. Political freedom is subject to majority rule, which at times may conflict with economic freedom.

Political freedom defined by open debate and modified from time to time by the same will always trump economic freedom since it will protect that freedom to the extent that it benefits all.

Like I said earlier, you want economic freedom to define political freedom. That is ass backwards.
+4 # RLF 2011-11-30 07:07
When a CEO commits organized fraud and takes home hundreds of millions for it, which is untouchable when the company goes bankrupt...What do you call that kind of Capitalism? That is what we got...and I call it crony capitalism.
+14 # CandH 2011-11-29 12:43
"There's a time when the operation of the machine becomes so odious—makes you so sick at heart—that you can't take part. You can't even passively take part. And you've got to put your bodies upon the gears and upon the wheels, upon the levers, upon all the apparatus, and you've got to make it stop. And you've got to indicate to the people who run it, to the people who own it, that unless you're free, the machine will be prevented from working at all." Mario Savio, Sproul Hall Steps, December 2, 1964"

Video Archive:
+3 # Vardoz 2011-11-29 23:36
They depend on our apathy!
+14 # reiverpacific 2011-11-29 12:00
It's a tricky equation in many ways.
Industry via unions, worker-employer liaison formerly drove the economy but even more so did small business, which gets short-shrift to put it succinctly, and is especially ignored in these times of divisive politics between "Rich-v's-middl e class" only (hardly and mention of "poor", "working class", small business").
Unfortunately, hand-in-glove with all the resultant rampant and mindless consumerism engendered in the "democratic" Henry Ford model (that old anti-Semite), almost by default, was environmental degradation and this has continued until only in the recent decade or two came to a few, some realization of what was happening to the planet, -although the huge, overblown US military is still the worst polluter and destructive force on the planet.
So the question should probably be, can a sustainable WPA be proposed and instigated, with funding taken partially in taxes from the over-rich, incentives to develop "Green" technology and make it affordable to everybody, like the old Model T Ford? This to include not only energy-building s-forest-water sustainability but also high-speed rail over inter-city intermediate distances and local arterial rail, public transport and community-build ing resources in general, which is now almost an alien concept in the US.
That's REAL change!
+11 # James Marcus 2011-11-29 12:04
The 'Basic Bargain'....nev er was.
A Ponzi is still a Ponzi, by any other name called.

The whole 'Bank Reserve Ratio', at the core of the issue, allows 'manufacturing money from thin air', (or withholding same) lending it for outrageous interest rates, and absconding with the Real Assets it is used to purchase, should the loan 'default'.
+5 # CatherineTB 2011-11-29 12:58
Yes but at the time Ford paid his working force a decent wage, the cars were made in the USA.

Things are so different today when everything is made abroad, is this model still reverent?
+10 # AndreM5 2011-11-29 14:29
What are you talking about? The cars are still made in the USA with ever-cheaper labor, but our overlords schemed to have the profits sent abroad.
+7 # jwb110 2011-11-29 13:16
Once the US moved from being a manufacturing economy to being a service economy the social contract of labor/employer was bound to make a huge shift. The nation and the economy in post WW2 was tied to Oil, Rubber and Cars. The automotive industry was what the banking industry is today. In 1940, Henry Ford planned to introduce a car that ran on hemp oil. This would have made the rationing of fuel in order to support the war effort a non-problem. A new industry called Hemp would have replaced a series of other industries not just Oil. Cotton, a plant that seriously depletes the soil, woud have been replaced by the much more benign Hemp. Clothing, even uniforms for the troops would have been made from hemp fiber. Paper could have been made from the spent fibers of the hemp plants. We certainly would not have been importing rope. Cannabinoids even then would have shown medicinal value. And hemp is more or less a weedy plant that needs not much in the way of petro-chemical fertilizers. "Reefer Madness" kept the hemp oil car from happening.
Henry Ford was a bright man who because he owned his company and had a vested interest in making the entire nation better and nondependent on foreign interests.
The enemy of inovations and independence from foreign markets and commodities in the United States is the American Corporate System.
+6 # dwainwilder 2011-11-29 13:32
Mr. Reich, I get everything you say here except the Payroll Tax cut. The Payroll Tax, or FICA, goes into the Social Security/Medica re trust fund.

We should not be raiding this trust fund for general expenditures, nor should a cut of the fund's income be viewed as a way to get money into workers' pockets; it a withdrawal from their futures, and every call for the extension of this unfortunate illusions simply compounds the nonsense, and the deterioration of Social Security.

This is like robbing workers and paying them with the loot, calling it a "tax holiday!" Please stop this nonsense.

We should be extending the FICA cap, so all wage-earners bear the same burden. As it now stands, higher earners are exempted from payments once a cap is reached. This is where to make changes, not a so-called "tax holiday." Even the name is an affront to intelligence.
+3 # BradFromSalem 2011-11-29 15:24

Tax cuts are the weakest tool there is to stimulate job growth. But, you have to remember that one of Reich's strengths is also his greatest weakness. He tries to forge a solution that encompasses the opposition's ideas, but ones that have a positive impact. Sort of like Obama, but without as much capitulation.

The tax cut does put a few dollars into the pockets of those that will spend it and politically it highlights the hollowness of the Right Wing assertions that the economy ONLY needs tax cuts to rescue it.

But, in the end, you are 100% correct.
+1 # Texas Aggie 2011-11-29 21:05
Also, the missing money is supposed to be replaced by the tax on greater than $1 million/yr income. That is the other part of the plan.
+2 # Vardoz 2011-11-29 23:39
there wasn't and endless pool of cheap labor back in the day and FDR created regulations that protected our economy.
0 # RLF 2011-11-30 07:13
Those tax cuts go to the wage is a boost guessed it...the big corps. How about a big tax break for the self employed and businesses with 10 employes or less...yuck! Yuck!
-1 # Martintfre 2011-12-02 10:09
//We should not be raiding this trust fund for general expenditures,//
Absolutely correct -- but too late.

We should allow the younger workers to opt out and invest in their own plans - If some one is going to stupidly going to squander retirement money it should be the person retiring rather then politicians who buy re-election with other peoples retirement funds.

PS: like it or not all those special treasuries that are the 'assets' of the Social Security Trust fund are IOU's.

The proof is simple - when they are to be cashed in -- where will the funds come from to make them good?
+3 # samothrellim 2011-11-29 13:33
Hence the adage: "If you want to live like a Republican, vote Democratic".
+2 # BradFromSalem 2011-11-29 21:52

I think most folks missed your point, hence the negative number.

I believe you are saying that in order to do well economically (live like a Republican i.e rich) then you need to vote for Democrats, due to their economic policy.
+19 # AEH 2011-11-29 13:41
Someone wrote earlier: "Dr. Reich, you are a broken record. You've been writing the same stuff for months if not years... ". It occurs to me that yes, Dr. Reich, & Krugman, HAVE been writing this stuff for years. Maybe that proves that it takes repeating a message over & over & over & over (like the Republicans have done so nauseatingly successfully) for that message to finally be heard on a societal level. I think it is possible that Dr. Reich's constant writing on this message may have contributed to the Occupy movement's raising the decibel level - of the same message. Thank you, Dr. Reich!
-19 # Jim Black 2011-11-29 14:04
Mr. Reich is correct in some respects. However we all still just earn 10 to 50 cents an hour. The same as people in 1913. Here is the proof. In 1913/1914 people could buy a house, food, clothing, etc. the same as we can today. All the rest of your money disappears due to taxation.
+6 # Texas Aggie 2011-11-29 21:12
Ah, no. In 1913 people couldn't buy cars or radios or TV's or central heating or refrigerators or medical care or double paned glass windows or any of the numerous improvements that we consider normal today. All of our money disappears because we buy a lot more and things like housing, insurance, education cost a heck of a lot more in comparison than they did even thirty years ago.
+1 # RLF 2011-11-30 07:16
One thing I have notice is that the Gov. always talks about the income for a family of 4 but since about 1975 it has been with two incomes rather than one!
+5 # noitall 2011-11-29 14:11
"The latest data on corporate profits and wages show we haven't learned the essential lesson of the two big economic crashes of the last seventy-five years: When the economy becomes too lopsided - disproportionat ely benefitting corporate owners and top executives rather than average workers - it tips over."

We've learned the lessons, 'we' just can't overcome 'our' greed. These greedy bastards will 'eat' themselves to death.
0 # slimslider 2011-11-29 14:43
The comment about Ford paying their employees half of what they did a few years ago accounts for the fact that Ford didn't have to take a government bailout or loan to keep its doors open. People in Detroit were overpaid just as most Americans were for decades. It created the false economy and the mirage of prosperity. Every time the unions won collective bargaining battles the rate of inflation went up and the doors were opening up for foreign competition. Eventually the Japanese and Koreans cleaned our plow with better products and those earlier bargaining victories turned out to be a strategy that mortgaged our grand kids' future. We may never go back to the economy of the 50's through the 80's, but in reality we never had that solid of an economy. It was all smoke and mirrors and we're paying the cost of that illusion now.
+5 # stonecutter 2011-11-29 15:05
What's the answer? Keep playin' that broken record until more and more people hear it and finally start listening to it. That's the only way ANY progress in America has EVER been made.

With respect, Reductio, Dr. Reich may be right, but he is a voice in a wilderness I've seen developing for 40 years, moving in one inexorable direction: away from economic fairness, justice, and bargaining leverage for ordinary working Americans. Private unions have all but disappeared; their political power is nil. These comment streams are choked with armchair solutions, many of which are merely empty rants. Paul Krugman is brilliant, and also usually right, but is anyone in the White House calling him for advice? The Wall St. mole Geithner is STILL running the financial show. Christ, even Barney Frank, who's had enough and is retiring, took campaign money from Goldman Sachs, his largest donor on Wall Street. Perhaps you have to keep repeating this stuff, until long after my ashes are floating in the ocean, but you might also get rid of some of these bums on both sides of the aisle. I read today that 17 Dems have announced their retirement from Congress next year, against only 7 Repubs. Great news. Wake up and smell the coffee, stop pontificating and get real. OWS is a gutsy, admirable start; where is it going?
+2 # angelfish 2011-11-29 15:22
Sadly, there is no more Industry in this country. A few Car manufacturers is about all that's left. Health care is where the jobs are today. EVERYTHING is made in China and third World countries. You can hardly buy ANY consumer goods that aren't made overseas. If an item I want is made in China, i put it back and look for a similar product made HERE. If we don't ALL start to do that they WILL OWN our breakfast and dinner along with our sack lunch! Buy AMERICAN!
+5 # reiverpacific 2011-11-29 17:34
Quoting angelfish:
Sadly, there is no more Industry in this country. A few Car manufacturers is about all that's left. Health care is where the jobs are today. EVERYTHING is made in China and third World countries. You can hardly buy ANY consumer goods that aren't made overseas. If an item I want is made in China, i put it back and look for a similar product made HERE. If we don't ALL start to do that they WILL OWN our breakfast and dinner along with our sack lunch! Buy AMERICAN!

Even American cars are composites so many components made both here and overseas that it's hard to know what's what and where it really comes from, even if it's assembled here.
To me, the "car only" mentality, engineered at the behest and trickery of GM in the late 1940's to the demise of public transport (with a $5,000.00 slap on the wrist by the government who was bought off in the act) be re-thought and replaced by subsidized high-quality public transport -ESPECIALLY RAIL- country-wide. It is less isolationist, more relaxing and takes people right into the heart of any given city with views of the country + decent meals and snacks on the way.
Two companies whch are all-USA made: VIZIO TV's, (Irvine CA). Phoenix (Ontario CA) all-electric full-size cars, trucks and SUT's check 'em out. I'm sure that there's more.
0 # stonecutter 2011-11-30 06:54
I've had a Vizio since 2007; bought at Costco. Flawless, never a problem. I consciously bought it as American product, and made a happy choice. Strongly recommend it.
+1 # ericlipps 2011-11-29 17:44
Extending the payroll tax cut is a dreadful idea. It'll put more money into the hands of workers now, sure--but it will also drain revenue which should have gone to Social Security. That way lies the Social Security bankruptcy conservatives have been yelling about, and praying for.
+2 # Texas Aggie 2011-11-29 21:14
The tax on millionaires is designed to replace that money.
+7 # Electricrailwaygod 2011-11-29 18:33
To reiverpacific, A-MEN! FINALLY! Someone other than myself speaking up for the 21 Century railway infrastructure in this country! (Amtrash is a sad joke, as despite is low funding, it is 99,9% DIESEL) High speed rail or for that matter ANY railway transport in this country must be 21 Centuy -- and ELECTRIFIED! NORTH AMERICA NEEDS TO BUILD (or rebuild in some instances) ITS INTERCITY ELECTRIC RAILWAYNETWORK! The whole industry needs to be turned inside out shaken and totally revamped! Look at us in Europe and Japan! Now look at CHINA that now touts the fastest passenger trains on the planet -- and they are indeed ELECTRIC!

My question is, why can't Canada, México, and the States do the same? What is wrong here (other than out right corporate greed and indifference)? Again thank you and kudos to you reicerpacific! Thanks again!
+5 # Ken Hall 2011-11-29 19:02
I've wondered about your posting name and see it connects to a personal interest. You are so correct that public transport needs to be resurrected in the US, and high speed intercity rail and intracity light rail are key solutions. It should be noted that the current admin passed a bill that floated funds that states could acquire for the construction of rail systems.
+3 # douglassmyth 2011-11-29 19:21
I admire Dr. Reich's persistence, and would like to see his kind of New New Deal take shape, BUT

Unfortunately we don't live in the world of the 1930's. Now, we can't raise wages, because corporations are free to go abroad and buy labor at a small fraction of ours. Our "free trade" regime has essentially given the store to the corporations and their owners, and tied our hands behind our backs.

Corporations, also, can go abroad to sell their goods, and since China, India, Brazil and Russia are still doing relatively well, they can sell their goods there, instead of to the Ford factory worker here.

Until we replace the "free trade" regime with fair trade, corporations will earn fabulous profits and American workers will beg for even minimum wage jobs.
+2 # DPM 2011-11-29 21:02
It is because those with money and power aren't going to give it up, or even do what's best for the country, until they are forced. And, you're correct, Reich's talking won't make them do it, but the "education" of the people is necessary to cause action. Whatever that action may be.
Eventually, enough people will understand and will hurt badly enough to take action.
+5 # Texas Aggie 2011-11-29 21:20
It's true that the social bargain has disappeared, but the compact we had previously wasn't something that the elite gave us out of the goodness of their hearts or even enlightened self-interest. It was because we had a strong union system that was able to demand that the corporate profits be shared more equitably. The loss of that union system had a lot to do with the ability of the 1% to suck up all the corporate profits rather than share them with the people actually doing the production.
+1 # fhunter 2011-11-29 21:59
The Republicans kn ow just as well as Democrats, that without a middle class, the economy will not improve. And that is exactly what they want to achieve!
+4 # sj-ias 2011-11-29 22:01
Lots of interesting discussion here; I'll add my two cents. Reich writes well about the inequality issue in a general sort of way, but he has yet to get to its heart. What the Saez income database shows is an abrupt shift - one not properly explained by Reich. During Carter's presidency 63% of new income growth went to the Lower Nine-Tenths. In Reagan's presidency, that share plunges to 41%. James Galbraith is much clearer about this than Reich. When marginal tax rates on executives are high, as they were from the 40s through the 70s, executives accept modest compensation increases and leave money on the table for their hourly and salaried employees. Why did the labor market operate fairly? In large part because the tax code pushed it toward fairness.

Once Reagan's team got marginal rates cut, executive behaviors changed instantly. They cut income growth for the Lower Nine Tenths and boosted their own earnings dramatically. The Reagan era labor market became an anti-middle class labor market. The best way to restore labor market fairness and higher incomes for middle class Americans is to restore high marginal tax rates for the elites.

Robert Reich talks around this issue; it's time for him to highlight its central role in destroying the practice of shared prosperity.
+1 # PaineRad 2011-11-30 03:19
The problem with the Reagan scenario is that wage stagnation and CEO wage explosion began a few years earlier. 1973 - 75 is the period when the stagnation of workers' wages began. CEO, etc. compensation also began to climb just before Reagan was sworn in. Many did not see it at the time because it was too new to determine if it was becoming a trend. But that is when it began. Reagan, it is true, lit the afterburners on it, as did Clinton and both Bushes with their overwhelmingly conservative policies.

But I'm not sure we can lay the blame primarily at the feet of politicians or presidents. The Lewis Powell memo to the US Chamber may have had something to do with it. Nixon's unpegging the dollar probably had something to do with it. The move in 1973 to a trade policy that left manufacturing, programming and engineering defenseless certainly had a lot to do with it. The shock to the elites of the oil crises of the 70s probably had a lot to do with it. The general decline in corporate profits in the late 60s and throughout the 70s was likely a cause.

But the bigger issue is how do we turn it around. Taxation, alone, is unlikely to do the trick. Maybe CEO income and corporate profits need to be tied to productivity somehow.
0 # Capn Canard 2011-11-30 12:13
Wow, the best data I've read(it is dated) suggest that disparity of wealth ramped up just after the election of 1980. At that time I saw figures showing a 50 to 1 disparity between a CEO and a line worker. By 1990, I recall that in many firms it jumped to almost 400 to 1. Last I read it was up to 500 to 1 currently. That is quite a jump in executive compensation. In fact in many cases it is far more profitable to be an executive than an owner!
0 # PaineRad 2011-11-30 03:23
One thing that Reich does not mention is that Henry Ford tried to do almost the same thing in 1916. But some of his shareholders sued to prevent another wage increase for Ford's workers. The Supreme Court sided with his shareholders and uttered those fateful words in their ruling that "the sole responsibility of a corporation is to produce profits for its shareholders." The rest is the history of exploitation and theft by the corporation of the fruits of the workers' labor, leaving them with only the pits.
+2 # Buddha 2011-11-30 10:29
The problem is the American people are totally split on this. See:

When a third of Americans believe that cutting the deficit and Supply-side solutions like cutting business taxes will create jobs, statistically about as many who believe as Reich (and myself) that we need direct government investment to short-circuit the deflationary spiral, then you get a recipe for inaction at the government level. And let's not fool ourselves, government inaction (and Fail) plays right into the GOP's hands...after all, they are the ones preaching that the government can't do anything beneficial and is "the enemy"...
0 # gdp1 2011-11-30 16:46
Don't starve the ox that stamps out the grain...Proverb s something-or-ot her...
0 # stonecutter 2011-11-30 17:31
A lot of erudite history about wages in the last few comments, but not one mention of the word "union". In the period prior to Reagan's assent to POTUS, private sector unions, although declining, were still a major force in this economy. With Reagan's decert of PATCO in 1981 (ironically PATCO was technically a government union, with the FAA as employer, despite it's power over the conduct of private air traffic) and summary firing of its thousands of striking employees, the 20th century labor movement was dealt a lethal body blow, and along with it greatly diminished collective bargaining power for wages and benefits.

It's been downhill ever since: soon after, we got NAFTA, the waves of "globalization" and outsourcing of millions of jobs abroad, the deregulation of Wall Street, and wearing down the AFL-CIO to a nub of its former self. The collective bargaining templates of many key private unions in this nation, that were used to benchmark wages and benefits throughout the labor market based on COLA's, began to disappear from the marketplace, replaced with serial bankruptcies and restructuring, leveraged buyouts, massive downsizing and rampant non-union hiring at much lower wages and benefits. Job security went south.

Resurrection of private unions is the only real hope for the middle class labor force in America...other wise, it's the slave market.

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