Reproduced here for fair use and discussion purposes. My comments in bold.
This post originally appeared at RobertReich.org.
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Robert Reich is a lawyer and professor, who served as Secretary of Labor under Bill Clinton. He was a Rhodes scholar, and apparently is a pretty smart guy. So we would do well to realize that even smart people aren't the brightest when it comes to their inability to see things outside their world view. Read on:
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A few weeks ago I was visited in my office by the chairman of one of the country’s biggest high-tech firms who wanted to talk about the causes and consequences of widening inequality and the shrinking middle class, and what to do about it. (As is typical for the Left, the identified problem always has to do with some people not getting what they deserve while others get more than their fair share.)
I asked him why he was concerned. “Because the American middle class is the core of our customer base,” he said. “If they can’t afford our products in the years ahead, we’re in deep trouble.” (This is true, but the problem exists apart from income inequality. Mr. Reich will want to make a necessary connection between the two, but he never takes the time to demonstrate it.)
Since the depths of the Great Recession in 2009, median real household income has fallen 4.4 percent, according to an analysis by Sentier Research.
I’m hearing the same refrain from a growing number of business leaders.
They see an economic recovery that’s bypassing most Americans. Median hourly and weekly pay dropped over the past year, adjusted for inflation.
Since the depths of the Great Recession in 2009, median real household income has fallen 4.4 percent, according to an analysis by Sentier Research.
These business leaders know the US economy can’t get out of first gear as long as wages are declining. And their own businesses can’t succeed over the long term without a buoyant and growing middle class.
They also recognize a second danger.
Job frustrations are fueling a backlash against trade and immigration. Any hope for immigration reform is now dead in Congress, and further trade-opening agreements are similarly moribund. Yet the economy would be even worse if America secedes into isolationism.
Lloyd Blankfein, CEO of Goldman Sachs, warned recently on CBS This Morning that income inequality is “destablilizing” the nation and is “responsible for the divisions in the country.” He went on to say that “too much of the GDP over the last generation has gone to too few of the people.”
Blankfein should know. He pulled in $23 million last year in salary and bonus, a 9.5 percent raise over the year before and his best payday since the Wall Street meltdown. This doesn’t make his point any less valid. (It's refreshing to see someone on the Left Like Dr. Reich admit that the rosy predictions, glowing economic reports, and optimistic employment figures are a fiction. There is no recovery to speak of, even after 6 years of stimuli, jobs programs, and corporate bailouts. Most all this money has gone to benefit the rich, and he admits it. But...)
Several of business leaders are suggesting raising the minimum wage and increasing taxes on the wealthy. (Because the government initiatives to stimulate the economy have worked so well, we need... more government? This is an astonishing disconnect! Increase taxes so that government has even more money to waste on its harebrained schemes? What?)
Bill Gross, chairman of Pimco, the largest bond-trading firm in the world, said this week that America needs policies that bring labor and capital back into balance, including a higher minimum wage and higher taxes on the rich. (Mr. Gross makes an astounding $200 MILLION per year as a mutual fund manager. He makes this kind of money selling investments to little guys who make much less than him. He can voluntarily send money to the government and set an example by reducing income inequality right now.)
Gross has noted that developed economies function best when income inequality is minimal.
Several months ago Gross urged his wealthy investors, who benefit the most from a capital-gains tax rate substantially lower than the tax on ordinary income, to support higher taxes on capital gains. “The era of taxing ‘capital’ at lower rates than ‘labor’ should now end,” he stated.
Similar proposals have come from billionaires Warren Buffett and Stanley Druckenmiller, founder of Duquesne Capital Management and one of the top performing hedge fund managers of the past three decades. Buffett has suggested the wealthy pay a minimum tax of 30 percent of their incomes.
The response from the denizens of the right has been predictable: If these gentlemen want to pay more taxes, there’s nothing stopping them.
Which misses the point. (It does not. People who complain about income inequality but do nothing about it are exactly the point.) These business leaders are arguing for changes in the rules of the game that would make the game fairer for everyone. They acknowledge it’s now dangerously rigged in the favor of people like them. (So decline to participate if it's unfair. DO SOMETHING ABOUT IT. You have the power to. You don't need government enforcing its version of unfairness. We don't need more government meddling. Government is the cause of the problem, not the solution!)
They know the only way to save capitalism is to make it work for the majority rather than a smaller and smaller minority at the top. (To force changes to capitalism with the intent to "make it work" for any sort of target group makes it something other than capitalism. The fact that the system currently favors the rich also means we are talking about something other than capitalism. Any time government intervenes in the economy, it is no longer capitalism.)
In this respect they resemble the handful of business leaders in the Gilded Age who spearheaded the progressive reforms enacted in the first decade of the twentieth century, or those who joined with Franklin D. Roosevelt to create Social Security, a minimum wage and the 40-hour workweek during the Depression. (An unfortunate comparison, since the Depression lasted for more than 15 years, largely due to these and other programs which prolonged the misery of people. Henry Morgenthau, Jr., FDR's treasury secretary, said, "We have tried spending money. We are spending more than we have ever spent before and it does not work." And that's the crux of the matter. Government intervention exacerbates the problems it is trying to solve.
And people like Robert Reich, who cannot see past their love of government, keep recommending the same failed solutions time after time, never learning that it is the solutions that are the problem. )
Unfortunately, the voices of these forward-thinking business leaders are being drowned out by backward-lobbying groups like the US Chamber of Commerce that are organized to reflect the views of their lowest common denominator. (Note the carefully chosen language. Those with whom Dr. Reich agrees are forward-thinking, while his opponents are backward. This is the Progressive mindset, that more laws, more programs, more rules, all of that means progress. For Progressives, society always moves forward under their guidance. The human race is progressing because of government.
So for them, failure is never because of the wrongness of their ideas, it's because there wasn't enough money spent on them, there wasn't the right people doing them, there wasn't enough commitment to them. The ideas themselves cannot be wrong, only the implementation was faulty.)
And by billionaires like Charles and David Koch, who harbor such deep-seated hatred for government they’re blind to the real dangers capitalism now faces. (A persistent strawman of the Left, that those who want constitutionally limited government actually hate government. The Left loves to impute malevolent motives to their ideological detractors. They cannot countenance the thought of principled, thoughtful opposition. Because those on the Left are so smart, their ideas are so rational, their motives are so wonderful, anyone who disagrees has to be a hater.)
Those dangers are a sinking middle class lacking the purchasing power to keep the economy going, and an American public losing faith that the current system will deliver for them and their kids.
America’s real business leaders understand unless or until the middle class regains its footing and its faith, capitalism remains vulnerable.
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