The 7 biggest economic lies - Robert Reich

Found here. My comments in bold. I have previously commented on Dr. Reich here and here.
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Dr. Reich, a Rhodes Scholar, sets out to refute big lies told about economics. Read on:

"Big lies are to be believed unless they're refuted with the truth. Here are the seven biggest economic whoppers and facts in two minutes thirty seconds."

1) Tax cuts to the rich trickle down to the rest of us. Wrong. Both Ronald Reagan and George W. Bush cut taxes on the rich and nothing trickled down. In fact, adjusted for inflation the median hour wage stagnated and dropped. (Neither Reagan nor Bush cut taxes on the rich. Only Congress can appropriate and spend money. And the statement is cleverly phrased to allow Dr. Reich to refute a claim no one has made. No one has advocated tax cuts on the rich. But many have advocated tax cuts.

In addition, it is incorrect to claim that nothing trickled down. Wages did indeed stagnate, but we could just as easily blame the national debt for this. Government takes a huge share of the production of the economy and wastes it. It shifts whole industries, obsoletes others, and forces the economy to adjust and compensate. It's no wonder the worker has suffered, because business simply cannot account for what the fickle government will do next.

As we can see from this chart, wages actually began to stagnate in the 70s, well before Reagan was president. 

Here are the number of employed for selected presidents [We should note that presidents do not create jobs, businesses do.]:

Reagan 

    January 20th, 1981, 74,680,000, employed. 

    Unemployment rate: 7.5% 

    January 20th, 1989, 89,390,000, an increase of 

    16.5%. Unemployment rate: 5.4%

Clinton

    January 20, 1993, 90,904,000. Unemployment rate: 7.3%

    January 20, 2001, 111,859,000, an increase of 

    18.7%. Unemployment rate: 4.2%

Bush 

    January 20, 2001, 111,859,000. Unemployment rate: 4.2%

    January 20, 2009, 111,397,000, a decrease of 

    1%. Unemployment rate: 7.8%

    However, that was in the throes of the crash. The year 

    before, the number was 115,997,000, an increase of 4%, 

    and the unemployment rate was 5.0% 

Obama 

    January 20th, 2009, 111,397,000. Unemployment rate: 

    7.8%, but would increase 

    to 10% by October of 2009

    currently: 118,112,000, an increase of 5.7%. 

    However, his first budget would begin a year later, and 
    that number was 107,225,000, an increase of 9.21%. 
    Unemployment rate: 5.8% 

What is the purpose of me posting these numbers? First, to show that the conclusions that can be drawn are quite different depending of the factor being measured. But beyond the numbers, we need to realize the make-up of Congress is extremely relevant to the issue, because Congress has the control of the purse strings. And, the business climate, tax structure, foreign policy, regulations, subsidies, and a whole host of other factors impact the performance of the economy. 

Dr. Reich is attempting to confuse correlation and causation. With millions of variables at work, it is specious, even dishonest, to single out one factor and draw conclusions upon it.) 

2) High taxes on the rich hurt the economy. No. Look at history. The top tax rate was over 70% between WWII and 1980, and the economy grew faster than it has since. Small business owners, who increase most jobs won't be deterred by higher taxes. Fewer than 2% of them are in the top tax bracket. (Dr. Reich confuses nominal top tax rates with actual taxes paid. The only real measure of tax policy is actual revenue received. Anything beyond that is intended to create envy and hatred for those who are successful. 

Below are actual revenues derived from income tax [personal/corporate] since WWII. You will note that with the exception of a few small blips, revenue has tracked inexorably upward year after year. There has never been a revenue problem, no matter the tax rate. For all the noise the Left makes about paying one's fair share, clearly government has never had to suffer for revenue.

3) If we shrink the government we'll create jobs. No. A smaller government means fewer teachers, firefighters, social workers, police officers, and everyone else who delivers public services, and fewer jobs for everyone working for companies the government pays to build and maintain roads,bridges, transit systems, and schools. (Dr. Reich thinks that the economy is a closed system, so cutting government therefore means fewer jobs. But government pays these employees with money sourced from the private sector. So there's no net gain of employment due to government hiring. 

And notice that he doesn't bemoan the potential loss of bureaucrats, tax collectors, or fat cat department directors. No, he centers in on the prominent, crucial, and noble ones. In his mind, if government is cut, only the important jobs will be eliminated. Apparently, there is nothing else that government does that can be cut; every dollar spent is a benefit, every government job is someone who would be unemployed otherwise, and every program is required for society to even function. 

But can we ask, how many police officers, teachers, and social workers do the Feds employ? Aren't most, if not all of them state or local employees?) 

4) Cutting the deficit is more important now than boosting the economy with additional spending. Wrong. The long term goal is to reduce the debt as a percent of the economy (as he writes the word "deficit"). Unless we get jobs and growth back, that ratio worsens. So we need jobs and growth before we cut anything. (There's a lot wrong here. First, Dr. Reich is offering a false binary choice, either cut the deficit or boost the economy with additional spending. But cutting spending WILL boost the economy. Further, there is no evidence at all that government spending boosts the economy. Again, government is spending money that is sourced from the private sector. No new money is in operation here.

Further, who's "long term goal is to reduce the debt as a percent of the economy?" And, why are we now talking about the debt? Does Dr. Reich understand the difference between the national debt and the deficit? And lastly, the last time the national debt decreased was 1951. 

Does anyone seriously think that Dr. Reich is really interested in reducing the national debt?

Most certainly, we do need jobs and growth back. Is this a tacit admission that all the rosy reports about the economy recovering are not true? Everywhere you look in the news there are mentions of the wondrous recovery we are supposedly in. But Dr. Reich seems to think this isn't the case, because it's a part of his argument that we shouldn't cut government. 

And we need to recall Dr. Reich's statement from lie #2: "The top tax rate was over 70% between WWII and 1980, and the economy grew faster than it has since." So we had lots of jobs and lots of growth during that period. Dr. Reich, would you have supported government cuts at that time? No, I didn't think so.

Last point. We have yet to cut government. In my lifetime, government has never been smaller by any measure from one year to the next. But somehow he thinks we are in danger of hurting the economy because of cuts that have never been made.)

5) Medicare and Medicaid are killing the budget. No. Their costs are rising because healthcare costs are rising, And the best way to get healthcare costs under control is to use Medicare's bargaining leverage to get lower prices on drugs, medical supplies, and hospitals, and to move from fee for service to fee for healthy outcomes. And, because Medicare has lower administrative costs, than private insurance, open Medicare to everyone. (Huh? First he asserts the statement is false, and then he tells us why it is happening and how to fix it. So apparently Medicare and Medicaid ARE killing the budget. 

Notice how his solution is to expand a bad government program so that everyone is in it? However, government has increased its control of the healthcare economy for decades, and it's in shambles, so his answer is to give it more control? Whaaa?

Let's take a look at projected spending:

SS plus the healthcare portion of the budget will consume all revenues by 2030! No money for the military, welfare, pensions, food stamps, art, or highways. And Dr. Reich thinks it will fix the program to expand it. That is insane.)

6) Social Security is a ponzi scheme. Wrong. It's solid for 26 years, and would be for the next century if we lifted the ceiling on income subject to Social Security payroll taxes. (Here we have Dr. Reich refuting a different question than the one presented. The question he actually answered was, "Is Social Security going bankrupt?" 

So let's answer the ponzi scheme question first. Is SS a ponzi scheme? Emphatically, yes! The system relies on getting more and more people to contribute in order to provide payment to a completely different set of people who paid in earlier. SS is nothing more than an income redistribution mechanism, it's welfare, it's a tax with a future promised benefit.

Now, let's deal with the answer he provided. Is it solid for 26 years? Well, no. As we have noted elsewhere, There is no money in the SS trust fund; it has been borrowed, put into the general fund, and spent. It's gone, and all those bonds in the Fund will have to be paid back. 

And we don't have the money. We especially don't have the money as baby boomers begin to retire, and they stop making contributions and take benefits instead. And the economic crash and the resultant tepid recovery are making things worse. Add to that the hugely negative effects of the $18 trillion national debt, and we now have a recipe for collapse of SS, as well as total economic collapse.)  

7) It's unfair that lower income Americans pay no income tax. Wrong. The unfairness is lower income Americans pay a much bigger portion of their income in Social Security taxes, sales taxes, user fees, and tolls than anyone else. (Dr. Reich is actually refuting an opinion, not a lie. His answer, further, is a bait and switch, and we shall not allow Dr. Reich to divert the topic. No one is making the case for increasing SS or sales taxes on the poor. Quite clearly, these taxes are not under discussion and are a separate issue. 

The statement offered is, it is unfair that lower income Americans pay no INCOME tax? A lot of people would agree. If there is going to be a tax system that pays for the services everyone uses, then everyone ought to have a financial stake in it by paying the tax. No one should be exempt. 

Again, that is not a lie, it is an opinion. 

But we should also note that Dr. Reich appeals to the higher tax burden of SS and sales taxes to justify his position. Those are taxes are imposed by government according to the policies instituted by leftist hero FDR. That is a strange defense indeed. Is he now in support of cutting SS taxes? I didn't think so...)

And that's the truth.

(This man was the Secretary of the Treasury under Clinton. He's a professor at a university. He holds a doctorate. He makes a lot of money. Remember, he was going to deal with these big lies and tell us the truth. But he can't seem to argue his way out of a paper bag, so blinded by ideology he is.)