Robert Reich was secretary of labor under President Bill Clinton and is currently Chancellor’s Professor of Public Policy at the Goldman School of Public Policy at the University of California, Berkeley.
Sam Husseini: [On Saturday] Obama said fixing unemployment is going to take some time. How do you think such a statement can be justified given the urgency of helping the banks in 2008 and so on and now middle America is in trouble and there doesn’t seem to be real impetus?
Robert Reich: I don’t think the administration can simply rely on time to mend the economy. It needs to come up with a set of bold ideas, even if they can’t get them enacted, that will get jobs back. And the president has got to fight for them to be enacted.
SH: I want to ask you a historical question: if your analysis of this bears out there’s a lot of talk of fixing the corporate tax rates, you know revenue neutral and lowering the rates and plugging the loop holes. Isn’t that very similar to what was done in the Reagan administration so, correct me if I’m wrong: you have this pattern of doing a revenue-neutral thing that lowers the tax rate, then the loopholes come back and you keep replugging the loopholes and re-lowering the corporate tax rate.
RR: There’s a tendency in this country with regard to tax reform to continuously close loopholes and lower tax rates and then the loopholes open again, and then you close those loopholes and you lower the tax rates again on corporations [laugh]. And also on the very rich. Look the problem over the long-term with regard to the budget deficit is very clear and very simple: number one, you’ve got medical costs rising very, very fast, baby boomers retiring. Number two, you’ve got very rich who are paying a lower and lower rate of taxation as they take in more and more of the national income and wealth. Well you don’t have to be a rocket scientist to see that there’s going to be a long-term budget problem but that is all different from the short-term jobs problem. They are not the same. Solving that long term problem or even making a credible beginning to solve that long-term problem is not going to bring down the rate of unemployment. Government has got to, number one, exempt the first 20,000 dollars of income from the payroll tax for a year, number two, give people the opportunity to declare bankruptcy on their prime rate residence, so they can reorganize they’re mortgages if they’re in distress and give them more bargaining power– that gives them more bargaining power with their mortgage lenders. Number three, a WPA, a civilian conservation corps, some sort of program to hire the long-term unemployed. And we could go on– there are many things that could be done and I think the president has got to put them on the table and fight for them.
SH: And yet the administration isn’t doing that. Is that simply because of money in politics, that they’re getting so much money from Wall Street? Is it because labor hasn’t been as vibrant as the CIO was during the Great Depression and so on? Why is that not happening?
RR: I honestly think that the president figures that nothing can be enacted through this Republican house and given the numbers of Republican senators, and the only thing he needs to do or can do is work around the margins where he can get some agreement. But that leaves out, it seems to me, the possibility of energizing and mobilizing the public around some very simple, bold steps to get some jobs back and forcing the Republicans’ hand. Pardon me, but that’s what leadership is all about.
SH: Didn’t the administration sort of paint itself into the corner with this Republican House by not taking more vibrant steps when they first got into office?
RR: The administration deserves a great deal of credit for making sure that the great recession didn’t turn into another great depression, but we’re not out of the gravitational pull of the great recession. Most Americans are still seeing their wages drop, their housing values drop, most Americans are still in danger of losing their jobs and so they’re not spending. And if they’re not spending, business is not going to create new jobs. That’s where government comes in. We’ve known for 75 years — this is not new — that when consumers and the private sector cannot and will not spend enough, government has got to be the spender of last resort. And you know it defies logic, it defies reason, to say if we just get public spending down, we’re going to create jobs. That’s not true.
SH: You were of course in the Clinton administration. You weren’t in charge of it, but they deregulated Wall Street. Don’t a lot of the current problems stem from decisions made in the 90′s?
RR: Oh listen, undoubtedly. getting read of Glass-Steagall in the late 1990′s, failing to regulate derivatives — there were mistakes being made in the late 1990′s in the Clinton administration, undoubtedly. But with regard to jobs, Bill Clinton presided over the largest job recovery we’ve ever had, 22 million net new jobs and we saw the economy expand. Not just for the rich, but for everyone. One of the deep structural problems in the economy now, and we’ve seen this since really at least 2000, is that most Americans are not gaining from economic growth. Median wages adjusted for inflation are dropping — you saw that even before the great recession, so there’s not enough purchasing power in the great American middle class to get us out the gravitational pull of the great recession.
SH: Wasn’t a lot of that growth illusionary? People holding down more than one job, people going into credit card debt — wages have been stagnant since the 1970′s.
RR: Certainly the so-called recovery after 2000 was kind of illusionary recovery because so much of it was based on people going deeper and deeper into debt. It was not based on people getting fatter paychecks or people doing better. In the 1990′s some of the 22 million net new jobs created were a matter of double-counting [laughs]. Some people did have to take two or three jobs. But by in large the median wage — and that’s the way you measure overall economic well-being– rose. And it rose in ways that actually generated growth in wages for the bottom fifth as well as the top. We haven’t seen that since then and this is one of the fundamental problems we’re dealing with. But right now, given that the economy is sputtering, given that the recovery is, for all intents and purposes, stalling, there’s got to be bold action out of Washington and the silence, frankly, is deafening.
SH: One last question: you said leadership is necessary, and by that you meant the Obama administration, but let me go back to my question: there’s the famous thing of Roosevelt dealing with a labor leader I think and giving him his list of what he wanted and Roosevelt [saying] go out and make me do it.
RR: Yes, absolutely.
SH: Isn’t there a lack of impetus in labor in going out and making the administration do things?
RR: Well look I wish labor unions and other groups were more powerful in terms of pushing the administration towards a jobs program. People who are unemployed — 13.5 million people who are unemployed in this country, and if you add in people who are too discouraged to look for work it’s close to 14 million — they don’t have much political power. There is no national association of unemployed people in this country. They don’t lobby, they don’t make political contributions, they are not well organized. Washington and New York are existing in an echo-chamber right now that is unrelated to where the rest of the country is. You read the major newspaper of this country — how much news is there about the economic anguish that most Americans are now suffering? Almost none. It’s as if it’s not going on. And that’s what worries me. Out of this kind of economic frustration, anxiety and desperation shared by so many millions and millions of Americans comes a deep cynicism about the capacity of government, about the capacity of any institution, to work. And out of that cynicism comes demagoguery. We have people saying things now, running for president, who make no sense. To talk right now about giving tax breaks to corporations when they’re sitting on $1.9 trillion of cash that they don’t know what to do with is illogical. It defies logic. This is a demand-side problem. Consumers can’t and won’t spend because they are absolutely strapped.
Bold added. Major afterthought is that I wish I’d asked Reich about “welfare reform” done in the Clinton administration and I wish I didn’t use the term “middle America” to describe people who are not wealthy, since it would seem to exclude poor people. Thanks to Richard Wolff for ideas on several of these questions.
[originally published on Washington Stakeout on June 13, 2011; posted on posthaven Nov. 13, 2015]