Robert B. Reich, Bill Clinton’s first secretary of labor, admits in his new book, Aftershock, that he didn’t do enough to help avoid the oncoming economic mess. “We in the Clinton administration tinkered,” he writes. “We raised the minimum wage and guaranteed workers time off from their jobs for family or medical emergencies. We tried for universal health care.” He continues, “All these steps were helpful but frustratingly small in light of the larger backward lunge.”
Of course, he doesn’t take all the blame, either. Reich identifies America’s Great Prosperity as the time from 1947 to 1975, when the country experienced unparalleled growth, and he credits that growth almost solely to the middle class. He attributes the regular series of busts since that time—the recessions in the early ’80s, ’90s, and ’00s, including the recession the Obama White House inherited from Bush—to tax cuts for the wealthy that penalized the middle class, capping growth and inflating credit.
For those of us who find economics to be a mysterious, even frustrating, set of ideas, Reich proves to be an excellent teacher. He understands that one of the most daunting parts of economics is its verbosity: Aftershock is a breezy 146 pages, not including the index. He opens the book with a brief history of the modern American middle class, from its origins with Henry Ford’s decision to pay his assembly-line workers enough that they could afford the product they were building. Reich pauses to admire some of the mind-boggling ways conservative thinkers have misattributed market forces, as when business leaders during the Depression believed “a depression was the scientific operation of economic laws that were God-given and not man-made. They could not be interfered with.”
Modern-day Tea Partyers, Reich argues, are as sensible as those God-minded economists from the Depression if they believe that tax cuts for the wealthy and unregulated business is the way back to economic health. “This argument is bunk,” he writes. “It equates the stock market with the economy, and… does not acknowledge the consequences for an economy when the middle class lacks the means to buy what it produces.”
Simply put, the middle class is key to everything, he says. The top 5 percent of all American wealth can’t buy our way out of this recession, because it’s not humanly possible for Bill Gates, say, to spend the incomprehensible stores of wealth he has accrued. Without a healthy, spend-happy middle class, America will stagnate in this recession (and subsequent jobless recovery) for years to come.
Reich, an early Obama supporter whose snub of Hillary Clinton’s presidential campaign was one of the first signs of disaster for the Clinton machine, has some kind words for the current administration’s bailout plans. “The government,” he writes, “averted what in all likelihood would have become another Great Depression.” But “ironically, President Obama’s success in forestalling economic collapse reduced the urgency of dealing with the larger challenge.” Reich, a member of president-elect Obama’s transition team, says the enormity of the financial crisis preempted any discussions about how to do any more than maintain the status quo.
What Reich proposes in Aftershock is a bold reimagining of populist presidential candidate Huey Long’s “Every Man a King” proposal from the 1930s, a kind of socialized capitalism. The government would pay wage supplements to full-time workers. Those earning $20,000 or less a year would get $15,000 annually. Workers who make $30,000 would get supplements of $10,000; $40,000-a-year workers would get $5,000; and the scale would even out at $50,000. Taxes would only become a factor after the $50,000 mark, starting at 10 percent and climbing higher from there. With the extra money, middle-class Americans would be able to buy more products and services for their homes and families. This cash influx would benefit small businesses and local economies, driving the economy upward. Reich would pay for this plan with higher taxes on the wealthy and a steadily increasing carbon tax on business.
It practically goes without saying that this plan has its flaws. It continues to rely on consumerism as the most important—sole?—engine of America’s economy. A consumer economy relies on consistent growth to stay healthy, which, as anyone who has studied basic physics knows, is impossible. This system also wouldn’t play very nicely with state taxes. And, further, Reich’s plan sounds like political suicide in our gaffe-thirsty media climate. It’s hard to imagine a presidential candidate putting this plan forth at a debate and not being Kuciniched over into the corner of the stage next to the wilted fern.
But part of the pleasure of books like this, and of thinkers like Reich who are willing to expend their political capital on daring proposals that wouldn’t fly on CNN, is that once the idea is spoken, it starts to sound less strange. As it circulates, it begins to gather an increasing air of normalcy until it becomes safe to say in public political settings without being laughed out of the room. Taking the first step is often the hardest part. That part is over. 
Very interesting plan. Initially my reaction was “yeah right”, but in looking at it again it does gather increased normalcy. Good piece.
I wish our country wasn’t so afraid of supporting a healthy middle-class, and so insistent on maintaining the good life only for the wealthy who, not surprisingly, are also the ones in charge.
It would be tough to campaign on the “50K” plan for a lot of reasons, the charge of buying votes being one of the first. The bureaucracy needed to run such a plan would also be a deal killer for many.
Still, just getting such ideas at the table may help to widen the scope of possible solutions.
I’m with sgt.doom.
Reich is on the right track. It’s a good piece.
It continues to rely on consumerism because consumerism is still the only game in town. Show me another proven way of improving the material conditions of life for 300 million people, and I’ll sign up.
The only reason for America’s post-war prosperity isn’t because Americans are more hardworking, innovative, or ingenious than the rest of the world – it’s because the rest of the world was in shambles from war and colonialism. Now that a good chunk of the world has stabilized post-Cold War and has had ample time to catch up economically, it’s easy to see that we ain’t all that. The fact is we have had 2-3 generations of comfort and stability – Americans aren’t willing to be productive for low wages. We bitch about our recession, but until we start scooping out squirrel brains for dinner (which is what our old Depression-era neighbor did), we haven’t seen nothing yet. Our situational gravy train, along with the advantageous position from the post-war German technological know-how, is over.
I’m with sgt_doom on this one.
I don’t really trust one of Clinton’s cronies.
Remember NAFTA?
The top 5% isn’t required to care about ‘the people’. They are wealthy and competitive individuals who view all people as competitors for their wealth.
If altruistic need-based, first-in-line economics worked, nobody would ever fight over a parking space or a spouse – but the fact remains that desire and cunning trumps all else.
This ‘solidarity’ thing is viewed by them as socialism, and it kind of is.
There’s really no way to force the wealthy to ‘play nice’ without going socialist (which I’m against).
Unless someone broke a law while accruing that wealth, and it can be proven in court, there’s not much we can do.
This sounds pretty stupid to me. You subsidize low paid workers with a huge cash bonus and guess what will happen? Employers will pay the lowest salary possible, make more money, and we’ll end up depending even more on taxing rich mofos to run the economy and fund the government budget.
“Don’t worry Jimbob, on top of this $20,000 salary you’ll get your government check every month! We’ll throw in some half-assed benefits so your children don’t die from tooth decay. Happy now? Great!”
No chance in hell this would ever work; it might run but only until the rich mofos figure out a way to shelter their money again.
Truth is, if they’d just fix the frigging health care system and make higher education (including more vocational ed opportunities, not just college) affordable, we could all save money and spend it on better housing and other things to improve quality of life. Give me financial security for my loved ones and a decent place to live, not shiny crap.
@8 That is an interesting read. I get the feeling that DeGraw is one of those writers that the tin-foil hat crowd like to read, and substitute their own villians and solutions. He noticeably does not point to Jews, Rothschilds, Illuminatti, etc. (though maybe he does in other works – I dunno) Aside from agency, he has certainly put the pieces together to reveal the true situation we are in.
I don’t necessarily agree with the situation being the result of some perfectly coordinated plot by the “global banking elite”, however. True conspiracies are tough to execute, especially if the conspirators are all motivated by greed. We are more likely looking at the results of unfettered global greed by many non-related agents. Nevertheless, DeGraw’s predictions may still play out: social safety net collapse; domestic civil violence; global resources war w/ China.
We are not having a war with China, they would be attacking their own assets in America. Greed is right, they won’t lose money on a war with themselves or customers.
@9: I do remember NAFTA (I remember when it was signed, in fact, because I am old), and I am a much harsher critic of the Clinton administration than most of my peers.
But I think that sometimes people can change and learn from their mistakes, and I think Reich has done that here.
I know I shouldn’t feed the trolls, but it’s so easy sometimes!
Sarge: Please keep taking your meds – you’re scaring the children & livestock.
those that are cynical about the whole global banker elite running the world need to look up “Bretton Woods” in wikipedia. International finance is one of the power mechnisms of post WW2 Pax Americana. Also check “Neo Liberal” – essentially the idea is to have the mercantile class grow more powerful than gov. the stated reason for this is to deter nation state conflict by increasing co dependance between trade partners. COuntries under the American world order are encouraged to open up thier markets to international finance and to break off gov services into the private sector to put them under the sway of global financiers. unfortunately the new “free” trade system breaks with THE AMERICAN SCHOOL OF ECONOMICS (also worth checking on wiki) which is responsible for AMericas prosperity up until the 60s. Reichs “reverse income tax” proposal is typically associated with libertarian flat tax systems. it was even tried in a few failed experiements int eh early 70s.
And it must be really haaard sleeping with all those voices in your head. Just go shoot yourself, you fucking psycho, and save the rest of us the irritation.
Bolds off now?
That is far too flip.
It might be possible to argue that endless growth is impossible, but you’re using “basic physics” to make that claim? If we equate “economic growth” with “consumption of resources” and/or “burning of fossil fuel”, then yes, physics backs you up here.
But economic value is not always directly tied to physical mass or energy. Some things, like art or intellectual property, or intellectual/emotional experiences (a musical performance, the luxury to take time off from work, for example) can be produced in greater quantity for greater numbers of people without necessarily using up more resources, energy, or space. Miniaturization (e.g. those banal smart phones) means that is might even be possible to produce greater quantities of more valuable physical consumer goods without using up more resources.
In the past, a growing economy was equated with faster use of resources, so if you’re only saying that, according to basic physics, we can’t go on as we have in the past, that’s true. But odds are we will not repeat the past; after all, basic physics says we cannot repeat it. We necessarily will go forward via some other mode.
The third to last paragraph, where the plan is laid out, is a pleasant fantasy for liberals like you and I, but it would never pass in a million years. The right (representing businesses) would find no upside for their demographic (again, businesses) and would fight it tooth and nail. I also think that there’s a certain center of unfairness “right in the middle.” The person who made $40k because of their market value and got to $45k using a $5k supplement from the government is probably going to feel a little cheated having worked so hard to make almost the same money as someone who was only making $20k. The deading of incentive is important to note, and businesses would be pushing back very strongly on something like this that is “wealth distribution” in the most literal sense I’ve ever seen.
*deadening, not “deading”