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The Republican shakedown

Robert Reich, professor of public policy | February 25, 2011

You can’t fight something with nothing. But as long as Democrats refuse to talk about the almost unprecedented buildup of income, wealth, and power at the top — and the refusal of the super-rich to pay their fair share of the nation’s bills — Republicans will convince people it’s all about government and unions.

Republicans claim to have a mandate from voters for the showdowns and shutdowns they’re launching. Governors say they’re not against unions but voters have told them to cut costs, and unions are in the way. House Republicans say they’re not seeking a government shutdown but standing on principle. “Republicans’ goal is to cut spending and reduce the size of government,” says House leader John Boehner, “not to shut it down.” But if a shutdown is necessary to achieve the goal, so be it.

The Republican message is bloated government is responsible for the lousy economy that most people continue to experience. Cut the bloat and jobs and wages will return.

Nothing could be further from the truth, but for some reason Obama and the Democrats aren’t responding with the truth. Their response is: We agree but you’re going too far. Government employees should give up some more wages and benefits but don’t take away their bargaining rights. Private-sector unionized workers should make more concessions but don’t bust the unions. Non-defense discretionary spending should be cut but don’t cut so much.

In the face of showdowns and shutdowns, the “you’re right but you’re going too far” response doesn’t hack it. If Republicans are correct on principle, they’re more likely to be seen as taking a strong principled stand than as going “too far.” If they’re basically correct that the problem is too much government spending why not go as far as possible to cut the bloat?

The truth that Obama and Democrats must tell is government spending has absolutely nothing to do with high unemployment, declining wages, falling home prices, and all the other horribles that continue to haunt most Americans.

Indeed, too little spending will prolong the horribles for years more because there’s not enough demand in the economy without it.

The truth is that while the proximate cause of America’s economic plunge was Wall Street’s excesses leading up to the crash of 2008, its underlying cause — and the reason the economy continues to be lousy for most Americans — is so much income and wealth have been going to the very top that the vast majority no longer has the purchasing power to lift the economy out of its doldrums. American’s aren’t buying cars (they bought 17 million new cars in 2005, just 12 million last year). They’re not buying homes (7.5 million in 2005, 4.6 million last year). They’re not going to the malls (high-end retailers are booming but Wal-Mart’s sales are down).

Only the richest 5 percent of Americans are back in the stores because their stock portfolios have soared. The Dow Jones Industrial Average has doubled from its crisis low. Wall Street pay is up to record levels. Total compensation and benefits at the 25 major Wall St firms had been $130 billion in 2007, before the crash; now it’s close to $140 billion.

But a strong recovery can’t be built on the purchases of the richest 5 percent.

The truth is if the super-rich paid their fair share of taxes, government wouldn’t be broke. If Governor Scott Walker hadn’t handed out tax breaks to corporations and the well-off, Wisconsin wouldn’t be in a budget crisis. If Washington hadn’t extended the Bush tax cuts for the rich, eviscerated the estate tax, and created loopholes for private-equity and hedge-fund managers, the federal budget wouldn’t look nearly as bad.

And if America had higher marginal tax rates and more tax brackets at the top — for those raking in $1 million, $5 million, $15 million a year — the budget would look even better. We wouldn’t be firing teachers or slashing Medicaid or hurting the most vulnerable members of our society. We wouldn’t be in a tizzy over Social Security. We’d slow the rise in healthcare costs but we wouldn’t cut Medicare. We’d cut defense spending and lop off subsidies to giant agribusinesses but we wouldn’t view the government as our national nemesis.

The final truth is as income and wealth have risen to the top, so has political power. The reason all of this is proving so difficult to get across is the super-rich, such as the Koch brothers, have been using their billions to corrupt politics, hoodwink the public, and enlarge and entrench their outsized fortunes. They’re bankrolling Republicans who are mounting showdowns and threatening shutdowns, and who want the public to believe government spending is the problem.

They are behind the Republican shakedown.

These are the truths that Democrats must start telling, and soon. Otherwise the Republican shakedown may well succeed.

Cross-posted from Robert Reich’s blog.

Comments to “The Republican shakedown

  1. To reduce the federal deficit, I’d look to
    [1] taxes on high-earners
    [2] reducing military’s far-flung empire
    [3] getting contribution from other countries who benefit from that empire
    [4] reducing use of contractors, consultants, privatization for doing normal governmental jobs.

    Reducing the military/intelligence budget and significantly increasing taxes on high-wage individuals are, to me, obvious places to begin to reduce the USA’s annual deficit, particularly if the numbers can be determined (well enough) and published beforehand. Another thought is to examine and then reduce the expenditure (by USA and states and cities) for “privatized government”, contractors and consultants doing the work of government (and often, so I’ve heard, determining what other and further work should be done — by other and further contractors and consultants, naturally!). I’d wish to end the use of mercenaries and reduce the use of other contractors by the USA’s armed forces, and end the use of all contractors for intelligence and anti-terrorism projects. The civil service gives the USA better control anyway, and the waste (using contractors, consultants, and war-profiteers generally) may well far exceed the waste from inefficiency of letting government do government’s work. At all events, Republicans should not be allowed to “get away” with claims to admire “small government” unless and until we all take a very close look at the costs of “privatization”.

  2. There was no collective bargaining pre 1978 – 87 in US history — F.D.R. openly opposed it. Most unions were private before 1980s, but now socialiszed — communized unions are everywhere and they make up the mid-to-rich classes. You have failed to point to these ‘masses’ of rich republicans — they do not exist. Conservatives , perhaps, are mostly Liberals (Ds), and all the corporations are in fact DNC donors.

    The Democrats have made it their ‘mission’ to place regs on buisness so most of USA buisness is in Mexico and we import most of our little commodities from Asia. You cannot sustain that very long.

    I would sure like you to identify these republicans — they do not exist. There are a few ‘very’ rich, but most of these richys! are centrists.

    And Obama, the Ds boy, has done not a thing to make tax-brackets more faire — so stop saying it is the conservatives. Obama can say what he wants anytime — however he has not done so. So they question to you is why?

  3. Saving the American Dream is not for chickens, cowards, cream puffs, crybabies, featherweights, fraidy-cats, jellyfish,or namby-pambies

    Tomorrow, I HOPE everyone who still believes in the American Dream, that dream of a land of opportunity, that with hard work should provide a better, richer and fuller life for everyone, (not just a few) Shows Up.

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