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ROBERT B. REICH is Chancellor’s Professor of Public Policy at the University of California at Berkeley and Senior Fellow at the Blum Center for Developing Economies. He served as Secretary of Labor in the Clinton administration, for which Time Magazine named him one of the ten most effective cabinet secretaries of the twentieth century. He has written fourteen books, including the best sellers “Aftershock, “The Work of Nations,“ and"Beyond Outrage,” and, his most recent, “Saving Capitalism.” He is also a founding editor of the American Prospect magazine, chairman of Common Cause, a member of the American Academy of Arts and Sciences, and co-creator of the award-winning documentary, INEQUALITY FOR ALL.
Updated: 3 hours 3 sec ago
INTO THE WORLD OF WORK
What do you need to know – about the new world of work, but also about yourself – as you graduate and launch yourself into the world of work? We made a short film of my last class of the semester, where I speak to graduating seniors about these questions and more. If you’re a graduating senior (or know one) we hope this is helpful.
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WHY IS THE RACIAL WEALTH GAP WIDENING? AND WHAT SHOULD BE DONE TO REVERSE IT?
Wealth inequality is even more of a problem than income inequality. That’s because you have to have enough savings from income to begin to accumulate wealth – buying a house or investing in stocks and bonds, or saving up to send a child to college.
But many Americans have almost no savings, so they have barely any wealth. Two-thirds live paycheck to paycheck.
Once you have wealth, it generates its own income as the value of that wealth increases over time, generating dividends and interest, and then even more when those assets are sold.
This is why wealth inequality is compounding faster than income inequality. The richest top 1% own 40% of the nation’s wealth. The bottom 80% own just 7%.
Wealth is also transferred from generation to generation, not only in direct transfers, but also in access to the best schools and universities. Young people who get college degrees are overwhelmingly from wealthier families.
Which is why kids from low-income families, without such wealth, start out at a huge disadvantage. This is especially true for children of color from low-income families. Such families typically rent rather than own a house, and don’t earn enough to have any savings.
Throughout much of America’s history, the federal government has given families tax breaks in order to help them save and build assets – such as paying no tax on income that’s put away for retirement, and being able to deduct interest on home mortgages.
But these tax breaks mainly help those with high income and lots of wealth in the first place, who can afford to put away lots for retirement or get a large mortgage on a huge home. They don’t much help those with low incomes and minimal savings.
Families of color are especially disadvantaged because they’re less likely to have savings or inherit wealth, and face significant barriers to building wealth, such as discriminatory policies and practices that thwart home ownership.
These structural disadvantages have built up to the point where the median net worth of white families is now more than 10 times greater than that of African-American or Latino families.
So what can we do to help all Americans accumulate wealth?
First, reform the tax system so capital gains – increases in the value of assets – are taxed at the same rate as ordinary income.
Second, limit how much mortgage interest the wealthy can deduct from their incomes.
Then use the tax savings from these changes to help lower-income people gain a foothold in building their own wealth.
1. Provide every newborn child with a savings account consisting of at least $1,250 — and more if a child is from a low-income family. This sum will compound over the years into a solid nest egg.
Research shows it could reduce the racial wealth gap by nearly 20% — more if deposits are larger. At age 18, that young person could use the money for tuition or training, a business or a home. Studies show such accounts can change children’s behavior and increase the likelihood they’ll attend college.
1. Allow families receiving public benefits to save. Today a family receiving public assistance can be cut off for having saved just $1,000. Raise the limits on what a family can save to at least $12,000—roughly three months’ income for a low-income family of four—and thereby put that family on the road to self-sufficiency.
All these steps would allow families to invest in their own futures – which is the surest way out of poverty. All of us benefit when everyone has the opportunity to accumulate wealth.
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THE NEW COMMON GROUND BETWEEN POPULIST LEFT AND RIGHT
The old debate goes something like this:
‘You don’t believe women have reproductive rights.”
“You don’t value human life.”
“You think everyone should own a gun.”
“You think we’re safer if only criminals have them.”
“You don’t care about poor people.”
”You think they’re better off with handouts.”
“You want to cut taxes on the rich.”
"You want to tax everyone to death.”
But we’re seeing the emergence of a new debate where the populist left and right are on the same side:
Both are against the rich to spend as much as they want corrupting our democracy.
Both are against crony capitalism.
Both are against corporate welfare.Both are against another Wall Street bailout.
Both want to stop subsidizing Big Agriculture, Big Oil, and the pharmaceutical industry.
Both want to ban inside trading on Wall Street.
Both want to stop CEOs from pumping up share prices with stock buy-backs … and then cashing in their stock options.
Both want to stop tax deductions of CEO pay over $1 million.
Both want to get big money out of politics, reverse Citizens United, and restore our democracy,
If we join together, we can make these things happen.
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Stop Voter Suppression
A crowning achievement of the historic March on Washington, where Dr. Martin Luther King gave his “I have a dream” speech, was pushing through the landmark Voting Rights Act of 1965. Recognizing the history of racist attempts to prevent Black people from voting, that federal law forced a number of southern states and districts to adhere to federal guidelines allowing citizens access to the polls.
But in 2013 the Supreme Court effectively gutted many of these protections. As a result, states are finding new ways to stop more and more people—especially African-Americans and other likely Democratic voters—from reaching the polls.
Several states are requiring government-issued photo IDs—like drivers licenses—to vote even though there’s no evidence of the voter fraud this is supposed to prevent. But there’s plenty of evidence that these ID measures depress voting, especially among communities of color, young voters, and lower-income Americans.
Alabama, after requiring photo IDs, has practically closed driver’s license offices in counties with large percentages of black voters. Wisconsin requires a government-issued photo ID but hasn’t provided any funding to explain to prospective voters how to secure those IDs.
Other states are reducing opportunities for early voting.
And several state legislatures—not just in the South—are gerrymandering districts to reduce the political power of people of color and Democrats, and thereby guarantee Republican control in Congress.
We need to move to the next stage of voting rights—a new Voting Rights Act—that renews the law that was effectively repealed by the conservative activists on the Supreme Court.
That new Voting Rights Act should also set minimum national standards—providing automatic voter registration when people get driver’s licenses, allowing at least 2 weeks of early voting, and taking districting away from the politicians and putting it under independent commissions.
Voting isn’t a privilege. It’s a right. And that right is too important to be left to partisan politics. We must not allow anyone’s votes to be taken away.