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ROBERT B. REICH, Chancellor’s Professor of Public Policy at the University of California at Berkeley and Senior Fellow at the Blum Center for Developing Economies, was Secretary of Labor in the Clinton administration. 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.” He is also a founding editor of the American Prospect magazine and chairman of Common Cause. His film, INEQUALITY FOR ALL is available on Netflix, iTunes, Amazon. His new book, “SAVING CAPITALISM: For the Many, Not the Few” is out 9/29.
Updated: 8 min ago
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WHY WE MUST END UPWARD PRE-DISTRIBUTIONS TO THE RICH
You often hear inequality has widened because globalization and technological change have made most people less competitive, while making the best educated more competitive.
There’s some truth to this. The tasks most people used to do can now be done more cheaply by lower-paid workers abroad or by computer-driven machines.
But this common explanation overlooks a critically important phenomenon: the increasing concentration of political power in a corporate and financial elite that has been able to influence the rules by which the economy runs.
As I argue in my new book, “Saving Capitalism: For the Many, Not the Few” (out this week), this transformation has amounted to a pre-distribution upward.
Intellectual property rights—patents, trademarks, and copyrights—have been enlarged and extended, for example, creating windfalls for pharmaceutical companies.
Americans now pay the highest pharmaceutical costs of any advanced nation.
At the same time, antitrust laws have been relaxed for corporations with significant market power, such as big food companies, cable companies facing little or no broadband competition, big airlines, and the largest Wall Street banks.
As a result, Americans pay more for broadband Internet, food, airline tickets, and banking services than the citizens of any other advanced nation.
Bankruptcy laws have been loosened for large corporations—airlines, automobile manufacturers, even casino magnates like Donald Trump—allowing them to leave workers and communities stranded.
But bankruptcy has not been extended to homeowners burdened by mortgage debt or to graduates laden with student debt. Their debts won’t be forgiven.
The largest banks and auto manufacturers were bailed out in 2008, shifting the risks of economic failure onto the backs of average working people and taxpayers.
Contract laws have been altered to require mandatory arbitration before private judges selected by big corporations. Securities laws have been relaxed to allow insider trading of confidential information.
CEOs now use stock buybacks to boost share prices when they cash in their own stock options.
Tax laws have special loopholes for the partners of hedge funds and private-equity funds, special favors for the oil and gas industry, lower marginal income-tax rates on the highest incomes, and reduced estate taxes on great wealth.
Meanwhile, so-called “free trade” agreements, such as the pending Trans Pacific Partnership, give stronger protection to intellectual property and financial assets but less protection to the labor of average working Americans.
Today, nearly one out of every three working Americans is in a part-time job. Many are consultants, freelancers, and independent contractors. Two-thirds are living paycheck to paycheck.
And employment benefits have shriveled. The portion of workers with any pension connected to their job has fallen from just over half in 1979 to under 35 percent today.
Labor unions have been eviscerated. Fifty years ago, when General Motors was the largest employer in America, the typical GM worker, backed by a strong union, earned $35 an hour in today’s dollars.
Now America’s largest employer is Walmart, and the typical entry-level Walmart worker, without a union, earns about $9 an hour.
More states have adopted so-called “right-to-work” laws, designed to bust unions. The National Labor Relations Board, understaffed and overburdened, has barely enforced collective bargaining.
All of these changes have resulted in higher corporate profits, higher returns for shareholders, and higher pay for top corporate executives and Wall Street bankers – and lower pay and higher prices for most other Americans.
They amount to a giant pre-distribution upward to the rich. But we’re not aware of them because they’re hidden inside the market.
The underlying problem, then, is not just globalization and technological changes that have made most American workers less competitive. Nor is it that they lack enough education to be sufficiently productive.
The more basic problem is that the market itself has become tilted ever more in the direction of moneyed interests that have exerted disproportionate influence over it, while average workers have steadily lost bargaining power—both economic and political—to receive as large a portion of the economy’s gains as they commanded in the first three decades after World War II.
Reversing the scourge of widening inequality requires reversing the upward pre-distributions within the rules of the market, and giving average people the bargaining power they need to get a larger share of the gains from growth.
The answer to this problem is not found in economics. It is found in politics. Ultimately, the trend toward widening inequality in America, as elsewhere, can be reversed only if the vast majority join together to demand fundamental change.
The most important political competition over the next decades will not be between the right and left, or between Republicans and Democrats. It will be between a majority of Americans who have been losing ground, and an economic elite that refuses to recognize or respond to its growing distress.
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Why We Must Fight the Attack on Planned Parenthood
On Thursday, right-wing extremists in the U.S. House of Representatives will vote to try to defund Planned Parenthood, one of the nation’s largest providers of women’s health care and family planning services.
Planned Parenthood is under attack and it’s up
to all of us to fight back. Any society that respects women must respect
their right to control their own bodies. There is a strong moral case to
be made for this — but this video isn’t about that. This is about the
economics of family planning – which are one more reason it’s important for
all of us to stand up and defend Planned Parenthood.
Reproductive rights, family planning, and women’s health are all interrelated. All girls and women need full information and access to family planning services, including abortion—regardless of their income level—so they can determine if or when they have children.
Public investments in family planning—enabling women to plan, delay, or avoid pregnancy– make economic sense, because reproductive rights are also productive rights. When women have control over their lives, they can contribute even more to the economy, better break the glass ceiling, equalize the pay gap, and much more.
Take the state of Colorado’s highly successful family planning program. Over the past six years, in Colorado health department has offered teenagers and low-income women free long-acting birth control that prevents pregnancy over several years. Pregnancy and abortion rates plunged—by about 40 percent among teenagers across the state from 2009 to 2013.
In 2009, half of all first births to women in the poorest areas of the state occurred before they turned 21. But by 2014, half of first births did not occur until the women had turned 24, a difference that gives young women time to finish their education and obtain better jobs.
Nationally, evidence shows that public investments in family planning result in net public savings of about $13.6 billion a year—over $7 for every public dollar spent.
This sum doesn’t include the billions of additional dollars saved by enabling women who may not be financially able to raise a child and do not want to have a child or additional children to stay out of poverty.
Yet, over the last five years Republicans have cut 10 percent of the Title X federal budget for family planning, which also pays for critical services such as cancer screenings and HIV tests. And the Republican-controlled House Appropriations Committee has gone as far as trying to eliminate the program.
Meanwhile, many states have been cutting or eliminating family-planning funds. This isn’t just morally wrong; its bad economics.
Obviously, these crass economic numbers don’t nearly express the full complexity of the national debate around abortion and family planning. But they help make the case that we all benefit when society respects women to control their bodies and plan their families.
Please watch my latest video, which includes the economic argument for funding family planning and women’s health services, and why it’s critical that all of us step up right now to defend Planned Parenthood.
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CORPORATE WELFARE IN CALIFORNIA
Corporate welfare is often camouflaged in taxes that seem
neutral on their face but give windfalls to big entrenched corporations at
the expense of average people and small businesses.
Take a look at commercial property taxes in California, for example.
In 1978 California voters passed Proposition 13 – which began to assess property for tax purposes at its price when it was bought, rather than its current market price.
This has protected homeowners and renters. But it’s also given a quiet windfall to entrenched corporate owners of commercial property.
Corporations don’t need this protection. They’re in the real economy. They’re supposed to compete on a level playing field with new companies whose property taxes are based on current market prices.
This corporate windfall has caused three big problems.
First, it’s shifted more of the property tax on to California homeowners.
Back in 1978, corporations paid 44 percent of all property taxes and homeowners paid 56 percent. Now, after exploiting this loophole for years, corporations pay only 28 percent of property taxes, while homeowners pick up 72 percent of the tab.
Second, it’s robbed California of billions of dollars to support schools and local services. If all corporations were paying the property taxes they should be paying, schools and local services would have $9 billion dollars more in revenues this year.
Third, it penalizes new and expanding businesses that don’t get this windfall because their commercial property is assessed at the current market price – but they compete for customers with companies whose property is assessed at the price they purchased it years ago.
That’s unfair and it’s bad for the economy because California needs new and expanding businesses.
Today, almost half of all commercial properties in California pay their fair share of property taxes, but they’re hobbled by those that don’t.
This loophole must be closed. All corporations should be paying commercial property taxes based on current market prices.
The giant corporations that are currently exploiting the loophole for their own profits obviously don’t want it closed, so they’re trying to scare people by saying closing it will cause businesses to leave California.
That’s baloney. Leveling the playing field for all businesses will make the California economy more efficient, and help new and expanding businesses.
Besides, California’s property taxes are already much lower than the national average. So even if corporations pay their full share, they’re still getting a great deal.
Right now, a grassroots movement is growing of Californians determined to reform this broken commercial property tax system, and who know California needs more stable funding for its schools, libraries, roads, and communities.
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