Posts Tagged Robert Reich

Obama Should Focus on Jobs, Not the Deficit – Room for Debate – NYTimes.com

Posted by Michael B. Calyn in Economy on November 8, 2012


Focus on Jobs, Not the Deficit

Robert Reich

Robert Reich, the former secretary of Labor in the Clinton administration, is Chancellor’s Professor of Public Policy at the University of California at Berkeley.

UPDATED NOVEMBER 8, 2012, 4:51 PM

President Obama’s victory gives him an opportunity to hit the economic reset button and alter the public’s view of America’s central economic challenge. It’s not to reduce the budget deficit. It’s to create more good jobs, grow the economy and widen the circle of prosperity.

The deficit is a problem only in proportion to the overall size of the economy. If the economy grows faster than its current 2 percent annualized rate, the deficit shrinks in proportion. Tax receipts grow, and the deficit becomes more manageable.

Any grand deficit reduction should start when unemployment is at 6 percent and growth at 3 percent growth for two quarters.

But if economic growth slows — as it will, if taxes are raised on the middle class and if government spending is reduced when unemployment is still high — the deficit becomes larger in proportion. That’s the austerity trap Europe finds itself in. We don’t want to go there.

This is why January’s “fiscal cliff” — $600 billion in automatic spending cuts and tax increases — is so dangerous. It’s too much deficit reduction, too quickly. Tax increases on the middle class would reduce their spending just when the economy needs that spending to keep growing, and cuts in government’s own spending would make the problem worse.

If we go over the fiscal cliff, we’re in another recession, according to the Congressional Budget Office and most private economic forecasters.

The way to ensure continued growth is to keep taxes low on the middle class — continue the president’s payroll tax cut and extend the Bush tax cuts for income under $250,000 — and continue government spending.

The way to increase growth is to make the payroll tax cut permanent — or, better yet, permanently exempt the first $20,000 of income from the payroll tax and make up for lost revenue by raising the ceiling on income subject to it (that ceiling is now $110,100). And increase government spending, especially on critical public investments like education, job training and infrastructure.

Any “grand bargain” on deficit reduction should contain a trigger for when it starts — and that trigger should be when the economy can safely be assumed to be back on track. I’d make that trigger 6 percent unemployment and 3 percent economic growth for two consecutive quarters, and make sure that trigger was right in the legislation.

Finally, the president needs to make it clear to the public that over the long term, the only way we can achieve a better economy is through a larger and more buoyant middle class. If we continue lurching toward widening inequality and ever more concentrated income and wealth at the top, the vast middle class — as well as all those who aspire to join it — won’t have the purchasing power to grow the economy and create more jobs.

The president’s victory doesn’t give him a clear mandate to reset the economic debate. The margin of victory was too small, and he didn’t tell the American electorate explicitly that his priority would be jobs and middle-class prosperity rather than deficit reduction. But his victory gives him the attention of the nation and the authority that comes with having won re-election, and therefore gives him the opportunity to reframe the debate.

I hope he takes it.

Join Room for Debate on Facebook and follow updates ontwitter.com/roomfordebate.

 Obama Should Focus on Jobs, Not the Deficit – Room for Debate – NYTimes.com.

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5 Key Points Obama Needs to Make in the Debate | Alternet

Posted by Michael B. Calyn in Opinion, Perspective, Politics on October 16, 2012


5 Key Points Obama Needs to Make in the Debate

Obama needs to remind us why we liked him in the first place.

October 15, 2012  

 

Photo Credit: Shutterstock.com

 

To: POTUS

From: Robert Reich

RE: Upcoming debate

Your passive performance in the last debate was damaging because it reenforced the Republican claim that you’ve been too passive in getting jobs back and in responding to terrorism abroad.

That doesn’t mean you have to “come out swinging” this time. You need to be yourself, and one of your qualities that the public finds reassuring is your steadiness and authenticity, by contrast to Romney’s unsteady flip-flopping and apparent willingness to say and be anything. But you will need to be more energetic and passionate.

And although the “town meeting” style debate in which you’ll be answering audience questions isn’t conducive to sharp give-and-take with Romney, look for every opportunity to nail him. Indignance doesn’t come naturally to you, but you have every reason to be indignant on behalf of the American people. 

Emphasize these five points:

1. Not only is the economy is improving, but there’s no reason to trust Romney’s claim he would improve it more quickly. He’s given no specifics about how he’d pay for his massive tax cut for the wealthy, or what he’d replace ObamaCare with, or how he’d regulate Wall Street if he repeals Dodd-Frank. His record to date has flip-flopped on every major issue. Why should Americans trust his assertions?

2. Our problems require we pull together, but Romney and his party want to pull us apart. Romney has praised Arizona’s draconian anti-immigration law profiling Hispanics, and has called for “voluntary deportation” by making life intolerable for undocumented workers. He is against equal marriage rights. He wants to ban abortions, and his party and running mate want to ban them even in the case of rape or incest. He’s determined to make the rich richer and the rest of us poorer. Romney is beholden to a radical right-wing Republican party that is out of step with most of America.

3. Romney’s “reverse Robin Hood” agenda is inappropriate at a time when the wealthy are taking home a larger share of total income and wealth than they have in a century, and when the middle class is still struggling. He wants to cut taxes on the rich by almost $5 trillion – which inevitably means higher taxes on the rest of us; and over 60 percent of its budget cuts come out of programs for the poor and working middle class. He’s determined to turn Medicare into vouchers whose value won’t keep up with rising healthcare costs, and turn Medicaid over to cash-starved states. His comment about “47 percent” of Americans not paying taxes and taking government handouts was not only wrong (every working person pays payroll taxes, and every consumer pays sales taxes; and the biggest so-called “entitlements” are Social Security and Medicare, which are insurance programs that Americans pay for during their working years). The comment also reveals a callousness and divisiveness that’s the opposite of what we need now. Romney wants to set Wall Street loose again when the Street’s greed got us into the mess we’re still trying to get out of.

4. Romney views America as if it was one huge corporation, but we’re not a corporation; we’re a nation. He says corporations are people; touts his years at Bain as if making companies profitable qualifies him to be president; wants to deregulate corporations and Wall Street; and assumes CEOs and the wealthy are “job creators,” and if we cut their taxes they’ll have more incentive to create jobs. None of this is true. The nation exists to make lives better for all its people – making sure that corporations treat their workers as assets to be developed rather than as costs to be cut. Companies have been slow to create jobs not because of insufficient profits but because of inadequate customers. The vast American middle class are the real job creators, but they don’t have enough money in their pockets because too many companies have broken the basic bargain linking wages to productivity.

5. On foreign policy, Romney wants to rush to judgment, blaming the administration for not acting quickly enough in Libya on scant information. But that rush-to-judgment mentality is exactly what got us into Iraq eight years ago on the pretext of “weapons of mass destruction.” Two days ago we marked the 50th anniversary of the Cuban missile crisis. Had John F. Kennedy rushed to judgment as Romney wants to, humankind would have been obliterated in a nuclear holocaust. 

Be indignant, but measured and steady – as you naturally are. Practice your closing (your last closing was listless) so the nation can see clearly the choice: We’re all in it together, or we’re on our own.

 5 Key Points Obama Needs to Make in the Debate | Alternet.

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Robert Reich: Romney’s Lying Machine

Posted by Michael B. Calyn in GOP, Mitt Romney on August 26, 2012


Robert Reich

Robert Reich

 

Chancellor’s Professor of Public Policy, University of California at Berkeley; Author, ‘Beyond Outrage’

Romney’s Lying Machine

Posted: 08/24/2012 11:05 am

I’ve been struck by the baldness of Romney’s repetitive lies about Obama — that Obama ended the work requirement under welfare, for example, or that Obama’s Affordable Care Act cuts $716 billion from Medicare benefits.

The mainstream media along with a half-dozen independent fact-checking organizations and sites have called Romney on these whoppers, but to no avail. He keeps making these assertions.

Every campaign is guilty of exaggerations, embellishments, distortions, and half-truths. But this is another thing altogether. I’ve been directly involved in seven presidential campaigns, and I don’t recall a presidential candidate lying with such audacity, over and over again. Why does he do it, and how can he get away with it?

The obvious answer is such lies are effective. Polls show voters are starting to believe them, especially in swing states where they’re being repeated constantly in media spots financed by Romney’s super PAC or ancillary PACs and so-called “social welfare” organizations (political fronts disguised as charities, such as Karl Rove and the Koch brothers have set up).

Romney’s lying machine is extraordinarily well financed. By August, according to Jane Mayer in her recent New Yorker article, at least 33 billionaires had each donated a quarter of a million dollars or more to groups aiming to defeat Obama — with most of it flooding into attack ads in swing states.

In early August, “Americans for Prosperity,” one of the nonprofit front groups masquerading as a charity, and founded in part by billionaire right-wingers Charles and David Koch, bought some $27 million in ad time on spots now airing in eleven swing states.

So Romney’s lying machine is working.

But what does all this tell us about the man who is running this lying machine? (Or if Romney’s not running it, what does it tell us about a man who would select the people who are?)

We knew he was a cypher — that he’ll say and do whatever is expedient, change positions like a chameleon, eschew any core principles.

Yet resorting to outright lies — and organizing a presidential campaign around a series of lies — reveals a whole new level of cynicism, a profound disdain for what remains of civility in public life, and a disrespect of the democratic process.

The question is whether someone who is willing to resort to such calculated lies, and build a campaign machine around them, can be worthy of the public’s trust with the most powerful office in the world.

 

 Robert Reich: Romney’s Lying Machine.

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Break Up the Banks — They’re Still Too Big to Fail or Regulate – Room for Debate – NYTimes.com

Posted by Michael B. Calyn in Banking on May 22, 2012


Break Up the Banks. They’re Too Big to Regulate

Robert Reich

Robert Reich, the former secretary of Labor, is Chancellor’s professor of public policy at the University of California at Berkeley. He is the author of “Beyond Outrage.”

MAY 21, 2012

The JPMorgan Chase debacle would have been prevented if the Volcker Rule were sufficiently strict, prohibiting banks from using commercial deposits to make bets –except very specific offsetting bets (hedges) on narrow classes of trades.

JPMorgan has proven that any nuance — any exception — will be stretched beyond recognition by the big banks.

But Jamie Dimon and JPMorgan have been lobbying like mad to loosen the Volcker Rule and widen that exception to include the very kind of reckless bets JPMorgan made. And they’re still at it, as evidenced by Dimon’s current claim that the rule that eventually emerges would allow those bets.

That’s why, as a practical matter, the Volcker Rule is hopeless. It was intended to be Glass-Steagall lite — a more nuanced version of the original Depression-era law that separated commercial from investment banking. But JPMorgan has proven that any nuance — any exception — will be stretched beyond recognition by the big banks. So much money can be made when these bets turn out well that the big banks will stop at nothing to keep the spigot open.

There’s no alternative but to resurrect Glass-Steagall as a whole. Even then, the biggest banks are still too big to fail or to regulate. We also need to heed the recent advice of the Dallas branch of the Federal Reserve, and break them up.

 Break Up the Banks — They’re Still Too Big to Fail or Regulate – Room for Debate – NYTimes.com.

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How Bain Capital made us fat – Mitt Romney – Salon.com

Posted by Michael B. Calyn in Social, Society on April 14, 2012


How Bain Capital made us fat

Why private equity — especially the firm that made Mitt Romney rich — loves fast-food chains

BY ANDREW LEONARD


fast_food_money_final

 (Credit: iStockphoto/liveslow/Salon)

Burger King’s Triple Whopper with cheese: 1,230 calories. Domino’sPhilly Cheese Steak Pizza: 2,140 calories. The Outback SteakhouseBloomin’ Onion: An incredible 2,210 calories. And to wash it all down: a Dunkin’ Donuts Mocha Almond Iced Latte: only 290 calories. You can have two!

What do all four of these culinary delights have in common, besides the clear and present danger they pose to your waistline and arteries?

The answer is Bain Capital, the private equity firm founded by the presumptive Republican presidential nominee, Mitt Romney. As each of these fast food and restaurant chains has wended its torturous way from private to public ownership and back again, from leveraged buyout to merger to spinoff, Bain Capital has been intimately involved, orchestrating management changes, public offerings and, above all, huge profits.

Bain purchased Domino’s from its founder, Tom Monaghan, in 1998, and was part of one consortium that bought a controlling stake in Burger King in 2002, another group that bought Dunkin’ Donuts in 2005, and a third that purchased Bloomin’ Brands, Outback Steakhouse’s corporate parent, in 2006. But Bain Capital is far from the only investor group to crave junk food. The private equity industry in general adores multi-franchised purveyors of low-priced calorie bombs, here in the U.S. and all across the globe.

Bain Capital’s record as a pioneer in private equity wheeling and dealing, however, along with its special status as the launching pad for Mitt Romney, demands that the company gets special attention. An obese, wheezing, diabetic nation wants to know: Can we blame Bain Capital for making us fat?

There are many structural reasons why free-market capitalism as practiced in a democracy dominated by special interests has resulted in the creation of a fast-food paradise. Government subsidies that promote everything from the build-out of highways to the farming of corn helped paved the way to a junk-food utopia at every clover-leaf intersection. Political resistance to higher minimum wage laws and health and safety inspections also keeps operating costs cheap. But there is a special synergy between the private equity profit model and fast food chains that keeps the whole system going like a Frankenstein monster that can’t be stopped.

The basic private equity play works like this: Bain Capital, or the Carlyle Group, or whoever, borrows a ton of cash and buys a stake in a company that, for whatever reason, isn’t performing very well, or is somehow undervalued by public markets. But the problem with using debt to make a purchase is that you are then immediately saddled with the irritating obligation to regularly come up with significant sums of cash just to cover your debt payments. Fast food chains — or any chain made up of thousands and thousands of franchises — are attractive because even in bad times they are generating plenty of cash. Access to that cash is the key to successfully orchestrating a leveraged buyout. Bain borrows a few billion dollars, swoops in on the vulnerable target, makes whatever changes it deems necessary to spruce up the company — selling assets, laying off workers, introducing the Triple Whopper – while covering its debt payments with the cash generated by daily operations.

The result: It’s very difficult for fast-food chains to die, no matter how badly they are run. If they start to sputter, they automatically become an attractive buyout target for someone with access to the capital necessary to do an overhaul. The process can be repeated ad infinitum, as the saga of Burger King, which is now gearing up for its second IPO in the last decade, amply illustrates. Like the McDonald’s burger that’s supposedly incapable of rotting, once a fast-food chain reaches a big enough size, it’s well-nigh immortal: There’s always going to be someone who sees potential value in the undying corpse.

The same is not true, it should go without saying, for your typical struggling mom-and-pop diner or locally sourced, all-organic fine dining eatery. If they can’t generate the cash to pay the bills, they are done, and the private equity moguls will not be interested in coming to the rescue.

Bain’s various investments in fast food do not all fit in exactly the same box. When Mitt Romney personally signed the check to buy Domino’s in 1998, the pizza company wasn’t in trouble. But if you want proof that quality does not coincide with profits, Domino’s example is instructive. The deal worked out fantastically for Bain. According to the Boston Globe, Bain extracted cash from Domino’s “in several chunks including: a 2003 refinancing of the company’s debt, a 2004 initial public stock offering, and an $897 million ‘monster dividend’ paid to Bain and other investors in 2007.”

But by the time Bain got out of Domino’s in 2010, Domino’s pizza was regularly placing last in taste tests when compared to its major competitors. That Philly Cheese Steak Pizza (introduced in 2003) just wasn’t doing the trick.

Burger King’s recent corporate history, however, offers the most delicious (if fattening) example of how a big fast food chain cannot sink, no matter how many icebergs it hits. In 2002, a coalition of Bain Capital, Goldman Sachs and TPG Capital purchased Burger King from the huge liquor conglomerate Diageo for about $1.5 billion. New managementclosed around 1,200 ailing franchises, and according to one study, revitalized sales by reducing customer wait time and staff turnover. Management also cooked up a plan to target the so-called super-fan — young men who could be counted on to load up at their neighborhood Burger King multiple times a week. Thus, the Triple Whopper and theEnormous Omelet Sandwich (730 calories).

In 2006, the investors exited successfully with a Burger King IPO. But then came the recession, which hit Burger King harder than its primary rivals, McDonald’s and Wendy’s. Even super-fans, apparently, have their limits when they are unemployed. But not to worry: In 2010, a group of Brazilian billionaires, 3G Capital, paid $4 billion to take Burger King private again. And now plans are afoot for another IPO. Maybe this time, the new Burger King Bacon Sundae will prove to be the draw that keeps customers coming.

The physical universe may frown upon perpetual motion schemes, but fast food chains appear to have found a way to scoff at entropy and death. In 2011 alone, private equity investors with around $500 billion to spend kept merger and acquisition activity in the restaurant industry hopping.

There are some signs that, spurred by customer demand and the pressure exerted by the up-and-coming “fast casual” restaurant sector, the big chains are beginning to move toward healthier menus. Dunkin’ Donuts, for example, announced it was dumping trans fats as early as 2007. But the bigger a chain is, and the tougher the competition, the more it will always be forced to scrimp on ingredient quality to keep prices low, and the more important it will be to keep pushing the addictively fattening bottom-line profit-makers: the fries and the shakes and the triple-cheese layered pizzas. We are a nation in love with our Bloomin’ Onions. The crazy thing is, the nature of the private equity beast is that even when the fast food dinosaurs are begging for extinction, they’ll always be offered a second chance.

Can we blame Mitt Romney’s Bain Capital for perpetuating this state of affairs? It might not be totally fair, but there’s at least a little bit of truth to it. Providing the capital necessary to keep Burger King and Domino’s and Dunkin’ Donuts going strong has added more than a few pounds to the collective scales. But if we’re going to assign blame, then perhaps we should also give some credit. Mitt Romney, after all, is the first politician in the United States to deliver universal care to his constituents. So even as Bain fattens ‘em up, Mitt made sure they can get coverage for whatever ill health ultimately ensues.

 How Bain Capital made us fat – Mitt Romney – Salon.com.

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Flat tax a flat-out fraud

Posted by Michael B. Calyn in Government, Politics, Taxes on October 31, 2011


Flat tax a flat-out fraud

Robert Reich, © 2011 Robert Reich

Sunday, October 30, 2011

The so-called flat tax is all the rage among Republican presidential hopefuls. Herman Cain was the first. Now, Rick Perry and Newt Gingrich have come up with their own flat-tax proposals.

The flat tax is a fraud. It raises taxes on the poor and lowers them on the rich.

The nonpartisan Tax Policy Center estimates that Cain’s flat-tax plan (the only one that’s been set out in any detail) would lower the after-tax incomes of poor households (incomes below $30,000) by 16 to 20 percent.

Meanwhile, 95 percent of households with more than $1 million of income would get an average tax cut of $487,300. And capital gains (a major source of income for the very rich) would be tax-free.

All flat-tax proposals benefit the rich more than the poor for one simple reason: Today’s tax code is still at least moderately progressive. The rich usually pay a higher percent of their incomes in income taxes than do the poor. A flat tax would eliminate that slight progressivity.

Nowadays, most low-income households pay no federal income tax at all – a fact that sends many regressives into spasms of indignation. They conveniently ignore the fact that poor households pay a much larger share of their incomes in payroll taxes, sales taxes and property taxes (directly, if they own their homes; indirectly, if they rent) than do people with high incomes.

Flat-taxers pretend a flat tax is good public policy, for two reasons.

First, they say, it would simplify paying taxes. Baloney. Flat-tax proposals don’t eliminate all deductions. People with families will still be able to deduct their dependents while single people will pay a higher rate, businesses will deduct their expenses, and, in most plans, people with homes will still be able to deduct interest on their mortgages.

That means most taxpayers would still have lots of paperwork.

Second, proponents of a flat tax say it’s fairer than the current system because, in Cain’s words, a flat tax “treats everyone the same.”

The truth is, the current tax code treats everyone the same. It’s organized around tax brackets. Everyone whose income reaches one bracket is treated the same as everyone else whose income reaches that bracket (apart from various deductions, exemptions and credits, of course).

For example, no one pays any income taxes on the first $20,000 or so of income. People in a higher bracket pay a higher rate only on the portion of their income that hits that bracket – not on their entire incomes.

So when President Obama calls for ending the Bush tax cut on incomes over $250,000, he’s only talking about the portion of people’s incomes that exceeds $250,000. He’s not proposing to tax their entire incomes at the higher rate that prevailed under President Bill Clinton.

Republicans have tried to sow confusion about this. They want Americans to believe, for example, that if the Bush tax cut ended, small-business owners with incomes of $251,000 a year would have to pay 39 percent of their entire incomes in taxes rather than 35 percent. Wrong. They’d only have to pay the 39 percent rate on $1,000 – the portion of their incomes over $250,000.

Get it? We already have a flat tax – flat within each bracket.

The real problem is that the top brackets are set too low relative to where the money is. The top-most bracket starts at $375,000 a year. People with incomes higher than that pay 35 percent – again, only on that portion of their incomes exceeding $375,000.

This means a doctor who’s making, say, $380,000 a year pays the same income-tax rate as a plutocrat pulling in $2 billion or $20 billion.

Actually, it’s worse than that because the plutocrats get most of their income in the form of capital gains, which are taxed at only 15 percent. That’s why America’s 400 richest people – who earned an average of $300 million last year, and who have more wealth than the bottom 150 million Americans put together – now pay at a 17 percent rate (according to the Internal Revenue Service).

The Republicans’ push for a flat tax masks what’s really going on.

Remember: The top 1 percent is now raking in over 20 percent of the nation’s total income and owns over 35 percent of the nation’s wealth. Under almost anyone’s view of fairness, these are grotesque portions. They’re especially large relative to what they were as recently as 30 years ago, when the top 1 percent raked in under 10 percent – and paid a top marginal tax rate of more than 70 percent. And these huge portions at the top continue to increase.

Simple fairness requires three things: More tax brackets at the top, higher rates in each of those top brackets and the treatment of all sources of income (capital gains included) exactly the same.

Not only fairness demands it, but also fiscal prudence. A truly progressive tax would bring in tens of billions of dollars a year from the people at the top who are in the best position to afford it.

Regressives are pushing the flat tax as a smokescreen. They’d rather not have anyone talk about the unfairness and fiscal absurdity of the current system.

Rather than merely oppose the flat tax, sensible people should push for a truly progressive tax – starting with a top rate of 70 percent on that portion of anyone’s income exceeding $5 million, from whatever source.

Robert Reich, former U.S. secretary of labor, is professor of public policy at UC Berkeley and the author of “Aftershock: The Next Economy and America’s Future.” He blogs at www.robertreich.org. To comment, go to www.sfgate.com/chronicle/submissions/#1. 

Flat tax a flat-out fraud.

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