Memo to Obama: Don’t be afraid of “redistribution”

The right shudders at the thought, but soon low-wage workers won't have enough money to keep the economy going

Topics: Redistribution, Inequality, Social Mobility, U.S. Economy, RobertReich.org, ,

Memo to Obama: Don't be afraid of "redistribution"US President Barack Obama speaks during a campaign event at the Apollo Theatre in New York on 19 January 2012. (Credit: Jewel Samad)

The President’s speech yesterday on inequality avoided the “R” word. No politician wants to mention “redistribution” because it conjures up images of worthy “makers” forced to hand over hard-earned income to undeserving “takers.”

But as low-wage work proliferates in America, so-called takers are working as hard if not harder than anyone else, and often at more than one job.

Yet they’re still not making it because the twin forces of globalization and technological change have reduced their bargaining power and undermined their economic standing — while bestowing ever greater benefits on a comparative few with the right education and connections (and whose parents are often best able to secure these advantages for them).

Better education and training for those on the losing end is critically important, as will several of the other proposals the President listed. But they will only go so far.

The number of losers is growing so quickly, and so much of the economies’ winnings are going to a small group at the top — since the recovery began, 95 percent of the gains have gone to the richest 1 percent — that some direct redistribution of the gains is necessary.

Without some redistribution, the losers are likely to react in ways that could hurt the economy. They’ll demand protection from global markets they believe are taking away good jobs, and even from certain technological advances that threaten to displace them (rather than smash the machines, as did England’s 19th-century Luddites, they’ll seek regulations that preserve the old jobs).

Without some redistribution, our ever-increasing number of low-wage workers won’t have enough money to keep the economy going. (This is one reason why the current recovery has been so anemic.)

And without some redistribution, America’s growing army of low-wage workers may fall prey to demagogues on the right or left who offer convenient scapegoats for their frustrations.

One way we already redistribute is through the Earned Income Tax Credit, a wage subsidy for the working poor, which, at about $60 billion a year, is the nation’s largest anti-poverty program. It’s like a reverse income tax — larger at the bottom of the wage scale (now around $3,000 for incomes around $20,000) and gradually tapering off as incomes rise (vanishing at around $35,000).



The EITC subsidy should be enlarged and extended further up the wage scale before tapering off.

How to pay for this? By cutting subsidies and special tax breaks for the oil and gas industries, big agribusiness, military contractors, hedge-fund and private-equity partners, and Wall Street banks. And by capping individual tax deductions (deductions are the economic equivalent of government subsidies) for gold-plated health care plans, lavish business junkets and interest on giant mortgages.

In other words, we can finance much of this redistribution to the working poor by ending unnecessary redistributions to the wealthy.

Robert Reich, one of the nation’s leading experts on work and the economy, is Chancellor’s Professor of Public Policy at the Goldman School of Public Policy at the University of California at Berkeley. He has served in three national administrations, most recently as secretary of labor under President Bill Clinton. Time Magazine has named him one of the ten most effective cabinet secretaries of the last century. He has written 13 books, including his latest best-seller, “Aftershock: The Next Economy and America’s Future;” “The Work of Nations,” which has been translated into 22 languages; and his newest, an e-book, “Beyond Outrage.” His syndicated columns, television appearances, and public radio commentaries reach millions of people each week. He is also a founding editor of the American Prospect magazine, and Chairman of the citizen’s group Common Cause. His new movie "Inequality for All" is in Theaters. His widely-read blog can be found at www.robertreich.org.

More Related Stories

Featured Slide Shows

  • Share on Twitter
  • Share on Facebook
  • 1 of 11
  • Close
  • Fullscreen
  • Thumbnails

    "Roman Candle" turns 20: Secrets of Elliott Smith's accidental masterpiece (slideshow)

    Elliott and the friends with whom he recorded in middle school in Texas (photo courtesy of Dan Pickering)

    "Roman Candle" turns 20: Secrets of Elliott Smith's accidental masterpiece (slideshow)

    Heatmiser publicity shot (L-R: Tony Lash, Brandt Peterson, Neil Gust, Elliott Smith) (photo courtesy of JJ Gonson photography)

    "Roman Candle" turns 20: Secrets of Elliott Smith's accidental masterpiece (slideshow)

    Elliott and JJ Gonson (photo courtesy of JJ Gonson photography)

    "Roman Candle" turns 20: Secrets of Elliott Smith's accidental masterpiece (slideshow)

    "Stray" 7-inch, Cavity Search Records (photo courtesy of JJ Gonson photography)

    "Roman Candle" turns 20: Secrets of Elliott Smith's accidental masterpiece (slideshow)

    Elliott's Hampshire College ID photo, 1987

    "Roman Candle" turns 20: Secrets of Elliott Smith's accidental masterpiece (slideshow)

    Elliott with "Le Domino," the guitar he used on "Roman Candle" (courtesy of JJ Gonson photography)

    "Roman Candle" turns 20: Secrets of Elliott Smith's accidental masterpiece (slideshow)

    Full "Roman Candle" record cover (courtesy of JJ Gonson photography)

    "Roman Candle" turns 20: Secrets of Elliott Smith's accidental masterpiece (slideshow)

    Elliott goofing off in Portland (courtesy of JJ Gonson photography)

    "Roman Candle" turns 20: Secrets of Elliott Smith's accidental masterpiece (slideshow)

    Heatmiser (L-R: Elliott Smith, Neil Gust, Tony Lash, Brandt Peterson)(courtesy of JJ Gonson photography)

    "Roman Candle" turns 20: Secrets of Elliott Smith's accidental masterpiece (slideshow)

    The Greenhouse Sleeve -- Cassette sleeve from Murder of Crows release, 1988, with first appearance of Condor Avenue (photo courtesy of Glynnis Fawkes)

  • Recent Slide Shows

Comments

Loading Comments...