Guest Voz - Robert Reich: The Big Economic Story, and Why Obama Isn't Telling It

These are the two competing stories Americans are telling one another.
Yes, I know: It's more complicated than this. In reality, the lousy economy is due to insufficient demand -- the result of the nation's almost unprecedented concentration of income at the top. The very rich don't spend as much of their income as the middle. And since the housing bubble burst, the middle class hasn't had the buying power to keep the economy going. That concentration of income, in turn, is due to globalization and technological change -- along with unprecedented campaign contributions and lobbying designed to make the rich even richer and do nothing to help average Americans, insider trading, and political bribery.

So B is the truth.
But A is the story Republicans and right-wingers (& Teapartiers) tell. It's a dangerous story because it deflects attention from the real problem and makes it harder for America to focus on the real solution -- which is more widely shared prosperity. (I get into how we might do this in my new book, Aftershock.)

A is also the story President Obama is telling, indirectly, through his deficit commission, his freeze on federal pay, his freeze on discretionary spending, and his wavering on extending the Bush tax cuts for the rich.
Most other Washington Democrats are falling into the same trap.

If Obama and the Democrats were serious about story A they'd at least mention it. They'd tell the nation that income and wealth haven't been this concentrated at the top since 1928, the year before the Great Crash. They'd be indignant about the secret money funneled into midterm campaigns. They'd demand Congress pass the Disclose Act so the public would know where the money comes from.

They'd introduce legislation to curb Wall Street bonuses -- exactly what European leaders are doing with their financial firms. They'd demand that the big banks, now profitable after taxpayer bailouts, reorganize the mortgage debt of distressed homeowners. They'd call for a new WPA to put the unemployed back to work, and pay for it with a tax surcharge on incomes over $1 million.

They'd insist on extended unemployment benefits for log-term jobless who are now exhausting their benefits. And they'd hang tough on the Bush tax cuts for the wealthy -- daring Republicans to vote against extending the cuts for everyone else.

But Obama is doing none of this. Instead, he's telling story A.
Making a big deal out of the deficit -- appointing a deficit commission and letting them grandstand with a plan to cut $4 trillion out of the projected deficit over the next ten years -- $3 of government spending for every $1 of tax increase -- is telling story A.

What the public hears is that our economic problems stem from too much government and that if we reduce government spending we'll be fine.
Announcing a two-year freeze on federal salaries - explaining that "I did not reach this decision easily... these are people's lives" -- is also telling story A.

What the public hears is government bureaucrats are being paid too much, and that if we get the federal payroll under control we'll all be better off.
Proposing a freeze on discretionary (non-defense) spending is telling story A. So is signaling a willingness to extend the Bush tax cuts to the top. So is appointing his top economic advisor from Wall Street (as apparently he's about to do).

In fact, the unwillingness of the President and Washington Democrats to tell story B itself promotes story A, because in the absence of an alternative narrative the Republican story is the only one the public hears.
Obama's advisors explain that the president's moves are designed to "preempt" the resurgent Republicans -- just like Bill Clinton preempted the Gingrich crowd by announcing "the era of big government is over" and then tacking right.

They're wrong. By telling story A and burying story B, the president legitimizes everything the right has been saying. He doesn't preempt them; he fuels them. He gives them more grounds for voting against raising the debt ceiling in a few weeks. He strengthens their argument against additional spending for extended unemployment benefits. He legitimizes their argument against additional stimulus spending.
Bill Clinton had a rapidly expanding economy to fall back on, so his appeasement of Republicans didn't legitimize the Republican world view. Obama doesn't have that luxury. The American public is still hurting and they want to know why.

Unless the President and Democrats explain why the economy still stinks for most Americans and offer a plan to fix it, the Republican explanation and solution -- it's big government's fault, and all we need do is shrink it -- will prevail.
That will mean more hardship for tens of millions of Americans. It will make it harder to remedy the bad economy. And it will set Republicans up for bigger wins in the future.

Guest Voz: Robert Reich: Why More Immigrants Are an Answer to the Coming Boomer Entitlment Mess

My friend, Robert Reich, posted the following on Huffington Post. He is blogging about what I have been recommending for years:

Why More Immigrants Are an Answer to the Coming Boomer Entitlement Mess

I was born in 1946, just when the boomer wave began. Bill Clinton was born that year too. So was George W. Bush. So was Laura Bush. And Ken Starr (remember him?) And then, the next year, Hillary Clinton. And soon Newt Gingrich (known as "Newty" as a boy). And Cher. Why did so many of us begin getting born in 1946?Simple. My father was in World War II. He came home. My mother was waiting. Ditto for the others.

Sixty years later, we boomers have a lot to be worried about because most of us plan to retire in a few years and Social Security and Medicare are on the way to going bust. I should know because I used to be a trustee of the Social Security and Medicare trust funds. Those of you who are younger than we early boomers have even more to be worried about because if those funds go bust, they won't be there when you're ready to retire. It's already starting to happen. This year Social Security will pay out more in benefits than it receives in payroll taxes. The tipping point came sooner than anyone expected because the recession has kicked so many people off payrolls. But it was coming anyway. And it adds new urgency to reforming Social Security -- a task the president's commission on the nation's debt is focusing on.

So what's the answer? Fed Chair Ben Bernanke this week listed the choices. "To avoid large and unsustainable budget deficits," he said in a speech on Wednesday, "the nation must choose among:

1. higher taxes,

2. modifications to entitlement programs such as Social Security and Medicare,

3. less spending on everything else from education to defense, or

4. some combination of the above."
Bernanke is almost certainly right about "some combination," but he leaves out one other possible remedy that should be included in that combination:

5. Immigration.

You see, the biggest reason Social Security is in trouble, and Medicare as well, is because America is aging so fast. It's not just that so many boomers are retiring. It's also that seniors are living longer. And families are having fewer children. Add it all up and the number of people who are working relative to the number who are retired keeps shrinking.

Forty years ago there were five workers for every retiree. Now there are three. Within a couple of decades, there will be only two workers per retiree. There's no way just two workers will be able or willing to pay enough payroll taxes to keep benefits flowing to every retiree. This is where immigration comes in. Most immigrants are young because the impoverished countries they come from are demographically the opposite of rich countries. Rather than aging populations, their populations are bursting with young people.

Yes, I know: There aren't enough jobs right now even for Americans who want and need them. But once the American economy recovers, there will be. Take a long-term view and most new immigrants to the U.S. will be working for many decades. Get it? One logical way to deal with the crisis of funding Social Security and Medicare is to have more workers per retiree, and the simplest way to do that is to allow more immigrants into the United States. Immigration reform and entitlement reform have a lot to do with one another.

Cross-posted from RobertReich.org

My Friend, Robert Reich´s Ideas on Fixing the Economy!

My friend, Robert Reich, an economic adviser to President Obama, believes Obama´s Jobs Program and government spending are good for our ailing economy.

Many Republicans disagree and call for tax cuts, rebates and limited government spending. Their plans did not work over the last 8 years and will not work in the future!

I tend to agree with my genius friend and my hero Robert!

From Robert Reich´s Blog:

Between now and late January, when the stimulus package will be voted on, we're likely to be treated to a great debate over the wisdom of Keynesianism. Fiscal hawks (Republicans) will claim government is already spending way too much. Even without the stimulus package, next year's budget deficit is likely to be in the range of $1.5 trillion, considering the shrinking economy and what's being spent bailing out Wall Street. The hawks also worry that post-war baby boomers are only a few years away from retirement, meaning that the costs of Social Security and Medicare will balloon.
What the hawks don't get is what John Maynard Keynes understood: when the economy has as much underutilized capacity as we have now, and are likely to have more of in 2009 and 2010 (in all likelihood, over 8 percent of our workforce unemployed, 13 percent underemployed, millions of houses empty, factories idled, and office space unused), government spending that pushes the economy to fuller capacity will of itself shrink future deficits.
Conservative supply-siders, meanwhile, will call for income-tax cuts rather than government spending, claiming that people with more money in their pockets will get the economy moving again more readily than can government. They're wrong, too. Income-tax cuts go mainly to upper-income people, and they tend to save rather than spend.
Even if a rebate could be fashioned for the middle class, it wouldn't do much good because, as we saw from the last set of rebate checks, people tend to use extra cash to pay off debts rather than buy goods and services. Besides, individual purchases wouldn't generate nearly as many American jobs as government spending on infrastructure, social services, and green technologies, because so much of we as individuals buy comes from abroad.
So the government has to spend big time. The real challenge will be for government to spend it wisely -- avoiding special-interest pleadings and pork projects such as bridges to nowhere. We'll need a true capital budget that lays out the nation's priorities rather than the priorities of powerful Washington lobbies. How exactly to achieve this? That's the debate we should be having between now and January 20 or 21st.