Robert Reich: The Defining Issue: Who Should Get the Tax Cut -- The Rich or Everyone Else?

Robert Reich: The Defining Issue: Who Should Get the Tax Cut -- The Rich or Everyone Else?: "

Who deserves a tax cut more: the top 2 percent -- whose wages and benefits are higher than ever, and among whose ranks are the CEOs and Wall Street mavens whose antics have sliced jobs and wages and nearly destroyed the American economy -- or the rest of us?

Not a bad issue for Democrats to run on this fall, or in 2012.Republicans are hell bent on demanding an extension of the Bush tax cut for their patrons at the top, or else they'll pull the plug on tax cuts for the middle class. This is a gift for the Democrats. But before this can be a defining election issue in the midterms, Democrats have to bring it to a vote. And they've got to do it in the next few weeks, not wait until a lame-duck session after Election Day.

Plus, they have to stick together (Ben Nelson, are you hearing me? House blue-dogs, do you read me? Peter Orszag, will you get some sense?)

Not only is this smart politics. It's smart economics.
The rich spend a far smaller portion of their money than anyone else because, hey, they're rich. That means continuing the Bush tax cut for them wouldn't stimulate much demand or create many jobs.
But it would blow a giant hole in the budget -- $36 billion next year, $700 billion over ten years. Millionaire households would get a windfall of $31 billion next year alone.And the Republican charge that restoring the Clinton tax rates for the rich would hurt the economy -- because it would reduce the 'incentives' of the rich (including the richest small business owners) to create jobs -- is ludicrous.

Under Bill Clinton and his tax rates, the economy roared. It created 22 million jobs.

By contrast, during George Bush's 8 years, commencing with his big 2001 tax cut, the economy created only 8 million jobs. And as the new Census data show, nothing trickled down. In fact, the middle class families did far worse after the Bush tax cut. Between 2001 and 2007 -- even before we were plunged into the Great Recession -- the median wage dropped.

It's an issue that could also be used to expose the giant chasm that's opened between the rich and everyone else -- aided and abetted by Republican policies. As I've noted before, in the late 1970s, the top 1 percent got 9 percent of total national income. By 2007, the top 1 percent got almost a quarter of total national income.

These figures don't even count in taxes. The $1.3 trillion Bush tax cut of 2001 was a huge windfall for people earning over $500,000 a year. They got about 40 percent of its benefits. The Bush tax cut of 2003 was even better for high rollers. Those with net incomes of about $1 million got an average tax cut of $90,000 a year. Yet taxes on the typical middle-income family dropped just $217. Many lower-income families, who still paid payroll taxes, got nothing back at all.

And, again, nothing trickled down.

As I've emphasized, the U.S. economy has suffered mightily from the middle class's lack of purchasing power, while most of the economic gains have gone to the top. (The crisis was masked for years by women moving into paid work, everyone working longer hours, and, more recently, the middle class going into deep debt -- but all those coping mechanisms are now exhausted.) The great challenge ahead is to widen the circle of prosperity so the middle class once again has the capacity to keep the economy going.

In other words, this is the right issue. It's the right time. It allows Democrats to explain what the Bush tax cuts really did, why supply-side economics is bogus, and the economic challenge ahead.
Even if Democrats feel they have to respond to the Republican charge that taxes shouldn't be raised on anyone when the employment rate is 9.6 percent, they have a powerful fallback: Extend the Bush tax cuts for everyone through 2011, then end them for the rich while making them permanent for the middle class.

Get it, Democrats? Please don't blow it this time.

This post originally appeared at robertreich.org
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Fighting to Protect Consumers

Fighting to Protect Consumers: "

Over the past several weeks, the President and I have had extensive conversations about the vital importance of consumer financial protection.

The President asked me, and I enthusiastically agreed, to serve as an Assistant to the President and Special Advisor to the Secretary of the Treasury on the Consumer Financial Protection Bureau. He has also asked me to take on the job to get the new CFPB started—right now. The President and I are committed to the same vision on CFPB, and I am confident that I will have the tools I need to get the job done.

President Obama understands the importance of leveling the playing field again for families and creating protections that work not just for the wealthy or connected, but for every American. The new consumer bureau is based on a pretty simple idea: people ought to be able to read their credit card and mortgage contracts and know the deal. They shouldn’t learn about an unfair rule or practice only when it bites them—way too late for them to do anything about it. The new law creates a chance to put a tough cop on the beat and provide real accountability and oversight of the consumer credit market. The time for hiding tricks and traps in the fine print is over. This new bureau is based on the simple idea that if the playing field is level and families can see what’s going on, they will have better tools to make better choices.

If the CFPB can succeed at leveling the playing field, we can go a long way toward repairing a gaping hole in the budgets of millions of families. But nobody has ever thought or argued that the consumer bureau can fix everything. Lost jobs, stagnant incomes, rising costs for college, dwindling retirement savings—there’s a lot of work to be done.

When she was 16, my grandmother, Hannie Reed, drove a wagon in the Oklahoma land rush. Her mother had died, so she was up front with her little brothers and sisters bouncing around in the back. When I was growing up, she talked about life on the prairie, about marrying my grandfather and making a living building one-room schoolhouses, about getting wiped out in the Great Depression. She was hit with hard challenges throughout her life, but the moral of her stories was always the same: she would solve her problems one at a time by pulling up her socks and getting to work.

It’s time for all of us to pull up our socks and get to work.

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Let's Stop Torturing Facts and Start Working Together

Let's Stop Torturing Facts and Start Working Together: "

Lindsay Graham has often shown that he’s fully capable of being reasonable and bipartisan. Which made it particularly disappointing to see his misleading use of numbers yesterday.

On Meet the Press, the Senator, against a wave of evidence to the contrary, argued that the Recovery Act has been “an absolute disaster” and called for cancelling “a lot” of what’s left in the bill (transcript here).

His evidence for this claim: “...we’ve lost two-and-a-half million jobs since the stimulus passed.”

Take a look at the figure below and you’ll see why this is so misleading. He’s conflating two periods of very different employment trends. In the first, when his team’s policies dominated, employment hemorrhaged at nightmarish rates. In the second, when the Recovery Act was on the scene, job losses in the private sector began to diminish, and this year, turned positive.

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