Robert Reich: We Can Save the Economy If We Get Serious About Taxing the Rich

It’s one of the central issues of our time. It spawned both the Tea Party and the Occupy movements. It has the potential to deeply sabotage our economy. And, argues former U.S. secretary of labor Robert Reich, the problem is much worse than we think.

Reich, who stands a little less than five foot nothing but was named one of the 10 best United States cabinet ministers of the 20th century by Time magazine, says income inequality isn’t just a threat to the economic future of North American society.

“Losers in rigged games can become very angry,” he says in the documentary Inequality for All, which will be released in the U.S. on Sept. 27. “We’re seeing an entire society that is starting to pull apart.”

Reich, who will speak at Vancouver’s Orpheum theatre Oct. 3at a free event moderated by Anna Maria Tremonti as part of SFU’s 2013 Community Summit, argues in the film that income disparity spiked dramatically in the years before the economic crash of 2007, just as it crashed before the Great Depression.

The documentary layers this and other economic and troubling social indicators together in a graph that looks like the profile of a suspension bridge. We are now near the second peak, and without big changes the North American economy will face serious decline.

On the phone to The Tyee from Los Angeles, along with Inequality director Jacob Kornbluth, Reich says we have not learned enough from the economic calamity we’ve recently experienced. “Unlike the 1930s, we haven’t had the kind of reforms we need to change direction.” In fact, he says, since 2007 economic gains have gone to the rich and inequality has increased.

Reich and Kornbluth also point to other trends – the dramatic rise in the cost of advanced education, the decline of organized labour, the erosion of minimum wage rules, the increase in child poverty, the move of capital into speculative instruments like gold and real estate that don’t actually generate much social wealth – as issues that need to be addressed.

However, they argue it’s not actually specific reforms that we need to champion. First, partly because consumer debt and women in the workplace have masked the decline in middle-class family incomes, we need to have a more constructive, informed conversation about the nature and the extent of the underlying problem.

Top tax rate was once 91 per cent

“I want to test your assumptions,” Reich says in the film, to a class at University of California, Berkeley, where he is a professor of public policy. “If possible I want to shake your assumptions.”

He starts with something a little oblique, and asks the class where they think the $178 cost of making a 3G iPhone was spent. Students naively believe the majority of the money stayed in the United States. But the real surprise is how little went to China, where the phones are assembled. The breakdown? Japan was tops with 34 per cent, followed by Germany (17 per cent) and South Korea (13 per cent). The U.S. came in at six per cent and China at just three.

This is part of Reich’s argument that a highly educated workforce – not cheap manufacturing – is what delivers respectable incomes, and the example is just the beginning of his litany of things we do not know, or are unable to properly discuss.

Reich points to another issue that has escaped rational public debate and bedeviled U.S. legislators over the last year: disparity in taxation.

Copyright: AlterNet