Tabacco: Some of you may be aware that the Texas School Board has altered all the text books in America for political and bigoted purposes. Among those “alterations” is the dropping of the word “Capitalism” in favor of “Free Enterprise” and other less objectionable and more euphemistic appellations. However, they have merely changed the title, not the institution.
Newt Gingrich, in like manner, attempts to “reinvent” himself. He’s not changing “Newt”; he’s attempting to change our perception of him! Newt has a multitude of comparable examples to draw upon: British Petroleum to “BP”, Black Water to “XE”, Extortion and Bribery to “Lobbying” to name just a few. Shakespeare called it “A rose by any other name”. However these “reinventions” smell like the stuff in its natural form that roses require in order to grow rather than the roses themselves.
We have been propagandized all these decades to revere “Capitalism” and abhor “Socialism” as “UN-American”. It is through Capitalism that America has been dichotomized into Have-Mores and the other 99%. So if Capitalism is American and Socialism is not, perhaps Americans need to change their perspectives as well as their Politics and their Economics! Indeed, perhaps the World needs to change its perspectives as well as its Politics and its Economics!
Richard Wolff: Eurozone Woes Result from Mating of Our “Dysfunctional” Political, Economic Systems
European leaders are preparing to unveil their plans for addressing the sovereign debt crisis that’s threatened to tear apart the Eurozone. Both France and Germany are expected to push for changes to the Eurozone treaty, including centralized oversight of national budgets and tighter reins on debt. In a speech on Thursday, French President Nicolas Sarkozy said radical changes are needed in order to save the euro. Sarkozy’s address came after central banks, including the U.S. Federal Reserve and European Central Bank, took coordinated action to prevent a credit crunch among European banks. For more on the developing crisis in Europe and its implications worldwide, we are joined by economist and professor, Richard Wolff. He is the author of several books, including “Capitalism Hits the Fan: The Global Economic Meltdown and What to Do About It.” “The Fed is recognizing that another bailout is needed,” Wolff says. “All the steps taken over the last few years to try to cope with this crisis of our capitalist system haven’t worked, and so we’re now again on the brink of a crisis, and again public money and public institutions are bailing out a private banking system and a private enterprise system that is not working and is not solving its own problems.” Wolff continues, “The fundamental question is, you’ve got to deal with an economic system that isn’t working… You’ve got to take big steps that change the way this economic system works, or find a new system… It’s as though we have a dysfunctional economic system coupled to a now dysfunctional political system, and instead of fixing each other, these two systems are making each other in a kind of a spiral downturn.” [includes rush transcript]
Richard D. Wolff, Emeritus Professor of Economics at University of Massachusetts, Amherst, and visiting professor at New School University. He is the author of several books, including Capitalism Hits the Fan: The Global Economic Meltdown and What to Do About It.
- Political Crisis in Greece Amidst Revolt Against Massive Budget Cuts and Tax Hikes
- Millions of British Public Sector Workers Take to the Streets in Historic General Strike
- Reporter Greg Palast Exposes How U.S. “Vulture” Funds Make Millions By Exploiting African Nations
- As Occupy Enters Third Month, a Look at How Protesters Are Building a Global Movement
- Italian Financial Crisis Prompts Berlusconi’s Exit, Escalates Fears of Europe’s Next Massive Bailout
This transcript is available free of charge. However, donations help us provide closed captioning for the deaf and hard of hearing on our TV broadcast. Thank you for your generous contribution.
- “Capitalism Hits the Fan: The Global Economic Meltdown and What to Do About It.” By Richard D. Wolff. (Olive Branch Press, 2009
- Professor Richard D. Wolff’s Official Website
JUANGONZALEZ: European leaders are preparing to unveil their plans for addressing the sovereign debt crisis that’s threatened to tear apart the euro zone. Both France and Germany are expected to push for changes to the eurozone treaty, including centralized oversight of national budgets and tighter reins on debt. In a speech Thursday, French President Nicolas Sarkozy said radical changes are needed in order to save the euro.
PRESIDENTNICOLASSARKOZY: [translated] Let me say it here: Europe must be rethought, refounded. It is urgent. The world won’t wait for Europe. If Europe doesn’t change fast enough, the history of Europe will be written without it. This is France’s conviction, and it is Germany’s conviction. We must discuss our budget policy, not so that they should be the same everywhere when situations are different, but so that they can converge rather than become more distant. Let’s examine our budgets, with punishments that are more automatic, more rapid and more strict for those who do not respect their commitments.
JUANGONZALEZ: Sarkozy’s address came after central banks, including the U.S. Federal Reserve and the European Central Bank, took coordinated action to prevent a credit crunch among European banks.
Well, for more on the developing crisis in Europe, we’re joined by Richard Wolff, Emeritus Professor of Economics at the University of Massachusetts, Amherst, and visiting professor at New School University. He’s the author of several books, including Capitalism Hits the Fan: The Global Economic Meltdown and What to Do About It.
Welcome to Democracy Now!
RICHARDWOLFF: Thank you, Juan.
JUANGONZALEZ: I want to start with this decision of the Federal Reserve Bank, as well with the European Central Bank, to make more money available to European banks.
RICHARDWOLFF: Well, this is not the first time the Fed has done this. In fact, the Fed is recognizing that another bailout is needed, that all the steps taken over the last few years to try to cope with this crisis of our capitalist system haven’t worked, and so we’re now again on the brink of a crisis, and again public money and public institutions are bailing out a private banking system and a private enterprise system that is not working and is not solving its own problems.
JUANGONZALEZ: But this is now again the Fed helping out not even U.S.—bailing out not only U.S. banks, we’re talking about European banks, as well, now.
RICHARDWOLFF: Yes, and I think it’s a wonderful illustration for everyone about how interdependent the world economy has become. The United States will suffer if the European situation keeps going in the direction it’s going, just as the reverse has been true: many of Europe’s problems right now come from the crisis that began in the United States in 2007. And I think the Federal Reserve realizes that to observe national boundaries is to put your head in the sand and not deal with what will happen here in the United States if something isn’t done.
JUANGONZALEZ: The continuing conflict among the European countries, with Germany and France, on the one hand, trying to preach austerity to the rest of the members of the eurozone, could you—what’s your analysis of what is going on there?
RICHARDWOLFF: I think what you have in Europe is a failure to understand that if you have very unequal members of your society, there’s going to be tension that has to be dealt with. The Germans are the most powerful economy. Most of that has nothing to do with Germany, per se, it has to do with the fact of history, that a few years ago, just as the European Union was coming together, the collapse of eastern Germany brought into the western German economy a highly skilled, highly disciplined, and low-paid industrial workforce that gave Germany an advantage, because of the collapse of Eastern Europe, that the other societies in Western Europe did not have. And so, Germany got a jumpstart on this thing, is doing really pretty well for a whole bunch of reasons, and wants everybody else to take all the suffering from this economic crisis. The rest of the Europeans are not willing to do it. The Greeks are fighting back—the Portuguese, the Irish, the Spanish, the Italians. And we’re only at the beginning of that process.
Fundamentally, this is a struggle to take a crisis, caused by the business community and the governments they support, and make the mass of people pay for it. That’s what austerity means. And the test here is whether the mass of people will absorb it and accept it. And I think what’s happening is that they didn’t accept it in Greece, they’re not accepting it in Italy, and so they’re trying to make it a continental austerity program, led by the powerful countries. And I don’t think that’s going to work any better than what has been done in the individual countries.
JUANGONZALEZ: Well, there was another 24-hour general strike in Greece to protest these austerity measures yesterday. And you’re seeing a situation where, as you say, the individual national governments are not being able to overcome the resistance of their own populations to these measures. So, is, in a sense, this push by Germany and France for greater integration a means of creating a new power over these national governments?
RICHARDWOLFF: It’s the attempt to do that. But, you know, if you internationalize the pressure to produce austerity, you’re going to provoke and organize the counter, the revolution from below, that says, “We are not going to pay for a crisis we didn’t cause” and for a crisis that has been resolved by trickle-down economics, in which all the governments, like here in the United States, helped the banks, helped the big corporations, boost the stock market, leaving the mass of people to look at a recovery program that doesn’t include them. And then now to be asked to pay for the crisis—the recovery program that was never for them? It’s too much. And it’s provoking, whether it’s Occupy Wall Street here or the anti-austerity general strikes in Europe, a kind of movement from below, the likes of which we have not seen for half a century.
JUANGONZALEZ: And, of course, the movement is not just within the eurozone itself. Britain just went for a major general strike, as well—
JUANGONZALEZ: —against the attempts at austerity there!
RICHARDWOLFF: In England, this strike was as big as the last one that everyone remembers back in the 1920s. You saw unions and students and others coming together in huge numbers, challenging Britain’s government, which is a conservative government now. But the same thing is happening in other societies where you have left governments. Anyone that’s going along with this austerity is in political trouble and will be in deeper political trouble as this crisis deepens. And I also think, as an American, that we ought to be very careful before we call this a European crisis. What we’re seeing in Europe is highly likely to be a foretaste of what will come here.
JUANGONZALEZ: The direct involvement of some of the major financial institutions of the United States in this crisis, obviously, because many of these governments took out loans, or huge loans, but often the governments insure those loans through various kinds of swaps, of credit swaps. And those credit swaps usually, because they’re not charted very well and there’s no exchange for them, no one really knows who holds them, for the most part. So the exposure of the U.S. banks to the crisis in Europe?
RICHARDWOLFF: I think it’s very profound. I think American banks have a closer relationship with their European counterparts than perhaps at any time before. I think that’s why the Federal Reserve is so deeply involved with banks abroad, as it was in 2008 and ’09 and now again, that we know enough to know that major economic downturn in Europe will impact the United States immediately in our credit situation. The banks, many American banks, which are already treading on thin ice—you just have to look at their stock prices to see how nervous everyone is about them—they have very little slack. And you have a problem in Europe, that’s going to take American banks over the edge, which means they will have to go back to the United States government for yet another bailout, when the American people are still angry about the first one. You’re getting politically impossible problems arising because of this interdependence. And again, it’s an illustration that the private enterprise business community that kept telling us for the last 30 years that it was the way to go, the way to prosperity, the way to well-being, it’s not working out that way. They keep demanding more and more from the government, and the problems get worse, not better.
JUANGONZALEZ: And the crisis—if you listen to President Nicolas Sarkozy of France, the crisis is not something that will await resolution. There’s a summit meeting next week of the European leaders, and Sarkozy is saying that if the right decisions aren’t made, Europe could be swept away.
RICHARDWOLFF: The problem with Mr. Sarkozy, who is widely known in his own country under the French term, le cloun, which in English translates like it sounds, “the clown,” he keeps telling everybody that he’s going to act in the next week, that he has a meeting, usually with Mrs. Merkel from Germany, and then big statements are made, much drama—the French like that anyway—and nothing happens. You see this over and over and over again, because the fundamental question is, you’ve got to deal with an economic system that isn’t working. You can’t dick around a little bit, dicker here, there, to make little adjustments, because that’s not the nature of the problem. It’s a little bit like putting a Band-Aid on when you’ve got a cancer. You’ve got to take big steps that change the way this economic system works, or find a new system. These are not the politicians that can even think like that, let alone do it. So you watch them failing and the business community worrying and taking its own steps, making it harder for the political system. It’s as though we have a dysfunctional economic system coupled to a now dysfunctional political system, and instead of fixing each other, these two systems are making each other in a kind of a spiral downturn, and the rest of the world watches. And the working mass of people are losing confidence in this system at a pace that I have not seen in my lifetime.
JUANGONZALEZ: The United States, the Obama administration now is attempting to ride the backs of the 99 percent movement by increasingly talking about its policies as defending the workingman and the middle class versus the 1 percent. Your sense of how that is working out in reality, in terms of the actual policies versus the rhetoric that the Obama administration is putting forth?
RICHARDWOLFF: Well, your question answers itself. This is all rhetorical game playing. None of what is being proposed, nothing that is being done, again, deals with the fundamental problem. The real wages of the American working people, which is the foundation of our economy, have been stagnant for the last 35 years. Nothing is happening now to deal with that situation. In fact, the high unemployment, which everyone in the government admits, is now here with us for years into the future, makes sure there will be no increase in real wages that workers actually get. Meanwhile, their pensions are being reduced; their benefits are being reduced. I noticed this last week, that everything from the American Airlines to the Philadelphia Symphony Orchestra are going into bankruptcy in order to be able to reduce the pensions that workers have paid for. I mean, everywhere, we see austerity shrinking the American economy, not solving the problem.
And a little adjustment on the edges, again, as in Europe, is not an adequate response to this situation, let alone facing that the system isn’t working, which is the deep insight of the Occupy Wall Street movement. And nothing—when you clear them out of a camp, it doesn’t change the appropriateness and the on-target understanding that that movement demonstrates.
JUANGONZALEZ: The headline in today’s New York Times, the Obama administration is trying use the reduction of the payroll tax to create a wedge against the Republicans, showing that they don’t want to lower taxes because this is an attempt to lower taxes for 160 million Americans, by reducing the Social Security payroll tax. But there is a—as we were discussing before the show, there’s a problem with that, that it was already reduced temporarily last year. If you reduce it further, sooner or later you’re going to have to reinstitute it. And then the issue becomes, is this going to become a way for some people in the Democratic Party, as well as Republicans, to institute their reform of Social Security, creating private savings accounts in place of a guaranteed retirement income?
RICHARDWOLFF: Yes, I think that you’re seeing a temporary palliative. The Obama administration has been unable or unwilling to intervene in the economy in the kind massive way that we need, and so it does these little things, including this program of extending the cut in the Social Security. But the law that provides for that also requires that the United States Treasury make up to the Social Security system, dollar for dollar, whatever it isn’t getting by lowering. So it’s a little bit of a card shuffle here. We’re having to take money that the government might have spent on other important things and give it to Social Security to make up for what Social Security isn’t getting from the mass of people. This is taking out of one pocket and putting into the other. It is in no way adequate to solve the problem.
So you have then this rhetoric, this political playing. It’s like saying we want to tax really rich people, and then when you look at the specifics, they want to raise it from 35 percent to 39 percent. That’s the big increase of taxes on the rich? If we go back to the ’50s and ’60s, the highest income tax bracket in this country was 91 percent, not 35 or 39. The massive tax cut on the rich is something that can’t be discussed, neither by Republicans or Democrats, yet that would be the best possible way to raise the money, without raising the deficit, to pay for a stimulation of this economy, which it so desperately needs. That is so far off the table that we never discuss it. We act like it’s not an option, just as in Europe, because the rich and the corporations have to be kept free of any criticism, of any going after their wealth to solve a problem—doubly ironic, since they’re the ones who caused this crisis, and they’re the ones who have benefited so far by the recovery bailouts that the governments have done. For them not to make a commitment now is an extraordinary act of political arrogance, which I suspect they will come to regret.
JUANGONZALEZ: Another proposal that’s been floating around but not gotten much attention at all is the financial transaction tax, which would basically not only begin to tax these constant trades that are occurring on Wall Street, but also, in one sense, might dampen some of the constant speculation in stocks, where people are buying and selling stocks on a daily basis, not really investing in these companies, but just speculating in them.
RICHARDWOLFF: Well, it’s a very popular idea, particularly in Europe, where it’s caught on more than here, even though it’s often attributed to an American economics professor, who was my professor, as it happens, James Tobin, a Nobel Prize winner. The idea is to tax transactions, to basically hit with a sales tax on transactions, the way the rest of us pay sales tax for the things we buy in the local store. Of course it’s a good idea in the sense that it taxes something that has escaped taxes and should be paying its fair share. I think the mistake about it comes in seeing it as some kind of magic bullet. In order for it to make it really raise huge amounts of money, it would have to be substantial. And all the forces that have prevented us from dealing with our economic problem are arrayed to make sure it doesn’t happen. And they play these little games in which the British say, “We can’t do it, because then everybody will go to America, where they don’t have to pay it,” and the Americans say, “We can’t do it, because everybody will go to Europe.” And so the different groups in power use their different situations to escape it. But it is one of a package of taxes, which, under a different plan, if you were to take this problem seriously and see where the money is to solve our problems, sure, this would be part of it.
JUANGONZALEZ: I want to ask you—2012 was declared recently by the United Nations to be the year of co-operatives. Can you speak to alternative democratic models that might be brought into play and might have some impact on where the economies of the U.S. and Europe are heading?
RICHARDWOLFF: Yeah. I think that we’re going to see a lot of interest, because of the U.N., but for many other reasons. This is a system that isn’t working, the traditional enterprise that we have in the United States. Shareholders, usually a few that own the bulk of the shares, select a board of directors, 15 to 20 people who make all the decisions. They’ve made those decisions—where to invest, how to invest, what to do with the profits. And here we are with the results: high unemployment, economies in collapse, bailouts needed almost on a regular basis. I think more and more people are beginning to recognize we need fundamental change.
And one of the models of an alternative would be a different way to organize a store, an office, a factory. And instead of a top-down, conventional, shareholder-driven entity, why not bring, as we say—and in your program, in particular, it would be appropriate—why not bring some democracy to the enterprise? Why not try to let the people in each enterprise make these decisions democratically and collectively, both within their enterprise and with the communities that are interdependent with these enterprises? Let’s start from that.
And, you know, think a minute with me. If the workers themselves made the decision, would they move the factory out of the country as quickly as we see capitalist enterprises do? I don’t think so. Would they use dangerous technologies that are toxic? Not likely, because they live with it, and so do their children, right there. The decision isn’t made by a board of directors thousands of miles away. And would they use the profits in a more socially useful way that benefits everybody? Well, they are everybody. That’s what democracy means. And I think we would see a lot less speculation, a lot less of the problems that have gotten us to the impasse now, if we were open enough as a society to look at alternative ways of organizing our business and make our commitment to democracy mean something, not just in the communities where we live, but in the workplaces where we spend most of our adult lives.
JUANGONZALEZ: And in the about 30 seconds that we have left, the impact of the Occupy Wall Street movement on the national debate on these issues?
RICHARDWOLFF: It is long overdue. I am deeply moved by it. They have put this question of economics, how we live, how we’ve divided our society between rich, as a tiny number, and poor, they’ve put that on the national agenda. For that, we will be grateful to them for years to come. The taboo about looking at capitalism the way we’ve looked at our other institutions is overcome, and they’re the ones that deserve the credit.
JUANGONZALEZ: Alright, well, I want to thank you very much, Richard Wolff, Emeritus Professor of Economics at the University of Massachusetts, Amherst, and visiting professor at New School University. He hosts a weekly program on WBAI 99.5 called The Economic Update every Saturday at noon. And he’s also the author of Capitalism Hits the Fan.
FULL TEXT: Read Transcript of President Obama’s Economic Speech in Osawatomie, Kansas
Below are the full remarks, as prepared for delivery, of President Barack Obama’s speech given on the economy in Osawatomie, Kansas Tuesday afternoon.
Good afternoon. I want to start by thanking a few of the folks who’ve joined us today. We’ve got the mayor of Osawatomie, Phil Dudley; your superintendent, Gary French; the principal of Osawatomie High, Doug Chisam. And I’ve brought your former governor, who’s now doing an outstanding job as our Secretary of Health and Human Services, Kathleen Sebelius.
It is great to be back in the state of Kansas. As many of you know, I’ve got roots here. I’m sure you’re all familiar with the Obamas of Osawatomie. Actually, I like to say that I got my name from my father, but I got my accent – and my values – from my mother. She was born in Wichita. Her mother grew up in Augusta. And her father was from El Dorado. So my Kansas roots run deep.
My grandparents served during World War II — he as a soldier in Patton’s Army, she as a worker on a bomber assembly line. Together, they shared the optimism of a nation that triumphed over a Depression and fascism. They believed in an America where hard work paid off, responsibility was rewarded, and anyone could make it if they tried — no matter who you were, where you came from, or how you started out.
These values gave rise to the largest middle class and the strongest economy the world has ever known. It was here, in America, that the most productive workers and innovative companies turned out the best products on Earth, and every American shared in that pride and success — from those in executive suites to middle management to those on the factory floor. If you gave it your all, you’d take enough home to raise your family, send your kids to school, have your health care covered, and put a little away for retirement.
Today, we are still home to the world’s most productive workers and innovative companies. But for most Americans, the basic bargain that made this country great has eroded. Long before the recession hit, hard work stopped paying off for too many people. Fewer and fewer of the folks who contributed to the success of our economy actually benefitted from that success. Those at the very top grew wealthier from their incomes and investments than ever before. But everyone else struggled with costs that were growing and paychecks that weren’t – and too many families found themselves racking up more and more debt just to keep up.
For many years, credit cards and home equity loans papered over the harsh realities of this new economy. But in 2008, the house of cards collapsed. We all know the story by now: Mortgages sold to people who couldn’t afford them, or sometimes even understand them. Banks and investors allowed to keep packaging the risk and selling it off! Huge bets – and huge bonuses – made with other people’s money on the line. Regulators who were supposed to warn us about the dangers of all this, but looked the other way or didn’t have the authority to look at all.
It was wrong. It combined the breathtaking greed of a few with irresponsibility across the system. And it plunged our economy and the world into a crisis from which we are still fighting to recover. It claimed the jobs, homes, and the basic security of millions – innocent, hard-working Americans who had met their responsibilities, but were still left holding the bag.
Ever since, there has been a raging debate over the best way to restore growth and prosperity, balance and fairness. Throughout the country, it has sparked protests and political movements – from the Tea Party to the people who have been occupying the streets of New York and other cities. It’s left Washington in a near-constant state of gridlock. And it’s been the topic of heated and sometimes colorful discussion among the men and women who are running for president.
But this isn’t just another political debate. This is the defining issue of our time. This is a make or break moment for the middle class, and all those who are fighting to get into the middle class. At stake is whether this will be a country where working people can earn enough to raise a family, build a modest savings, own a home, and secure their retirement.
Now, in the midst of this debate, there are some who seem to be suffering from a kind of collective amnesia. After all that’s happened, after the worst economic crisis since the Great Depression, they want to return to the same practices that got us into this mess. In fact, they want to go back to the same policies that have stacked the deck against middle-class Americans for too many years. Their philosophy is simple: we are better off when everyone is left to fend for themselves and play by their own rules.
Well, I’m here to say they are wrong. I’m here to reaffirm my deep conviction that we are greater together than we are on our own. I believe that this country succeeds when everyone gets a fair shot, when everyone does their fair share, and when everyone plays by the same rules. Those aren’t Democratic or Republican values, 1% values or 99% values. They’re American values, and we have to reclaim them.
You see, this isn’t the first time America has faced this choice. At the turn of the last century, when a nation of farmers was transitioning to become the world’s industrial giant, we had to decide: would we settle for a country where most of the new railroads and factories were controlled by a few giant monopolies that kept prices high and wages low? Would we allow our citizens and even our children to work ungodly hours in conditions that were unsafe and unsanitary? Would we restrict education to the privileged few? Because some people thought massive inequality and exploitation was just the price of progress.
Theodore Roosevelt disagreed. He was the Republican son of a wealthy family. He praised what the titans of industry had done to create jobs and grow the economy. He believed then what we know is true today: that the free market is the greatest force for economic progress in human history. It’s led to a prosperity and standard of living unmatched by the rest of the world.
But Roosevelt also knew that the free market has never been a free license to take whatever you want from whoever you can. It only works when there are rules of the road to ensure that competition is fair, open, and honest. And so he busted up monopolies, forcing those companies to compete for customers with better services and better prices. And today, they still must. He fought to make sure businesses couldn’t profit by exploiting children, or selling food or medicine that wasn’t safe. And today, they still can’t.
In 1910, Teddy Roosevelt came here, to Osawatomie, and laid out his vision for what he called a New Nationalism. “Our country,” he said, “…means nothing unless it means the triumph of a real democracy…of an economic system under which each man shall be guaranteed the opportunity to show the best that there is in him.”
For this, Roosevelt was called a radical, a socialist, even a communist. But today, we are a richer nation and a stronger democracy because of what he fought for in his last campaign: an eight hour work day and a minimum wage for women; insurance for the unemployed, the elderly, and those with disabilities; political reform and a progressive income tax.
Today, over one hundred years later, our economy has gone through another transformation. Over the last few decades, huge advances in technology have allowed businesses to do more with less, and made it easier for them to set up shop and hire workers anywhere in the world. And many of you know firsthand the painful disruptions this has caused for a lot of Americans.
Factories where people thought they would retire suddenly picked up and went overseas, where the workers were cheaper. Steel mills that needed 1,000 employees are now able to do the same work with 100, so that layoffs were too often permanent, not just a temporary part of the business cycle. These changes didn’t just affect blue-collar workers. If you were a bank teller or a phone operator or a travel agent, you saw many in your profession replaced by ATMs or the Internet. Today, even higher-skilled jobs like accountants and middle management can be outsourced to countries like China and India. And if you’re someone whose job can be done cheaper by a computer or someone in another country, you don’t have a lot of leverage with your employer when it comes to asking for better wages and benefits – especially since fewer Americans today are part of a union.
Now, just as there was in Teddy Roosevelt’s time, there’s been a certain crowd in Washington for the last few decades, who respond to this economic challenge with the same old tune. “The market will take care of everything,” they tell us. If only we cut more regulations and cut more taxes – especially for the wealthy – our economy will grow stronger. Sure, there will be winners and losers. But if the winners do really well, jobs and prosperity will eventually trickle down to everyone else. And even if prosperity doesn’t trickle down, they argue, that’s the price of liberty.
It’s a simple theory – one that speaks to our rugged individualism and healthy skepticism of too much government. It fits well on a bumper sticker. Here’s the problem: It doesn’t work. It’s never worked. It didn’t work when it was tried in the decade before the Great Depression. It’s not what led to the incredible post-war boom of the 50s and 60s. And it didn’t work when we tried it during the last decade.
Remember that in those years, in 2001 and 2003, Congress passed two of the most expensive tax cuts for the wealthy in history, and what did they get us? The slowest job growth in half a century. Massive deficits that have made it much harder to pay for the investments that built this country and provided the basic security that helped millions of Americans reach and stay in the middle class – things like education and infrastructure; science and technology; Medicare and Social Security.
Remember that in those years, thanks to some of the same folks who are running Congress now, we had weak regulation and little oversight, and what did that get us? Insurance companies that jacked up people’s premiums with impunity, and denied care to the patients who were sick. Mortgage lenders that tricked families into buying homes they couldn’t afford. A financial sector where irresponsibility and lack of basic oversight nearly destroyed our entire economy!
We simply cannot return to this brand of your-on-your-own economics if we’re serious about rebuilding the middle class in this country. We know that it doesn’t result in a strong economy. It results in an economy that invests too little in its people and its future. It doesn’t result in a prosperity that trickles down. It results in a prosperity that’s enjoyed by fewer and fewer of our citizens.
Look at the statistics. In the last few decades, the average income of the top one percent has gone up by more than 250%, to $1.2 million per year. For the top one hundredth of one percent, the average income is now $27 million per year. The typical CEO who used to earn about 30 times more than his or her workers now earns 110 times more. And yet, over the last decade, the incomes of most Americans have actually fallen by about six percent.
This kind of inequality – a level we haven’t seen since the Great Depression – hurts us all. When middle-class families can no longer afford to buy the goods and services that businesses are selling, it drags down the entire economy, from top to bottom. America was built on the idea of broad-based prosperity – that’s why a CEO like Henry Ford made it his mission to pay his workers enough so that they could buy the cars they made. It’s also why a recent study showed that countries with less inequality tend to have stronger and steadier economic growth over the long run.
Inequality also distorts our democracy. It gives an outsized voice to the few who can afford high-priced lobbyists and unlimited campaign contributions, and runs the risk of selling out our democracy to the highest bidder. And it leaves everyone else rightly suspicious that the system in Washington is rigged against them – that our elected representatives aren’t looking out for the interests of most Americans.
More fundamentally, this kind of gaping inequality gives lie to the promise at the very heart of America: that this is the place where you can make it if you try. We tell people that in this country, even if you’re born with nothing, hard work can get you into the middle class; and that your children will have the chance to do even better than you. That’s why immigrants from around the world flocked to our shores.
And yet, over the last few decades, the rungs on the ladder of opportunity have grown farther and farther apart, and the middle class has shrunk. A few years after World War II, a child who was born into poverty had a slightly better than 50-50 chance of becoming middle class as an adult. By 1980, that chance fell to around 40%. And if the trend of rising inequality over the last few decades continues, it’s estimated that a child born today will only have a 1 in 3 chance of making it to the middle class.
It’s heartbreaking enough that there are millions of working families in this country who are now forced to take their children to food banks for a decent meal. But the idea that those children might not have a chance to climb out of that situation and back into the middle class, no matter how hard they work? That’s inexcusable. It’s wrong. It flies in the face of everything we stand for.
Fortunately, that’s not a future we have to accept. Because there’s another view about how we build a strong middle class in this country – a view that’s truer to our history; a vision that’s been embraced by people of both parties for more than two hundred years.
It’s not a view that we should somehow turn back technology or put up walls around America. It’s not a view that says we should punish profit or success or pretend that government knows how to fix all society’s problems. It’s a view that says in America, we are greater together – when everyone engages in fair play, everyone gets a fair shot, everyone does their fair share.
So what does that mean for restoring middle-class security in today’s economy?
It starts by making sure that everyone in America gets a fair shot at success. The truth is, we’ll never be able to compete with other countries when it comes to who’s best at letting their businesses pay the lowest wages or pollute as much as they want. That’s a race to the bottom that we can’t win – and shouldn’t want to win. Those countries don’t have a strong middle-class. They don’t have our standard of living.
The race we want to win – the race we can win – is a race to the top; the race for good jobs that pay well and offer middle-class security. Businesses will create those jobs in countries with the highest-skilled, highest-educated workers; the most advanced transportation and communication; the strongest commitment to research and technology.
The world is shifting to an innovation economy. And no one does innovation better than America! No one has better colleges and universities. No one has a greater diversity of talent and ingenuity. No one’s workers or entrepreneurs are more driven or daring. The things that have always been our strengths match up perfectly with the demands of this moment.
But we need to meet the moment. We need to up our game. And we need to remember that we can only do that together.
It starts by making education a national mission – government and businesses, parents and citizens. In this economy, a higher education is the surest route to the middle class. The unemployment rate for Americans with a college degree or more is about half the national average. Their income is twice as high as those who don’t have a high school diploma. We shouldn’t be laying off good teachers right now – we should be hiring them. We shouldn’t be expecting less of our schools – we should be demanding more. We shouldn’t be making it harder to afford college – we should be a country where everyone has the chance to go.
In today’s innovation economy, we also need a world-class commitment to science, research, and the next generation of high-tech manufacturing. Our factories and their workers shouldn’t be idle. We should be giving people the chance to get new skills and training at community colleges, so they can learn to make wind turbines and semiconductors and high-powered batteries. And by the way – if we don’t have an economy built on bubbles and financial speculation, our best and brightest won’t all gravitate towards careers in banking and finance. Because if we want an economy that’s built to last, we need more of those young people in science and engineering. This country shouldn’t be known for bad debt and phony profits. We should be known for creating and selling products all over the world that are stamped with three proud words: Made in America.
Today, manufacturers and other companies are setting up shop in places with the best infrastructure to ship their products, move their workers, and communicate with the rest of the world. That’s why the over one million construction workers who lost their jobs when the housing market collapsed shouldn’t be sitting at home with nothing to do. They should be rebuilding our roads and bridges; laying down faster railroads and broadband; modernizing our schools – all the things other countries are already doing to attract good jobs and businesses to their shores.
Yes, businesses, not government, will always be the primary generator of good jobs with incomes that lift people into the middle class and keep them there. But as a nation, we have always come together, through our government, to help create the conditions where both workers and businesses can succeed. Historically, that hasn’t been a partisan idea. Franklin Roosevelt worked with Democrats and Republicans to give veterans of World War II, including my grandfather, the chance to go to college on the GI Bill. It was Republican President Dwight Eisenhower, a proud son of Kansas, who started the interstate highway system and doubled-down on science and research to stay ahead of the Soviets.
Of course, those productive investments cost money. And so we’ve also paid for these investments by asking everyone to do their fair share. If we had unlimited resources, no one would ever have to pay any taxes and we’d never have to cut any spending. But we don’t have unlimited resources. And so we have to set priorities! If we want a strong middle class, then our tax code must reflect our values. We have to make choices.
Today that choice is very clear. To reduce our deficit, I’ve already signed nearly $1 trillion of spending cuts into law, and proposed trillions more – including reforms that would lower the cost of Medicare and Medicaid.
But in order to actually close the deficit and get our fiscal house in order, we have to decide what our priorities are. Most immediately, we need to extend a payroll tax cut that’s set to expire at the end of this month. If we don’t do that, 160 million Americans will see their taxes go up by an average of $1,000, and it would badly weaken our recovery.
But in the long term, we have to rethink our tax system more fundamentally. We have to ask ourselves: Do we want to make the investments we need in things like education, and research, and high-tech manufacturing? Or do we want to keep in place the tax breaks for the wealthiest Americans in our country? Because we can’t afford to do both! That’s not politics. That’s just math.
So far, most of the Republicans in Washington have refused, under any circumstances, to ask the wealthiest Americans to go the same tax rates they were paying when Bill Clinton was president.
Now, keep in mind, when President Clinton first proposed these tax increases, folks in Congress predicted they would kill jobs and lead to another recession. Instead, our economy created nearly 23 million jobs and we eliminated the deficit. Today, the wealthiest Americans are paying the lowest taxes in over half a century. This isn’t like in the early 50s, when the top tax rate was over 90%, or even the early 80s, when it was about 70%. Under President Clinton, the top rate was only about 39%. Today, thanks to loopholes and shelters, a quarter of all millionaires now pay lower tax rates than millions of middle-class households. Some billionaires have a tax rate as low as 1%. One percent.
This is the height of unfairness. It is wrong that in the United States of America, a teacher or a nurse or a construction worker who earns $50,000 should pay a higher tax rate than somebody pulling in $50 million. It is wrong for Warren Buffett’s secretary to pay a higher tax rate than Warren Buffett. And he agrees with me. So do most Americans – Democrats, Independents, and Republicans. And I know that many of our wealthiest citizens would agree to contribute a little more if it meant reducing the deficit and strengthening the economy that made their success possible.
This isn’t about class warfare. This is about the nation’s welfare. It’s about making choices that benefit not just the people who’ve done fantastically well over the last few decades, but that benefits the middle class, and those fighting to get to the middle class, and the economy as a whole.
Finally, a strong middle class can only exist in an economy where everyone plays by the same rules, from Wall Street to Main Street. As infuriating as it was for all of us, we rescued our major banks from collapse, not only because a full blown financial meltdown would have sent us into a second Depression, but because we need a strong, healthy financial sector in this country.
But part of the deal was that we would not go back to business as usual. That’s why last year we put in place new rules of the road that refocus the financial sector on this core purpose: getting capital to the entrepreneurs with the best ideas, and financing to millions of families who want to buy a home or send their kids to college. We’re not all the way there yet, and the banks are fighting us every inch of the way. But already, some of these reforms are being implemented. If you’re a big bank or risky financial institution, you’ll have to write out a “living will” that details exactly how you’ll pay the bills if you fail, so that taxpayers are never again on the hook for Wall Street’s mistakes. There are also limits on the size of banks and new abilities for regulators to dismantle a firm that goes under. The new law bans banks from making risky bets with their customers’ deposits, and takes away big bonuses and paydays from failed CEOs, while giving shareholders a say on executive salaries.
All that is being put in place as we speak. Now, unless you’re a financial institution whose business model is built on breaking the law, cheating consumers, or making risky bets that could damage the entire economy, you have nothing to fear from these new rules. My grandmother worked as a banker for most of her life, and I know that the vast majority of bankers and financial service professionals want to do right by their customers. They want to have rules in place that don’t put them at a disadvantage for doing the right thing. And yet, Republicans in Congress are already fighting as hard as they can to make sure these rules aren’t enforced.
I’ll give you one example. For the first time in history, the reform we passed puts in place a consumer watchdog, who is charged with protecting everyday Americans from being taken advantage of by mortgage lenders, payday lenders or debt collectors. The man we nominated for the post, Richard Cordray, is a former Attorney General of Ohio who has the support of most Attorneys General, both Democrat and Republican, throughout the country.
But the Republicans in the Senate refuse to let him do his job. Why? Does anyone here think the problem that led to our financial crisis was too much oversight of mortgage lenders or debt collectors? Of course not! Every day we go without a consumer watchdog in place is another day when a student, or a senior citizen, or member of our Armed Forces could be tricked into a loan they can’t afford – something that happens all the time. Financial institutions have plenty of lobbyists looking out for their interests. Consumers deserve to have someone whose job it is to look out for them. I intend to make sure they do, and I will veto any effort to delay, defund, or dismantle the new rules we put in place.
We shouldn’t be weakening oversight and accountability. We should be strengthening them. Here’s another example. Too often, we’ve seen Wall Street firms violating major anti-fraud laws because the penalties are too weak and there’s no price for being a repeat offender. No more. I’ll be calling for legislation that makes these penalties count – so that firms don’t see punishment for breaking the law as just the price of doing business.
The fact is, this crisis has left a deficit of trust between Main Street and Wall Street. And major banks that were rescued by the taxpayers have an obligation to go the extra mile in helping to close that deficit. At minimum, they should be remedying past mortgage abuses that led to the financial crisis, and working to keep responsible homeowners in their home. We’re going to keep pushing them to provide more time for unemployed homeowners to look for work without having to worry about immediately losing their house. The big banks should increase access to refinancing opportunities to borrowers who have yet to benefit from historically low interest rates. And they should recognize that precisely because these steps are in the interest of middle-class families and the broader economy, they will also be in the banks’ own long-term financial interest.
Investing in things like education that give everybody a chance to succeed. A tax code that makes sure everybody pays their fair share. And laws that make sure everybody follows the rules. That’s what will transform our economy. That’s what will grow our middle class again. In the end, rebuilding this economy based on fair play, a fair shot, and a fair share will require all of us to see the stake we have in each other’s success. And it will require all of us to take some responsibility to that success.
It will require parents to get more involved in their children’s education, students to study harder, and some workers to start studying all over again. It will require greater responsibility from homeowners to not take out mortgages they can’t afford, and remember that if something seems too good to be true, it probably is.
It will require those of us in public service to make government more efficient, effective, and responsive to people’s needs. That’s why we’re cutting programs we don’t need, to pay for those we do. That’s why we’ve made hundreds of regulatory reforms that will save businesses billions of dollars. That’s why we’re not just throwing money at education, but challenging schools to come up with the most innovative reforms and the best results.
And it will require American business leaders to understand that their obligations don’t just end with their shareholders. Andy Grove, the former CEO of Intel put it best: “There’s another obligation I feel personally,” he said, “given that everything I’ve achieved in my career and a lot of what Intel has achieved…were made possible by a climate of democracy, an economic climate and investment climate provided by…the United States.”
This broader obligation can take different forms. At a time when the cost of hiring workers in China is rising rapidly, it should mean more CEOs deciding that it’s time to bring jobs back to the United States – not just because it’s good for business, but because it’s good for the country that made their business and their personal success possible.
I think about the Big Three Auto companies who, during recent negotiations, agreed to create more jobs and cars in America; who decided to give bonuses, not just to their executives, but to all their employees – so that everyone was invested in the company’s success.
I think about a company based in Warroad, Minnesota called Marvin Windows and Doors. During the recession, Marvin’s competitors closed dozens of plants and let go hundreds of workers. But Marvin didn’t lay off a single one of their four thousand or so employees. In fact, they’ve only laid off workers once in over a hundred years. Mr. Marvin’s grandfather even kept his eight employees during the Depression.
When times get tough, the workers agree to give up some perks and pay, and so do the owners. As one owner said, “You can’t grow if you’re cutting your lifeblood – and that’s the skills and experience your workforce delivers.” For the CEO, it’s about the community: “These are people we went to school with,” he said. “We go to church with them. We see them in the same restaurant. Indeed, a lot of us have married local girls and boys. We could be anywhere. But we are in Warroad.”
That’s how America was built. That’s why we’re the greatest nation on Earth. That’s what our greatest companies understand. Our success has never just been about survival of the fittest. It’s been about building a nation where we’re all better off. We pull together, we pitch in, and we do our part, believing that hard work will pay off; that responsibility will be rewarded; and that our children will inherit a nation where those values live on.
And it is that belief that rallied thousands of Americans to Osawatomie – maybe even some of your ancestors – on a rain-soaked day more than a century ago. By train, by wagon, on buggy, bicycle, and foot, they came to hear the vision of a man who loved this country, and was determined to perfect it.
“We are all Americans,” Teddy Roosevelt told them that day. “Our common interests are as broad as the continent.” In the final years of his life, Roosevelt took that same message all across this country, from tiny Osawatomie to the heart of New York City, believing that no matter where he went, or who he was talking to, all would benefit from a country in which everyone gets a fair chance.
Well into our third century as a nation, we have grown and changed in many ways since Roosevelt’s time. The world is faster. The playing field is larger. The challenges are more complex.
But what hasn’t changed – what can never change – are the values that got us this far. We still have a stake in each other’s success. We still believe that this should be a place where you can make it if you try. And we still believe, in the words of the man who called for a New Nationalism all those years ago, “The fundamental rule in our national life – the rule which underlies all others – is that, on the whole, and in the long run, we shall go up or down together.”
I believe America is on its way up. Thank you, God bless you, and may God bless the United States of America.
TABACCO: The President talks a Good Game! But why is it he rarely, if ever, mentions reversing the Laws, which reward Corporations for shifting American jobs OVERSEAS to avoid PAYING THEIR FAIR SHARE OF U.S. TAXES!
Tabacco knows where the JOBS are! And Tabacco knows why they are NOT HERE! Apparently neither President Obama nor the entire Republican Party knows what Tabacco knows?! Are Obama and the GOP that dumb, that uninformed, that incapable of solving the OUTSOURCING PROBLEM? Or are they that CALLOUS, that SOPHISTIC, and that SURE THAT AMERICANS ARE SO STUPID BY AND LARGE THAT THEY WON’T SEE THE OBVIOUS SOLUTION AND WON’T DEMONSTRATE AND CAUSE ATTENTION TO BE FOCUSED ON THAT SOLUTION SO MUCH SO THAT EVEN THE MAINSTREAM MEDIA WON’T BE ABLE TO IGNORE IT! In the event you don’t know what I’m talking about, allow me to be more specific:
OUR JOBS AND OUR
REVERSE THE LAWS
THAT PAY CORPORATIONS
TO OUTSOURCE JOBS
AND REWARD THOSE
LOWER TAXATION AS
LOWER FIXED COSTS!
Addendum Question: Which Group of Americans does NO WORK –
Welfare Moms? No! At the very least, they do housework and child rearing.
Public Employees? No! They may have super benefits, lots of time off, and retirement packages, but they do work.
Government Workers? No! Same as for Public Employees!
THE Unemployed? No! To receive “Unemployment Compensation”, you must have been previously EMPLOYED and therefore WORKED! The Unemployed look for work. This is particularly true when Benefits are about to run out. Even then, they survive. So they must be doing something gainful.
Investors (Corporate, Stocks & Bonds)? Yes! Just like Plantation owners during SLAVERY, these Have-Mores speculate (Gambling), but do NO ACTUAL “WORK”! The only truly LAZY GROUP IN AMERICA IS “INVESTORS”! Even Congress people do some work!
Remember that the next time some Republican Legislator demeans Working Folks or even the Unemployed!
Tabacco: I consider myself both a funnel and a filter. I funnel information, not readily available on the Mass Media, which is ignored and/or suppressed. I filter out the irrelevancies and trivialities to save both the time and effort of my Readers and bring consternation to the enemies of Truth & Fairness! When you read Tabacco, if you don’t learn something NEW, I’ve wasted your time.
Tabacco is not a blogger, who thinks; I am a Thinker, who blogs. Speaking Truth to Power!
In 1981′s ‘Body Heat’, Kathleen Turner said, “Knowledge is power”.
T.A.B.A.C.C.O. (Truth About Business And Congressional Crimes Organization) – Think Tank For Other 95% Of World: WTP = We The People