Tags: Reich | economy | earnings | inequality

Robert Reich: Let's Fight Against Inequality

By    |   Monday, 10 March 2014 12:21 PM

Remember when a single middle-class income was enough to buy a home, own two cars and raise a family?

"I remember," writes Robert Reich on his blog. "That used to be the norm."
Then came "the Great U-Turn," as Reich calls it.

During the three decades after World War II, both earnings of typical American workers and the size of the economy doubled, says Reich, a professor at the University of California at Berkeley and Secretary of Labor in the Clinton administration.

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More than a third of workers were in labor unions, and CEO pay was about 20 times more than their typical workers.

Over the last 30 years, the size of the economy doubled again, while earnings of typical workers remained stagnant. Less than 7 percent of workers in the private sector are in unions.

And CEO pay? It's more than 200 times their typical worker's pay.

In 30 years following World War II, the richest 1 percent earned 9 or 10 percent of total income, compared with more than 20 percent now, Reich explains.

In addition, the top tax rate was always over 70 percent. Today, the highest rate is 39.6 percent.

Using tax revenues from the wealthy, the government built the Interstate Highway system, the largest infrastructure project in our history, as well as the free public education system.

"Then came the great U-turn, and for the last thirty years we've been heading in the opposite direction."

The problem is that we forgot what it was like in the past, Reich states. "The collective erasure of the memory of that prior system of broad-based prosperity is due partly to the failure of my generation to retain and pass on the values on which that system was based. It can also be understood as the greatest propaganda victory radical conservatism ever won."

"America's great U-turn can be reversed. It is worth the fight," he argues.

Economist Paul Krugman agrees increasing inequality can be averted.

Research shows that income inequality varies greatly among advanced countries because of policies on taxes and government aid, Krugman writes in his New York Times column, citing the Luxembourg Income Study.

Studies also show that reducing inequality through redistribution does not hurt economic growth, he asserts. For instance, an International Monetary Fund study found that countries with relatively low inequality are better able to sustain economic growth.

"In short, what's good for the 1 percent isn't good for America. And we don't have to keep living in a new Gilded Age if we don't want to."

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Monday, 10 March 2014 12:21 PM
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