We Must Redistribute Income

Reply Thu 5 Dec, 2013 11:34 am
I am sure the right-wingers will scream about this piece. But any fair reading should tell them that Reich is correct.

We Must Redistribute Income

Robert Reich, the secretary of labor in the Clinton administration, is Chancellor's professor of public policy at the University of California, Berkeley.

DECEMBER 4, 2013

"Redistribution" has become a dirty word, conjuring up worthy "makers" forced to hand over hard-earned income to undeserving "takers." But as low-wage work proliferates in America, so-called takers are working as hard if not harder than anyone else, often at more than one job. Yet they're still not making it because the twin forces of globalization and technological change have reduced their bargaining power and undermined their economic standing, while bestowing ever greater benefits on a comparative few with the right education and connections (and whose parents are often best able to secure these advantages for them).

By cutting subsidies, breaks and deductions that benefit the 1 percent who've reaped the economy's gains, tax revenues can help poor workers.
Better education and training for those on the losing end is critically important but will only go so far. The number of losers is growing so quickly, and so much of the economies’ winnings are going to a small group at the top -- since the recovery began, 95 percent of the gains have gone to the richest 1 percent -- that without some redistribution, the losers are likely to react in ways that could hurt the economy. They’ll demand protection from global markets they believe are taking away good jobs, and even from certain technological advances that threaten to displace them (rather than smash the machines, as did England’s 19th-century Luddites, they’ll seek regulations that preserve the old jobs). They may fall prey to demagogues on the right or left who offer convenient scapegoats for their frustrations.

One way we already redistribute is through the Earned Income Tax Credit, a wage subsidy for the working poor, which, at about $60 billion a year, is the nation's largest anti-poverty program. It’s like a reverse income tax -- larger at the bottom of the wage scale (now around $3,000 for incomes around $20,000) and gradually tapering off as incomes rise (vanishing at around $35,000). The subsidy should be enlarged and extended further up the wage scale before tapering off.

How to pay for this? By cutting subsidies and special tax breaks for the oil and gas industries, big agribusiness, military contractors, hedge-fund and private-equity partners, and Wall Street banks. And by capping individual tax deductions (deductions are the economic equivalent of government subsidies) for gold-plated health care plans, lavish business junkets and interest on giant mortgages. In other words, we can finance much of this redistribution to the working poor by ending unnecessary redistributions to the wealthy.
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Reply Thu 5 Dec, 2013 06:59 pm
Granted I don't like a minimum wage--but perhaps Switzerland's Idea is worth thought--a maximum living wage---any individual in the US annual income is a set multiple of the minimum living wage---Say 100 to one--if the minimum wage is $7 an hour ($14,000 per year--the maximum is $700 per hour ($1,400,000)
per year.

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Reply Thu 1 Oct, 2015 02:31 pm
This is a great idea for economic growth, especially where increasingly corporate profits come from outsourced and automated jobs.

The loss of millions of good paying manufacturing jobs to China and elsewhere resulted in a loss of consumer demand, since uneducated unionized workers had to take entry level service sector jobs paying less. True, they can now buy manufactured products cheaper, but that can't make up for lost income on a systematic level: companies relocating overseas do not pass all of their labor cost saving on to consumers in the form of lower prices, since if they did the move would not result in higher profits. They also have a longer supply chain and higher shipping costs; so consumer gain from lower prices had to be less than consumer loss through lower wages, else company profits could not increase.

Money spent on imports also means that American workers (who are also consumers) do not receive back part of that purchase price in the form of wages. This further decreases domestic consumer buying power.

When Americans have less to spend as a group, business sales decrease (or grow more slowly than they otherwise would).

Increased consumer borrowing (credit card spending) and asset appreciation during the housing bubble disguised this; but now that the bubble burst and the associated credit crisis put an end to EZ credit, consumption relies once again largely on wages, which are stagnant or in decline for most.

Redistributing money from financial speculation to the pockets of those who will use it to purchase goods and services is good for economic growth and business.

P.S. Higher education is not a cure all: many of the fastest growing jobs in coming years pay less than $12 an hour on average. For the foreseeable future the economy will continue to be greased by ordinary service jobs that do not require a bachelor's degree. A large population of underemployed university graduates is s nucleus for social unrest and demagoguery.

Reply Fri 27 Nov, 2015 11:39 am
Of, course. Its the only way to improve our economic status and thus improving nation's perception.
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cicerone imposter
Reply Thu 21 Jan, 2016 03:48 pm
Do you know about "comparative advantage?"
Reply Thu 21 Jan, 2016 04:19 pm
@cicerone imposter,
I know that it's a theoretical principle used in discussions of international trade. If it is relevant to the current thread, you'll need to explain how.
cicerone imposter
Reply Thu 21 Jan, 2016 04:39 pm
The most economically developed countries produce the latest in technology while the least developed countries produce fabrics/clothes and other labor intensive products and services.
Have you noticed that many international companies now use Indian communication services?
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Reply Thu 21 Jan, 2016 04:44 pm
Advocate is missing in action: I miss him.
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Reply Thu 21 Jan, 2016 05:54 pm
The hyper wide spread of income is a real problem but the underlying macro economic cause must be recognized if the underlying problem is to be solved.

Basic problem: It only takes a fraction of the labor force to produce the necessities of all the people. Due to automation that fraction is getting smaller all the time.

The solution is not to limit automation or massively redistribute wealth. There IS a need for Government to increase the number of business opportunities. Not just get the **** out of the way but actively take a part in creating rather than limiting them. This will include things like tort reform and radically changing the patent system to reflect current realities. Because necessities are not an area of significant growth, recreation must be a major contributor.
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