OpEdNews Op Eds

The State of the Union: What the President Should Say

By (about the author)     Permalink       (Page 1 of 1 pages)
Related Topic(s): ; ; ; ; ; , Add Tags Add to My Group(s)

Must Read 1   Well Said 1   Interesting 1  
View Ratings | Rate It

opednews.com

Become a Fan
  (104 fans)

The President will have to devote a big part of his speech to the economy, but which economy? Corporate profits are up but jobs and wages remain in the doldrums. People with lots of financial assets, or who are deemed "talent" by large corporations, are enjoying a solid recovery. But most Americans continue to struggle.

In order for the public to understand what must be done, the President has to be clear about what has happened and why. Corporations are profiting from sales of their foreign operations, especially in China and India. Here at home, they're catering to rich Americans. But an important key to their profits is their reduced costs, especially payrolls. The result has been fewer jobs and lower pay.

The Great Recession accelerated trends starting three decades ago -- outsourcing abroad, automating work, converting full-time jobs to temps and contracts, undermining unions, and getting wage and benefit concessions from remaining workers. The Internet and software have made all this easier.

He should point out that the U.S. economy is now twice as large as it was in 1980 but the real median wage has barely budged. Most of the benefits of economic growth have gone to the top. In the late 1970s, the richest 1 percent of Americans got about 9 percent of total income. By the start of the Great Recession they received more than 23 percent. Wealth is even more concentrated.

This is the heart of our problem. Most Americans no longer have the purchasing power to get the economy moving again. Once the debt bubble burst, they were stranded.

The President should make it clear corporations aren't to blame. After all, they're designed to make profits. Nor is it the fault of the rich who have played by the rules. The problem is the rules need fixing. He should stress that a future with no jobs or lousy jobs for most Americans is not sustainable -- not even for American corporations, whose long-term profitability depends on the revival of broad-based domestic demand. (Watch out for the upcoming "correction.")

The solution is to give average Americans a better economic deal.

For starters, he should propose to expand the Earned Income Tax Credit (essentially, a wage subsidy) all the way up through the middle class. And he should make the tax system more progressive: The rate on the first $50,000 to $90,000 of income should be cut to 10 percent; the next $90,000 to $150,000, 20 percent; and the next $150,000 to $250,000, 30 percent. Make up the revenue by increasing taxes on the next $250,000 to $500,000, to 40 percent; from $500,000 to $5 million, to 50 percent; and anything over $5 million, 60 percent. Tax capital gains the same as ordinary income.

In addition, he should call for strengthening unions by increasing penalties on employers who illegally deter them.

He will have to call for reducing the long-term budget deficit, but must make sure to distinguish between public investments that build future productivity (education, infrastructure, and basic R&D) and expenditures that improve our lives or keep us safe today. The former -- essentially the nation's "capital expenditures" -- shouldn't be cut at all. Indeed, they should be substantially increased. A "capital budget" separate from the regular federal budget would help draw this fundamental distinction.

Finally, he should recommend that Congress make college affordable by allowing federal loans to be repaid as 10-percent of earnings for the first 10 years of full-time employment.

Importantly, he should make it clear this isn't redistribution. These measures would be good for everyone. Rich Americans will do better with smaller share of a rapidly-growing economy than a large share of one that remains in a deep hole.

 

http://robertreich.org/

Robert Reich, former U.S. Secretary of Labor and Professor of Public Policy at the University of California at Berkeley, has a new film, "Inequality for All," to be released September 27. He blogs at www.robertreich.org.

Share on Google Plus Submit to Twitter Add this Page to Facebook! Share on LinkedIn Pin It! Add this Page to Fark! Submit to Reddit Submit to Stumble Upon

The views expressed in this article are the sole responsibility of the author and do not necessarily reflect those of this website or its editors.

Writers Guidelines

Contact Author Contact Editor View Authors' Articles

Most Popular Articles by this Author:     (View All Most Popular Articles by this Author)

The Republican's Big Lies About Jobs (And Why Obama Must Repudiate Them)

Paul Ryan Still Doesn't Get It

What Mitt Romney Really Represents

The Minimum Wage, Guns, Healthcare, and the Meaning of a Decent Society

Why the Right-Wing Bullies Will Hold The Nation Hostage Again and Again

The Gas Wars

Comments

The time limit for entering new comments on this article has expired.

This limit can be removed. Our paid membership program is designed to give you many benefits, such as removing this time limit. To learn more, please click here.

Comments: Expand   Shrink   Hide  
2 people are discussing this page, with 2 comments
To view all comments:
Expand Comments
(Or you can set your preferences to show all comments, always)

Problem students have to be t... by morris wise on Monday, Jan 24, 2011 at 8:31:47 PM
Wouldn't that be a - gasp - tax cut? But for the p... by Nikk Katzman on Tuesday, Jan 25, 2011 at 5:01:06 AM