Robert Reich, Chancellor’s Professor of Public Policy at the Goldman School of Public Policy, was joined today (Friday, April 1) by several California legislators at a round table discussion of the federal and state economies. State senators Loni Hancock, Assemblywoman Joan Buchanan, Assemblyman Tom Ammiano, Board of Equalization member Betty Yee, and other notable state representatives were invited by the campus to the informal gathering at the Women’s Faculty Club.
While Reich admitted that he did not have the answer to the woes besetting California, he did promise to put the current economic crisis in context. The growing disparity between the wealthy and the middle- and lower-classes, the lack of a realistic tax structure, and falling consumer confidence, have all snowballed to create a national crisis that baffles world-class macroeconomists. Why such a deep recession?
Noting that it cannot all be blamed on faulty financial practices, Reich explained his theory – that several factors are involved. Families in 1961 were paid a decent wage, enough to allow them to purchase the goods Americans made. Houses were affordable and were considered a family’s prime asset. Taxes were equitable, the most wealthy paying, on average, 31.3 percent. Today, the most wealthy pay only 21.8 percent. Were the tax system put back to the 1961 level, he said, the United States would see an increase in tax revenue of $382 billion…and that’s just income tax revenue alone. Corporate taxation is a whole other matter, Reich said.
Reich continued that the falling housing market made a family’s prime asset almost worthless, as lenders allowed borrowers to over-extend themselves, the borrowers assuming that housing values would hold. When the housing bubble burst, the whole house of cards came tumbling down, he said. Families could no longer look to their homes as a source of income.
What Reich said he finds particularly ironic is that the middle-class is been manipulated into warring with itself. Instead of questioning why corporations are allowed to shelter money off-shore, or why they are currently sitting on $1.6 trillion dollars, the middle-class fights amongst itself over why this public worker gets more than that public worker. Noting that the United States is, historically, the richest country that’s ever existed, Reich said he questions why wages are falling, benefits are being cut, and public services are being decimated.
In spite of the oftentimes sobering discussion, Reich did give a glimmer of hope. The economy, he said, is not falling apart, but it’s not getting better fast. The year 2018 is an optimistic target to get the economy back to pre-recession levels. While he was cautiously optimistic about today’s jobless rate report from the Labor Department, Reich wants many more jobs created to bring the state and national economies roaring back. Otherwise, the road to recovery, he said, will be “anemic, long and torturous.”