Beyond
Outrage
What Has Gone Wrong with
Our Economy and Our Democracy,
and How to Fix It
Robert B. Reich
VINTAGE BOOKS
A Division of Random House, Inc.
New York
FIRST VINTAGE BOOKS EDITION, SEPTEMBER 2012
Copyright © 2012 by Robert B. Reich
All rights reserved. Published in the United States by Vintage Books, a division of Random House, Inc., New York, and in Canada by Random House of Canada Limited, Toronto. Originally published in somewhat different form as an e-short by Alfred A. Knopf, a division of Random House, Inc., New York.
Vintage and colophon are registered trademarks of Random House, Inc.
Library of Congress Cataloging-in-Publication Data
Reich, Robert B.
Beyond outrage : what has gone wrong with our economy and our democracy, and how to fix it / Robert B. Reich.
p. cm.
eISBN: 978-0-345-80449-5
1. United States—Economic policy—Citizen participation.
2. Right and left (Political science). 3. Conservatism—United States.
4. Democracy—United States. I. Title.
HC106.84.R453 2012
330.973—dc23
2012025077
www.vintagebooks.com
Cover design by Abby Weintraub
v3.1
To the Occupiers, and all others committed to taking back our economy and our democracy
Contents
Cover
Title Page
Copyright
Dedication
Introduction
Part One
The Rigged Game
Part Two
The Rise of the Regressive Right
Part Three
Beyond Outrage: What You Need to Do
Appendix:
President Barack Obama’s Speech in Osawatomie, Kansas, December 6, 2011 (Annotated)
Acknowledgments
About the Author
Also by Robert B. Reich
Introduction
I’ve written this book to give you the big picture of why and how our economy and our democracy are becoming rigged against average working people, what must be done, and what you can do about it. I’ve called it Beyond Outrage for a very specific reason. Your outrage is understandable. Moral outrage is the prerequisite of social change. But you also need to move beyond outrage and take action. The regressive forces seeking to move our nation backward must not be allowed to triumph.
I have been involved in public life, off and on, for more than forty years. I’ve served under three presidents. When not in office, I’ve done my share of organizing and rabble-rousing, along with teaching, speaking, and writing about what I know and what I believe. I have never been as concerned as I am now about the future of our democracy, the corrupting effects of big money in our politics, the stridency and demagoguery of the regressive right, and the accumulation of wealth and power at the very top. We are perilously close to losing an economy and a democracy that are meant to work for everyone and to replacing them with an economy and a government that will exist mainly for a few wealthy and powerful people.
This book is meant to help you focus on what needs to be done and how you can contribute, and to encourage you not to feel bound by what you think is politically possible this year or next. You need to understand why the stakes are so high and why your participation—now and in the future—is so important. I’ve tried to array concepts and arguments in a way that you’ll find helpful. All the facts I’ve cited are from government reports unless otherwise indicated.
In my experience, nothing good happens in Washington unless good people outside Washington become mobilized, organized, and energized to make it happen. Nothing worth changing in America will actually change unless you and others like you are committed to achieving that change.
CONNECTING THE DOTS
The first thing you need to do is connect the dots and understand how many troubling but seemingly unrelated things are interwoven. The challenge we face is systemic. The fundamentals of our economy are out of whack, which has distorted our democracy, and these distortions, in turn, are making it harder to fix the economic fundamentals. Later in the book we’ll examine several of these dots in detail, but now I’d like you to see the big picture.
The first dot: For three decades almost all the gains from economic growth have gone to the top. In the 1960s and 1970s, the wealthiest 1 percent of Americans got 9–10 percent of our total income. By 2007, just before the Great Recession, that share had more than doubled, to 23.5 percent. Over the same period the wealthiest one-tenth of 1 percent tripled its share. We haven’t experienced this degree of concentrated wealth since the Gilded Age of the late nineteenth century. The 400 richest Americans now have more wealth than the entire bottom half of earners—150 million Americans—put together. Meanwhile, over the last three decades the wages of the typical worker have stagnated, averaging only about $280 more a year than thirty years ago, adjusted for inflation. That’s less than a 1 percent gain over more than a third of a century. Since 2001, the median wage has actually dropped.
This connects to…
The second dot: The Great Recession was followed by an anemic recovery. Because so much income and wealth have gone to the top, America’s vast middle class no longer has the purchasing power to keep the economy going—not, at least, without going deeper and deeper into debt. But debt bubbles burst. The burst of 2008 ushered in a terrible recession—the worst economic calamity to hit this country since the Great Depression of the 1930s—as middle-class consumers had to sharply reduce their spending and as businesses, faced with declining sales, had to lay off millions. We bottomed out, but the so-called recovery has been one of the most anemic on record. That’s because the middle class still lacks the purchasing power to keep the economy going and can no longer rely on borrowing.
While at the same time…
The third dot: Political power flows to the top. As income and wealth have risen to the top, so has political clout. Obviously, not everyone who’s rich is intentionally corrupting our democracy. For those so inclined, however, the process is subtle and lethal. In order to be elected or reelected, politicians rely greatly on advertising, whose costs have risen as campaign spending escalates. They find the money where more and more of the money is located—with CEOs and other top executives of big corporations and with traders and fund managers on Wall Street. A Supreme Court dominated by conservative jurists has opened the floodgates to unlimited amounts of money flowing into political campaigns. The wealth of the super-rich also works its way into politics through the corporations they run or own, which employ legions of lobbyists and public relations experts. And their wealth buys direct access to elected officials in informal dinners, rounds of golf, overnight stays in the Lincoln Bedroom, and fancy boondoggles.
Which connects to…
The fourth dot: Corporations and the very rich get to pay lower taxes, receive more corporate welfare, and are bound by fewer regulations. Money paid to politicians doesn’t enrich them directly; that would be illegal. Rather, it makes politicians dependent on their patrons in order to be reelected. So when top corporate executives or Wall Street traders and managers want something from politicians they have backed, those politicians are likely to respond positively. What these patrons want most are lower taxes for themselves and their businesses. They also want subsidies, bailouts, government contracts, loan guarantees, and other forms of corporate welfare, and fewer regulations. The tax cuts enacted in 2001 and 2003—and extended for two years in 2010—in 2011 saved the richest 1.4 million taxpayers (the top 1 percent) more mon
ey than the rest of America’s 140,890,000 taxpayers received in total income.
Leading to…
The fifth dot: Government budgets are squeezed. With so much of the nation’s income and wealth at the top, tax rates on top earners and corporations dropping, and most workers’ wages stalling or declining, tax revenues at all levels of government have fallen precipitously. This has led to a major squeeze on public budgets at all levels of government. The result has been deteriorating schools, less college aid, crowded and pockmarked highways, unsafe bridges, antiquated public transportation, unkempt parks, fewer police officers, fewer social workers, and the decline of almost everything else the broader public relies on.
Which connects to…
The sixth dot: Average Americans are competing with one another for slices of a shrinking pie. There is now more intense competition for a dwindling number of jobs, a smaller share of total income, and ever more limited public services. Native-born Americans are threatened by new immigrants; private sector workers are resentful of public employees; non-unionized workers are threatened by the unionized; middle-class Americans are competing with the poor. Rather than feel that we’re all in it together, we increasingly have the sense that each of us is on his or her own.
Which leads, finally, to…
The seventh dot: A meaner and more cynical politics prevails. Because of all these occurrences, our politics has become nastier, more polarized, and increasingly paralyzed. Compromise is more difficult. Elections are more venomous, political advertising increasingly negative. Angry voters are more willing to support candidates who vilify their opponents and find easy scapegoats. Talking heads have become shouting heads. Many Americans have grown cynical about our collective ability to solve our problems. And that cynicism has become a self-fulfilling prophecy, as nothing gets solved.
Connect these dots and you understand why we’ve come to where we are. We’re in a vicious cycle. Our economy and our democracy depend on it being reversed. The well-being of your children and grandchildren requires it.
In Part One, I describe how the game is becoming rigged against average working people and in favor of wealthy plutocrats and large corporations. In Part Two, I explain the rise of the regressive right, a movement designed not to conserve what we have but to take America backward toward the social Darwinist ideas that prevailed in the late nineteenth century. In Part Three, I suggest what you can do to reverse this perilous course.
Part One
The Rigged Game
I receive many e-mails from people who have read my columns or who have seen me in the media. Some e-mails are very friendly; others are hostile. But almost all share a common feature. The writers believe the game is rigged. Here’s a composite of several I’ve received from people who describe themselves as Tea Partiers:
Mr. Reich,
I saw you on television just now. You want to raise taxes on the rich so there’s more money for education and infrastructure. You’re a stupid ass. When taxes go up, it’s people like me who end up paying more because the rich always find ways to avoid paying. If you think the money will go to helping average Americans, you’re even dumber. Government is run by Wall Street traders, the CEOs of big corporations, and military contractors. They’ll get the benefits. Where were you when my taxpayer dollars were used to bail out fucking Wall Street? The answer is less government, not more. Do me a favor and shut up.
I don’t recall so many people, regardless of political party or ideology, expressing so much outrage and cynicism about our economic and political system.
The presidential candidate Mitt Romney said free enterprise is on trial. He’s right, but it’s not on trial in the way he assumed. The attack on it is not coming from the left. It’s coming from the grass roots of America—right, left, and center. And it’s been triggered by an overwhelming consensus that Wall Street, big corporations, and the very wealthy have rigged it to their benefit. Increasingly, the rewards have gone to the top, while the risks have been borne by middle- and lower-income people. At the same time, the very wealthy are getting a greater share of total income than they did at any point in the last eighty years. Their tax rates are lower than they’ve been in a generation. Republicans want us to believe that the central issue is the size of government, but the real issue is whom government is for. Public institutions are deteriorating. We’re saddled by the most anemic recovery from the worst economy since World War II, while the basic bargain linking pay to productivity continues to come apart.
FREE ENTERPRISE ON TRIAL
In the late 1980s, I noticed a troubling trend. A larger and larger share of the nation’s income and wealth was going to the very top—not just the top 1 percent, but the top of the top 1 percent—while other Americans were dividing up a shrinking share. I wrote up my findings, and my tentative explanation for this trend, in a book called The Work of Nations. Bill Clinton read the book, and after he was elected president, he asked me to be his secretary of labor. He told me he was committed to reversing the trend, and he called for more investment in education, training, infrastructure, and health care in order to make the bottom half of our population more productive. Clinton and his administration worked hard, but we were never able to implement his full agenda. The economic recovery of the middle and late 1990s was strong enough to generate twenty-two million new jobs and raise almost everyone’s wages, but it did not reverse the long-term trend. The share of total income and wealth claimed by the top continued to grow, as did the political clout that accompanies such concentration. Most Americans remained unaware.
But now the nation is becoming aware. President Obama has made it one of the defining issues of his reelection campaign. The nonpartisan Congressional Budget Office has issued a major report on the widening disparities. The issue has become front-page news. For the first time since the 1930s, a broad cross section of the American public is talking about the concentration of income, wealth, and political power at the top.
Score a big one for the Occupiers. Regardless of whether you sympathize with the so-called Occupier movement that began spreading across America in the fall of 2011, or whether you believe it will become a growing political force in America, it has had a profound effect on the national conversation.
Even more startling is the change in public opinion. Not since the 1930s has a majority of Americans called for redistribution of income or wealth. But according to a New York Times/CBS News poll, an astounding 66 percent of Americans say the nation’s wealth should be more evenly distributed. A similar majority believes the rich should pay more in taxes. According to a Wall Street Journal/NBC News poll, a majority of people who describe themselves as Republicans believe taxes should be increased on the rich.
I used to be called a class warrior for even raising the subject of widening inequality. Now it seems most Americans have become class warriors. Or at least class worriers. And many blame Republicans for stacking the deck in favor of the rich. In that New York Times/CBS News poll, 69 percent of respondents said Republican policies favor the rich (28 percent said the same of President Obama’s policies).
The old view was that anyone could make it in America with enough guts and gumption. We believed in the self-made man (or, more recently, woman) who rose from rags to riches: inventors and entrepreneurs born into poverty, like Benjamin Franklin; generations of young men from humble beginnings who grew up to become president, like Abraham Lincoln. We loved the novellas of Horatio Alger and their more modern equivalents—stories that proved the American dream was open to anyone who worked hard. In that old view, which was a kind of national morality play, being rich was proof of hard work, and lack of money was proof of indolence or worse.
A profound change has come over America. Guts, gumption, and hard work don’t seem to pay off as they once did—or at least as they did in our national morality play. Instead, the game seems rigged in favor of people who are already rich and powerful—as well as their children. Instead of lionizing the rich, we
’re beginning to suspect they gained their wealth by ripping us off.
As recently as a decade ago the prevailing view was also that great wealth trickled downward—that the rich made investments in jobs and growth that benefited all of us. So even if we doubted that we ourselves would be wealthy, we assumed we’d still benefit from the fortunes made by a few. But that view, too, has lost its sheen. Americans see that nothing has trickled down. The rich have become far richer over the last three decades, but the rest of us haven’t benefited. In fact, median incomes are dropping.
Wall Street moguls are doing better than ever—after having been bailed out by taxpayers. But the rest of us are doing worse. CEOs are hauling in more than three hundred times the pay of average workers (up from forty times the pay only three decades ago). But average workers have been losing their jobs and wages. The ratio of corporate profits to wages is higher than it’s been since before the Great Depression. The chairman of Merck took home $17.9 million in 2010, as Merck laid off sixteen thousand workers and announced layoffs of twenty-eight thousand more. The CEO of Bank of America raked in $10 million, while the bank announced it was firing thirty thousand employees.
Even though the rate of unemployment has begun to fall, jobs still remain scarce, and the pay of the bottom 90 percent continues to drop, adjusted for inflation. But CEO pay is still rising through the stratosphere. Among the CEOs who took in more than $50 million in 2011 were Qualcomm’s Paul Jacobs ($50.6 million), JCPenney’s Ron Johnson ($51.5 million), Starbucks’s Howard Schultz ($68.8 million), Tyco International’s Ed Breen ($68.9 million), and Apple’s Tim Cook ($378 million). The titans of Wall Street are doing even better.
The super-rich are not investing in jobs and growth. They’re putting their bonanza into U.S. Treasury bills or investing it in Brazil or South Asia or anywhere else it can reap the highest return. The American economy is in trouble because so much income and wealth have been going to the top that the rest of us no longer have the purchasing power to keep the economy going. I’ll get into this in greater detail shortly.
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