The Coffee Klatch with Robert Reich

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America's 30-year recession Aug 09, 2022

Show notes

The Labor Department reported Friday that U.S. employers added 528,000 jobs in July, more than twice the number analysts had expected. And the rate of unemployment dipped to just 3.5 percent.

Undeniably good news.

But this good news also means the Federal Reserve will almost certainly keep raising interest rates, believing the job market is now too “tight.”

This is not good news.

The Fed is wrong: The job market is not too tight. In fact, the share of Americans working or actively looking for work fell in July to its lowest level of the year — presumably because fewer people believe it worthwhile to work. This is because of (1) the rising costs (and hassles) of childcare and eldercare, and (2) the continuing drop in inflation-adjusted wages. Wages are rising at an annual rate of 5.2 percent but inflation is rising at over 9 percent. Which means that, in terms of real purchasing power, the pay of most workers continues to plummet.

You’d think that the stall in the size of the workforce and the decline in inflation-adjusted wages might cause the Fed to hit the pause button on further interest-rate increases. But the Fed is still wedded to the anachronistic view that a “tight” jobs market is pushing prices upward.

Rubbish. The real inflationary culprits are global supply constraints and big corporations with the power to raise prices.

So beware. The Fed is likely to continue to raise interest rates when it meets in September. This means middle and lower-income Americans will be hit with two simultaneous shocks: not just shrinking paychecks they’re now enduring, but also a slowing economy in which they are the first to lose hours and jobs.

Lower-income workers have little room reduce their spending because a large portion of their family budgets already goes to the necessities of food and housing — both of whose prices are soaring. Many are coping by taking on more credit card debt, which is also becoming more expensive as the Fed raises interest rates.

So don’t be misled by the headlines. Yes, overall consumer spending is still going gangbusters. But most of it is coming from the upper middle class. The top 40 percent of the income distribution now accounts for around 60 percent of spending; the bottom 40 percent, about 22 percent. As the Fed slows the economy, the bottom 40 percent are getting squeezed even more.

Yes, job growth is booming as well. But the sheer number of jobs is not a sufficient measure of the strength of the economy, especially when the real wages attached to so many of them are dropping. It is no great feat to create an abundance of low-wage jobs.

The Fed is poised to make all this worse for lower-income Americans. Inequality in America is already horrific. Why worsen it?

In the first three decades after World War II, America produced the largest middle class the world had ever seen. Most jobs continued to pay more and more. Almost all Americans were on an upward escalator.

But for the last three decades, the middle class has been shrinking, and only the classes surrounding them have been growing — the “have-mores” and the “have-lesses.” The have-lesses — most of whom don’t have college degrees and are paid in hourly wages and — have been in a slow-motion recession. If they’re white and without college degrees, they’ve been losing ground fastest of all. Adjusted for inflation, their pay and benefits today are lower than they were in 1990. They also have less job security. In 2016, they formed the core of Trump’s base, and are still among his most ardent supporters.

The biggest threat to our economy and society is no longer inflation or recession, per se. The biggest threat is a large and growing class of have-lesses — slammed by the double-whammy of a slowing economy and declining real wages. The Fed must not harm them further by taming inflation on their backs.

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What the hell did they learn at Harvard and Yale? Aug 08, 2022

Show notes

The original justification for elite higher education in the United States was to train the future leaders of American democracy. As Charles W. Eliot, who became president of Harvard in 1869, noted, Harvard existed to inculcate the ideals of “service and stewardship.”

Since then, Harvard has produced eight US presidents; Yale, five. (Stanford can boast Herbert Hoover, if it feels compelled to do so.)

Elite universities have also produced a disproportionate number of senators and representatives from both parties. In fact, Republicans elected to the Senate over the last decade are more likely than their Democratic counterparts to have attended Harvard, Yale, Princeton, or Stanford.

So how to explain Elise Stefanik, Harvard class of 2006, now the third-ranking House Republican, who recently called the January 6 hearings a “partisan witch hunt,” voted to invalidate the 2020 election, and has repeated Trump’s Big Lie of election fraud?

Or Josh Hawley, Stanford class of 2002 and Yale Law class of 2006, now senator from Missouri, who in December 2020 became the first US senator to announce plans to object to the certification of Joe Biden’s victory, then led Senate efforts to overturn the Electoral College vote count, and fist-bumped the rioters on January 6?

Or Ted Cruz, Princeton class of 1992 and Harvard Law class of 1995, now senator from Texas, who in late 2020 joined in John Eastman’s and Trump’s plot to object to the election results in six swing states and delay accepting the Electoral College results on January 6, potentially enabling Republican state legislatures to overturn them?

And how to explain a new crop of Republican senate candidates?

JD Vance, Yale Law class of 2013, now Republican candidate for the Senate from Ohio, has claimed that there “were certainly people voting illegally on a large-scale basis” in the 2020 election. When asked earlier this year if the 2020 election was “stolen,” he said, “Yeah, I do.”

Blake Masters, Stanford class of 2008 and Stanford Law class of 2012, now the Republican candidate for the Senate from Arizona, has declared in campaign ads that “Trump won.” He promotes rightwing “replacement theory” – that Democrats favor illegal immigration “so that someday they can ‘amnesty’ these people and make them voters who they expect to vote Democrat.”

These alumni of America’s finest institutions of higher education haven’t adhered to their alma maters’ ideals of service and stewardship of American democracy. In fact, they’re actively wrecking American democracy.

Nor can these elite graduates claim they don’t know any better. Most third-graders can distinguish a lie from the truth.

No, these scions of the most prestigious halls of American academe are knowingly and intentionally abetting the most dangerous attack on American democracy since the Civil War.

Whatever did they learn from their rarified education? Obviously, zilch.

The core of a good liberal arts education is ethics. The central question is the meaning of a good society. This has been the case since the eighteenth century, when most of America’s prestigious institutions of higher education were founded.

Adam Smith, the progenitor of modern economics, didn’t call his field economics. He called it “moral philosophy,” and thought his book The Theory of Moral Sentiments more important than his The Wealth of Nations.

Edmund Burke – Irish statesman and philosopher, and godfather of modern conservatism – didn’t advise that people in public life seek power above all else. He argued that they owe the public their “judgment and conscience.”

There is no single answer to the meaning of a good society, of course. It is the pursuit of it that draws on one’s judgment and conscience. This is why higher education has advanced the role of reason in human affairs and stood for the Enlightenment values of democracy and the rule of law.

But this new crop of Republican pretenders hasn’t learned anything of the kind. They are practitioners of a much earlier and more cynical set of ideas: that might makes right, that the purpose of human endeavor is to gain power, and that ambition and treachery trump (excuse the verb) all other values.

I can’t help wondering: What do they see when they look into the mirror each morning? And what do they tell themselves after a day of deceit?

Any of them who tries to justify the despicable means they are employing by telling themselves they can do more good by gaining or keeping power is under a dangerous illusion. As the great civil rights leader Bayard Rustin once said, “If we desire a society that is democratic, then democracy must become a means as well as an end.”

These products of the best education America has to offer are betraying the core values of America.

They deserve only shame.

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Reasons to be less depressed? Aug 06, 2022

Show notes

Each Saturday I grab coffee with my colleague Heather Lofthouse, and we turn on my laptop mic so you can listen in and then provide your two cents in the comments. Heather is the Executive Director of Inequality Media Civic Action, and my former student. She asks me questions about the economic and political happenings of the past week. We cover both the highlights and lowlights, and aim to provide a larger context around what we’re all being presented with (or not!) in the news. She’s Gen X and I’m, um, older than that; we often address our generational divide. Sometimes we veer off into stories about family or what shows we’re watching, but we try to stay on task. And we always work to avoid being too cynical.

Like you, I imagine, I find conversations with others — on the phone, in person, or even just online typing back and forth asynchronously — to be an important way of processing information, including during trying times.

In today’s coffee klatch we cover:

* Friday’s jobs report: The large number of jobs added is great, but what will the Fed do with this data?

* Sinema’s last stand: Why exactly was she holding out on signing off on the Inflation Reduction Act?

* The good people of Kansas: Kansans beat back abortion restrictions at the ballot box on Tuesday. What might this mean for democracy, and the midterms?

* The awful Alex Jones: Holy karma, Batman. What will be made of his years of unintentionally shared text messages? And what is the role of defamation lawsuits in the (dis)information age?

* A Coffee Klatch theme song: Last week we asked for anyone who might be interested and willing to send in a non-copyrighted tune for us to use as an intro for these weekly recordings. You lovely, talented listeners came through in spades! We’ve been overwhelmed with your outpouring of original songs and kind emails. Thank you to all of you who took the time to compose music for this community to hear. Today we feature some early results from this “contest.”

Please pull up a chair.

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Viktor Orban's eugenics and the GOP Aug 05, 2022

Show notes

Yesterday, Hungarian Prime Minister Viktor Orban addressed a crowd of thousands of American admirers in Dallas, Texas, at the Conservative Political Action Conference (CPAC). Orban described Hungary and America as “twin fronts” in a struggle against globalists, progressives, communists, and “fake news.”

To fully comprehend Orban’s influence on the Trump Republican Party, you need to understand the Orban has stripped Hungary of its democratic institutions and demonized immigrants. But that’s not all. He has also embraced a form of eugenics, in which he claims that the future of the West is threatened by the “racial mixing” of white Christian Europeans with others.

On July 23, Orban put it bluntly in a speech at the 31st Bálványos Summer Free University and Student Camp:

The internationalist left employs a feint, an ideological ruse: the claim – their claim – that Europe by its very nature is populated by peoples of mixed race. …

[We] do not want to become peoples of mixed-race. This is why we fought at Nándorfehérvár/Belgrade, this is why we stopped the Turks at Vienna, and – if I am not mistaken – this is why, in still older times – the French stopped the Arabs at Poitiers.

Today the situation is that Islamic civilization, which is constantly moving towards Europe, has realized – precisely because of the traditions of Belgrade/Nándorfehérvár – that the route through Hungary is an unsuitable one along which to send its people up into Europe. This is why Poitiers has been replayed; now the incursion’s origins are not in the East, but in the South, from where they are occupying and flooding the West.

Orban’s words and phrases were familiar to anyone who lived through the Nazi holocaust. After the speech, one of Orban’s closest advisers resigned, calling it “pure Nazi.”

Prominent American Republicans have rushed to Orban’s defense. On Wednesday, when Orban stopped off at Trump’s (Saudi-sponsored) golf tournament on the way to the CPAC conference, Trump called him a “friend,” adding “few people know as much about what is going on in the world today.” That evening, Tucker Carlson smirked on his Fox television show, “So Viktor Orban is now a Nazi because he wants national borders?” (Last year, Carlson did a special broadcast from Budapest during which he praised Orban’s Hungary as a model for America.) And, of course, Orban gave yesterday’s keynote at CPAC.

Eugenics was popular at the turn of the last century. Developed largely by Sir Francis Galton — supposedly as a method to improve the human race — it called for arranging reproduction within the human population to increase characteristics regarded as desirable and minimize the undesirable. After the adoption of eugenics by the Nazis to justify their treatment of Jews, disabled people, and other minority groups, eugenics was discredited as unscientific and racially motivated.

But eugenics has been reborn under another guise — that of white Christian nationalism. It is now presented as the scourge of “racial mixing” between white Christians of European descent, and others.

It is a small leap from the invasions of Europe by Turks and Arabs centuries ago to the present generation of immigrants swarming over borders and “invading” white Christian nations.

In Republican primary races this year, few issues have come up more frequently in TV ads than immigration — all featuring the word “invasion.” It’s pure Orban.

"We're gonna end this invasion," says Blake Masters, the Republican candidate for the Senate from Arizona, in one ad. “Invasion” is featured in ads for Gov. Brian Kemp in Georgia, Senator Rick Scott in Florida, and Kari Lake (now in a close race in the Republican primary for governor in Arizona).

And, of course, for the past six years Trump has warned that America is being “invaded” by immigrants.

The word “invasion” has a long history among white nationalists. It has been widely used by supporters of the "replacement theory" — the baseless conspiracy theory that Jews or elites are intentionally replacing white Americans with immigrants and people of color. Both Blake Masters and J.D. Vance, the Republican candidate for the Senate from Ohio (each the beneficiary of $15 million in campaign funding from far-right billionaire Peter Thiel and of a Trump endorsement) claim that Democrats are deliberately trying to “import” immigrants in an attempt to “replace Americans who were born here.”

The racist tropes of “invasion” and “replacement” are intended to stoke fear and drive votes. They also fuel violence. Three years ago, a white gunman opened fire at a Walmart in El Paso, killing 23 people, most of them Latino. The suspect was motivated by what he called a "Hispanic invasion" of people coming to the U.S. illegally. The man suspected of killing 10 Black people earlier this year in Buffalo was also motivated by the replacement theory.

The bogus science of eugenics, popular at the turn of the last century but since disgraced and forgotten, has now morphed into white Christian nationalism — which, at its core, is nothing but ugly racism. Along with Trump’s big Lie, it defines today’s Republican Party.

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Kansas on my mind Aug 04, 2022

Show notes

Today, I want to talk about Kansas. Not about its corn as high as an elephant’s eye, nor about Dorothy and Toto trying to find their way home, but about Kansas as the geographic and Republican center of America, Kansas as the vintage Norman Rockwell core of America, Kansas as what the Republican Party was before being hijacked by Newt Gingrich and then mugged by a New York real estate con artist.

I’m moved to do so because on Tuesday the good people of Kansas voted against a ballot measure that would have stripped from their state constitution a woman’s right to choose, and they did it by a whopping 18-point margin.

For decades, the Republican Party has exploited social fissures in America – from immigration to race – as its means of deflecting attention from the immutable fact that most Americans, especially those without college degrees and depending on an hourly wage, have been on a long downward escalator, and an ever-larger portion of the economic gains have been going to the top. Republicans have had no economic response to this except to promote the gonzo fiction that tax cuts for the rich somehow trickle down.

For much of this time, Democrats have unwittingly aided this Republican strategy by eschewing the populist-progressive economic policies that attracted downwardly mobile voters in the 1930s and 1940s, and before that, in the 1880s and 1890s. Instead, modern Democrats have substituted a neoliberal stew of free trade, privatization, and deregulation (until big banks or corporations need to be bailed out). The stew has helped corporate Democrats to prosper but, as I’ve argued elsewhere, has left the working class in the dust.

But something has now happened that few predicted. The Republicans’ culture war has come back to bite the Republicans in their incidentals. The GOP has ventured into territory that even Kansans apparently decided was a dangerous overreach. A woman’s right to choose tipped the scales but the scales were already tipping as the GOP began to encroach on many aspects of private life: contraception, same-sex marriage, transgender bathroom rights, books, and religion.

Kansans, like most Americans, know the difference between what should be left to personal choice and what should be public. But in its ardor to fuel the culture war, the GOP forgot.

In addition, prairie populism lies just under the surface of the Kansas topsoil, as it does in much of the Midwest. Over the last several decades the giant corporations that supply Kansans with seed and fertilizer, and that turn the livestock and crops Kansans produce into food products, have grown much larger and more powerful. They are now among America’s biggest monopolies, siphoning off money from farmers as well as from consumers. If there’s one thing Kansans dislike as much as government intruding on their freedom, it’s big predatory corporations intruding on their meager profit.

Perhaps Kansas, as well as much of the rest of America, is ready for a dose of economic populism. If so, the Democrats’ pending “Inflation Reduction Act” – with its healthcare subsidies, declining pharmaceutical costs, and boosts for solar and wind power -- may prove more popular in the hinterlands than anyone expected.

As William Allen White, the famed progressive editor of the Emporia (Kansas) Gazette in the first half of the twentieth century, once wrote:

Democracy is an experiment, and the right of the majority to rule is no more inherent than the right of the minority to rule; and unless the majority represents sane, righteous, unselfish public sentiment, it has no inherent right.

(White also wrote: “My advice to the women of America is to raise more hell and fewer dahlias.”)

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How to stop rightwing media lies? Aug 02, 2022

Show notes

Defamation law may turn out to be America’s most important weapon against rightwing media lies.

On Friday, Infowars star Alex Jones’ parent media company, Free Speech Systems, filed for bankruptcy in the midst of a defamation damages trial underway in Austin, Texas.

Jones, you may recall, had portrayed the Sandy Hook school shooting massacre as a hoax involving actors, aimed at increasing gun control. Neil Heslin and Scarlett Lewis, whose 6-year-old son, Jesse Lewis, was among the 20 children and six educators killed, have sued Jones and his media company for $150 million. Courts in Texas and Connecticut have already found Jones liable for defamation.

To win a defamation lawsuit, a plaintiff must show four things: the defendant made a false statement purporting to be fact; the statement was published or communicated; the defendant failed to exercise reasonable care or, worse, knew the statement was incorrect and hurtful but made it anyway; and the plaintiff suffered harm as a result.

By these criteria, it’s no wonder Jones will soon be paying out a fortune in damages. Declaring bankruptcy won’t save him.

Defamation litigation is slow and expensive and, like all litigation, it enriches lawyers. It can also be abused. Anyone remember what happened to Gawker after its tech blog published a post under the headline, “Peter Thiel is totally gay, people”? Billionaire Thiel quietly bankrolled Hulk Hogan, the professional wrestler, to sue Gawker for defaming Hogan in a totally unrelated story — and Hogan’s nine-figure defamation award bankrupted Gawker Media.

But at a time when social media can’t be trusted to police itself against weaponized lies, and when much of the public doesn’t trust government to regulate social media, defamation lawsuits may be the best we can hope for.

One America News (OAN), a right-wing media organization that pushed conspiracy theories about the election, is facing so many defamation lawsuits from those injured by the network’s lies that its future is now in doubt.

Five years ago, Trump was ecstatic about OAN’s flattering coverage of him. By the summer of 2020 -- dissatisfied with what he considered insufficient gushing by Fox News – Trump was urging his followers to switch to OAN and Newsmax, calling them “much better” than Fox. He did the same after the election, when OAN’s journalists were more willing than many Fox correspondents to continue pushing Trump’s Big Lie.

Last December, Ruby Freeman and Wandrea Moss, Georgia election workers, sued OAN hosts and guests, including Rudy Giuliani, for baselessly accusing them of committing election fraud and engaging in a criminal conspiracy. Freeman and Moss said OAN’s lies subjected them to an onslaught of harassment and racist threats, leading one of them to leave her home for months at the recommendation of the Federal Bureau of Investigation.

OAN ultimately settled the case for an undisclosed sum. Apparently as part of the settlement agreement, OAN admitted on air that Freeman and Miss “did not engage in ballot fraud or criminal misconduct.”

Meanwhile, Dominion Voting Systems, which provided voting machines to 28 states in the 2020 election, has accused OAN of defaming the company and its products by airing false reports that its machines switched votes from Donald Trump to President Biden, thereby hurting its business and putting its employees in danger. (One of those employees, Eric Coomer, received death threats after OAN named him in a report as an alleged collaborator of the far-left movement, antifa. Coomer is now suing OAN, too.)

The litigation has not gone well for OAN. Judges have rejected its motions to dismiss the case. In one ruling, a judge concluded that OAN acted “maliciously and consciously” in perpetuating falsehoods about Dominion, and that its chief White House correspondent, Chanel Rion, failed to exercise even minimal journalistic standards.

In April, OAN was dropped by AT&T’s DirecTV, which has about 15 million subscribers. Verizon just announced it would stop carrying OAN on its Fios television service. OAN will soon be available to no more than a few hundred thousand people.

Dominion isn’t stopping with OAN. It’s seeking a total of $1.6 billion in damages extending to Newsmax as well as to Fox News and Fox News’s parent, the News Corp. And it’s seeking an additional $1.3 billion in damages from each of Trump’s most whacko conspirators — Sydney Powell, Rudy Giuliani and MyPillow CEO Mike Lindell.

As to the News Corp, Dominion alleges that Rupert Murdoch and his son, Lachlan, acted with “actual malice” because they knew that the lie Fox News was touting was false.

Defamation lawsuits aren’t sure things, and they pose potential threats to the free press. But if the press is alert to errors and corrects them quickly, defamation shouldn’t be a problem.

Sarah Palin recently lost her defamation suit against The New York Times, in which she alleged that the Times defamed her when it erroneously linked her campaign rhetoric to a mass shooting. Part of the reason Palin lost was the Times quickly corrected its mistake.

The Times’ behavior stands in sharp contrast to that of Fox News. Although Dominion repeatedly asked Fox News to stop its lies and correct the record, Fox persisted even though it knew they were lies (Dominion cites a report that Rupert Murdoch spoke with Trump a few days after the election “and informed him that he had lost.”)

Even if it loses the lawsuit, Fox News can weather this storm financially (although cable providers are likely to use the lawsuit to drive down what Fox charges them when they renegotiate their contracts at the end of this year).

Notably, though, Trump has not been interviewed on Fox in more than a hundred days and the network has avoided live coverage of his rallies and speeches, while granting more airtime to other Republican presidential hopefuls, such as Florida Gov. Ron DeSantis. Meanwhile, Murdoch’s Wall Street Journal and New York Post have issued sharp rebukes of Trump.

Is this because the Murdochs have had a change of heart about Trump? Or because they’ve had a change of litigation strategy?

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How to bask in the political limelight? Be Manchinema Aug 01, 2022

Show notes

TONIGHT I’m talking with Stephanie Ruhle, on MSNBC’s 11th Hour, about the biggest difference between Joe Manchin and Kyrsten Sinema — the so-called “carried interest loophole” that rewards big bucks to private equity managers.

This week, the spotlight once again will be on Manchin and Sinema (dubbed “Manchinema” by the Washington press corps as the two blocked much of Biden’s agenda) because it’s the Democrats’ last chance for a large package — Manchin has agreed to $790 billion — on the climate and healthcare, financed by a tax increase on the rich and big corporations.

But will Sinema go along?

It has been said that the word “politics” is derived from the Latin “poli,” meaning “many,” and “tics,” small blood-sucking insects. I don’t hold such a cynical view. But I do know, from fifty year’s experience in and around Washington, that most of the people who serve in our nation’s capital have very, very large — shall we say? — ego’s.

Yesterday, Manchin made the rounds of every Sunday talk show — doing what’s known as a “full Ginsburg” (named after William Ginsburg, the lawyer for Monica Lewinsky, who first appeared on all five Sunday morning talk shows on February 1, 1998). Record-keepers note that Manchin is only the 31st newsmaker to have accomplished this feat, but purists dispute his accomplishment because Manchin appeared remotely.

Manchin treated it as a victory lap. He took credit for his newly-named “Inflation Reduction Act” (he refused to allow it to be named “Build Back Better” because he’s still smarting over what he viewed as the Biden administration’s criticism of him for blocking the original BBB).

One interesting sidebar: When Manchin was asked by “Meet the Press” host Chuck Todd whether he wanted Democrats to keep control of the House and Senate after the midterms, Manchin declined to answer. (Does he want to hold out the possibility of becoming a Republican kingmaker if the Dems lose?)

Tellingly, Manchin wouldn’t even use the pronoun “we” when talking about the Democrats.

I’ve always made it a point to listen to the pronouns politicians use. The use of pronouns tells you a lot about where a politician’s loyalties lie. Manchin almost never uses “we” when he refers to Democrats. Sometimes, it’s “they.” When Trump was president, he used “we” to refer to the people who voted for him, and “they” for everyone else.

Which brings me to Kristyn Sinema — who uses the pronoun “I” perhaps more frequently than any other contemporary politician. (“I’m always surprised when people say, ‘Oh, she’s an enigma,’” said Sinema in an interview with the Washington Post. “I’m, like, not at all, actually. I’m very straightforward about what I believe in and why I’m doing what I do.”)

“What good would politics be,” Thomas Mann wrote in The Magic Mountain, “if it didn't give everyone the opportunity to make moral compromises?” Sinema seems to relish that opportunity.

Although not up for reelection until 2024, she is one of the senate’s major recipients of Wall Street cash (the finance industry has donated $2.2 million to her since she took office in 2017). She has obliged by, among other things, refusing to close the so-called “carried interest” tax loophole that mostly benefits private-equity investors and hedge fund managers by treating their pay as capital gains (at a tax rate of 20 percent) rather than as ordinary income (36 percent) — even though their pay is ordinary income, since they risk none of their own capital.

By contrast, Manchin wants to close the loophole — or nearly so. (Manchin’s bill would lengthen the amount of time private-equity and hedge-fund managers must hold their investments to qualify them for capital gains.) "The only thing I was adamant about was the carried interest," he told reporters last Thursday. Manchin’s aversion to the loophole isn’t new. Last year he joined two other Senate Democrats in sponsoring a bill to close it.

Closing the carried-interest loophole is the only tax increase on rich individuals in Manchin’s compromise bill. The rest of the tax hikes are on corporations.

The carried-interest loophole is a blatant giveaway to the super-rich. It has no redeeming social value. Even Trump promised to eliminate it. So did Barack Obama. So has Joe Biden. Yet it’s still there, in the tax code. Why? Because lobbyists for the private-equity and hedge fund industries care about little else, and pour lots of money into the campaigns of both Democratic and Republican members of Congress to maintain it. (Democratic House Ways and Means Committee Chair Richard Neal is a powerful supporter of the loophole. I don’t believe it a coincidence that the private equity industry is one of Neal’s biggest donors.)

Sinema's office says she’s still reviewing Manchin’s bill. How long will Democrats have to wait until she breaks her silence on it? If there’s one thing Sinema loves more than Wall Street dollars, it’s national media attention. So it could be a while.

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Inflation: argggghhhhhhh! Jul 30, 2022

Show notes

My informal weekly coffee with Heather Lofthouse (Executive Director of Inequality Media Civic Action and my former student), discussing the past week: The Fed’s decision to raise interest rates yet again — wrong medicine? Recession — should we be worried? Joe Manchin’s change of heart — will it stick? Merrick Garland’s inevitable decision of whether to prosecute Trump — by when?

Plus a special request from Heather — if you're willing to take a stab at composing a very short theme song for this klatch please send it to Heather and me at: robertreich@substack.com.

Please pull up a chair.

This is a public episode. If you'd like to discuss this with other subscribers or get access to bonus episodes, visit robertreich.substack.com/subscribe

I've been jilted too many times by Manchin to fall for him again Jul 28, 2022

Show notes

Has Joe Manchin really, finally seen the light? Word is that President (sorry) Senator Manchin has agreed to roughly $433 billion in new spending, much of it focused on lowering energy costs, increasing clean energy production, and reducing carbon emissions.

Part of the Manchin-approved deal would raise $739 billion in taxes over the next decade — including a new minimum tax on corporations and additional funding to help the Internal Revenue Service pursue tax cheats.

1. A few grounds for skepticism

If this deal happens, great. But by my count this is the third time Manchin has agreed to support something Democrats desperately want, only to reverse himself a bit later.

There’s also the inconvenient reality of the ever-elusive, often bizarre Arizona Democrat Kyrsten Sinema, who has made opposition to tax increases on the wealthy one of the cornerstones of her short, regressive time in the Senate. (Remember, Dems need 50 votes.)

Putting all the blame on Manchin and Sinema for stopping Dems from raising taxes on big corporations and the wealthy lets too many other Democratic lawmakers off the hook.

Democratic senators and representatives from New York, New Jersey, and California have insisted that any tax bill must raise or eliminate the $10,000 cap on the state and local tax deduction, which has hit higher-income taxpayers in these states. (It was the only slightly progressive feature of the Trump tax cut, thrown in to penalize these anti-Trump jurisdictions.) Will they go along with the Manchin-supported tax increase?

Many Democratic lawmakers cried foul recently when Democrats on the House Ways and Means Committee considered imposing Social Security payroll taxes on wages and self-employment earnings above $400,000, to help fortify Social Security. Will they go along with the Manchin tax increase?

Meanwhile, Democrats such as Senator Jon Tester of Montana blocked Biden’s plan to tax unrealized capital gains at death, expressing concerns about what it would mean for family-owned farms and businesses. Translated: They’ve been bought by Big Ag. Will Big Ag go along with the Manchin tax increase?

House Democrats shot down a plan to require banks to report annual account flows to the Internal Revenue Service, saying it was too intrusive. Why should Democrats object to giving the IRS the data it needs to collect taxes that are due? Will they go along with the Manchin tax increase, some of whose revenue will beef up IRS enforcement?

The record isn’t encouraging. Democrats have so far failed to increase taxes on big corporations or the wealthy, even though a Democratic president now occupies the White House and Democrats control both houses of Congress.

2. The Manchin-approved tax is still small potatoes

Even if the Manchin-approved $739 billion tax increase over ten years gets enacted, it would still be small potatoes considering that large corporations have been enjoying record profits (even with the current economic turmoil, they’re sufficiently flush to be buying back their own stock at near-record levels); that the ratio between the pay of CEOs in large corporations and the pay of average workers has never been as large as it is today; and that the richest Americans have by now accumulated the largest share of the nation’s wealth since the Gilded Age of the late nineteenth century.

And it’s small potatoesconsidering that tax revenue collected from corporations is at a record low as a share of the economy, and that the super-rich are paying a lower effective tax rate than the average tax rate paid by workers in the bottom half of the income distribution.

3. What’s behind the Democrat’s failure to raise taxes so far?

Part of the Democrat’s problem is that the party has become such a big tent that it’s no longer a tent at all. It’s more like a leaky tarp — and what’s been leaking in is big money. As I’ve noted here, the Democratic base has steadily shifted to include more high-income suburban voters while drifting away from its working class roots. So when it comes to raising taxes on the rich, Democrats increasingly find themselves facing their own most active constituents.

Another part of the Democrat’s dilemma is their dependence on big corporations and the wealthy to fund their political campaigns. Many big American corporations are equal-opportunity bribers whose executives and PACs give generously to both parties. Meanwhile, rich liberals who fund Democrats tend to be almost as unwilling to part with their money as the rich conservatives who fund Republicans. The result is a reluctance among legislators, Democrats almost as much as Republicans, to bite the hands that feed them.

There is also the inconvenient fact that nearly half of retiring Democratic lawmakers are ending up as lobbyists for big corporations and the wealthy, as are Republican lawmakers. (It’s not that they’re greedier than former generations of retired lawmakers; it’s that lobbying has become far more lucrative.) And what do Washington lobbyists do? A significant part of their time and energy is focused on preventing tax increases on big corporations and the rich, and seeking tax cuts and loopholes for them.

4. Where does all this leave us?

When more of the nation’s wealth and income have moved to the top than at any time in the last century, and when taxes on the top are at their lowest in more than fifty years, the least we should expect from Democrats is to raise taxes on the wealthy and on big corporations. Such taxes not only help the nation pay for what it needs (including measures that slow climate change). They also reduce record levels of inequality.

If the latest Manchin deal becomes law, two cheers for the Democrats. Even though it’s not up to the scale of the challenge, it will give Democrats something to crow about in the upcoming midterms.

If the deal falls through, shame on them.

The difficulties Democrats have had so far in raising taxes illustrate the vicious cycle at the heart of American capitalism today: Because wealth and power are inseparable, as more of the nation’s wealth concentrates in a few hands, the greater the power those hands have to reduce taxes on themselves and to shift taxes onto those with less wealth and power. The bottom 80 percent of Americans (by income) is now paying a larger share of the nation’s total tax bill (including Social Security taxes, sales taxes, user fees, tolls, and property taxes) than ever before, yet arguably getting less return on their tax dollars. Meanwhile, their incomes have stagnated or declined, adjusted for inflation, and they have little or no savings.

Let’s hope that Joe Manchin’s change of heart results in legislation. But let’s not forget the twin challenges of growing inequality and big money drowning American politics. They are two sides of the same crisis of American capitalist democracy. More than at any time since the Gilded Age of the late nineteenth century, America needs a pro-democracy movement focused on getting big money out of politics and reducing near-record inequalities of wealth and income. One cannot be achieved without achieving the other.

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What's the biggest Trump Oxymoron of all? Jul 26, 2022

Show notes

Today, Donald Trump returns to Washington — his first visit since leaving in disgrace after January 6 — to deliver the keynote address for the America First Policy Institute’s “America First Agenda Summit.”

The purpose of this confab is to give Trump some policy creds as he prepares to announce a 2024 run for re-election. Brooke Rollins, one of the organizers of the Institute and the Summit (who was domestic policy adviser in Trump’s White House) says “having worked next to him for almost three years in the White House, a lot of people didn’t give him enough credit for his policy vision.”

Sane people don’t give Trump credit for having a policy vision at all. In the annals of political oxymorons, a “Trump policy vision” must rank very high.

To have a policy vision, it is first necessary to have some capacity for thinking about policy. Trump never did and never will.

To think about policy is to contemplate something beyond oneself. Trump can only think about how something will reflect on his own reflection. The only policies he’s ever cared about are those that advance Trump.

Policy entails a degree of deliberation, of assessment based on logic and fact. That’s not the Trump we’ve known, either. When president, Trump never read memos. He never looked at graphs or charts. He hated numbers. He is contemptuous of data, analysis, science, reality.

To have a vision is to be forward-looking. But Trump always looks backwards – to vindicate himself, retaliate, take revenge, exact retribution, settle scores, counterattack, return fire.

“It’s an opportunity for President Trump to come to Washington and give a visionary speech about why the future would be better with his leadership — and to the degree he focuses on that it could be a very important speech,” says Newt Gingrich, the former Republican House speaker who remains close to Trump, about tonight’s address.

But Trump can’t get over the past. Especially now — after weeks of the Jan. 6 committee hearings exposing his conduct before and during the insurrection at the Capitol — does anyone seriously expect him to stay on message about the future?

Maybe if they drug him and administer an electric shock every time he diverges from the teleprompter text his policy advisers have prepared for him, he may surprise. But the outtakes from the remarks he was supposed to give on January 7 suggest even this will pose a challenge.

On the rare occasion Trump has offered a vision about the future, it’s been a weather prediction. Remember when he warned the public that Alabama was going to be hit by Hurricane Dorian — long after Dorian was already heading toward the Carolinas, leaving Alabama back in the sunshine? Rather than admit error, Trump had his White House policy staff release a 225-word statement defending his erroneous warning, and spent the next four days defending himself with a doctored and outdated hurricane map that looped in Alabama with a black marker, followed by assertions that his prediction was accurate at the time he issued the warning (it wasn’t), a week-old map that showed a low probability of tropical-storm winds in a small corner of Alabama, and incessant tweets culminating with “What I said was accurate! All Fake News in order to demean!” and “I accept the Fake News apologies!”

It's been the same with all his bogus claims – starting with the crowd size at his inaugural, to voter fraud in 2016 and again in 2020, to “unknown Middle Easterners” streaming across the southern border in migrant caravans. He lies, then defends his lies with more lies, then rips into those who tell the truth. That’s always been his MO.

The worst job I can imagine is to be a Trump policy adviser. It would be like running behind an elephant with a giant pooper-scooper.

In addition to Rollins, the America First Policy Institute -- described gingerly as a “White House in waiting” -- is run by Larry Kudlow, Trump’s top economic adviser, and Robert O’Brien, Trump’s national security adviser. It has a staff of 150 and an operating budget of $25 million.

I have no idea if they’re doing serious policy analysis. Trump’s former trade adviser Peter Navarro, appearing on Steve Bannon’s War Room podcast Friday, called the organization “a dumping ground and haven for a lot of the failed people from the first administration, the RINOs, and the disloyalists who let Trump down.”

It’s the nicest compliment I’ve heard anyone give the Institute’s personnel, but I still doubt they’ll get Trump to be a policy visionary.

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