Friday, October 8, 2010

qotd: Robert Reich: Aftershock

By Robert B. Reich
Published 2010 by Alfred A. Knopf


In September 2009... Treasury Secretary Tim Geithner, assessing what had happened to the United States in the years leading up to the Great Recession, repeated the conventional view that "for too long, Americans were buying too much and saving too little."

The problem was not that Americans spent beyond their means but that their means had not kept up with what the larger economy could and should have been able to provide them.

Part I - The Broken Bargain 
Chapter 2 - Parallels

Economists Emmanuel Saez and Thomas Piketty have examined tax records extending back to 1913. They discovered an interesting pattern. The share of total income going to the richest 1 percent of Americans peaked in both 1928 and in 2007, at over 23 percent.

Between the two peaks is a long, deep valley. After 1928, the share of national income going to the top 1 percent steadily declined... to 9 to 11 percent in the 1950s and 1960s, finally reaching the valley floor of 8 to 9 percent in the 1970s. After this, the share going to the richest 1 percent began to climb again... reaching its next peak of more than 23 percent in 2007.

Part III - The Bargain Restored
Chapter 1 - What Should Be Done: A New Deal for the Middle Class

Medicare for all. The passage of health care legislation in 2010 represents only the first step toward reform. The next stage should be Medicare for all. The most efficient way to provide all Americans with high-quality health care is to allow everyone to sign up for Medicare and to subsidize the costs for middle-class and lower-income families.

Emmanuel Saez - Striking it Richer: The Evolution of Top Incomes in the United States

Comment:  The landmark study by Emmanuel Saez and Thomas Piketty has been cited by many in helping to explain what went wrong with our economy. The productivity gains of American workers were not shared with the workers but were transferred to the wealthiest Americans. Robert Reich explains that the economy falters when the masses to not have the funds to purchase the products and services made possible by their own productivity.

What should be done is intuitive. In restoring the bargain by creating a New Deal for the middle class, one of the most obvious and effective measures would be to establish a Medicare program for everyone and fund it publicly through progressive tax policies.

So simple and so right. Yes, Reich is right.

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