The first section of Robert Reich’s “After Shock, The Next Economy and America’s Future” was informative, even if it at times seems to take liberties to make the point that for the nation to progress requires all income groups to share the new wealth or there will be insufficient demand for goods for and services. The second section seemed like filler, perhaps because much of the material had already been presented. But at the conclusion, Reich sets forth eight specific and provocative recommendations for renewing prosperity by growing the economy through enabling growth in income for the lower and middle classes, and conceivably even for those who are already well to do and even super rich.
1) A reverse income tax. President Richard Nixon favored this type of approach, whereby many current programs for the poor are replaced by the government simply supplementing their earnings. For example, the minimum wage earner might receive a few extra dollars an hour from the government, enabling the person to rise above the poverty level and increase his or her purchasing power.
2) A carbon tax. By taxing fossil fuels (coal, oil products and natural gas) and the trading of “rights to pollute”, conservation would be encouraged, investment would be accelerated into ways to reduce pollutants, and funds would become available to pay for the “reverse income tax.”
3) Higher marginal tax rates on the wealthy. Increase income taxes and close loopholes so that the maximum marginal tax on those earning more than $260,000 annually would be 55%. This would still be far lower than during most of the years of prosperity following World War II. Reich indicates that there is no evidence that raising taxes retards the economy and cites evidence to the contrary.
4) A reemployment system rather than an unemployment system: Job seekers taking jobs paying less than they had earned over time in the past would receive a subsidy for two years to enable them to gain new skills (and presumably begin to earn more) or perhaps to obtain job training. He also suggests that companies with substantial earnings should have to pay very large severances to laid off workers (a concept which the Watchdog disputes and has not worked well in Europe.) He also advocates school vouchers to enable students, regardless of their neighborhood, to seek out better school alternatives and to spur competition among schools.
5) College loans linked to subsequent incomes: By repaying only a set proportion of their future earnings of a set number of years, graduates would be better able to afford lesser paying careers such as teaching, engineering, and family medical practice. With more able to afford education, the nation would become more competitive. (The Watchdog independently learn today that the USA is ranked tenth in the world for percentage of college graduates and trails Poland!)
6) Medicare for all: Reich points out that already 52% of Americans are covered by government health insurance which programs are far more efficient that private programs. “Medicare’s administrative costs [is] (in the range of 3% of premiums), companies that self insure (5 to 10 percent of premiums), companies in the small-group market (25% to 27% of premiums), and individual insurance (40%.)”
7) Public goods: He advocates greater government expenditure for mass transportation (with much resulting savings), parks, recreational facilities, museums and libraries in order to benefit all of society.
8) Money out of politics: He would require that all political donations go to “trusts” whereby the identity of the donor would never be divulged to the recipient, thus defeating the very purpose of corporate donations and other major donors!
The above summary is far from complete and does not do justice to what Reich has written. For that you need to read the book. Rather it simply serves to suggest the scope and thrust of his bold recommendations.
From the viewpoint of the Watchdog, a return to earlier interpretations and enforcements of laws governing mergers and acquisitions should be #9 and restructuring financial regulations to prevent “too big to fail” future bail outs would make an appropriate #10.
Reich’s final chapter is entitled “How it can be done.” It envisions the possibility of a further deep recession (the “aftershock”) finally bringing about circumstances whereby the two political parties will work together to bring about necessary reforms to improve the condition of the middle class and thereby generate greater purchasing power for goods and services. He anticipates circumstances reminiscent of the New Deal of the 1930s but reforms conducted in a wiser manner based upon Keynesian analysis. Whether this can be accomplished under our current two party system is the issue that Reich flirts with but fails to address head on. Or perhaps that will be the subject of his next book.
