From Robert Reich Archive

Some politicians are calling for higher taxes on the rich. Naturally, these proposals have unleashed a torrent of opposition – mostly from…the rich. Here are the 12 biggest myths they’re propounding: 

Myth 1: A top marginal tax rate applies to all of a rich person’s total income or wealth.

Wrong. It would only apply to dollars in excess of a certain level. The 70 percent income tax rate proposed by Congresswoman Alexandria Ocasio-Cortez would apply only to dollars in excess of 10 million dollars a year. The 2 percent wealth tax proposed by Elizabeth Warren would apply only to wealth in excess of 50 million dollars.

Myth 2 : Raising taxes on the rich is a far-left idea.

Baloney. 70 percent of Americans – including 54 percent of Republicans – support raising taxes on families making more than 10 million dollars a year.  And expecting the rich to pay their fair share is a traditional American idea. From 1930 to 1980, the average top marginal income tax rate was  78 percent. From 1951 to 1963 it exceeded 90 percent – again, only on dollars in excess of a very high threshold. Even considering all deductions and tax credits, the very rich paid over half of their top incomes in taxes.  

Myth 3: A wealth tax is unconstitutional.

Rubbish. Most locales already impose an annual wealth tax on the value of peoples’ homes – the main source of household wealth for most people. It’s called the property tax. The rich hold most of their wealth in stocks and bonds, so why should these forms of wealth escape taxation?  Article I Section 8 of the Constitution gives “Congress [the] power to lay and collect taxes.”

Myth 4: When taxes on the rich are cut, they invest more and everyone benefits, when taxes on the rich are increased, economic growth slows.

Utter baloney. Trickle-down economics is a cruel joke. Donald Trump, George W. Bush, and Ronald Reagan all cut taxes on the rich, and nothing trickled down. There’s no evidence that higher taxes on the rich slows economic growth. To the contrary, when the top marginal tax rate has been high – between 71 to 92 percent – growth has averaged 4 percent a year. But when top rate has been low – between 28 and 39 percent – growth has averaged only 2.1 percent.

Most Americans still cling to the meritocratic notion that people are rewarded according to their efforts and abilities. But meritocracy is becoming a cruel joke.

The Justice Department recently announced indictments of dozens of wealthy parents for using bribery and fraud to get their children into prestigious colleges.

But the real scandal isn’t how far a few wealthy parents will go to get their kids admitted (apparently $1.2 million in illegal payoffs), but how commonplace it has become for them to go almost as far without breaking any laws – shelling out big bucks for essay tutors, testing tutors, admissions counselors, and “enrichment” courses (not to mention sky-high tuition at private schools feeding into the Ivy League).  

Inequality is lurking behind all this, and not just because the wealthy can afford it. Researchers Daniel Schneider, Orestes Hastings, and Joe LaBriola found that in states with the biggest gaps between rich and poor, well-to-do parents spend the most trying to get their children into elite colleges.

America’s unprecedented concentration of wealth combined with seemingly bottomless poverty have increased parental anxiety – raising the stakes, and the competition, for admission.

While some entrepreneurs in America’s billionaire class lack a prestigious degree, it’s become harder to become a run-of-the-mill multimillionaire in America without one.

“America will never be a socialist country,” Donald Trump declared in his State of the Union address. Someone should alert Trump that America is now a hotbed of socialism. But it is socialism for the rich. Everyone else is treated to harsh capitalism.

In the conservative mind, socialism means getting something for doing nothing. That pretty much describes the $21 billion saved by the nation’s largest banks last year thanks to Trump’s tax cuts, some of which went into massive bonuses for bank executives. On the other hand, more than 4,000 lower-level bank employees got a big dose of harsh capitalism. They lost their jobs.

Banks that are too big to fail – courtesy of the 2008 bank bailout – enjoy a hidden subsidy of some $83 billion a year, because creditors facing less risk accept lower interest on deposits and loans. Last year, Wall Street’s bonus pool was $31.4 billion. Take away the hidden subsidy and the bonus pool disappears.

Trump and his appointees at the Federal Reserve are easing bank requirements put in place after the bailout. They’ll make sure the biggest banks remain too big to fail.

Trump is promoting socialism for the rich and harsh capitalism for everyone else in other ways. Since he was elected, GM has got more than $600 million in federal contracts plus $500 million in tax breaks. Some of this has gone into the pockets of GM executives. Chairman and CEO Mary Barra raked in almost $22m in total compensation in 2017 alone.

But GM employees are subject to harsh capitalism. GM is planning to lay off more than 14,000 workers and close three assembly plants and two component factories in North America by the end of 2019.

Air traffic controllers hold the trump card (pardon the expression) in upcoming negotiations between Donald Trump and congressional Democrats over border security.

That’s because the president and the Republicans know that another shutdown would likely cause a repeat of what happened last Friday, when so many of the nation’s air traffic controllers called in sick that America’s air traffic came to a near standstill. Hours later, Trump agreed to reopen the government without funding for his wall.

Never underestimate the power of airport delays to arouse the nation. Nancy Pelosi deserves credit for sticking to her guns, but the controllers brought the country to its knees.

Trump is threatening another shutdown if he doesn’t get his way by 15 February, when government funding will run out again. “Does anybody really think I won’t build the WALL?” he tweeted Sunday, after his acting chief of staff said that he was prepared to shutter the government for a second time.

But his threat is for the cameras. If there’s no agreement this time around, the controllers won’t work another 35 days without pay. Now that they understand their power, they will shut down the shutdown right away. Trump knows this.

Ironically, it was Ronald Reagan’s audacious decision in 1981 to fire and replace more than 11,000 air traffic controllers who were then striking illegally that legitimized decades of union busting. It signaled to employers around the country that unions – both public and private-sector – were fair game.

The Trump Justice Department has approved a $69 billion merger between CVS, the nation’s largest drugstore chain, and insurance giant Aetna. It’s the largest health insurance deal in history.

Executives say the combination will make their companies more efficient, allowing them to gain economies of scale and squeeze waste out of the system.

Rubbish. This is what big companies always say when they merge.

The real purpose is to give Aetna and CVS more bargaining power over their consumers and employees, as well as pharmaceutical companies and healthcare providers (which have also been consolidating).

The result: Higher prices. Americans already spend far more on healthcare and medications per person than do citizens in any other developed country – and our health is among the worst.

America used to have antitrust laws that permanently stopped corporations from monopolizing markets, and often broke up the biggest culprits. 

But now, especially with Trump as president and lobbyists and CEOs running much of the government, giant corporations like Aetna and CVS are busily weakening antitrust enforcement and taking over the economy.

Millennials (and their younger siblings, generation Z’s) are the largest, most diverse and progressive group of potential voters in American history, comprising fully 30 percent of the voting age population.

On November 6th, they’ll have the power to alter the course of American politics – flipping Congress, changing the leadership of states and cities, making lawmakers act and look more like the people who are literally the nation’s future.

But will they vote?

In the last midterm election, in 2014, only 16 percent of eligible voters between the ages of 18 and 29 bothered.

In midterms over the last two decades, turnout by young people has averaged about 38 points below the turnout rate of people 60 and older. Which has given older voters a huge say over where the nation is likely to be by the time those younger people reach middle age and the older voters have passed on.

I’m not criticizing younger non-voters. They have a lot on their minds – starting jobs, careers, families. Voting isn’t likely to be high on their list of priorities.  

Also, unlike their grand parents – boomers who were involved in civil rights, voting rights, women’s rights, the anti-Vietnam War movement – most young people today don’t remember a time when political action changed America for the better.

When Trump and his followers refer to “America,” what do they mean?

Some see a country of white English-speaking Christians.

Others want a land inhabited by self-seeking individuals free to accumulate as much money and power as possible, who pay taxes only to protect their assets from criminals and foreign aggressors.

Others think mainly about flags, national anthems, pledges of allegiance, military parades, and secure borders. 

Trump encourages a combination of all three – tribalism, libertarianism, and loyalty. 

But the core of our national identity has not been any of this. It has been found in the ideals we share – political equality, equal opportunity, freedom of speech and of the press, a dedication to open inquiry and truth, and to democracy and the rule of law. 

We are not a race. We are not a creed. We are a conviction – that all people are created equal, that people should be judged by the content of their character rather than the color of their skin, and that government should be of the people, by the people, and for the people.

Political scientist Carl Friedrich, comparing Americans to Gallic people, noted that “to be an American is an ideal, while to be a Frenchman is a fact.”

We must make sure our democracy doesn’t ever again elect a candidate who loses the popular vote. That means making the Electoral College irrelevant.

Here’s how: As you probably know, the Constitution assigns each state a number of electors based on the state’s population. The total number of electors is 538, so any candidate who gets 270 of those Electoral College votes becomes president. 

Article II of the Constitution says states can award their electors any way they want. So all that’s needed in order to make the Electoral College irrelevant is for states with a total of at least 270 electors to agree to award all their electoral votes to the presidential candidate who wins the popular vote. 

If they do that, then automatically the winner of the popular vote gets the 270 electoral college votes he or she needs to become president.   

Already 10 states and the District of Columbia have passed laws to do this – awarding all their electoral votes to the candidate who wins the popular vote, as soon as the 270 elector goal is met. Together, these states total 165 electoral votes.

Apple is only the latest big global American corporation to use foreign tax shelters to avoiding paying its fair share of U.S. taxes. It’s just another form of corporate desertion.

Corporations are deserting America by hiding their profits abroad or even shifting their corporate headquarters to another nation because they want lower taxes abroad. And some politicians say the only way to stop these desertions is to reduce corporate tax rates in the U.S. so they won’t leave.

Wrong. If we start trying to match lower corporate tax rates around the world, there’s no end to it.

Instead, the President should use his executive power to end the financial incentives that encourage this type of corporate desertion. President Obama has already begun, but there is much left that could be done.

In addition, corporations that desert America by sheltering a large portion of their profits abroad or moving their headquarters to another country should no longer be entitled to the advantages of being American.

Can we have a word? I continue to hear from many of you who say you won’t vote for Hillary Clinton because, you claim, (1) she’s no better than Donald Trump, or (2) even if she’s better, she’s still corrupt, and you refuse to vote for the “lesser of two evils,” or (3) you don’t want to reward the Democratic Party for corrupt primaries that gave the nomination to Hillary instead of Bernie Sanders.

Please allow me to respond.

(1) Anyone who equates Donald Trump with Hillary Clinton hasn’t been paying attention. Trump is a dangerous, bigoted, narcissistic megalomaniac with fascist tendencies who could wreak huge damage on America and the world. Hillary isn’t perfect but she’s able and experienced. There is simply no comparison.

(2) Even if you see Hillary Clinton as the “lesser of two evils,” the greater of two evils in this case (if you see the choice in these terms) is seriously evil. You’ve probably had occasion in the past to vote for someone who doesn’t meet your ideals, when the alternative is someone who falls much further from those ideals. This doesn’t mean you’ve sold out or compromised your principles. You’ve just been realistic and practical. Realism and practicality are critically important now.

I recently got a call from a political analyst in Washington. “Trump is dropping like a stone,” he said, convincingly. “After Election Day, he’s history.”

I think Trump will lose the election, but I doubt he’ll be “history.”

Defeated presidential candidates typically disappear from public view. Think Mitt Romney or Michael Dukakis.

But Donald Trump won’t disappear. Trump needs attention the way normal people need food. 

For starters, he’ll dispute the election results. He’s already warned followers “we better be careful because that election is going to be rigged and I hope the Republicans are watching closely, or it’s going to be taken away from us.“

His first campaign ad, released last week, features an image of a polling site with the word “rigged” flashing onscreen less than two seconds after the spot begins.

Trump won’t have any legal grounds to stand on—this election won’t be a nail-biter like 2000—but his goal won’t be to win in court. It will be to sow enough doubt about the legitimacy of Hillary Clinton’s election that he can continue to feed paranoia on the right.

Does Hillary Clinton understand that the biggest divide in American politics is no longer between the right and the left, but between the anti-establishment and the establishment?

I worry she doesn’t — at least not yet.

A Democratic operative I’ve known since the Bill Clinton administration told me “now that she’s won the nomination, Hillary is moving to the middle. She’s going after moderate swing voters.”

Presumably that’s why she tapped Tim Kaine to be her vice president. Kaine is as vanilla middle as you can get.

In fairness, Hillary is only doing what she knows best. Moving to the putative center is what Bill Clinton did after the Democrats lost the House and Senate in 1994 — signing legislation on welfare reform, crime, trade and financial deregulation that enabled him to win reelection in 1996 and declare “the era of big government” over.

In those days a general election was like a competition between two hot-dog vendors on a boardwalk extending from right to left. Each had to move to the middle to maximize sales. (If one strayed too far left or right, the other would move beside him and take all sales on rest of the boardwalk.)

But this view is outdated. Nowadays, it’s the boardwalk versus the private jets on their way to the Hamptons.

The Constitution of the United States is clear: Article II Section 2 says the President “shall nominate, and by and with the advice and consent of the Senate, shall appoint … judges to the Supreme Court.”

It doesn’t say the President can’t appoint in the final year of his term of office. In fact, a third of all U.S. presidents have appointed a Supreme Court justice in an election year. Yet many Republicans argue that no appointment can be made in the election year.

And the Constitution doesn’t give the Senate leader the right to delay and obstruct the rest of the Senate fro voting on a President’s nominee. Yet this is what the current Republican leadership argues.

In refusing to vote or even hold a hearing on the President’s nominee to the Supreme Court, the GOP is abdicating its constitutional responsibility. It’s not doing its job.

You are the captains of American industry, the titans of Wall Street, and the billionaires who for decades have been the backbone of the Republican Party.

You've invested your millions in the GOP in order to get lower taxes, wider tax loopholes, bigger subsidies, more generous bailouts, less regulation, lengthier patents and copyrights and stronger market power allowing you to raise prices, weaker unions and bigger trade deals allowing you outsource abroad to reduce wages, easier bankruptcy for you but harder bankruptcy for homeowners and student debtors, and judges who will let you to engage in insider trading and who won't prosecute you for white-collar crimes.

All of which have made you enormously wealthy. Congratulations.

But I have some disturbing news for you. You're paying a big price -- and about to pay far more.

First, as you may have noticed, most of your companies aren't growing nearly as fast as they did before the Great Recession. Your sales are sputtering, and your stock prices are fragile.

Instead of "Yes we can," many Democrats have adopted a new slogan this election year: "We shouldn't even try."

We shouldn't try for single-payer system, they say. We'll be lucky if we prevent Republicans from repealing Obamacare.

We shouldn't try for a $15 an hour minimum wage. The best we can do is $12 an hour.

We shouldn't try to restore the Glass-Steagall Act that used to separate investment and commercial banking, or bust up the biggest banks. We'll be lucky to stop Republicans from repealing Dodd-Frank.

We shouldn't try for free public higher education. As it is, Republicans are out to cut all federal education spending.

We shouldn't try to tax carbon or speculative trades on Wall Street, or raise taxes on the wealthy. We'll be fortunate to just maintain the taxes already in place.

1. "He'd never beat Trump or Cruz in a general election."

Wrong. According to the latest polls, Bernie is the strongest Democratic candidate in the general election, defeating both Donald Trump and Ted Cruz in hypothetical match-ups. (The latest Real Clear Politics averages of all polls shows Bernie beating Trump by a larger margin than Hillary beats Trump, and Bernie beating Cruz while Hillary loses to Cruz.)

2. "He couldn't get any of his ideas implemented because Congress would reject them."

If both house of Congress remain in Republican hands, no Democrat will be able to get much legislation through Congress, and will have to rely instead on executive orders and regulations. But there's a higher likelihood of kicking Republicans out if Bernie's "political revolution" continues to surge around America, bringing with it millions of young people and other voters, and keeping them politically engaged.

3. "America would never elect a socialist."

P-l-e-a-s-e. America's most successful and beloved government programs are social insurance - Social Security and Medicare. A highway is a shared social expenditure, as is the military and public parks and schools. The problem is we now have excessive socialism for the rich (bailouts of Wall Street, subsidies for Big Ag and Big Pharma, monopolization by cable companies and giant health insurers, giant tax-deductible CEO pay packages) -- all of which Bernie wants to end or prevent.

What's at stake this election year? Let me put as directly as I can.

America has succumbed to a vicious cycle in which great wealth translates into political power, which generates even more wealth, and even more power.

This spiral is most apparent in declining tax rates on corporations and on top personal incomes (much in the form of wider tax loopholes), along with a profusion of government bailouts and subsidies (to Wall Street bankers, hedge-fund partners, oil companies, casino tycoons, and giant agribusiness owners, among others).

The vicious cycle of wealth and power is less apparent, but even more significant, in economic rules that now favor the wealthy.

Billionaires like Donald Trump can use bankruptcy to escape debts but average people can't get relief from burdensome mortgage or student debt payments.

Giant corporations can amass market power without facing antitrust lawsuits (think Internet cable companies, Monsanto, Big Pharma, consolidations of health insurers and of health care corporations, Dow and DuPont, and the growing dominance of Amazon, Apple, and Google, for example).

But average workers have lost the market power that came from joining together in unions.

It's now easier for Wall Street insiders to profit from confidential information unavailable to small investors.

The great American middle class has become an anxious class – and it’s in revolt.

Before I explain how that revolt is playing out, you need to understand the sources of the anxiety.

Start with the fact that the middle class is shrinking, according to a new Pew survey.

The odds of falling into poverty are frighteningly high, especially for the majority without college degrees.

Two-thirds of Americans are living paycheck to paycheck. Most could lose their jobs at any time.

Many are part of a burgeoning “on-demand” workforce – employed as needed, paid whatever they can get whenever they can get it.

Yet if they don’t keep up with rent or mortgage payments, or can’t pay for groceries or utilities, they’ll lose their footing.

The stress is taking a toll. For the first time in history, the lifespans of middle-class whites are dropping.

According to research by the recent Nobel-prize winning economist, Angus Deaton, and his co-researcher Anne Case, middle-aged white men and women in the United States have been dying earlier.

The next president of the United States will confront a virulent jihadist threat, mounting effects of climate change, and an economy becoming ever more unequal.

We're going to need an especially wise and able leader.

Yet our process for choosing that person is a circus, and several leading candidates are clowns.

How have we come to this?

First, anyone with enough ego and money can now run for president.

This wasn't always the case. Political parties used to sift through possible candidates and winnow the field.

Now the parties play almost no role. Anyone with some very wealthy friends can set up a Super PAC. According to a recent New York Times investigation, half the money to finance the 2016 election so far has come from just 158 families.

Or if you're a billionaire, you can finance your own campaign.

Much of the national debate about widening inequality focuses on whether and how much to tax the rich and redistribute their income downward.

But this debate ignores the upward redistributions going on every day, from the rest of us to the rich. These redistributions are hidden inside the market.

The only way to stop them is to prevent big corporations and Wall Street banks from rigging the market.

For example, Americans pay more for pharmaceuticals than do the citizens of any other developed nation.

That's partly because it's perfectly legal in the U.S. (but not in most other nations) for the makers of branded drugs to pay the makers of generic drugs to delay introducing cheaper unbranded equivalents, after patents on the brands have expired.

This costs you and me an estimated $3.5 billion a year -- a hidden upward redistribution of our incomes to Pfizer, Merck, and other big proprietary drug companies, their executives, and major shareholders.

We also pay more for Internet service than do the inhabitants of any other developed nation.

Among the current crop of candidates for president of the United States, who exhibits leadership and who doesn't?

Leadership isn't just the ability to attract followers. Otherwise some of the worst tyrants in history would be considered great leaders. They weren't leaders; they were demagogues. There's a difference.

A leader brings out the best in his followers. A demagogue brings out the worst.

Leaders inspire tolerance. Demagogues incite hate.

Leaders empower the powerless; they give them voice and respect. Demagogues scapegoat the powerless; they use scapegoating as a means to fortify their power.

Leaders calm peoples' irrational fears. Demagogues exploit them.

My list of great American leaders would include Abraham Lincoln, Susan B. Anthony, Franklin D. Roosevelt, Frances Perkins, and Martin Luther King, Jr.

In his second inaugural address near the end of the Civil War, Abraham Lincoln urged his followers to act with "malice toward none, with charity for all."

Have you noticed how often conservatives who disagree with a policy proposal call it a “job killer?”

They’re especially incensed about proposals to raise the federal minimum wage. They claim it will force employers to lay off workers worth hiring at the current federal minimum of $7.25 an hour but not at a higher minimum.

But as Princeton University economist Alan Krueger pointed out recently in the New York Times, “research suggests that a minimum wage set as high as $12 an hour will do more good than harm for low-wage workers.”

That’s because a higher minimum puts more money into the pockets of people who will spend it, mostly in the local economy. That spending encourages businesses to hire more workers.

Which is why many economists, like Krueger, support raising the federal minimum to $12 an hour.

What about $15 an hour?

The Washington Post just ran an attack on Bernie Sanders that distorts not only what he’s saying and seeking but also the basic choices that lie before the nation.  Sanders, writes the Post’s David Fahrenthold, “is not just a big-spending liberal. And his agenda is not just about money. It’s also about control.”

Fahrenthold claims Sanders’s plan for paying for college with a tax on Wall Street trades would mean “colleges would run by government rules.”

Apparently Fahrenthold is unaware that three-quarters of college students today attend public universities financed largely by state governments. And even those who attend elite private universities benefit from federal tax subsidies flowing to wealthy donors. (Meg Whitman’s recent $30 million donation to Princeton, for example, is really $20 million from her plus an estimated $10 million she deducted from her taxable income.) Notwithstanding all this government largesse, colleges aren’t “run by government rules.”

The real problem is too many young people still can’t afford a college education. The move toward free public higher education that began in the 1950s with the G.I. Bill and was extended in the 1960s by leading public universities was reversed starting in the 1980s because of shrinking state budgets. Tuition has skyrocketed in recent years as states slashed education spending. It’s time to resurrect that earlier goal.