Robert Reich's Prescription for the Economy

Former Secretary of Labor and Economics Professor, Robert Reich was on Bloomberg TV's Taking Stock with Pimm Fox, yesterday. Reich is promoting his recently released book, “Aftershock: The Next Economy and America's Future” Reich thinks that the economic problems facing the nation stem from the huge income disparity between rich and poor. Reich said, there were only 2 years where the top 1% of incomes were equal to over 25% of total U.S income. That was in 1928 right before the great depression and in 2007 before the financial collapse. The assumption is that income disparity was one of the causes of the financial collapse Reich thinks that if incomes rise for the average U.S. citizen, that it would be better for everybody including the rich. “It's better to have a smaller share of a rapidly growing economy than a larger share of a declining one. When you have huge concentration of wealth at the top people don't have the purchasing power to pay off their debt,” said Reich. Reich made some salient points: "When the public is insecure there is fodder for demagogues. People want to blame immigrants, and foreign trade. It makes for a very angry and ugly political situation.” History shows that Reich is right about that. During the depression in the 1930's you had a rise of extremism on the right and left. The best example was Father Coughlin, a popular racist and ant-Semitic priest who attracted a large following on the radio. The Communist party was extremely active, and many recruits were later purged in the 1950's during the McCarthy era. So what are Reich's solutions: 1) He wants to exempt people making less than $20,000 from income tax. 2) He wants to extend the earned income tax credit to the middle class. 3) Apply a carbon tax. Which would spur growth and create jobs in energy efficient industries. The 500 pound gorilla, that Reich dared not mention is of course the Tea Party. In my opinion, the Tea Party is both extremist and angry. They are being financed by millionaires, and the last thing their wealthy handlers want to do is exempt poor people from income taxes. A carbon tax is a non starter for air polluting Tea Party financiers like the Koch Brothers. Reich repeatedly made clear that he is not for an income redistribution from rich to poor. However, a rose by any other name is still a rose. Reich might have the right prescriptions for the economy but since the electorate has moved to the right, not many people are ready for his message. If history is a guide, the electorate may switch from right back to left, if unemployment is still high in a few years. They will certainly want to kick the new bums out. As Winston Churchill said: "The American Public always does the right thing, after they've tried everything else."