Take from the rich, give to the poor (and middle class)? Robert Reich says so

Nov 1, 2012

The middle class is struggling. The rich are growing richer.

Is there anything we can do to stem rising income inequality? Would changes to our tax system help?

In the final days before the election, KPLU asked two experts – one liberal, one conservative – to weigh in on what to do about income inequality and how to fix our tax system.

In part one, we hear from Robert Reich, who served as labor secretary under President Bill Clinton and is now a professor of public policy at the University of California Berkeley. His latest book is called Beyond Outrage: What Has Gone Wrong with our Economy and our Democracy, and How to Fix Them. Reich came to Tacoma recently to speak at the University of Puget Sound.

Reich says there are two main reasons for the widening gap between the very rich and everybody else: technological change and globalization. Computers, cargo ships, satellites all enabled companies to automate and move jobs overseas, leaving many Americans out of work or forced to take lower-paying jobs.

“The point is, those innovations did reward the innovators, but they displaced a lot of people who were not the innovators,” Reich said. “So the real question is how can we as an economy, as a society, adapt, move onward and upward to higher value-added production and even those of us who can’t do it, how do we make sure we bring them along?”

Reich says there are two important things that our government could do to help our workers adapt to the new global economy. One, he says the U.S. could expand the earned income tax credit, a program that gives money back to the lowest-rung earners at tax time. He says we should extend that up into the middle class, and that we could do that by raising taxes on the wealthiest people to 40 percent from about 35 percent now.

“Now, this sounds blasphemous, I know, because this sounds like I’m talking ‘redistribution,’” Reich said. “But look, compare this to what we used to do in the first three decades after the Second World War. Even under Dwight David Eisenhower, nobody would accuse him of being a socialist, but the marginal income tax on the highest earners in the 1950s was 91 percent. I’m not talking about anything close to that.”

In part two, airing Friday, Nov. 2, we’ll hear a different perspective from conservative economist Douglas Holtz-Eakin.