Robert Reich on the three economic myths that blind us

Writing for his eponymous blog, former Secretary of Labor and professor Robert Reich boils the left-right argument about economics down to what he calls the “three biggest myths that blind us to the economic truth.” Each myth is followed by the truth with which he would like to replace it.

Here’s his list:

Myth 1: “The ‘job creators’ are CEOs, corporations, and the rich, whose taxes must be low in order to induce them to create more jobs.” He calls that one “rubbish.”

Myth 2:The critical choice is between the “free market” or “government.” Reich deems that one “baloney.”

Myth 3: “We should worry most about the size of government.” He calls that one just “wrong.”

Of course there are many who will think that his myths are truth and his truths are myth. That’s what makes politics. But his short piece (accompanied by a short video in which he says almost exactly the same thing) cuts directly to the chase on most of the issues (outside of foreign policy and social issues) that separate red and blue Americans.

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Comments (16)

  1. Submitted by Ray Schoch on 03/12/2015 - 02:10 pm.

    And I side

    …with Reich, more or less, on each of the three – at least as they’re presented here and on his blog.

    In a society where most of the domestic spending is… well… spending, jobs are created by the people who are doing the spending. While the 1% do their best to emulate Thorstein Veblen’s “Conspicuous Consumption,” they can’t match millions of “Mr. and Mrs. Smiths,” and their children, when it comes to the purchase of everything from automobiles to macaroni and cheese.

    In line with what numerous prize-winning economists have written, I’ve said several times in comments previously, there never has been, nor will there ever be, the sort of “free market” that gets some on the right salivating. The United States has been a “mixed economy” from day one, and continues to be so. There IS “a market,” but it’s created and maintained by government, whether those on the right like it or not, and the most important decisions about how it runs and is organized are made by government. This is why it matters who’s running the show in Washington – whose prejudices and biases do you want built into those decisions?

    Size of government matters little in the rarified philosophical atmosphere populated by right-wing pundits and politicians. Government needs to be large enough to do what we ask it to do. The key question, as Reich and numerous others have pointed out, is who the government purports to serve. When the government serves the interests of the wealthy and über-wealthy, it’s probably not serving the interests of people at 20% above median income and below – the majority of the population. When Congress is populated by millionaires, they’re not likely to look after the interests of “average” citizens and families as dutifully as they look after the interests of people like themselves. While there are, and have been, exceptions, it remains a useful rule of thumb.

  2. Submitted by Paul Brandon on 03/12/2015 - 02:53 pm.

    Reich

    is being polite.

  3. Submitted by Neal Rovick on 03/12/2015 - 03:44 pm.

    Some other myths:–increased

    Some other myths:

    –increased productivity leads to increased worker income

    –general increases in education levels lead to a generalized rise in wages.

    –demand is independent of “ability to pay”.

  4. Submitted by Ilya Gutman on 03/12/2015 - 08:29 pm.

    Let’s try this

    If Mr. Reich and Mr. Schoch are right, the best way is to raise the minimum wage to $50 an hour so all people will have money to buy all stuff so economy will prosper… Or confiscate everything from 1% (OK, everything above average income) and give to the rest of us… Wait, that has been tried. So if the above suggestions seem odd, then the next best one is to give money to people by taxing them less…. which is what Republicans are suggesting I believe.

    I also wonder how the government is supposed to serve us? By giving us money taken from the rich?

    • Submitted by Paul Brandon on 03/13/2015 - 08:17 am.

      Coherence

      You appear to be saying that above average and 1% are the same thing.
      Is this Republican mathematics?
      Actually, in the ’90’s when the real minimum wage was higher and so were taxes, the economy was also stronger.
      Are you proposing a flat income tax? A national sales tax?
      These have been the most common alternatives proposed to the progressive income tax which has served us (and the civilized world) well.

  5. Submitted by Ron Gotzman on 03/12/2015 - 09:06 pm.

    such insight…

    Mr. Reich makes up simplistic “political” questions and gives the humorous left wing “answers.”

    This is similar to B. Obama planting the questions at his own press conferences.

    Of course – the left wing views this make-believe exchange as “settled economic science” and not just a pure political exercise by Mr. Reich.

    • Submitted by Logan Foreman on 03/13/2015 - 10:01 am.

      Worried about the rich?

      The top 3% held 54.4% of all wealth in 2013; probably more now. The bottom 90% held 24.7 % at the same time; probably less now. Please explain why there is such a need to lower taxes for the wealthy rather than just continually complaining about the views of Reich.

      • Submitted by Ron Gotzman on 03/13/2015 - 01:16 pm.

        pure politics

        Myth #1 – Constantly raising taxes on the rich will lower the gap between rich and poor – Baloney.

        Myth#2 – The more Government employees equals better services for the people – rubbish.

        Myth#3 – The more government taxes and spends equals a better economy for the people – wrong.

        Just a political exercise by Mr. Reich and me…..

        • Submitted by RB Holbrook on 03/13/2015 - 03:56 pm.

          What insight!

          Now, that’s what I call a well-reasoned, persuasive argument.

          Mr. Reich presented somewhat more detailed reasons for his adjectives. Would you care to make a similar elucidation?

        • Submitted by Logan Foreman on 03/13/2015 - 03:50 pm.

          I knew that

          You couldn’t do it. As I recall, 1 tax raise on the rich in the last 15 years while their percentage of total wealth increases on a yearly basis. How are they making it?

    • Submitted by jason myron on 03/13/2015 - 04:08 pm.

      I guess conservatives

      have declared war on math as well as science.

  6. Submitted by Ilya Gutman on 03/14/2015 - 09:49 am.

    “myths”

    Mr. Brandon, I think you misunderstood what I said about 1% and above average so you may want to reread it. Yes, I support flat tax and national sales tax which should be progressive (the cheaper the product you are buying relative to average product of this type, the less you pay in sales tax and vice versa). Clothing is considered necessity in Minnesota but if someone is buying designer jeans or swimsuit for thousands of dollars, they can afford a sales tax.

    Mr. Holbrook, I reread Mr. Riech’s “myths” and did not see much of a reasoning there (see my previous message showing how unreasonable Mr. Reich’s reasons are for Myth 1. For the second one I can just say one word – Venezuela and one can see the difference between free market and not free market. If one dips a thermometer into the ocean, the reading will be accurate but if one tries to measure water temperature in a spoon this way, it will be way off – so influence may be so much different. And of course the government in the Soviet Union was for “everyone” – no rich people there…

    As for the interesting myths by Mr. Gotzman, I can explain for example the first one: both France and New York State tried to raise taxes – and figured out it did not work. And of course the government in the Soviet Union was everywhere since practically everyone worked for government – but trust me, the service was terrible.

    • Submitted by Paul Brandon on 03/14/2015 - 05:14 pm.

      This is what you said…

      “… Or confiscate everything from 1% (OK, everything above average income)….”

      Flat taxes and sales taxes are regressive, since the rich spend a smaller proportion of their income directly (as opposed to investing it) and derive a smaller proportion of their income from wages.
      To take an extreme case, how much of a hedge fund manager’s capital gains income would be subject to a flat tax? There are ways to do it, but they are at least as convoluted as the current tax code. The supposed advantage of simplicity of a flat tax simply does not exist in the real world.

      For a more immediate example, cutting taxes has not resulted in Wisconsin’s economy doing better than Minnesota — the opposite is clearly true.

      And New York State has raised taxes many times; which one did you have in mind?

  7. Submitted by Jon Kingstad on 03/14/2015 - 12:08 pm.

    How about Minnesota?

    I don’t know where you get the idea that raising taxes on the right “didn’t work” or “won’t work” in New York or France or anywhere else. Minnesota raised taxes on the rich. I’d say it worked here here. We’re now in the position of arguing over a budget surplus which the right wants to give back.

    The usual argument made against taxing the rich is that they do work, too well, and the reason is the specious one that somehow “government doesn’t create jobs” or some irrelevant nonsense. As if any one thing or person creates jobs. But that leads to the second Reich myth, that there is some alternative between the “free market” and a government economy. The US has long had elements of both with the government acting as a “countervailing power” against “markets” which were and still are, controlled by a few large oligopolistic market actors.

    Right wing policies starting with Reagan have failed. Reich’s Myths are simply the negation of right wing slogans which have been repeated continuously since then as if they were eternal truths. It doesn’t do any good to pretend that they haven’t been tried but something else has (it’s simply not true that the government has been “constantly raising taxes”. Or to pretend that people who don’t agree with the standard right wing, failed bromides are all “leftists” or determined to turn the US into the Soviet Union. Reich’s point is that it’s time to move beyond these failed right wing ideas and reclaim the idea that government can be turned to affect people’s lives positively for the good of the whole country. Reich only advocates the idea, which I agree with, that it’s necessary to reverse some of these policies which have greatly contributed to the redistribution of wealth into the hands of a few and to the growing inequality of wealth in this country. Our experience in Minnesota shows that these ideas do work.

    • Submitted by Paul Udstrand on 03/16/2015 - 10:19 am.

      Don’t forget raising taxes worked right here in the US

      After WWII we raised the top tax bracket to 94% for the wealthiest Americans and paid off the war AND the New Deal debt while growing the economy at the same time. The we reversed those taxes and ended up with massive deficits, serial recessions culminating the Great Recession, and staggering wealth disparity. Forget France, just look our own history.

  8. Submitted by Karen Sandness on 03/14/2015 - 05:36 pm.

    Two of the right-wing’s articles of faith are that

    1) Money paid in taxes is lost to the private sector

    This SOUNDS good unless you think about it. What do governments do with tax money? Bury it in the backyard? No, they hire people and buy goods and services, all in the private sector. The only people who may POSSIBLY live in an all-government closed system are military personnel (government employees, lest we forget) who do all their shopping on base, but even there, the federal government doesn’t manufacture the goods that are on sale on the base. It buys them from the private sector.

    When governments build infrastructure or housing or anything else, they hire local private sector companies to do so. The only builders that the federal government hires directly (i.e. not through contracting the work out) are in the military.

    2) Government employees “suck from the public teat” and produce nothing useful

    The government employees that the right-wing loves to hate (except cops or military, since most right-wingers I know are authoritarians deep down, even if they claim to be Libertarians) buy the same things that private sector employees buy. They shop at the same grocery stores, fill their cars at the same gas stations, buy clothes at the same malls, go to the same movies.

    Aside from their roles as consumers, they also fight fires, teach children and adults, manage forests, license professions, process criminal and civil legal cases, inspect restaurants, run water and sewage treatment plants, take care of veterans, and do a lot of other behind-the-scenes jobs that are essential for the running of a modern society.

    I have a professional colleague who lives in a country that is much farther along the socialist scale than the U.S. is. Everyone is enrolled in government insurance, and health care is free at the point of service. There is no university tuition. There is also little unemployment, and in fact, I know young Americans who have gone to that country to help fill labor shortages. By all measures, the quality of life is very high, and yet, this fellow is a Libertarian. Why? Basically, he hates paying taxes. Period. He has benefited from the educational system, the health care, and the overall quality of life, but he would rather deny the same to others–especially people he personally disapproves of –than have to pay taxes. That’s the contemporary right-wing ideology in a nutshell. (By the way, the other people from that country who are in my circle of professional acquaintances do NOT agree with him.)

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