According to former Treasury Secretary Larry Summers – who is emerging as a key economic adviser to Hillary Clinton and succeeded Rubin as Secretary of the Treasury under Bill Clinton—was the was also played an influential role in the American advised privatization of the economies of the Post-Soviet states, and in the deregulation of the U.S financial system, including the abolishment of the Glass-Steagall Act. While working for the Clinton administration Summers infamously stated that the big political challenge in addressing economic inequality is not to embrace “a politics of envy.”
No, Mr. Summers – that’s not the politics of envy. That’s the politics of responsibility.
Summers was quoted in The New York Times about “what has emerged as a central question of her [Hillary Clinton’s] early presidential campaign strategy: how to address the anger about income inequality without overly vilifying the wealthy.” In all fairness Mr. Summers, the wealthy have peddled their influence to politicians and deserve whatever vilifying they receive.
The rich may imagine that blaming them for the struggles of the rest of us is driven by envy, but that’s their own conceit rising to the surface in order to make themselves feel good. Americans don’t resent the rich. While some might fantasize about winning the lottery, they are not consumed by jealousy but are distinctly aware of the unfairness in the tax code, as well as the business world. What most Americans understand is that they are struggling financially because the wealthy have rigged the economic and political system to benefit themselves at the expense of the rest of us. That’s not envy: it’s stark reality.
Summer’s formulation is meant to give intellectual cover to the real problem that Democrats like Clinton face: criticizing, rightly so, those who finance their political campaigns. As the New York Times puts it: “And she [Clinton] must convince a middle class that feels frustrated and left behind that she understands its struggles, even as she relies heavily on the financial industry and corporate interests to fund her candidacy.”
Getting to the Root Causes
There are two ways in which we can have a conversation about responsibility. The first is in explaining who is responsible for the financial squeeze on American working and middle class families. The second is to describe the kind of responsible behaviors that we can insist upon from those who are responsible to undertake the rebuilding of opportunity and security in the U.S. The two are related, because one needs to be clear on who is responsible in order to identify how to fix the problem.
For example, wages are stagnant because corporations engaged in concerted strategies to limit the proportion of profits shared with workers, including: busting unions, rather than negotiating with them; shipping jobs overseas rather than paying higher wages to American workers; and aggressively using campaign contributions and lobbyists to undermine labor standards (minimum wage; overtime protection; etc) and labor laws. Corporations spent their huge profits on stock buybacks, primarily to increase CEO pay-don’t kid yourself into believing it was to increase shareholder value–rather than better compensation for workers, who would in turn, buy goods and services which, in turn, would stimulate the economy.
Then there’s Wall Street’s culpability for using its political clout to shred financial regulations and oversight while engaging in the unfettered orgy of financial speculation and predatory lending that triggered the Great Recession.
Or tax policy, where corporations pushed to reduce their proportion of taxes paid to the federal government and by the wealthy so that they now pay a lower share of taxes than the middle-class via passive income rather than earned income. The result: working and middle class families pay higher taxes and more for public services. A glaring example is the enormous rise in the cost of public higher education, as funding for public colleges and universities has been slashed, especially by GOP governors in Kansas, Wisconsin, and most dramatic of all, Louisiana State University, where outgoing governor Bobby Jindal has proposed such draconian cuts that 1,400 professors and dozens of degree programs will be jettisoned, stranding students in programs that no longer exist and conceivably losing accreditation for the business, engineering, law and possibly the medical programs.
The economic “truthiness” about who is responsible requires acknowledging the democratic story. One thing that Americans seem to universally agree on is that the wealthy and their corporate lobbyists have hijacked our democracy. That’s not cynicism – it’s simply the truth. And it is a major reason why so many have given up on government working for them, much less solving the problems they face. It could very well explain the unprecedented low voter turnout for the last election.
And it’s certainly not “over-vilifying the wealthy.” It is describing the reality that 99% of Americans understand. As we saw in the election this past fall, Democrats who fail to identify those responsible lose, as base Democrats stay home and white working-class voters turn to Republicans who assign blame to the government and the poor.
Identifying and projecting responsibility to whom it belongs, drives the power of solutions to address those problems. For example, corporate suppression of wages could be fixed by: 1) revitalizing labor law and enforcement; 2) raising labor standards like minimum wage and earned sick days; 3) creating new workplace protections, like paid family leave; 4) changing the rules on stock buy-backs; 5) raising Capital Gains taxes to equal or exceed taxes on productive EARNINGS; 6) bringing back Glass-Steagall to protect commercial deposits; and 6) limiting CEO compensation by basing it on earnings rather than shareholder value.
Addressing the adverse impact of Wall Street’s drive for speculative profits calls for taxing speculative trading,(see–Financial Transaction Tax and the One Penny Solution December 13, 2011) (or trading at all) in a minimalist, but effective way, (see: breaking up the big banks, stopping predatory lending, and providing new, publicly backed mechanisms for financing the residential and community lending that banks have abdicated.
Revenue raised from reversing tax breaks for corporations and the very wealthy can be used to invest in services families need like affordable child care and free community college, proposals in President Obama’s new budget.
Instead of vilifying the wealthy, the politics of responsibility can lift up corporate leaders and wealthy Americans who are examples of responsible behavior. President Obama has done this occasionally, for example, lauding Costco for its high pay and good benefits for big box stores. Last week, Aetna announced it was going to raise wages and benefits for its lowest-wage workers. Warren Buffett has a “rule” bearing his name, for proposing that the wealthy shouldn’t pay lower shares of taxes than their secretaries. Buffett’s example is particularly important because he’s calling for government action, not just setting an example through his own behavior.
The handful of corporate leaders who are acting responsibly are also acting in their own long-term self-interest. They understand that their businesses do better with workers who get paid decently. They realize they need an educated workforce. They may even comprehend that if workers get paid more, they’ll have more to spend, driving the economy forward.
The real emotional challenge in addressing inequality is not envy by the 99 percent for the 1 percent. It’s the very thin skins of the super-rich. President Franklin D. Roosevelt, born one of the 1 percent, understood this. FDR framed the question of wealth and responsibility brilliantly when he said:
Government can deal and should deal with blindly selfish men. But that is a comparatively small part – the easier part of our problem. The larger, more important and more difficult part of our problem is to deal with men who are not selfish and who are good citizens, but who cannot see the social and economic consequences of their actions in a modern economically interdependent community—some are so foolish as to call for a return to the Gold Standard…a sure-fire way to ensure a second Great Depression. They fail to grasp the significance of some of our most vital social and economic problems because they see them only in the light of their own personal experience and not in perspective with the experience of other men and other industries. They, therefore, fail to see these problems for the nation as a whole.
There were some prominent capitalists who supported New Deal programs, including banking reforms. But of the rest, FDR famously said, “I welcome their hatred.”
At the end of the day if Hillary Clinton or any other Democrat is going to champion the policies essential to rebuilding the middle-class and creating a new era of broad, sustainable prosperity, she will have to join FDR in applauding those businesses who worked for the benefit of all and welcoming the hatred of those who resist the fundamental changes needed to build an America that works for all of us.
Harvey A. Gold