OP-ED

The Defining Issue: Not Government’s Size, but Who It’s For

The defining political issue of 2012 won’t be the government’s size. It will be who government is for.

Americans have never much liked government. After all, the nation was conceived in a revolution against government.

But the surge of cynicism now engulfing America isn’t about government’s size. The cynicism comes from a growing perception that government isn’t working for average people. It’s for big business, Wall Street, and the very rich instead.

In a recent Pew Foundation poll, 77 percent of respondents said too much power is in the hands of a few rich people and corporations.

That’s understandable. To take a few examples:

Wall Street got bailed out but homeowners caught in the fierce downdraft caused by the Street’s excesses have got almost nothing.

Big agribusiness continues to rake in hundreds of billions in price supports and ethanol subsidies. Big pharma gets extended patent protection that drives up everyone’s drug prices. Big oil gets its own federal subsidy. But small businesses on the Main Streets of America are barely making it.

American Airlines uses bankruptcy to ward off debtors and renegotiate labor contracts. Donald Trump’s businesses go bankrupt without impinging on Trump’s own personal fortune. But the law won’t allow you to use personal bankruptcy to renegotiate your home mortgage.

If you run a giant bank that defrauds millions of small investors of their life savings, the bank might pay a small fine but you won’t go to prison. Not a single top Wall Street executive has been prosecuted for Wall Street’s mega-fraud. But if you sell an ounce of marijuana you could be put away for a long time.

Not a day goes by without Republicans decrying the budget deficit. But the biggest single reason for the yawning deficit is big money’s corruption of Washington.

One of the deficit’s biggest drivers — Medicare – would be lower if Medicare could use its bargaining leverage to get drug companies to reduce their prices. Why hasn’t it happened? Big Pharma won’t allow it.

Medicare’s administrative costs are only 3 percent, far below the 10 percent average administrative costs of private insurers. So why not tame rising healthcare costs for all Americans by allowing any family to opt in? That was the idea behind the “public option.” Health insurers stopped it in its tracks.

The other big budgetary expense is national defense. America spends more on our military than do China, Russia, Britain, France, Japan, and Germany combined. The basic defense budget (the portion unrelated to the costs of fighting wars) keeps growing, now about 25 percent higher than it was a decade ago, adjusted for inflation.

That’s because defense contractors have cultivated sponsors on Capitol Hill and located their plants and facilities in politically important congressional districts.

So we keep spending billions on Cold War weapons systems like nuclear attack submarines, aircraft carriers, and manned combat fighters that pump up the bottom lines of Bechtel, Martin-Marietta, and their ilk, but have nothing to do with 21st-century combat.

Declining tax receipts are also driving the deficit. That’s partly because most Americans have less income to tax these days.

Yet the richest Americans are taking home a bigger share of total income than at any time since the 1920s. Their tax payments are down because the Bush tax cuts reduced their top rates to the lowest level in more than half a century, and cut capital gains taxes to 15 percent.

Congress hasn’t even closed a loophole that allows mutual-fund and private-equity managers to treat their incomes as capital gains.

So the four hundred richest Americans, whose total wealth exceeds the combined wealth of the bottom 150 million Americans put together, pay an average of 17 percent of their income in taxes. That’s lower than the tax rates of most day laborers and child-care workers.

Meanwhile, Social Security payroll taxes continue to climb as a share of total tax revenues. Yet the payroll tax is regressive, applying only to yearly income under $106,800.

And the share of revenues coming from corporations has been dropping. The biggest, like GE, find ways to pay no federal taxes at all. Many shelter their income abroad, and every few years Congress grants them a tax amnesty to bring the money home.

**

Get it? “Big government” isn’t the problem. The problem is big money is taking over government.

Government is doing less of the things most of us want it to do — providing good public schools and affordable access to college, improving our roads and bridges and water systems, and maintaining safety nets to catch average people who fall — and more of the things big corporations, Wall Street, and the wealthy want it to do.

Some conservatives argue we wouldn’t have to worry about big money taking over government if we had a smaller government to begin with.

Here’s what Congressman Paul Ryan told me Sunday morning when we were debating all this on ABC’s “This Week”:

If the power and money are going to be here in Washington, that’s where the influence is going to go … that’s where the powerful are going to go to influence it.

Ryan has it upside down. A smaller government that’s still dominated by money would continue to do the bidding of Wall Street, the pharmaceutical industry, oil companies, big agribusiness, big insurance, military contractors, and rich individuals.

It just wouldn’t do anything else.

If we want to get our democracy back we’ve got to get big money out of politics.

We need real campaign finance reform.

And a constitutional amendment reversing the Supreme Court’s bizarre rulings that under the First Amendment money is speech and corporations are people.

Robert Reich served as the 22nd United States Secretary of Labor under President William Jefferson Clinton from 1992 to 1997. He shares many of his thoughts and columns at Robert Reich, where this post first appeared.

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20 replies »

  1. Here’s my little Jingle Bells’ serenade for you all this holiday eve, sung to Jingle Bells, of course:

    ACA, ACA,
    the Democrats’ big dream,
    when the truth to what it was
    just made you want to scree-am.

    ACA, ACA,
    now it goes to court,
    the judges there will then decide
    if mandate is fair sport.

    Dashing this dumb law,
    through partisan rude ways,
    Pelosi tells us folks,
    “Pass it then it pays”.

    The cronies want a pass,
    because it’s not what it is worth,
    if you don’t have a congress pal
    then hit the g-damn turf!

    ACA, ACA,
    Congress says it’s great
    then why the hell these past 2 years
    it’s still up for debate?

    ACA, ACA,
    its benefits are few,
    won’t affect Obama & pals
    cause they’ll be exempted too!

    Hope you find my holiday jeer, er, cheer to be so restive as 2012 approaches, because, hey, just look how these bozos in DC handled passing an extension of the payroll tax issue these past couple of weeks.

    Gotta love people who allegedly represent you who are so worried to get out of town, they don’t even care how the public is affected by their selfish and narrow minded concerns. Here’s a tip for considering New Year’s resolutions: if you expect narcissistic, antisocial, and inciteful people to be your allies and leaders, expect there to be sharp, hard rocks at the bottom of that fall!

    Good luck in 2012. Not!

  2. Don’t be deluded by the propaganda that no crimes have been committed. Read what economics professor and former regulator Bill Black has to say:

    In the Savings and Loans crisis, which was 1/70th the size of this crisis, our agency made over 10,000 criminal referrals that resulted in the conviction on felony grounds of over 1,000 elites in what were designated as major cases. And to pick up on what’s just been said, this is not just some sidelight to economics, this is why we have recurrent intensifying crises, these epidemics of fraud from the C-Street—from the CEOs and CFOs.

    Read more of his post “Banking System Rotten to the Core” at
    Financial Sense: Applying Common Sense to the Markets where he explains that the FBI warned in 2004 in open testimony that there was “an ‘epidemic of mortgage fraud’ and predicted it would cause a financial crisis.”

    No victims? Prof. Black:

    They [the financial fraudsters] wiped out six million existing jobs and five to six million jobs that would’ve been created. As you’ve heard, they’ve left 26 million Americans wanting full-time work with no ability to find that work. If you look at just losses in the household sector, it is $11 trillion.

  3. “The reason bankers are not being prosecuted for “fraud” is because a. some are, and b. the rest didn’t commit fraud. The little people, and those who get elected by stroking them, like to confuse risk and fraud.”

    Tim, you might want to look a little deeper and little more to reality when “enlightening” us simpletons. You might also want to down size your use of the word “some”.

    “It’s been three years since the financial crisis crippled the American economy, and much to the consternation of the general public and the demonstrators on Wall Street, there has not been a single prosecution of a high-ranking Wall Street executive or major financial firm even though fraud and financial misrepresentations played a significant role in the meltdown.”

    http://www.propublica.org/article/why-no-financial-crisis-prosecutions-official-says-its-just-too-hard/single

    As to risk versus fraud argument those two are closely intertwined. But it’s fraud if those were sold risk do not get full disclosure and are not resonably made aware of what the risk is (not to diminish due dilihgence), while those selling the risk don’t have anything to risk, or, has been shown, sell the risk as low to nothing while betting that same sale will go bad.

    The housing/mortgage crisis started with fraud from the real estate industry and appraisals. As my sister-in-law real estate agent stated, appraisers would ask “What comps do you want.” Then the lenders created fraudulent loan applications and impossible to meet contracts, while never having to carry any of the risk, but simply sold it to the next crook in the chain right up the the Wall Street “securitzers” who, with the backing of the likes of Standard & Poors, sold the “risk” as AAA.

    “Justice” goes to those who can afford good attorneys and have the resources to out spend the other guy.

  4. I heard a stat today that the average person pays about 19 percent of what they later get out of Medicare payment for treatments rendered.

    OK you government defenders and apologists, give us a parallel legitimate example of a system that survives financially that it’s income source only provides 1/5 of the support?

    The bullshit that is going on right now, today, involving the payroll tax positioning solely for either party’s own benefit is representative of why PPACA is yet another example of why whatever comes from DC is a failed experiment.

    And too many lame commenters here only care about a party, the public be damned. At least this validates for me why only a select few get admission to medical school. Otherwise, being a doctor would just become what is convenient and easy.

    2012, a defining moment in American history.

  5. Who is to way their influence is “undue”. I;d say the unbridled unfluence of big labor is “undue”. Labor has bullied itself into an unearned ownership position in General Motors and is exempt from the campaign finance laws you want corporations to follow.

    As for Medicare it needs to be gutted, not just cut. It is the perfect example of politicians overpromising and underfunding.

    As for being in the “unwashed masses” I can bathe myself, as should each American. Freedom is a great detergent for that unhealthy mass effect.

  6. Awfully nice of you to stand up for the “rights” of super billionaires to exercise undue influence over our political system.
    They don’t seem inclined to return the favor though, seeing how Medicare cuts are about to take effect and I don’t see either Goldman Sachs or GE making a stand for you.
    One of these days, you will come to the unnerving realization that you are just one of the unwashed masses, as far as they are concerned.

  7. So because someone is a Democrat, we should dismiss what he says right off the bat? I assume that on the other side of the fence, we should dismiss what any Republican says too. Ergo, we should only listen to what we say to ourselves, whether anchored in reality or not.
    Government may or may not be “too big”, but this is not the subject here. Government is being corrupted by the wealthy and no amount of defunding can change that. You can have a corrupt government handling 30% of GDP and an equally corrupt government handling 5% GDP..
    Granting regulatory favors to special interests does not cost any money.
    Mr. Reich ends with two recommendations: Campaign finance reform and removing free speech rights for dollar bills.
    Any of you gentlemen opposed to these two measures?

    i agree you

  8. So because someone is a Democrat, we should dismiss what he says right off the bat? I assume that on the other side of the fence, we should dismiss what any Republican says too. Ergo, we should only listen to what we say to ourselves, whether anchored in reality or not.

    Government may or may not be “too big”, but this is not the subject here. Government is being corrupted by the wealthy and no amount of defunding can change that. You can have a corrupt government handling 30% of GDP and an equally corrupt government handling 5% GDP..
    Granting regulatory favors to special interests does not cost any money.

    Mr. Reich ends with two recommendations: Campaign finance reform and removing free speech rights for dollar bills.
    Any of you gentlemen opposed to these two measures?

  9. Euphemism is a valuable tool. You can even win a Nobel prize with it. You should never read Reich without your internal translator turned on.

    Since the moral justification for government is the protection of private property, no discussion makes sense unless you first figure out “who owns it?” and “did they steal it, or not?” If Reich can make a case that somebody stole something, then confiscate it and give it back. Short of that, yada yada yada.

    What James Madison grasped and Reich will go to his grave not grasping is that the size of the treasury has something to do with how the country votes, over time. The ability to vote yourself largesse from the public bucket is, in and of itself, a corruption that no historical civilization has ever escaped. But I’m sure this time it’s different. I’m sure we can have 30% of our own GDP pass through the hands of career officials (who we somehow appoint) and create a structure by which we ourselves have no influence on how its spent. Also, we can invent a perpetual motion machine and then there’s cold fusion.

    The reason bankers are not being prosecuted for “fraud” is because a. some are, and b. the rest didn’t commit fraud. The little people, and those who get elected by stroking them, like to confuse risk and fraud. Most people want to borrow money and not have to pay it back if they decide to spend their money on something else. Most people want to invest their money in something that goes up when the market goes up, and goes up when the market goes down. If it doesn’t always go up, then somebody rich and invisible must have cheated them. They don’t know who it was exactly, but they’ll march in the streets about it, because, yo, partay.

    What Reich really means when he says “who is it for? ” is “who is going to get the free money?” He might make the case that “the rich” are getting the free money now, but he first has to make the case that they steal what they have. It’s much easier to imply the premise then to establish it.

    And Gore Vidal, that crypto-Marxist, has never been an authority on anything. He could start by giving away his own substantial wealth. Of course, he won’t.

  10. Your 10% admin vs. 3% admin is only one measure to look at the cost effectiveness of payers. Outcomes and preventing catastrophic care also has a impact on cost. Private payers and employers are leading the charge in these areas. 3% admin on dialysis is more expensive than 10% admin spent to prevent needing dialysis.

  11. The problem is the types of people such a system tends to elevate–the venal and the easily bought. Those politicians who don’t provide an ROI simply don’t get the money needed to run a modern campaign, or the soft money that gets spent outside the campaign. So they lose or don’t get involved at all.

    It does no good to simply wish politicians were better people when the system is currently set up to favor the worst types of people.

  12. Amen to that!

    Reich is a Democrat hack. Defenders & apologists ready and eager as backup choir, let’s hope you are tuned up!

  13. The problem is government taking over big money. People who lie for a living should not be trusted with trillions of dollars and a credit card.

  14. Are we reading the same article?

    I think Mr. Reich’s main thesis is this:
    “Get it? “Big government” isn’t the problem. The problem is big money is taking over government.”

    It does not mater how much you defund government. It will always have the power to grant favorable concessions to the super-wealthy, even if it cannot grant the tiniest bowl of soup to a homeless veteran.

    This is not class warfare, unless you consider the 400 hundred people who have more wealth between them than half of all American households, to be a “class”. ( http://bit.ly/fdXRU9 )

    The truth of the matter is that both you and the unemployed laborer are being robbed blindly, not just of your property, but of your democracy, because politicians are human and they will succumb to temptation if there are no laws and regulations to prevent that.
    It is up to the people to fix this mess, just like they fixed the mess of the 1920s, but it won’t happen if we keep fighting each other.

    As Gore Vidal put it aptly: “There is only one party in the United States, the Property Party…and it has two right wings: Republican and Democrat. Republicans are a bit stupider, more rigid, more doctrinaire in their laissez-faire capitalism than the Democrats, who are cuter, prettier, a bit more corrupt–until recently… and more willing than the Republicans to make small adjustments when the poor, the black, the anti-imperialists get out of hand. But, essentially, there is no difference between the two parties.”

  15. What has this blog degraded to? De facto Democrat partisan campaigning fairly much to push the EHR and other computer tech agendas?

    Pretty pathetic and disappointing for independent readers like me, eh?

  16. This post is delusional. Our federal government was never intended to have this much money to play with. If government bailed out Wall Street it was because there was something in it for the pols. What was that? Avoiding the pain of a collapsing economy which would have swept them all from office is what.

    Reich continues the class warfare theme scripted by Axelrod. Lets all stop working. Then the poor can catch up.

  17. “Big Pharma won’t allow it”

    Lost me after that. Those poor polititians, they don’t stand a chance against those evil corporations. Poor things have to endure those free meals and trips and call girls, and then to top it all off they are forced into the impossible position of having to take a stand for what’s right or lose those necessary perks. Impossible for any human to endure such pressure! Somebody please find a way to save our poor polititians!

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