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Robert Reich on Budget & Economy

Former Secretary of Labor; Democratic Challenger MA Governor


Middle class needs more jobs to cope with Great Recession

substantially had changed. Not until these coping mechanisms became fully exhausted in the Great Recession would the underlying reality become evident. (And not until the federal government ended its stimulus would that reality be exposed as more Starting in the late 1970s, the American middle class honed three coping mechanisms , allowing it to behave as though it was still taking home the same share of total income as it had during the Great Prosperity [of the 1960s], and to spend as if nothing foreseeable future, even if women and men were willing and able to work longer hours, there are not nearly enough jobs or hours to go around. It will be many years before the economy comes close to making up all the jobs it lost in the Great Recession. enduring than the Great Recession's downturn).
    Coping mechanisms:
  1. Women move into paid work
  2. Everyone works longer hours
  3. We draw down savings and borrow to the hilt.

In 2008, the coping mechanisms are exhausted. Now and in the

Source: Aftershock, by Robert Reich, p. 60-65 , Apr 5, 2011

Remember Keynesian lessons learned in the Great Depression

[Until the Great Depression], classical economists had viewed markets as self-correcting. They had supposed that full employment would always prevail in the end.

Keynes did not view unemployment as a moral failing. He saw it as a failure of demand. Average workers lacked enough purchasing power to buy what they produced. Keynes's big idea was to use macroeconomic policy to maintain full employment. Policymakers should expand the money supply to permanently lower interest rates, so that consumers and businesses could get lower-cost loans, and government should increase its own spending to make up for the shortfall in consumer demand, so that more jobs would be created. Part of Keynes's answers was also to spread the benefits of economic growth.

Source: Aftershock, by Robert Reich, p. 30-31 , Apr 5, 2011

Differed with Clinton; less emphasis on deficit reduction

In 1997, I appointed Alexis Herman to succeed Bob Reich at the Labor Department. Bob Reich had done a good job at the Department of Labor and as a member of the economic team, but it was becoming difficult for him; he disagreed with my economic and budget policies, believing I had put too much emphasis on deficit reduction and invested too little in education, training, and new technologies. Bob also wanted to go home to Massachusetts to his wife, Clare, and their sons.
Source: My Life, by Bill Clinton, p.738 , Jun 21, 2004

Reagan cuts intended to produce deficits & prevent programs

Hillary Clinton later told me, "In 1993, our most important job was dealing with 'Stockman Revenge'--which I think was Daniel Patrick Moynihan's term for the massive deficits that the Reagan tax cuts and defense buildup had created. Unless we dealt with the deficits first," Mrs. Clinton concluded, "We'd never be able to do any of the other things we wanted to do." Robert Reich, who led the economic team through the transition process and then was shuttled off to the Labor Department, called the debilitating impact of the Republican budget deficits, first imagined by Reagan budget director David Stockman, "the law of intended consequences"--in other words, the Reagan tax cut was INTENDED to produce budget deficits that would prevent new federal programs.
Source: The Natural, by Joe Klein, p. 49-50 , Feb 11, 2003

Fiscal prudence over market patriotism, even post-9-11

Just before the terrorist attacks, the prudent thing for most families to do was to trim their budgets somewhat, pay down more of their debts, and put a bit more of their savings into bonds. After the terrorist attacks, that's still prudent behavior. There's no patriotism in being a spendthrift, no heroism in exposing one's family to unwarranted financial stress.

If political leaders want a display of market patriotism, an appropriate target would be profitable companies on the verge of announcing new rounds of mass layoffs. Companies should be asked to forbear laying off more workers, if they possibly can, for the duration of the war emergency. What better way of demonstrating we're all in this together?

Source: I'll Be Short, by Robert Reich, p. 36 , May 2, 2002

Give $60,000, for college or business, to kids reaching 18

Rather than seek to preserve & protect old jobs, or go to the opposite extreme and let 'er rip, a balanced society would seek to accomplish several goals: Source: The Future of Success, by Robert Reich, p.242ff , Jan 8, 2002

Greenspan’s caution is ludicrous during a recession

Consumers won’t flood the malls if they’re deep in debt, afraid of losing their jobs, and, on top of that, worried about the nation’s future and the safety of their loved ones. They’ll hunker down instead, batten down the hatches, cut spending that’s not absolutely necessary.

Under these circumstances, Greenspan’s caution is ludicrous. It’s also grossly unfair. As the economy falls into steeper recession, the people hurt the most will be those who are likely to lose their jobs first and have no cushion to fall back on.

Waiting and seeing if the rebound occurs isn’t all that burdensome for [the rich. For the poor], it’s a different matter. The economy will rebound, eventually. It always has. That’s not the test. The question is the human cost of the wait along the way. And by this test, too, it’s time to act. [We need a stimulus package right now which would] respond directly to these people caught in the worst of the recession.

Source: The American Prospect, vol.12, no.18, “Gen. Greenspan” , Oct 22, 2001

Stimulus: more unemployment insurance, less payroll tax

Source: The American Prospect, vol.12, no.18, “Gen. Greenspan” , Oct 22, 2001

Low-unemployment recession may result from wage fluctuation

Companies can adjust to changes in demand if they don’t have to bear the costs of steady payrolls. They’d rather not fire employees when things slow down, because the cost of retraining them when times get better is high. The answer is to give employees wages that rise or fall depending on demand. As the economy slows, all those commissions and the rest are dropping, which means customers won’t have the income they need. If this continues, we could find ourselves in a low-unemployment recession.
Source: PBS “Marketplace” Broadcast , Jul 5, 2001

New progressivism: economic dynamism with social cushions