The Seven Biggest Economic Lies
By Robert Reich, Robert Reich's blog
By Robert Reich, Robert Reich's blog
12 October 11
The president's jobs bill doesn't have a chance in
Congress - and the occupiers on Wall Street and
elsewhere can't become a national movement for
a more equitable society - unless more Americans
know the truth about the economy.
Congress - and the occupiers on Wall Street and
elsewhere can't become a national movement for
a more equitable society - unless more Americans
know the truth about the economy.
Here's a short (2 minute 30 second) effort to rebut
the seven biggest whoppers now being told by
those who want to take America backwards.
The major points:
Tax cuts for the rich trickle down to everyone else.
Baloney. Ronald Reagan and George W. Bush both
sliced taxes on the rich and what happened? Most
Americans' wages (measured by the real median
wage) began flattening under Reagan and has
dropped since George W. Bush. Trickle-down
economics is a cruel joke
Higher taxes on the rich would hurt the economy
and slow job growth. False. From the end of World
War II until 1981, the richest Americans faced a
top marginal tax rate of 70 percent or above. Under
Dwight Eisenhower it was 91 percent. Even after all
deductions and credits, the top taxes on the very rich
were far higher than they've been since. Yet the
economy grew faster during those years than it has
since. (Don't believe small businesses would be hurt
by a higher marginal tax; fewer than 2 percent of
small business owners are in the highest tax bracket.)
and slow job growth. False. From the end of World
War II until 1981, the richest Americans faced a
top marginal tax rate of 70 percent or above. Under
Dwight Eisenhower it was 91 percent. Even after all
deductions and credits, the top taxes on the very rich
were far higher than they've been since. Yet the
economy grew faster during those years than it has
since. (Don't believe small businesses would be hurt
by a higher marginal tax; fewer than 2 percent of
small business owners are in the highest tax bracket.)
Shrinking government generates more jobs. Wrong
again. It means fewer government workers - everyone
from teachers, fire fighters, police officers, and social
workers at the state and local levels to safety
inspectors and military personnel at the federal. And
fewer government contractors, who would employ fewer
private-sector workers. According to Moody's economist
Mark Zandi (a campaign advisor to John McCain), the
$61 billion in spending cuts proposed by the House
GOP will cost the economy 700,000 jobs this year and
next.
again. It means fewer government workers - everyone
from teachers, fire fighters, police officers, and social
workers at the state and local levels to safety
inspectors and military personnel at the federal. And
fewer government contractors, who would employ fewer
private-sector workers. According to Moody's economist
Mark Zandi (a campaign advisor to John McCain), the
$61 billion in spending cuts proposed by the House
GOP will cost the economy 700,000 jobs this year and
next.
Cutting the budget deficit now is more important than
boosting the economy. Untrue. With so many Americans
out of work, budget cuts now will shrink the economy.
They'll increase unemployment and reduce tax revenues.
That will worsen the ratio of the debt to the total economy.
The first priority must be getting jobs and growth back by
boosting the economy. Only then, when jobs and growth
are returning vigorously, should we turn to cutting the deficit.
boosting the economy. Untrue. With so many Americans
out of work, budget cuts now will shrink the economy.
They'll increase unemployment and reduce tax revenues.
That will worsen the ratio of the debt to the total economy.
The first priority must be getting jobs and growth back by
boosting the economy. Only then, when jobs and growth
are returning vigorously, should we turn to cutting the deficit.
Medicare and Medicaid are the major drivers of budget deficits.
Wrong. Medicare and Medicaid spending is rising quickly, to
be sure. But that's because the nation's health-care costs are
rising so fast. One of the best ways of slowing these costs is
to use Medicare and Medicaid's bargaining power over drug
companies and hospitals to reduce costs, and to move from
a fee-for-service system to a fee-for-healthy outcomes system.
And since Medicare has far lower administrative costs than
private health insurers, we should make Medicare available
to everyone.
Wrong. Medicare and Medicaid spending is rising quickly, to
be sure. But that's because the nation's health-care costs are
rising so fast. One of the best ways of slowing these costs is
to use Medicare and Medicaid's bargaining power over drug
companies and hospitals to reduce costs, and to move from
a fee-for-service system to a fee-for-healthy outcomes system.
And since Medicare has far lower administrative costs than
private health insurers, we should make Medicare available
to everyone.
Social Security is a Ponzi scheme. Don't believe it. Social
Security is solvent for the next 26 years. It could be solvent
for the next century if we raised the ceiling on income subject
to the Social Security payroll tax. That ceiling is now $106,800.
Security is solvent for the next 26 years. It could be solvent
for the next century if we raised the ceiling on income subject
to the Social Security payroll tax. That ceiling is now $106,800.
It's unfair that lower-income Americans don't pay income tax.
Wrong. There's nothing unfair about it. Lower-income Americans
pay out a larger share of their paychecks in payroll taxes, sales
taxes, user fees, and tolls than everyone else.
Wrong. There's nothing unfair about it. Lower-income Americans
pay out a larger share of their paychecks in payroll taxes, sales
taxes, user fees, and tolls than everyone else.
Demagogues through history have known that big lies, repeated
often enough, start being believed - unless they're rebutted.
These seven economic whoppers are just plain wrong. Make
sure you know the truth - and spread it on.
often enough, start being believed - unless they're rebutted.
These seven economic whoppers are just plain wrong. Make
sure you know the truth - and spread it on.
--------------------------------------------------------------------------------
Robert Reich is Chancellor's Professor of Public Policy at the University of California at Berkeley. He has served in three national administrations, most recently as secretary of labor under President Bill Clinton. He has written thirteen books, including "The Work of Nations," "Locked in the Cabinet," "Supercapitalism" and his latest book, "AFTERSHOCK: The Next Economy and America's Future." His 'Marketplace' commentaries can be found on publicradio.com and iTunes.
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