Former Labor Secretary Robert Reich feels as strongly as I do that something must be done to shrink the American income gap, which was partially responsible for the Great Recession of 2008. Rather than write about the subject to an audience comprised of its fair share of those whose wealth places them in the top one percent of Americans, Reich is now the subject of a fabulous new documentary film, “Inequality For All,” directed by Jacob Kornbluth.
I’ve read critiques of this picture which equate it with Al Gore’s “An Inconvenient Truth.” I understand the sentiment. After all, “Inequality For All” is as much about Reich himself than it is his teachings. But I prefer to compare it to Charles H. Ferguson’s 2010 documentary, “Inside Job,” which exposed the financial services industry’s role in the Great Recession. Where Gore’s film put scientific facts into plain English, “Inside Job” and now “Inequality For All” do the same with economics.
As in “Inside Job,” Reich doesn’t dumb down economic theory, but he doesn’t talk over our heads either. Heck even I could follow his logic. Reich examines the two times in post-income-tax America when income inequality was at historically high levels. The first preceded the Great Depression. The second preceded the Great Recession. During the 1940’s, 1950’s and 1960’s (which Reich describes as the economic “glory years” of the 20th Century), income inequality was at historically low levels. Furthermore, this mid-century prosperity was the era in which top marginal tax rates were at their highest levels – 91 percent during the Eisenhower administration, 70 percent under Nixon and still over 50 percent during the Carter White House. It wasn’t until Ronald Reagan that top marginal rates dropped below 50 percent for the first time since the 1920’s. Rates have remained historically low ever since.
Reich interviews the CEO of a pillow manufacturer who paid just 11 percent of his total income in taxes. Billionaire Warren Buffett tells Reich he only paid 13 percent, but his employees (many of whom struggle to pay bills) paid anywhere from 30 to 42 percent. While lower taxes on the richest Americans resulted in the Roaring Twenties (and the Roaring Nineties of more modern times), income inequality eventually threw America into a time of economic crisis. In both cases (the Great Depression and the Great Recession) recovery was slow.
The mid-century glory years were also the years when labor unions were at their strongest. Reich believes that for America to prosper it must have a strong, viable middle class. Today, those we think of as middle class Americans live in families in which both parents must work to make a living. Women in the workforce is less a product of the Women’s Rights Movement as it is the necessity of an economy which rewards fewer and fewer Americans at the expense of most others. These families are also carrying an inordinate amount of personal debt, again in sharp contrast to the middle class families of the mid-20th century – the period during which the richest Americans paid the highest marginal rates in recent history.
Reich believes that wealth concentrated in the hands of the very few does not result in increased consumer spending. To wit, his data shows consumer spending is at its highest levels during those times when middle-class Americans are most prosperous. Increased consumer spending results in a stronger business climate, which leads to increased tax revenues, and therefore a government flush with money. Contrast that to today’s economy. Most Americans are struggling. The business climate is weak. Our government is defaulting on its own loans.
The correction: Reduce the income gap. How? Strengthen labor unions. Increase taxes on the wealthiest 5 percent of Americans, and in particular, the top 1 percent. Of course, these remedies are those which the Tea Party (and its media mouthpieces, Rush Limbaugh and Fox News) have lambasted as unfair. “Inequality For All” has a humorous section showing various talking heads, such as Bill O’Reilly, calling Reich everything from a socialist to a communist. How ironic for someone whose first public job was as a part of that bastion of liberalism, the Gerald Ford Administration.
Among other realities, this documentary shows how far we’ve moved toward the far political right wing during the past 30 years. Right-wing economic policies (those we used to call “supply-side” economics) have ruined America and taken prosperity with it. Unfortunately, those who need to see this film won’t. It’s not even showing in first-run theatres anymore. I had to go on a Tuesday night to see it before it vanished. But please, I implore you, check out “Inequality For All” on NetFlix or at the RedBox. You’ll enjoy yourself and learn something while you’re at it. Then let all your CEO friends see it too!