Government Shutdown a Byproduct of ‘Inequality for All’ in America

Robert Reich’s powerful new film, “Inequality for All,” breaks down the disparity of wealth that is so pronounced in this country. It solves the riddle of why San Jose is really two cities, and it explains the great political divide we face locally and as a nation.

The facts are indisputable: The top 400 people in America have more wealth than the bottom 150 million people. The top 2 percent of Americans are beyond rich; the top 20 percent are doing very well. But after that, America is struggling. You are poor if you are in the bottom 50 percent.

These are facts. As the late Daniel Moynihan noted, “You are entitled to your opinion, but you are not entitled to your own facts.”

Reich, a professor at UC Berkeley and former U.S. Secretary of Labor, systematically shows what caused the disparity in wealth: an unfair tax system that taxes the wealthy too little; a failure to invest in education; technology and globalization that opened up the labor market; reduced manufacturing jobs; the decline of labor unions, which helped build the middle class; a failure to increase wages—even the minimum wage—over the last 30 years; and government policies written by and for the rich and powerful. This last point has provided benefits and subsidies to the wealthy and influential while poking holes in an ever-expanding safety net that is stretched beyond its capacity.

Reich notes that Americans are working longer hours, producing more than ever and yet they still struggle to make ends meet. The American Dream has become a nightmare for many. Working people are the victims of this calamity.

Reich also focuses on how the disparity in wealth has caused unrest and a great political divide in this country. The Tea Party and the Occupy movement were two sides of the same coin. People are angry, but differ on who or what to blame. The current federal government shutdown is a significant example of the polarization that Reich claims is inherent when the disparity of wealth is grossly unequal.
He has the data to back it up.

Locally, the political divide between the Chamber of Commerce and South Bay Labor Council mimics the national political divide. These are times when the interests should be the same, as the solutions are very apparent and beneficial to both sides.

But in the final analysis, it is not class warfare that causes inequity. The rich are fine as long as there is no cataclysmic event. But without labor, their wealth cannot be sustained. They need a working middle class to survive as much as those in the middle class need upwardly mobile jobs. The failure to reinvest in people is the biggest problem. While the wealth is concentrated at the top, it’s not trickling down—it’s being hoarded.

Apple, for instance, is sitting on $147 billion in cash. Some large investors want the company to buy back their stock at a profit. But that makes no sense, because every $1 billion invested in new products, ideas and businesses is 50,000 jobs. That is real economic growth. Every $1 billion that goes to Carl Ichan increases his net worth on paper, but does not change his lifestyle and does very little for the greater economy.

There is no begrudging Ichan a return on his investment, but the money he wants can be used more effectively by expanding opportunities in the labor market, which will ultimately result in more wealth for Mr. Ichan and other Apple investors over the long term.

For years, Steve Jobs refused to pay dividends to investors, believing that if Apple lost its “growth” mentality it would begin to decline.

Apple is not the only Silicon Valley company with vast cash reserves. And the 400 wealthiest people in America have vast sums that could be invested in America. In short, we need to open the spigot of wealth to produce more and better jobs and grow the economy. We need to innovate instead of speculate.San Jose and Silicon Valley lead the country in economic opportunity, and we could make it happen elsewhere.

In the final analysis, nobody cares how much money the top 2 percent has if the rest of society can afford to buy a home, put food on the table, provide opportunities for its children and have some semblance of financial and personal security.

Robert Reich is right. It is not only in the best interest for everyone to have a strong middle class, it is also the morally right thing to do.

Rich Robinson is a political consultant in Silicon Valley.

Rich Robinson is an attorney and political consultant in Silicon Valley. Opinions are the author’s own and do not necessarily reflect those of San Jose Inside.

8 Comments

  1. > Robert Reich’s powerful new film, “Inequality for All,” breaks down the disparity of wealth that is so pronounced in this country.

    Robert Reich is one obtuse son or a gun.

    Ditto for his camp followers.

    Economic “inequality” ultimately occurs because there is inequality among human beings in attributes like talent, ability, intelligence, diligence, energy, health, etc. etc. etc.

    The oldest profession in the book (older even than prostitution) is the prehistoric “warlord”.

    Before there was civilization, the tribal leader/alpha-male/chief gained stature, influence, power, and wealth by promising to obtain wealth for the ignorant tribesmen by leading them in looting raids on “rich” neighboring tribes.

    For Robert Reich and Rich Robinson, nothing has changed. Civilization has passed them by.

    Reich and all the other tribal shaman’s are still making the same speech:  “Join my war party, and we’ll raid the villages in the next valley, and we’ll all share the loot.”

    Same old.  Same old.

    Civilization was the true revolution of human history.

    Investment, agriculture, and trade replaced predatory raids as mechanisms of creating, increasing, and sharing wealth.

    “The Golden Rule”, trade, collaboration, and harmony replaced enemies lists and banditry as the prevailing societal ethic.

    The tragedy of human societies is that every age has it’s “levelers” and it’s charlatans preaching the unobtainable promise of “equality”.

    The English people succumbed to Oliver Cromwell’s calls for an “equal” society, only to experience equal poverty, and equal misery.  In the end, the English found that they preferred Oliver Cromwell’s head on a pike over the reality of his vision of “equality.”

    The answer to “inequality” is not destroying wealth and destroying the wealthy.

    The answer is to maximize the opportunities for everyone to contribute in their own way to increasing the wealth, prosperity, and freedom of their own community.

    In order for this to occur, society must recognize the necessity of protecting the wealth creators from the warlords and their raiding parties.

    • You are person who badly needs to see the movie.  All of the mythology you spew, while highly ingrained in the American psyche is pure horse manure. 

      There is no egalitarian effort on Reich’s part, simply an analysis of a system that does not reward hard work coupled with stagnate wages even though productivity has increased an unfair tax system, and a shrinking middle class that is dangerous for even, yes, the rich.

      We are a consumer society, quickly running out of people who can afford to be consumers.  See the movie and we can chat.  But unfettered capitalism would have died years ago without some government regulation.  Absolutist theories are a crock and we have to add pragmatic mechanisms to any system to make it work.

      • Rich Robinson enunciates the Rich Robinson Theory:

        “Absolutist theories are a crock and we have to add pragmatic mechanisms to any system to make it work.”

        Undoubtedly, Appendix 9 to Annex 11 of the Rich Robinson Theory specifies the Rich Robinson Theory of Pragmatic Mechanisms.

  2. Apple, for instance, is sitting on $147 billion in cash. Some large investors want the company to buy back their stock at a profit. But that makes no sense, because every $1 billion invested in new products, ideas and businesses is 50,000 jobs. That is real economic growth. Every $1 billion that goes to Carl Ichan increases his net worth on paper, but does not change his lifestyle and does very little for the greater economy.

    The problem is that Apple and other companies aren’t investing the money.  So whether the money stays with Apple or is doled to shareholders, it’s still likely to sit, or be used for unproductive things like speculation.

    If your solution is to tax the money, then that also doesn’t solve the problem for a couple of reasons:

    1. Rich people and companies people will relocate.

    2. The government’s spending will create jobs, but those jobs will cease to exist once that spending ceases.  Consider all the money that the government has spent since the Great Recession.  Why does the government have such a hard time stopping “quantitative easing”?  Because all the money that has been spent hasn’t created sustainable jobs, and once the flow stops, so do the jobs.

    Robert Reich is right. It is not only in the best interest for everyone to have a strong middle class, it is also the morally right thing to do.

    I agree with that, but easier said than done.  Until you can convince rich people that giving up some of their wealth will effect some sort of meaningful change, then why would they want to.  And how can you convince them when current policies haven’t resulted in meaningful change.

    • Agree if the money simply sits it doesn’t matter, but Apple can research, invest and provide capital of a myriad of ideas and projects that will create jobs.  That is how the economy (macro) grows.

      They can give some back to shareholders, they can keep some appropriate amount for reserve, but a major key to their growth as a company to produce—globally and locally.

      • Name a tech company in this valley that isn’t sitting on a pile of cash.  It’s pure hubris to think that you know more about investing and R&D than all of these folks.  No wonder you’re in politics.

  3. Rich, in a nut shell I tend to agree.  The rich get richer for sure but some middle class investors also benefit from ideas such as Carl Ichan’s stock buy back.  Of course Mr. Ichan would benefit tremendously but so would the institutional investors.  If a large buy back program boots share prices then those that have invested in Apple via 401K plans, mutual funds and pension portfolios also increase their net asset.  That is just the other side of the coin I suppose.

    Apple (like many other large companies) has a majority (I think) of that $147 Billion tied up off shore. If they were allowed to pay a reasonable tax rate, I believe they would bring that money back to the United States and hopefully reinvest that money here.  Perhaps that would be the stipulation…that money must be used to bring back manufacturing to the US. (i.e. jobs)  This is the type of Quantitative Easing that I would like to see.  This might be too much to ask, but congress needs to get off their asses and make that happen.  Just to make it clear…I am all for these large companies paying their fair share of taxes.

    Finally, in the case of Apple.  They are spending lots of money to build a new campus.  This will generate hundreds of jobs just for the construction alone.  Also it keeps those Apple jobs in the Bay Area.