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4.5
This book is a must read for all who want to understand and see a path to fixing our economy. Reich draws a comparison of economic conditions that resulted in the great depression and the ongoing great recession. Both periods had a huge income inequality where 24% of income went to the most wealthy 1% of the nation. The Obama administration learned from the past and avoided depression 2.0 by bailing out the financial system and saving the auto industry. However they did little to deal with the root cause of high unemployment: extreme income inequality.He talks about the influence in the 1930s of a conservative Utah businessman by the name of Marriner Eccles who helped guide FDRs policies during the great depression. Eccles understood that it was "the vast accumulation of income in the hands of the wealthiest people in the in the nation, which siphoned purchasing power away from most of the rest."Because the wealthy have no need to spend most of their income, compared to low income earners who must spend nearly all to survive, there is a net lack of demand for goods and services that the nation can produce. This leads to high unemployment. Reich talks about coping mechanisms that helped mitigate the inequality issue until recently, including: a move to two earner families, using homes as piggy banks to go into debt, and working longer hours. These coping mechanisms are no longer viable. Quoting Reich: "The fundamental problem is that Americans no longer have the purchasing power to buy what the US economy is capable of producing."He talks about the period of great prosperity after the New Deal and WWII, from 1947 to 1975 when the share of income to the top 1% was much lower, in the range of 10 to 12%. During this time "the typical family's income rose from about $25,000 to $55,000." During this period the top tax rate was 91 to 77% and yet the country prospered "including those at the top".Failure to fix our economy leads to the politics of anger (which we already see evidence of in the Tea Party) that could lead to the rise of "demagogues who prey on public anxieties to gain power" with simplistic and ineffective solutions.Reich's solutions include a revised tax code to give more purchasing power to the middle class and includes an expanded reverse income tax for the lower earners and a top tax rate of 55% as well as other ideas. He also proposes a carbon tax to help get us off of our dependence on oil and to mitigate climate change. The impact of the carbon tax on low earners would be off set by the reverse income tax. The carbon tax would be much more equitable solution than the cap and trade approach.The book is powerful, extremely well written and easy to follow.
