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Refuting Robert Reich

Posted By Arnold Ahlert On February 14, 2014 @ 12:55 am In Daily Mailer,FrontPage | 49 Comments

Former Clinton Labor Secretary and lifelong leftist Robert Reich has just released a new video for MoveOn.org, alleging that there is a “war” being waged on the poor and working families.

“What are they really after?” Reich begins, never bothering to explain who “they” are. His rant connects “seven dots” that point to a conspiracy of class oppressors who are “sinking” the poor with their opposition to big-government dependency programs, such as Food Stamps and long-term unemployment benefits. And once “they” get their way, “you’ll do exactly as they tell you,” Reich says.

Reich’s seven spurious claims, as over-worn and tired as they are, deserve to be responded to individually. It should be no surprise that each of Reich’s proposed “solutions” does its own damage to the poor, while offering little in the way of genuine social improvement.

1. “They’re against extending unemployment benefits for people who have been out of work for more than six months.”

The framing of this issue is dishonest at best. On first inspection, someone unfamiliar with the recent history of unemployment compensation extensions on Capitol Hill might sympathize with the idea of extending benefits for those out of work for “more than six months.” Six months, after all, is not an unimaginable amount of time to be chronically unemployed in the Obama economy.

The problem is, the recent benefit extension fight in Congress was not targeted just at workers who find themselves still treading water after six or seven months. Combined with state emergency benefits that usually last 26 weeks, federal add-ons initiated after the 2008 recession raised that total to 73 weeks, meaning people were eligible to collect benefits for almost a year and half. This was an unprecedented extension of the unemployment compensation program, and many Americans justifiably question the wisdom of such exceedingly long durations of unemployment benefits. 

One reason for this skepticism has to do with the indisputable capacity of benefit extensions to exacerbate long-term unemployment. Analyses conducted by the Federal Reserve Bank of San Francisco and the National Bureau of Economic Research (NBER) concluded that such extensions over the past five years have kept more than 600,000 out of the labor force by paying people not to work. Those claims were echoed in a survey of recently unemployed people in New Jersey commissioned by Alan Krueger of Princeton University and Andreas Mueller of the University of Stockholm. They discovered that after a burst of initial activity, people slack off on their job search and wait for something to happen. Moreover, it is likely more workers have been drawn into the mire of unemployment due to the benefit extensions: Another study from the NBER concluded that unemployment benefit extensions have increased overall unemployment by over 3 percent.

Workers are not benefited by being encouraged to remain unemployed for such long periods of time. Long-term unemployment dulls skill sets and makes workers less attractive to potential employers. The longer workers are enticed to stay unemployed, prolong the job hunt, or even dismiss jobs with lower pay, the weaker their resumes become when they inevitably reenter the job market. 

Leaving this aside, if Reich’s “they” bogeymen are meant to refer to Republican congressional leadership, his claim that “they are against” the benefits extension is also untrue. Republicans have approved renewal of the extension numerous times. This year, Republican lawmakers, led by Senate Minority Leader Mitch McConnell and House Speaker John Boehner, requested that the renewal of the extension be offset elsewhere in the budget and accompanied by job-creations measures, which Democrats refused. If Democrats had conceded to these commonsense compromises, it is more than likely unemployment insurance extension would have been approved for 2014.

2. “They don’t want to raise the minimum wage.”

A 2007 survey of 100 studies on the effects of raising the minimum wage was conducted David Neumark and William Wascher at the National Bureau of Economic Research. It revealed that a “sizable majority” of those studies, including those with the ”most credible evidence,” concluded that raising the minimum wage produced “negative employment effects, both for the United States as well as for many other countries.” Even more tellingly, “the studies that focus on the least-skilled groups provide relatively overwhelming evidence of stronger disemployment effects for these groups.”

Furthermore, according to the Bureau of Labor Statistics (BLS) only 5 percent of hourly U.S. workers made the federal minimum wage or less in 2012. Among those earning it, 63 percent were second- or third-wage earners from households with incomes equal to three times the poverty line or more. Only 11.3 percent of workers who would experience the increase live in households officially designated as poor. As the BLS survey also reveals, most minimum wage earners are young, part-time workers with an average family income of $53,000 per year. If Reich wishes to help teenage, middle class burger-flippers he might have a point. 

3. “They’re against extending Medicaid benefits.”

Unfortunately, the disaster known as ObamaCare is doing precisely this. More than double the number of people who have signed up for healthcare via the exchanges have enrolled in Medicaid. Since Medicaid is government-subsidized insurance, it is paid for by a combination of funds from state and federal budgets. Prior to its expansion under ObamaCare, Medicaid had already become the largest line item in a typical state’s budget, exceeding such items as public safety, infrastructure, roads and, since 2009, education spending for kindergarten-through-12th-grade.

Yet there is a far bigger problem. Since Medicaid payments are 61 percent less that what private insurance pays, an increasing number of doctors refuse to accept new Medicaid patients. ”About half of the physicians in many communities refuse to take Medicaid patients because the payment system is just too low,” reports James Capretta of the Ethics and Public Policy Center. Many doctors are still willing to take a certain percentage of such patients in order to fulfill a moral obligation, but they are not willing to put themselves out of business to do so.

In other words, many Americans enrolled in Medicaid are going to discover a reality that invariably eludes people like Robert Reich: “extending Medicaid benefits” isn’t remotely the same thing as getting actual healthcare. The end result will be rationing and denial of care for the millions of poor sold empty promises.

4. “They want to cut food stamps.”

As with much of the progressive lexicon, “cut” is a euphemism. In reality, food stamp usage has exploded, with a record-setting one-in-five American households on the program in 2013, according to the U.S. Dept. of Agriculture. Furthermore, the cost of the program has increased a whopping 164 percent over the last decade, and 36.8 percent since the Obama administration assumed control in 2009. Thus a program that cost the nation $58.2 billion in 2009 cost $79.6 billion last year. 

The latest Farm Bill under which the food stamp program operates does cut food stamp spending, but those cuts amount to $800 million per year, or approximately one percent of the overall total — a total that has grown exponentially, even as America remains saddled with a national debt of more than $17 trillion, along with unfunded liabilities that exceed $85 trillion. 

5. “They refuse to invest in education and job training.”

In reality the federal government alone has 47 job-training programs run by nine different agencies, according to the the U.S. Government Accountability Office (GAO). These programs cost the taxpayer $18 billion per year, and a 2011 report by the same GAO concluded that some of them are riddled with mismanagement, waste, fraud, abuse and corruption. The report further noted that since 2004, only 5 of the 47 agencies involved kept tabs on whether participants had actually secure jobs. ”Little is known about the effectiveness of most programs,” the GAO concluded.

As for education, the federal government spent $138 billion in FY2013. In both real dollars and as a percentage of GDP, the United States outspent most of the world’s developed nations in education. When one factors in vocational training and college as well, the United States outspends all of them. Yet if bang for the buck counts, America comes up woefully short, routinely scoring well below other nations on international exams. 

But this is only part of the story. Every one of America’s true educational wastelands — namely, most of our major inner cities where graduation rates hover around 60 percent or less, where budgets are routinely on the verge of bankruptcy or already there, and where teachers unions fight tooth and nail for the miserable status quo — are Democrat strongholds. If Reich were truly interested in helping the poor and working class Americans he professes to care so deeply about, he’d be far more interested in challenging that status quo, which revolves around the unholy alliance of education unions and a Democratic Party beholden to their campaign contributions and marching orders.

6. “They don’t want to rebuild America’s crumbling infrastructure.”

Reich has an exceedingly short memory. The American Recovery and Investment Act of 2009, more familiarly known as the stimulus bill, was supposed to target the lion’s share of its $787 billion appropriation (increased to $840 billion in 2012) on “shovel-ready jobs.” One year later, President Obama admitted “there’s no such thing.” To be fair to Reich, infrastructure spending has taken a nosedive since its peak before the recession began, but it’s not because the state and local governments that provide the vast majority of infrastructure spending don’t want to spend the money. It’s because they can’t afford to do so.

Yet even in the midst of such cuts, America spends more on infrastructure than the progressive stronghold known as the European Union, at 3.3 percent of our GDP from 2006-2011, compared to only 3.1 percent for the EU. The clamor for increased spending is all about doing it with more borrowed money, with the American Society of Civil Engineers (hardly a neutral entity) calling for a $3.6 trillion “investment” between now and 2020. Congress’s most recently passed budget allocates $108 billion for federal construction accounts.

The only way we will likely see more infrastructure spending is with a growing economy. Obama could contribute to that growth if he would approve the Keystone pipeline, among other things. Perhaps he could explain why he won’t to Robert Reich.

7. “They’re out to bust unions.”

Unions are doing a good job of busting themselves. Nothing speaks louder to this reality than the debacle Big Labor perpetrated in Wisconsin, where their thug-like tactics were rejected by both Republican Gov. Scott Walker and the voters themselves. As a result of Walker’s triumph, a projected $3 billion-plus deficit turned into a projected $300,000 surplus in 2011. Much of it was accomplished by getting government union members to pay for a portion of their own healthcare and pensions and eliminating automatic pay and benefit increases that are strangling states like New York, Illinois and California.

On the national level, a recent study by the Mackinac Center reveals that right-to-work states have seen greater improvements in employment rates, income, and population growth than non-right-to-work states over the last 60 years. Critics attempt to obscure this reality by pointing to the fact that states with right-to-work laws have lower per capita incomes. Yet they fail to factor in the cost of living, which is far more expensive in states where union monopolies push government budgets, and the taxes that pay for them, ever higher. When cost of living is factored in,  people in right-to-work states have 4.1 percent higher per-capita personal incomes than those in non-right-to-work states.

Furthermore, in cities that have gone bankrupt, such as Stockton, and Detroit, the primary drivers of that bankruptcy were out-of-control legacy costs for government union workers. Of Detroit’s $12 billion in outstanding debt, $9.2 billion of it is comprised of health and pension benefits owed to retired workers. When the city filed for bankruptcy, it had 47 different public employee unions, and a worker at the Water and Sewer Department who collected $56,000 in pay and benefits for his job as a horse-shoer despite the department having no horses. Detroit also has three retired municipal workers collecting a pension for every two that are still working.

According to Heritage Foundation’s chief economist Stephen Moore, more than 60 American cities may be facing the same fate as the Motor City. “Keep an eye on ‘too big to fail’ cities like Chicago, Philadelphia, and New York,” he warns.

Moore goes on to cite the progressive ideology in general championed by Reich and others as the primary impetus for such failure. “For at least the last 20 years major U.S. cities have been playgrounds for left-wing experiments—high taxes on the rich; sanctuaries for illegal immigrants; super-minimum wage rules; strict gun-control laws; regulations and paperwork that makes it onerous to open a business or develop on your own property; crony capitalism with contracts going to political donors and friends; and failing schools ruled by teacher unions, with little competition or productivity.”

If Robert Reich had any intellectual honesty, he would answer his question, “What are they really after?” by examining who really benefits from large swathes of the population kept mired in poverty and being sucked into the mentality of dependency. It is no accident that every major American city besieged by poverty, crime, economic disfunction and failing schools is a Democratic stronghold. Reich’s proposals offer more of the same. They merely reassert a long-held belief by the American left that success is measured by how many people they get on government programs, not off government programs. Americas would do well to “connect the dots” regarding the utter bankruptcy of such ideology.

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