Obama Fails To Address Roots Of Income Inequality
Put in historical context, a $10.10 minimum wage is still substantially lower than it was in the 1960s
JESSICA DESVARIEUX, TRNN PRODUCER: Welcome to The Real News Network. I’m Jessica Desvaireux in Baltimore.
President Obama’s State of the Union address focused on expanding economic opportunities by raising the minimum wage, making college more affordable, and increasing economic mobility.
BARACK OBAMA, U.S. PRESIDENT: Today, after four years of economic growth, corporate profits and stock prices have rarely been higher, and those at the top have never done better. But average wages have barely budged. Inequality has deepened. Upward mobility has stalled. The cold, hard fact is that even in the midst of recovery, too many Americans are working more than ever just to get by–let alone to get ahead. And too many still aren’t working at all.
DESVARIEUX: But during the previous five years of the current economic recovery, income and wealth inequality has not only increased, but accelerated. That’s according to economists Thomas Piketty and Emmanuel Saez.
Now joining us to unpack all this is David Cay Johnston. He’s a Pulitzer Prize-winning investigative reporter and a contributor to Newsweek.
Thanks for joining us, David.
DAVID CAY JOHNSTON, PULITZER PRIZE-WINNING INVESTIGATIVE REPORTER: Glad to be here.
DESVARIEUX: David, do you think President Obama’s focus on expanding educational opportunities and raising the minimum wage are sufficient steps to narrowing the income gap?
JOHNSTON: No, not even close. It’s important that we restore the minimum wage. We’re not talking about raising it. We’re talking about restoring it. Back in the mid ’60s, it was almost $11 an hour. And education is certainly very important and too much neglected in this country. We put huge barriers to bright but poor and middle-class children getting first-rate educations, especially at college.
But we have much more fundamental problems than that. Many of these problems involve things like government rules that hardly anybody knows about that take money from the many and redistribute it to the few, the use of tax dollars to build factories, office buildings, and shopping malls, the rules that allow multinational corporations–not domestic, not mom-and-pop corporations, but multinational corporations– to actually profit off their corporate income taxes by delaying payment of them for 30, 40, 50 years and having you and I let them deposit that money with the government to collect interest while the value of the tax they owe erodes.
OBAMA: Opportunity is who we are. And the defining project of our generation must be to restore that promise.
We know where to start: the best measure of opportunity is access to a good job. With the economy picking up speed, companies say they intend to hire more people this year. And over half of big manufacturers say they’re thinking of insourcing jobs from abroad.
DESVARIEUX: David, you previously published an article in NationalMemo.com titled “Inequality Rising–All Thanks to Government Policies”. What federal policies are most responsible for the income and wealth gap, in your opinion?
JOHNSTON: First and foremost, we have shifted the income tax burden in this country down. And understand that the share of income that people in the middle class and the upper middle class are paying is higher now than it was in the early ’60s, while for people at the very top it’s much lower. That means people can’t save, they can’t invest.
Secondly, we have completely eviscerated unions. Only about 7 percent of private production workers are in unions now, compared to in the mid 30s 40 years ago when we were much healthier economically. (All of our competitors, our major economic competitors are highly unionized. In Germany, executives have unions.) And that’s allowed companies to push down wages.
And then deindustrialization, closing our factories and sending them to China, has cost us the equivalent of every job of every kind in greater metropolitan Philadelphia. Two-point-eight million jobs–that’s just the jobs we lost to China. Then there’s Mexico and Vietnam and a lot of other places.
So we’ve been pursuing policies that have made the global-level capitalists very wealthy, and we’ve been doing so by doing terrible damage to the rest of the country.
DESVARIEUX: David, can you speak to specific policies? ‘Cause I know there are going to be some people who are going to say, oh, that’s just the way business evolved over time. Can you just speak to specific federal policies?
JOHNSTON: Well, sure. Politicians all the time talk about free trade. There’s no such thing as free trade. All trade is subject to intense rules.
And to give you an idea of that, there’s an effort right now to push through Congress, with no significant debate, on an up-or-down vote, something called the Trans-Pacific Partnership. We only know about one section of that. It’s called Chapter QQ, which tells you there’s more than 40 chapters. And it’s 30,000 words long–thirty thousand words for one chapter. These are rules that will benefit the biggest corporations and do so at the expense of working people. And it’s all being done in secret. Louise Slaughter, a member of Congress, told a story recently that she wanted to read the agreement. So she’s a microbiologist–very, very smart woman. She goes to this room. They make her be searched to make sure she doesn’t have a pencil, a pen, or a tape recorder, or a piece of paper. And then they present her with material that–she said it was all gobbledygook to her the way that it is written.
If we’re going to have trade agreements, they should be subject to open discussion, and we should make sure that the rules don’t have subtle items in them, as all of our previous trade agreements do, that shift jobs out of the country.
And let me just give you one good example. Under our free trade agreement with Korea, we were promised both sides would be better off. We would have more exports, and the South Koreans would have more imports to the U.S. Well, that’s true. And for every dollar of gain we’ve made in sales of goods to South Korea, they’ve gained $25 in sales to us.
OBAMA: Profitable corporations like Costco see higher wages as the smart way to boost productivity and reduce turnover. We should too. In the coming weeks, I will issue an executive order requiring federal contractors to pay their federally funded employees a fair wage of at least $10.10 an hour–because if you cook our troops’ meals or wash their dishes, you should not have to live in poverty.
DESVARIEUX: So what policies do you think could substantially reduce or reverse income inequality?
JOHNSTON: Well, in the short run we need to raise the minimum wage, which will also improve the wages of many other workers, and restore it to where it was in the 1960s.
Secondly, we need to have federal rules–and President Obama has pushed these now in his State of the Union address–that will subject federal contractors to the rules to pay more money to their workers. You shouldn’t be a federal government contract employee and have to have food stamps.
Next, we need to stop these massive subsidies, particularly to retail. The Walmart–the Walton family that owns Walmart does not need to have taxpayers build their stores for them and their distribution centers. Warren Buffett, who controls the Burlington Northern Santa Fe Railway, doesn’t need to have monopoly rates in places where there are competitive rail lines. And yet all of these rules are in place, and the news media has neglected to report on these.
DESVARIEUX: Alright. David Cay Johnston, thank you so much for joining us.
JOHNSTON: Thank you very much, Jessica.
DESVARIEUX: And thank you for joining us on The Real News Network.
The Washington Monthly calls David Cay Johnston “one of this country’s most important journalists” and the Oregonian newspaper says his work is the equal of the great muckrakers Lincoln Steffens, Ida Tarbell and Upton Sinclair.
Johnston won a Pulitzer Prize in 2001 for his exposés of tax loopholes and inequities. After the San Jose Mercury hired him as its youngest staff writer when he was just 19 years old, Johnston spent 40 years as an investigative reporter for that paper and the Detroit Free Press, Los Angeles Times, Philadelphia Inquirer end of the New York Times, where he got his Pulitzer.
His trilogy on hidden aspects of the American economy –Perfectly Legal, Free Lunch and The Fine Print – revealed from official government and corporate materials the massive upward redistribution of income and wealth over the last 33 years. DIVIDED: The Perils of Our Growing Inequality, An anthology that he edited, will be published in April by The New Press.
Johnston writes columns for Al Jazeera America, NationalMemo.com and Tax Analysts and is a contributing editor to Newsweek. While he is not a lawyer, or accountant, for the last five years he has taught of the business and tax law of the world at Syracuse University College of Law and Whitman School of Management.