Readers of my occasional contributions to this site realize I have written several times about the going economic commentary of former Clinton Labor Secretary Robert Reich.

I do this out of no personal animus: By all accounts, Mr. Reich is a lively, warm, and indisputably intelligent man. However, he is a man whose economic misunderstandings border on the fabulous – fabulous in the literal sense, the sense in which Gulliver’s Travels was fabulous. Absurd, gigantic, the stuff of satire. And just plain wrong.

Last evening, during his weekly “Marketplace Radio” commentary, Mr. Reich commented on the President’s plan to provide tax reduction for businesses. Mr. Reich was intellectually apoplectic, reduced to explaining his understanding of the rudiments of the American economy:

“The reason businesses aren’t investing in new plants and equipment has nothing to do with the cost of capital. It’s because they don’t need the additional capacity.”

Well, I’ll grant him this: capacity is related to productivity. However, capacity exists because capital is inaccessible (see below). And then, Mr. Reich persists:

“Obama’s proposed corporate tax cuts won’t generate more jobs, because they won’t put any more money in worker’s pockets … Obama’s whopping proposed corporate tax cuts help legitimize the supply-side dogma that the economy’s biggest obstacle to growth is the cost of capital, rather than the plight of ordinary working people.”

Two broad observations:

(1) Mr. Reich argues that we should put more money in worker’s pockets so they will spend more and thereby foster greater demand and thus stimulate corporate output, which means new hires and more jobs.

As usual, Mr. Reich is wrong. Most of the “workers” to whom he refers already pay, at best, modest taxes. Although I strongly support tax reductions for virtually everyone who pays them, the fractional amount of money a “tax cut for the working lower-income” (not quite the same ring as “tax cuts for the rich,” but more accurate) would put in their pockets would do little to induce economic growth.

Or perhaps Mr. Reich is thinking of some kind of direct federal payment to workers, of having the Treasury Department fabricate yet more money and dispense an arbitrary but politically potent amount of it to a favored group. Naturally, this would create more federal debt and serve as an at-best temporary infusion of capital into the economy. Sort of like a fiscal heroin injection.

Here’s a better idea: If we lower taxes on corporations and provide incentives (e.g., making the R&D tax credit permanent, as Republicans have long advocated and which the President now suggests) to enhance innovation and improve America’s global competitiveness, companies will begin to hire more employees (i.e., “workers,” in Mr. Reich’s parlance). These people will then start paying taxes, buying things of all types (from new cars to groceries) and thereby stimulate the market through – wonder of wonders – the private sector itself!

(2) Mr. Reich asserts that President Obama wants corporate tax reductions to lower the cost of capital.

This is part right, but misses the larger point. Corporate tax reduction encourages investment, productivity improvements, and frees up capital itself. A business that is not growing cannot access capital. A business that is growing – and private sector growth happens, in large part, when the tax burden is not excessive – creates jobs, eases the “plight” of those in the lower income brackets, and builds a stronger America.

Robert Reich has a marvelously mellifluous voice which is a delight to the ear. His obvious passion for people on the down-side of advantage is compelling. But he is wrong, in fact, philosophy, and policy. That’s what makes him, and his compeers in the American Left, so dangerous.

Tags: Robert Reich

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In the late 1990s, former Clinton Labor Secretary Robert Reich wrote a book called Lost in the Cabinet about his admitted misadventures as head of a major federal agency.

Now comes his latest missive, an article in the left-leaning American Prospect Magazine called “What Happened to Democracy.” In it, he decries industry lobbyists and back-room negotiations – pretty standard fare for a liberal who is as yet un-mugged by reality.

No one wants “closed door” deals or unfair benefits for any company or group.  But then Mr. Reich takes us into the intellectual thin air with this statement: He calls for “adequate public financing for congressional and presidential candidates who refuse private funding, more constraints on lobbyists, tighter rules for who must register as a lobbyist, fuller disclosure, and tougher rules on the revolving door between public service and private gain.”

Let me see if I understand: The federal government will pick and choose what candidates are viable for public office (that’s the basis of public financing) but people representing private corporations and business associations (that would be lobbyists) merit “more constraints.”

Then Mr. Reich leaps beyond the ether into stratospheric terra incognita and gets thoroughly lost in political space: “Yet nobody seems to be talking about these sorts of reforms. They don’t appear on Obama’s agenda. True, they don’t generate lots of public excitement, and they’re murderously difficult to enact. But without them our democracy doesn’t stand a chance.”

Conservatives have, for decades, been calling for full and immediate disclosure of campaign contributions.  No argument there.  But does Mr. Reich honestly believe that without federal financing of elections and tighter rules about lobbying – it’s already illegal for lobbyists even to buy a Congressman a cheeseburger; how much more “constrained” can the rules get? – “democracy doesn’t stand a chance?”

We live in a republic, not a democracy, a political sphere in which people govern themselves through elected representatives at the local, state and national levels.  Our Founders were terrified of democracies, considering direct self-rule an invitation to mobocracy and social dissolution.  They believed that representative self-government is the only sure way for honorable, or as they put it, “virtuous,” citizens to maintain ordered liberty.

My good friend and former colleague Bill Wichterman will be addressing this theme at the Family Research Council in a speech titled, “Did the Founding Fathers Establish a Democracy?” this coming Thursday, February 4 at 11 a.m. ET.  The speech will be Webcast and can be viewed at frc.org.

I hope Mr. Reich will join us.  Perhaps together we can learn a thing or two about representative republican democracy.

Tags: Robert Reich

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I’ve been on travel the past week, visiting with college administrators, staff, and students. I’m often asked by concerned young people: “Has it ever been this bad before?”

Oh, my yes. When I was your age, I tell them, 300 American cities went up in flames after Dr. King was assassinated, riots in the streets turned huge areas of America’s cities into no-go zones. Bob Kennedy was assassinated en route to a likely presidential nomination. Three hundred young Americans were dying in Vietnam every week, with no strategy for victory and no end in sight. Inflation was rampant and few Americans could see our country healing after such terrible divisions.

But heal she did. Last week, I witnessed American troops coming home from Iraq in two of our major airports. Welcoming committees cheered them wildly. What a great improvement on the sullen indifference that greeted too many of our returning Vietnam vets. One of my pool pals–guys I swim with every morning–was one of those Vietnam vets who came home to no welcome. Today, he joins the welcomers in applauding our magnificent troops. God bless you, Bob Hogan!

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Tags: Bill Clinton, Ernest Furgurson, George W. Bush, Martin Luther King Jr., Norman A. Graebner, President Barack Obama, Robert Kennedy, Robert Reich, Roger B. Taney, Rush Limbaugh, Ruth Bader Ginsburg, Sarah Palin

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