The Fable of the Century

Imagine a country in which the very richest people get all the economic gains. They eventually accumulate so much of the nation’s total income and wealth that the middle class no longer has the purchasing power to keep the economy going full speed. Most of the middle class’s wages keep falling and their major asset – their home – keeps shrinking in value.

Imagine that the richest people in this country use some of their vast wealth to routinely bribe politicians. They get the politicians to cut their taxes so low there’s no money to finance important public investments that the middle class depends on – such as schools and roads, or safety nets such as health care for the elderly and poor.

Imagine further that among the richest of these rich are financiers. These financiers have so much power over the rest of the economy they get average taxpayers to bail them out when their bets in the casino called the stock market go bad. They have so much power they even shred regulations intended to limit their power.

These financiers have so much power they force businesses to lay off millions of workers and to reduce the wages and benefits of millions of others, in order to maximize profits and raise share prices – all of which make the financiers even richer, because they own so many of shares of stock and run the casino.

Now, imagine that among the richest of these financiers are people called private-equity managers who buy up companies in order to squeeze even more money out of them by loading them up with debt and firing even more of their employees, and then selling the companies for a fat profit.

Although these private-equity managers don’t even risk their own money – they round up investors to buy the target companies – they nonetheless pocket 20 percent of those fat profits.

And because of a loophole in the tax laws, which they created with their political bribes, these private equity managers are allowed to treat their whopping earnings as capital gains, taxed at only 15 percent – even though they themselves made no investment and didn’t risk a dime.

Finally, imagine there is a presidential election. One party, called the Republican Party, nominates as its candidate a private-equity manager who has raked in more than $20 million a year and paid only 13.9 percent in taxes – a lower tax rate than many in the middle class.

Yes, I know it sounds far-fetched. But bear with me because the fable gets even wilder. Imagine this candidate and his party come up with a plan to cut the taxes of the rich even more – so millionaires save another $150,000 a year. And their plan cuts everything else the middle class and the poor depend on – Medicare, Medicaid, education, job-training, food stamps, Pell grants, child nutrition, even law enforcement.

What happens next?

There are two endings to this fable. You have to decide which it’s to be.

In one ending the private-equity manager candidate gets all his friends and everyone in the Wall Street casino and everyone in every executive suite of big corporations to contribute the largest wad of campaign money ever assembled – beyond your imagination.

The candidate uses the money to run continuous advertisements telling the same big lies over and over, such as “don’t tax the wealthy because they create the jobs” and “don’t tax corporations or they’ll go abroad” and “government is your enemy” and “the other party wants to turn America into a socialist state.”

And because big lies told repeatedly start sounding like the truth, the citizens of the country begin to believe them, and they elect the private equity manager president. Then he and his friends turn the country into a plutocracy (which it was starting to become anyway).

But there’s another ending. In this one, the candidacy of the private equity manager (and all the money he and his friends use to try to sell their lies) has the opposite effect. It awakens the citizens of the country to what is happening to their economy and their democracy. It ignites a movement among the citizens to take it all back.

The citizens repudiate the private equity manager and everything he stands for, and the party that nominated him. And they begin to recreate an economy that works for everyone and a democracy that’s responsive to everyone.

Just a fable, of course. But the ending is up to you.

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About Robert Reich 547 Articles

Robert Reich is the nation's 22nd Secretary of Labor and a professor at the University of California at Berkeley.

He has served as labor secretary in the Clinton administration, as an assistant to the solicitor general in the Ford administration and as head of the Federal Trade Commission's policy planning staff during the Carter administration.

He has written eleven books, including The Work of Nations, which has been translated into 22 languages; the best-sellers The Future of Success and Locked in the Cabinet, and his most recent book, Supercapitalism. His articles have appeared in the New Yorker, Atlantic Monthly, New York Times, Washington Post, and Wall Street Journal. Mr. Reich is co-founding editor of The American Prospect magazine. His weekly commentaries on public radio’s "Marketplace" are heard by nearly five million people.

In 2003, Mr. Reich was awarded the prestigious Vaclev Havel Foundation Prize, by the former Czech president, for his pioneering work in economic and social thought. In 2005, his play, Public Exposure, broke box office records at its world premiere on Cape Cod.

Mr. Reich has been a member of the faculties of Harvard’s John F. Kennedy School of Government and of Brandeis University. He received his B.A. from Dartmouth College, his M.A. from Oxford University, where he was a Rhodes Scholar, and his J.D. from Yale Law School.

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5 Comments on The Fable of the Century

  1. The government takes 50% of everyones earnings, devalues the remaining 50% with 13% inflation and still runs a deficit that is 100% of GDP. Stop the blame game Reich. If Government took 100% of eveyones earnings it still would not satisfy the bottomless lust to spend of congress and the whitehouse. What we need are fewer government programs, dependents, & employees. Less government is the only answer. A lot less. And it is going to happen. Market forces will make happen no matter what abominations congress passes.

    • Amen Frank. Communism doesn’t work. It might make those in government and universities feel good, like they are helping. But in the end it makes populations dependent, less productive, and more dependent over time.

      Insurance policies (including some small gov’t efforts) for safety net are ok. But when gov’t is involved it always migrates through emotion and the ability to take other peoples money. Then the debates of priories for spending taxed (and borrowed) funds happen in public with riots, etc.

      Might be interesting to see what 1 year of a 70% cut in all federal spending would do. Which, by the way, might still not ballance the books because such a large percent of yearly spending is debt spending on top of taxes collected. When I have big credit card bills, I take a year off in spending to get them paid off.

      We have a spending crisis not a tax-the-rich crisis. The only communist manifesto goal Reich hasn’t asked for yet is to confiscate rich peoples houses/land. That’ll happen after you tax their yearly income at 75%, next comes envy that they already possess wealth that needs to be returned to the state (first start with businessess like oil companies, banks. but then take what belongs to individuals too. All those nice big houses in california should be taken over by the state and issued to those more deserving– maybe 3 families could all live in Reich’s house alone!) That’s the Communist/utopian way

  2. Mr. Reich deserves criticism for lack of imagination. He claims to tell a fairy tale and instead gives us facts. Americans want to hear more fantasy, especially about the economy and government!

  3. Imagine a country in which more than half the citizens pay no federal income tax. Imagine further that these same citizens rake in the majority of federalized direct payments. Meanwhile, imagine also that the minority of citizens, that would be the ones who work and are taxed, are paying for the majority’s direct government payments. Then imagine that the Emporer of this country says that the tax-paying workers aren’t paying their “fair share,” and proceeds to make attempts to further raise the taxes on these workers. But no one makes any comments at all on the fact the the Emporer is also spending government money on programs designed to keep him in power, as well as lots of gov’t money to take his family on wild vacations all around the world. And hardly anybody is looking behind the curtain to realize that, under this Emporer, the employment rate has fallen terribly from what it was before he slipped into power. Welcome to the United States of Unfairness.

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