As the war in Ukraine grinds on, a look at the economic battlefield and how the conflict might permanently reshape the global economy. Diane talks to Sebastian Mallaby, senior fellow for international economics at the Council on Foreign Relations.
The U.s economy grew by 2.5 percent in the third quarter, the fastest pace in a year. The congressional debt reduction supercommittee met in public Wednesday. But the real action continued behind closed doors. A Democratic proposal was leaked, and countered by a Republican offer, but taxes remain the stumbling block. President Obama announced economic measures that don’t require congressional approval, including one to ease student loan debt. And GOP presidential hopeful Rick Perry unveiled his flat-tax plan. The domestic hour of our Friday News Roundup David Corn of Mother Jones, Jeanne Cummings of Bloomberg News and Byron York of the Washington Examiner.
- David Corn Washington bureau chief, "Mother Jones" magazine; author of several books, most recently, "Hubris: The Inside Story of Spin, Scandal, and the Selling of the Iraq War."
- Jeanne Cummings Deputy government editor, Bloomberg News.
- Byron York Chief political correspondent, Washington Examiner.
The panelists respond to a caller’s view on the Occupy Wall Street movements and discuss the political and cultural forces that precipitated the movements. Bloomberg’s Jeanne Cummings said that the question many frustrated Americans continue to ask, both inside and outside the movement, is “where are the jobs?”
MS. DIANE REHMThanks for joining us. I'm Diane Rehm. The U.S. economy grew by 2.5 percent over the summer, easing fears of a second recession. Cities began cracking down on the Occupy movement with arrests and President Obama unveiled both a new student loan plan and a plan to help underwater homeowners.
MS. DIANE REHMJoining us for the domestic hour of the Friday News Roundup, David Corn of Mother Jones magazine, Jeanne Cummings of Bloomberg News, and Byron York of The Washington Examiner. You are always a part of this program. Do join us, 800-433-8850. Send us your email to email@example.com. Join us on Facebook or Twitter. Good morning, everybody.
MR. BYRON YORKGood morning.
MS. JEANNE CUMMINGSGood morning.
REHMSo the economy grew by 2.5 percent in the third quarter. Is it enough to fend off the prospects of a double dip, Jeanne?
CUMMINGSYes. That, plus an uptake in consumer spending has economist saying that we are avoiding that trap for now. The uptake in consumer spending was 0.6 percent, so it's not a huge lift, but it's a signal that maybe consumers are getting back into the market. And as we all know, demand has got to increase before we're going to see any real expansion in the business community and job growth.
REHMAnd lot of folks. Byron, you're looking at what consumer spending might be going through the holidays?
YORKSure. I mean, this is objectively good news. Given the fears that we had a couple of months ago, the stock market seemed to be going through the floor, fears of a double dip. So 2.5 is actually quite good. One little caveat about the consumer spending. It appears that the savings right actually went down at the same time indicating, you know, maybe people are spending or saving as opposed to having more money to spend.
REHMInteresting that a report showed, David Corn, that state tax revenues rose for the first time since the recession began. How come?
MR. DAVID CORNWell, probably because of more economic activity. With the growth we've seen, it was 0.6 percent growth in the first quarter, 1.3 percent in the second quarter and now 2.5. So it's kinda like doubling. Now, I don't think it's only 5 percent in the next quarter that would make people very happy. But, you know, the states have been hit really hard on it, with all these cut backs in rescue workers and police and teachers. And they still have, you know, all of them still have a lot of riding to deal with, but that's good news for, I think, for working families.
REHMAnd yet, local government revenues appear to be going down, Jeanne.
CUMMINGSIt's very confusing, what's happening out there. But it is worth noting that, as well when we talk about this growth, the 2.5 percent, there are two revisions coming up. And every time we've had a revision for the last couple of quarters, the number goes down.
REHMExplain that revision.
CUMMINGSWell, they have -- part of the initial number is an estimate, and then they go back and they look at real numbers, and they start bringing -- and it start each time the number has gone down once they've looked at real revenues and real growth. And so we should be cautiously optimistic that this was our growth and that, maybe, it will continue through to the fourth quarter.
REHMAnd yet, you have a Congressional Budget Office saying yesterday that Wall Street -- exactly what the occupiers are saying that the rich are getting richer, while the rest left behind, Byron?
YORKWell, can I say one more thing about this -- the growth rate...
REHMSure. Go ahead.
YORK...which is that its effect on the unemployment rate, which is more important to most people, is unclear here. Given the fact that the country is always growing, 2.5 percent is about enough for the economy to stay in place, which is a great concerning it was going backwards for a good while. But it's not enough to get people really back to work. On this 1 percent thing, the one -- we should say that they're talking about a 30-year trend. I believe it was 1979 to 2007.
YORKAnd what they found was that the top 1 percent, their income had -- after inflation and after tax income had increase rather enormous amount and the smallest -- the lowest portion of increase, I think by only 18 percent. So the disparity of that...
CORNYeah. I mean, its, you know, its, you know, almost 20 times or 15 times the amount and it shows. I mean, you look at wages over that period from, you know, the post-war period up until now for middle income earners, and they've been flat. You know, they were going up a lot, you know, for the first couple of decades in that period and now live in flat for a long time.
YORKAnd this is really, I think, at the core of the Occupy Wall Street movement, which we can talk about, has its ups and downs, and it's sort of inchoate still at this point. But people get a sense that America, which used to be a fair country economically, is not as fair. You see the disparity incomes, but also you see the disparity in treatment. So when people, you know, the Wall Street guys and gals who had all those shenanigans its, you know, that enriched them and sent the rest of the economy off the cliff have gotten off largely just scot-free.
YORKCan I -- there's one detail in this. It's really quite intriguing. It is true that the finance sector is growing enormously in that period and their compensation has grown enormously. But the role of federal transfer payments, Medicare, Medicaid, Social Security has changed in that period, and a larger percent of it used to go to the lowest percentile.
YORKAnd now it is spread more throughout the economy, which is that the safety net programs have, in this time period, become kind of middle-class programs as well, which I think is going to get -- add fuel to the idea that you need to means test some of these programs.
REHMBut that surely doesn't account for 275 percent growth in the top 1 percent of the earners granted last 30 years, Jeanne?
CUMMINGSNo, it doesn't. And even if you see an expanded use of government programs, it doesn't mean that they become middle-class programs. It will likely means that people are falling out of the middle class, and their incomes are at a level now where they qualify for these program because they are poor, not because the programs have inched in to the middle class.
REHMSo what do you see is the implications of these new figures? And by the way, Byron, you asked before the program began about the jobless claims. They decreased by 2,000 to 400, 2,000 the week ending October 22nd. But what are the implications of this finding by the CDO that you've got a 275 percent increase in the top 1 percent?
YORKWell, an obvious political -- I think there are tremendous social and cultural implications, but a political implication is that we're having a debate, which we're gonna be talking about on the show about what to do with the U.S. government budget and deficit and the debt issue. And it's a fundamental divide that has not been solve in the last few years or in the last few months, which is the Democrat say, okay, you wanna say we're gonna cut back Medicare.
YORKThe average Medicare beneficiary lives in $23,000 a year in income and you -- we say -- we'll look at that to some degree, but we wanna see some extra revenues come from the people who have doubled their income in the last 30 years. And you'll at least see the Bush tax cuts expired. I think the rich did pretty well before those tax cuts. And the Republicans keep insisting -- we almost had, you know, a government shutdown over this. We almost had a default over this that we will not raise taxes on the rich.
CUMMINGSWell, it isn't a doubling. It's almost a quadrupling of the amount of money that the 1 percent has increased their income by. It's -- it really is an astonishing number and it comes out -- as David said, there are cultural implications but the more immediate one is political...
CUMMINGS...because it play -- it does play right into the debate that's happening there.
REHMBut is it affecting the debate with hundreds of lobbyists lobbying the super committee, a range of more than 600?
CUMMINGSI think it will affect politics. I do not believe, at this point, it will affect policy, and the reason for that is that both of the political parties in Washington are dug in. They are where they are, and they're not gonna move before the election.
REHMBut how can they continue to call it a democratic process, Jeanne?
CUMMINGSWell, it is -- the Tea Party wing of the Republican Party is still ascendant. It's still the strongest thug in their caucus. And they are adamant or that you see no movement from the Tea partiers that they would allow or let pass new revenues without first seeing deep cuts...
CUMMINGS...and that is going -- and they're -- have also put all of their members, the Republican members of Congress, on notice that they're going to hold them accountable.
YORKI actually agree with that. I don't think we're gonna see any changing in positions that we saw in the debt ceiling fight and that we're now seeing in the super committee fight, because they are in part based on philosophy. The Republicans believe that that top 1 percent has a disproportionate amount of talent, smart and ambition, and more so than the lower, you know, 20 percent...
CORNThe rest of us.
YORK...the rest of us, certainly in the top 20 percent, and I believe that myself. And the question is, is the disparity too big? There's gonna be a disparity. And they also believe, Republicans do, that that -- those are -- that that is the job-creating class, and they're not gonna budge on that. And this is a difference that they feel will be solve by 2012 election, not by a grand pardon.
REHMSo what about this leak that came from the debt reduction super committee? What was in the plan that the Democrats were offering?
CORNI'll probably talk about that, but it's important to note that there is a little movement on the Republican side. There are a couple of dozen Republicans who have signed a letter organized by Rep. Steve La Tourette and some others and sort of more moderate some who are associated with Boehner saying everything should be on the table, including some form of revenues.
CORNSo they're kinda pushing back on the Tea Party. So this is not quite a simple war within the Republican rings yet, but it shows that there is, indeed, movement away from the Grover Norquist, you know, last stand, you know...
YORKYou know to make a -- they should make a distinction now between revenues and taxes. And going to tax reform route is a way to solve this problem in a way the Republicans do not wanna simply raise taxes.
REHMByron York of The Washington Examiner. We'll take a short break. And when we come back, we'll talk about the Occupy movements around the country and take your calls. Stay with us.
REHMWelcome back. Here in the studio for the domestic hour of our Friday News Roundup, Byron York of The Washington Examiner, Jeanne Cummings of Bloomberg News, David Corn, Washington bureau chief for Mother Jones magazine. We will take your calls in just a few moments, 800-433-8850. Talk about these Occupy movements around the country, Byron, and what kind of an impact do you think they might have on not only raising the awareness of the public, but getting through to members of Congress?
YORKWell, let's put aside this issue in Oakland that happened the other day, which was very newsworthy and like a real mishandling of the situation. And on the Occupy movements in general, it strikes me that they're quite small. They are in coed. And I have to say I've not been to the one in Manhattan. I have hung around the Occupy D.C. protest. And it strikes me, looking at it, as very similar to some of the anti-war and anti-Bush protests that I covered in 2002, 2003, 2004. Just kind of a bunch of group.
YORKI think -- one time, they even had their Dick Cheney puppet there. It's just kind of a bunch of mostly fringe lefty types who don't have a lot else to do right now.
CUMMINGSWell, they may be small, but their impact is much larger than that. And if they are the groups that were out there in 2004 or they represent them, then the Republicans in Congress ought to be pretty darn nervous because it was in 2006 that they started to have major losses in Congress. So I think that the groups themselves will see how long they last. If its starts snowing, that could be the end of Occupy anywhere, except maybe somewhere in California.
CUMMINGSHowever, what we have already seen is that they have had -- they have lit a fire under some of the traditional Democratic activist groups. We did a report this week at Bloomberg. Labor is energized by them. MoveOn.org is energized by them. So they have had a political impact. Whether they last, doesn't -- remains to be seen.
REHMHere's the question of the group of whom I talked to a number of people this week, if we can call it a group, have said, they wish to begin a dialogue. What would that dialogue be comprised of?
CORNWell, I think they have given voice to a deep-seeded resentment that goes far beyond drum circles. I think across America, people have felt like they've gotten a raw deal, while people at the top, the 1 percent, The Wall Street, the big financiers, have gotten taken care of. And I think there was a lot of anxiety. I'd wrote a piece two years ago in Mother Jones about where was the popular anger about this.
CORNAnd I think it was mainly a year or two of anxiety, people worried that economy will really collapse. And now that things have settled and they see who's at top and who's still struggling, the anger is sort of coming back in, in a slow way. But no...
REHMBut I'm still worried about the dialogue.
CORNNo, no, no. So now the question is, this is a movement that can either stay kind of impressionistic or it could go more towards policy and platforms and electoral politics. We knew the Tea Party was lucky and that it had people like Americans for Prosperity and the Koch brothers come in and say, great, they can be our electoral battering ram and fight for things that we want with a veneer of populism, and they gave them buses and jets and money and organization. This movement won't work that way.
CORNBut the question is whether is does have an impact in people running for office and on politicians already in office, who see it as sort of a, you know, cliche, but the tip of a sentimental iceberg.
CUMMINGSThe -- this group could go the route of the Tea Partiers if they wanted to. Labor has opened to door to provide a backbone, an organization and finances to it. However, when you interview the folks who are involved, they talk a lot like the Tea Partiers, and that they want to stay out if the system. They don't wanna be co-opted. They, in some ways, are as mad at Congress as they are at President Obama.
CUMMINGSThese people are frustrated at every single level. And they feel that Washington, as a whole, has let them down and they don't wanna become a part of that system that they feel has failed.
REHMYou know, it was interesting that this week you had another high-profile arrest of a former executive on charges of insider trading. That kind of fuels this whole discussion, Byron.
YORKWell, you know, it's interesting. James Carville and maybe some other Democratic strategists have suggested, the Democrats need to arrest people. I mean, these are criminals and everybody's mad at them. The Justice Department, we can all be thankful, has decided to only do it in cases of actual criminal activity. This kind of stuff is -- it’s just a classis Wall Street insider trading corruption case. Whether there are thousands more of them, I don’t know.
CORNYou know, one manifestation of Occupy Wall Street may not seem obvious to people. But I don't know if you saw the picture, Diane, this week. Elizabeth Warren, who's running for Senate in Massachusetts, had to put a meeting -- a call out for volunteers. And literally, hundreds of people packed this town hall meeting. It looked like a presidential race. So people out there -- and she sort of represents what I would call the policy side, maybe the --within the establishment criticism of the Occupy Wall Street movement.
CORNAnd when she called for people, I mean, if was Scott Brown, who'll she be running against probably in the fall, I'd be, you know, thinking about my next job because to have that sort of energy at this stage of a Senate campaign, it was mindboggling.
CUMMINGSElizabeth Warren may well prove to have hit the perfect sweet spot for her campaign, for her message and for her -- both her academic and the role she has played in politics, 'cause she has been the voice of the consumer for the last few years. And that seems to be where we're at right now, where we have consumers, little people, the 99 percent looking for some kind of champion. And she's already been there. If she can rally around that, it may, in fact, propel her into the Senate. That remains to be seen.
YORKWell, perhaps, she would be the answer to your question about the dialogue. I mean, the question on the dialogue was, who's gonna talk for him? I mean, they don't seem to have anybody who really speaks for them, and they want it that way. Candidate turned in to have some sort of electoral impact, the way the Tea Party did in November 2010. We're nowhere close to that right now. But there's still time.
REHMSee, I'm -- I keep wondering not only about who it is who might speak with somebody, but how that discussion would begin and what these folks who are with Occupy Wall Street would say? Jeanne.
CUMMINGSThat's a really hard question, Diane. There have been several polling groups that have gone to the various Occupy locations to try to figure out what is the message. And it's -- there are many messages. Some of them are, you know, go far, far left, where, you know, there's a real socialist bent to what they think the solutions are. Others are students who are underwater, who are just so frustrated. Others are people who are out of work, who've been looking for a long time, who just wanna get a job.
CUMMINGSSo we have lots of messages very similar to the Tea Party and that there were a lot of reasons people came out, and it coalesced around the idea of taxes and health care reform.
CUMMINGSIf there is a way, and I think that the White House is toying with trying to figure out a way to funnel all this energy and direct at one or two messages, then they could have some impact. And of the messages -- clearly The White House has already been setting the Republicans up for this, is that the Republicans are protecting millionaires in the battle over how to deal with our debt. They're on the side millionaires. I'm on the side of you.
YORKDid you see the video of Alec Baldwin when he visits the Occupy Wall Street? Could be part of a TV Show, but basically he's saying to them, well, you know, I think capitalism is really OK and we need robust capital markets. Actually, he a spokesman for a bank. But, you know, we can't just throw the system out. You guys wanna get rid of the Federal Reserve. We actually need a currency.
YORKThere -- it struck me that you can see a real division between sort of standard liberals like Baldwin, and the people who were there, who were just a mixture of a bunch of people. We want to throw people in jail, they want to get rid of the banks, they want to get rid of the Fed. Do all sorts of stuff.
CORNYou have that within the Tea Party too. There are some aspects the Tea Party that are far-right libertarian, they wanted, you know, and, you know, get rid of the Fed as well. And, you know, like, Ron Paul, and there are some of...
CORNI know, I mean, there is. Well, you know, eventually, this has to be, you know, the conversation has to, you know, focus on some specifics, whether it' jobs program, whether it's a transaction tax, whether it's more transparency in politics. But I think the overwhelming sense is we want leaders who we believe are looking out for the bottom 99 percent than the -- rather than the top 1 percent.
CORNAnd there are different ways you can show that.
REHMLet's talk about how the Obama administration is trying, through executive order, to accomplish some things like this new student loan plan. What does it do, Jeanne?
CUMMINGSWell, the student loan plan, it essentially just tweaks with the current system and reduces the amount of money that students have got to pay back in, you know, in the course of their loan. Right now, student -- the required payment on student loans is at 15 percent of discretionary income of students post-graduation, and this would reduce it to 10 percent. And so it just gives them more time to pay their student loans back, and it allows them to keep a little more of the money they earn in their pocket.
CUMMINGSAnd what -- what's interesting with this and the proposal the president came out with just about a week ago on homeownership is that what the White House has done is pretty clever positioning. They have spent a month out there on the campaign stump, running against the do-nothing Congress. And they ran on that until Congress didn't pass the jobs bill.
CUMMINGSAnd then they have pivoted, in the last two weeks, with we can't wait, and he's stepping in and using his executive powers to get -- try to get relief to people who are struggling. So they are setting up the political argument about why him and not them.
REHMBut surely it's not all politics. Surely it is an effort to help students and to help homeowners.
CORNThe biggest and best thing that the president can do for his own political future is to help people and to help the economy. You know, that's -- the tax cut deal of last December was basically a second stimulus. It would have done more for the economy have we not had gas prices go up and the Japanese tsunami and the European crisis. By -- you know, it's -- people tend to look at this -- I think in Washington too -- as who's up, who's down, what gives you the political advantage or not.
CORNIf the president can do anything to get the conditions on the ground, the economic conditions, to improve even marginally, that's good for Americans. It also happens to be good for him.
YORKHe can only do so much. This is the kind of stuff that Congress really does. And the measure that Jeanne talked about with the student loans going from 15 to 10 percent of your disposable income is something that Congress has already passed. He's using his executive power to speed it up, to accelerate the process. The Atlantic Monthly did, I thought, what seemed a pretty persuasive analysis of the student loan thing and found that it would help the average student loan holder by about $10 a month.
YORKIt is not a big deal, and it doesn't address this weird situation we have, where the cost of higher education chart is going up and up and up. And as it goes up, the political system just calls for more loans to feed that system. It doesn't address that.
REHMByron York of the Washington Examiner, and you're listening to "The Diane Rehm Show." How many people is this student loan thing gonna help? How many people is the housing plan that President Obama introduced gonna help?
CORNI saw the Atlantic Monthly piece that Byron mentioned, but I also -- there was also an AP piece that said, you know, up to a couple of $100 a month to help some students. So I think it's still open which analysis is correct. The White House says, you know -- and at the beginning of the program it's hard to tell -- that 1.6 million people will be helped by the student loan.
CORNOn the home foreclosure business, you know, they originally had this plan called the HAMP plan that they thought would hit -- you know, would help millions of homeowners who are underwater, and ended up only reaching about 800,000 people. And so what this new plan does is sort of, you know, make it easier to get access to that, so they're hoping for a couple of million. But I gather that up to 15 or 20 million people might be in needing of this help. And whether they can do it right to reach all those people is gonna be the big challenge.
REHMAll right. Let's move on to two flat tax plans on the table. Rick Perry is first. He introduced this this Tuesday. He would scrap graduated income tax plan, replace it with a 20 percent flat tax. But here's what I didn't quite get, and, Byron, maybe you can explain it to me. He said that those people who want to continue with the current plan could do so. And I found myself seeing a gigantic IRS trying to figure out who's doing what.
YORKI just happen to have written about it this week...
YORK...and talked at length with the Perry people about this. And it is an optional system. There are a number of other tax proposals, like Paul Ryan's tax proposal, which propose, essentially, a two-part system, which says, here's our new flat tax plan. We would like you to enroll in it. However, if you wanna stay with the current situation, your current tax system, you can do that too. So what's gonna happen in a situation like this is everybody is gonna look at it.
YORKThey're gonna do the math, and they figure -- gonna figure out under which system would I pay less taxes. Problem is, about 46, 47 percent of the public pays no federal income tax, and that's what we're talking about here. Twenty-three percent, about half of those actually get money back from the government in terms of...
YORKEarned income tax credit.
CORNEarned income tax credit.
YORKSo they're gonna stay with the system. And then there are the people who have -- who don't get money back, but they have zero tax liability. What? Do they change simply for simplicity's sake? So probably half -- maybe more -- of the people aren't gonna go into this new system.
CUMMINGSWell, it is a complicated proposal despite the fact that they were trying to come up with something as simple and snappy as 99 in Herman Cain, although that proved to be too simple...
REHMAnd that became 909.
CUMMINGS...that he had to change it. But, I mean, it's not a flat tax. It's some kind of incline. I mean, he says, 20 percent, but you can still get your mortgage deduction. You could still get your charitable deductions. So it's not as flat as what Cain initially proposed. And it's further complicated by the fact that not only can you get each -- you could choose where you want to -- what kind of tax you wanna pay under the current system or under his new plan, you could do that every year.
CUMMINGSAnd so talk about a big IRS. People from year to year to year could be flipping how they do it. There have been similar proposals by other Republicans who say once you pick one of these methods, you have to stay in it for a certain period of time to create some continuity.
YORKLet me add one...
YORK...quick thing the Perry people have told me, that that's an action, not the case. And this -- and under this proposal, when you're in, you're in. So they don't see people going back...
CORNIt's -- it seems to me a full employment plan for accountants. But both, you know, Herman Cain's 999 or 909, or whatever it's gonna be next, and the 2020 0 plan of Rick Perry, you know, failed the Ronald Reagan test. Ronald Reagan said that, you know, bus drivers should, you know, should, you know, should pay lower rates than millionaires and business people. These -- every flat tax that comes down the pike lowers taxes for the well-to-do and either keeps them at the same for the lower folks or actually raises them.
REHMDavid Corn of Mother Jones magazine. When we come back, we'll open the phones and hear your thoughts. Stay with us.
REHMAnd this hour of the Friday News Roundup will be up on our website, portions of it, in about an hour. Here in the studio, David Corn, Jeanne Cumming, Byron York. Let's go to the phones. Plantation, Fla. is first. Good morning, Cindy.
CINDYGood morning. One thing in the domestic area I haven't talked about either on TV or on the radio is what is happening to municipalities because states are in a better position to meet their bond obligation. But could they push this down to the municipal level, to towns and counties? Michael Lewis, who wrote "The Blind Side" and "Moneyball," had an article on Vanity Fair's website called "California and Busted," (sic) and he talks about two towns on California and the fact that hardly anybody works for the town anymore.
CINDYOne was Vallejo, and I can't remember the name of the other one. But what dire straits they're in. And also, Harrisburg, Pa., not an insignificant city, just declared bankruptcy. And I haven't heard anybody in the national media talking about this or what it means for people that have annuities that are tied up in municipal bonds.
REHMYou know what, Cindy, we have done programs exactly on that. Just to let you know, you could go to our website and check that out. Jeanne.
CUMMINGSWell, she's absolutely right. We -- the first stimulus that was passed by Congress, it sent a lot of money to the state and local communities, and all economists pointed out that once that money went away, the true condition, the true financial condition of the states and municipalities was going to come to fore. And it was going to be a dire situation because of all of the job loss, because of the continued unemployment and all of the lost revenue.
CUMMINGSAnd so that is our bleak situation right now. It's that, you know, the makeup has been wiped off, and this is the true financial condition of the country right now and its government.
REHMAll right. To Bill in Lewes, Del. Good morning.
BILLYes. Good morning. An observation leading to a question. Since 1979, we've seen near stagnation of the personal wealth and income of the average American. At the same time, the personal wealth and income of the top 1 percent increases substantially. And this was a period when Republicans began the erosion of the tax rates, federal income tax rates. Now, there's certainly a relationship there.
BILLAnd the question is did Republicans really believe this stuff? They seem to be calling for more tax reductions, especially on the top 1 percent. Did they really think this is good for the United States in the long run?
YORKWell, correct me if I'm wrong, but I think over the -- if you look over decades, the federal government, whatever the tax rates are, has ended up collecting about 18 percent of gross domestic product. And how much we spend, of course, is a big issue. And now we're, you know, we're getting -- it's less than that now. It's like 15 percent because the tax collections are so bad. But over these years, the federal government has been collecting about the same amount of money the whole time.
YORKAnd there has been an enormous growth of spending and a number of things. We're headed for a huge expansion of entitlement spending. But I think it's reasonable to ask, do you have to collect more money if that's they've been doing for decades?
CORNBut I think if you're gonna have to wars and have them expand Medicare to do a drug-prescription benefit and, you know, give, you know, a tax cut back to people on the top and say we're not gonna pay for this, well that's certainly is, you know, it doesn't matter what the tax rates are then or what the tax revenue collection is. You are putting yourself on the path to a gigantic fiscal hole. And that's what happened. And then when it comes around to fixing that hole, to say, well, what are we gonna do?
CORNWe're gonna cut back on people who -- low-income Americans who need medical assistance? Or we're gonna look at people who have just, you know, quadrupled their wealth in the last 30 years?
REHMAll right. To Logan, W. Va. Good morning, Mike.
REHMGood morning, sir. Go right ahead.
MIKEGood morning. I just like to thank all the people in the Occupy movement. The commercial press fractured fringe movement of some sort because of their disparate grievances. But I believe they're only expressing what, actually, 100 percent of Americans know and feel. But our government is closed to the public. And there's been a corporate takeover of our government, and we want our government back.
CUMMINGSWell, the caller is right in that if public opinion polls that have been taken in the last couple of weeks indicate that not a majority but a -- about 40 percent of Americans agree with the message of what we -- of Occupy Wall Street, that the halves have gotten too much, and the rest of America have been suffering and taking big hits. Only about 25 percent don't agree with them. And it's -- it has been called a fractured group. It's been called lots of different things. The Tea Party face the same thing.
CUMMINGSThey were called lots of things before when they first started out. And what they turned out to be, in large measure, were ordinary Americans who were just really frustrated with Washington, D.C. And in the long run, it could be that Occupy Wall Street is coming from a different place but is really just ordinary Americans, as the caller is, who are just very frustrated how their government has not been able to help them in a time of such economic hardship.
REHMHere's an email from Cynthia, who's listening on WNIJ in DeKalb, Ill. And apparently, we've had several like this. She says, "If the top 1 percent have had such a large income increase in the last few years, where are all the jobs they have created?" "Right now," she says, "I feel our country has been hijacked by political interest. Most American people are struggling to get by while the politicians continue their wrangling."
CORNYou know, productivity has gone up tremendously in the last couple of decades. So basically, businesses are getting more work out of workers, so they have to have less workers and pay them, you know, their labor cost aren't as high. We've had a lot of outsourcing, which we've talked about. We have a lot of people who make a lot of money here, who parked that money outside the U.S., in bank accounts that are undisclosed.
CORNI mean, there's a lot of ways for people who are making money to sort of take that money and either use it for their own benefit and not really invest back in America. There's no law that says they have to. And if they're not going to, then I think that's where you have a tax system come in to try to say, OK, we're going to try to keep that money to build America which you have done very well by.
YORKRemember, this is a 30-year trend from the CBO numbers that we're talking about. That 30 years would include the Clinton boom years. I doubt that you had many shows devoted this issue during the Clinton boom years, and yet those same things were going on just a few years ago under George Bush. Unemployment was, what, 4 1/2, 5 percent, something like that. Not a huge amount. There are temporary conditions that exist now, and we all know what they are after the collapse.
REHMI hope they're temporary.
CORNThey may not be temporary. That's the issue. I mean...
REHMThat's the concern.
CORN...you had this build up of deregulation, and you have the expansion of the casino economy based on Wall Street that held the rest of the economy hostage. And it all kind of collapsed. It doesn't mean -- it's not necessarily a boom-and-bust cycle. This may be a transition moment.
CUMMINGSThere are other statistics out there that show that in the recession, the wealthy did better and -- while the 99 percent were suffering. And so this is not just a 30-year trend, this is about the last two or three years. And the public, if you do focus groups, if you go out and interview people, they're angry that the wealthy have gotten wealthier. That the banks, as we all know, are sitting on cash.
CUMMINGSAnd the answer that they hear is that these people need more money to create jobs. And that caller and those emails are raising, I think, what is going to be the next big question in this debate -- where are the jobs?
REHMAll right. To Dennis in -- sorry, to Padrea (sp?) in Dennis, Mass. Good morning.
PADREAYeah. I'm calling from the Cape & Islands WCAI. At this point, the subject is kind of been beaten to death. Ms. Cummings said earlier in the program that this was a demand-side problem, and it's been discussed that there has been as 275 percent expansion of wealth in the upper echelons of the economy.
PADREAAnd I just felt like I needed to point out that the past 30 years of economic policy have done nothing but help the supply side of the economy, when what we're looking at is low consumer spending and low consumer confidence, and those are demand-side problems. We need education, we need health care and we need jobs and higher wages. And...
YORKHere again, I -- this concern, and it's absolutely real and it's legitimate, but it is the result of a time in which we have 9 percent unemployment right now. And these same trends were going on earlier, at earlier times, when their unemployment was much lower, employment was much higher. And to treat a temporary situation as if this is the way life is going to be forever from now on is probably wrong.
YORKI'll say one little example. From '93 and '94, when the deficits were a big problem -- there were about $250 billion a year, which seemed huge at the time -- there were many, many predictions that we were facing deficits like that, federal budget deficits, as far as the eye could see. There was a surplus within four or five years. I'm not suggesting things like that will happen right now, but I'm suggesting it is absolutely wrong to take temporary conditions and suggest they are going to exist for the rest of our lives.
CORNBut you have to address the seriousness of the problem. '93, '94 what did Bill Clinton do? He raised taxes on the wealthy and he had -- and led to surpluses and an expanding economy. Everybody was happy. Now, what -- the president's agenda this year is to do exactly what the caller just asked for. To invest in education and to deal with the rising health care, innovation, R&D, all of the things that Republicans what to cut back tremendously, dramatically.
CORNSo they're not investing in the future. They're not doing anything now. All they're saying is if we cut government, somehow that will lead to a magic recovery, which there is no basis in the past to believe that. It may be true, but it's an article of faith.
REHMAll right. Let's go to Saint Claire Shores, Mich. Good morning, Ben.
BENGood morning, Diane. I'm a huge fan.
BENMy question is one of your panelists suggested that the talent and ambition of America comes from the top 1 percent. Is it possible that that talent and ambition is a product of their socioeconomic status? And if so, what does that suggest about fairness and social mobility in our country? Thank you.
YORKI was the one who said it. And let me amend that to the top 20 percent versus the bottom 20 percent. I -- listen, I think that there is more talents, smarts, and ambition in the top 20 percent of the earning class than there is in the lowest 20 percent. Maybe I'm wrong. People move -- the great thing about America is people move from one percentile to another, but that's a result of their own effort and their own talents.
CORNWell, we see poverty rates had gone up in America in the last -- in last few years. And if, you know, there is no doubt that people move and that America is a dynamic society. But you go look at a school in Bethesda and you go look at a school in Anacostia or some other place and you can't tell me that that's not a level playing field for most Americans.
REHMAnd you're listening to "The Diane Rehm Show." To Whittier, Calif. Good morning, Gary.
GARYHi, Diane. I'm one of your big fans like some of your callers. First time that I've called.
GARYI just wanted to say I am not a mostly fringe lefty with not much to do. I am a professional. I am a airline pilot at the biggest airline in the United States. You can't believe the devastation that -- I'm a captain who's gonna retire soon. My co-pilots, people who have served our country in the military, the way that they have been treated, they cannot put their -- save enough money for the retirement that we have left, put their kids through school.
GARYDollar journalist, conservatives like Byron York, cannot help themselves from denigrating this movement. But this Occupy Wall Street movement, I support it, so many others support it. I'm tired of the way it's put down by these conservatives.
YORKI -- people disagree about that. I mean, clearly, there was a lot of liberal commentary on the Tea Party when it was having big rallies. I just gave my observations of what I've seen.
CUMMINGSWell, they were wrong about the Tea Party. And in all likelihood, people are wrong to denigrate this group, as I've said a couple of times on this show. We found out about the Tea Partiers that they were ordinary Americans who were very frustrated that Washington was not helping them. And I think what you have with Occupy Wall Street, again, is -- are ordinary Americans finding a voice, finding a way to vent their frustration at Washington for not helping them during this time of economic need.
REHMHere's an email from Matt who says, "All the polls I see show a large majority of Americans in favor of higher taxes on the rich. If the Democrats stick to a message of, we can't pass a jobs bill or fix infrastructure or reduce the deficit because they won't raise taxes on their rich friends, it seems to me they will have the public on their side and pick up many seats and hold the White House." Who agrees? Who disagrees?
CORNWell, that's certainly the theory. I think the Republicans are scared. The more that the issue is defined as fairness for our society, who should pay, how much should they pay, they're on the wrong side of public sentiment. That's why they have to turn this into class warfare and use rhetorical devices because if it's on the issues, they're on the wrong side.
YORKOh, the rhetorical devices won't win them the election. I mean, the public has shown an interest -- an inclination to throw people out. I mean, clearly, they were extremely unhappy with George Bush and the Republicans. They threw the Republicans out of Congress on '06, and gave the whole thing to Democrats on '08. And then they turned around and gave a smashing victory to Republicans for the House in 2010.
YORKI do not think rhetoric about class warfare will win the election for Republicans. On the other hand -- remember when at the end of Medicare, excuse me, the Obamacare debate, they were having this big forum and they had members of Congress there, and at the end Obama said, well, we disagree and we'll just have an election. That's what's gonna happen.
REHMYou know, I think an awful lot of our listeners resent health care being called Obamacare. Just a word. Go ahead, Jeanne.
CUMMINGSWell, I do think that this -- we have been, as Byron said it, in a very volatile political world right now. And I think the message from the voters has consistently been, do something to help us. And so far nobody's done it. And it could be that next year they'll look for a whole new group to try to get the job done.
REHMAll right. And finally, tonight is Game 7 in the World Series. Who's gonna win, the St. Louis Cardinals or the Texas Rangers? Who do you pick, David? Quickly.
CORNI'm not a Texas fan. I got to go with the St Louis.
YORKSomebody's gonna have to speak up for people who aren't watching. I'll pick either one.
REHMAll right. That's fine. Thank you, all. Byron York, Jeanne Cummings, David Corn. Thanks for listening. Have a great weekend, everybody. I'm Diane Rehm.
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