“America will
never be a socialist country,” Donald Trump declared in his State of the
Union address. Someone should alert Trump that America is now a hotbed of socialism. But it is socialism for the rich. Everyone else is treated to harsh capitalism.
In the
conservative mind, socialism means getting something for doing nothing.
That pretty much describes the $21 billion saved by the nation’s largest banks last year thanks to Trump’s tax cuts, some of which went into massive bonuses for bank executives.
On the other hand, more than 4,000 lower-level bank employees got a big dose of harsh capitalism. They lost their jobs.
That pretty much describes the $21 billion saved by the nation’s largest banks last year thanks to Trump’s tax cuts, some of which went into massive bonuses for bank executives.
On the other hand, more than 4,000 lower-level bank employees got a big dose of harsh capitalism. They lost their jobs.
Banks that are
too big to fail – courtesy of the 2008 bank bailout – enjoy a hidden
subsidy of some $83 billion a year, because creditors facing less risk
accept lower interest on deposits and loans. Last year, Wall Street’s
bonus pool was $31.4 billion. Take away the hidden subsidy and the bonus
pool disappears.
Trump and his appointees at the Federal Reserve are easing bank requirements put in place after the bailout. They’ll make sure the biggest banks remain too big to fail.
Trump is
promoting socialism for the rich and harsh capitalism for everyone else in
other ways. Since he was elected, GM has got more than $600 million in
federal contracts plus $500 million in tax breaks.
Some of this has gone into the pockets of GM executives. Chairman and CEO Mary Barra raked in almost $22m in total compensation in 2017 alone.
Some of this has gone into the pockets of GM executives. Chairman and CEO Mary Barra raked in almost $22m in total compensation in 2017 alone.
But GM employees
are subject to harsh capitalism. GM is planning to lay off more than
14,000 workers and close three assembly plants and two component factories
in North America by the end of 2019.
When he was in
business, Trump perfected the art of using bankruptcy to shield himself
from the consequences of bad decisions – socialism for the rich at its
worst – while leaving employees twisting in the wind.
Now, all over
America, executives who run their companies into the ground are getting
gold-plated exit packages while their workers get pink slips.
Sears is doling
out $25 million to the executives who stripped its remaining assets and
drove it into bankruptcy, but has no money for the thousands of workers it
laid off.
As Pacific Gas and Electric hurtles toward bankruptcy, the person who was in charge when the deadly infernos roared through northern California last year (caused in part by PG&E’s faulty equipment) has departed with a cash severance package of $2.5 million.
The PG&E executive in charge of gas operations when records were allegedly falsified left in 2018 with $6.9 million.
Under socialism
for the rich, you can screw up big time and still reap big rewards.
Equifax’s Richard Smith retired in 2017 with an $18 million pension in the
wake of a security breach that exposed the personal information of 145
million consumers to hackers.
Wells Fargo’s
Carrie Tolstedt departed with a $125 million exit package after being in
charge of the unit that opened more than 2 million unauthorized customer
accounts.
Around 60
percent of America’s wealth is now inherited. Many of today’s super rich
have never done a day’s work in their lives.
Trump’s response
has been to cut the estate tax to apply only to estates valued at over $22
million per couple. Mitch McConnell is now proposing that the estate tax
be repealed altogether.
What about the
capitalist principles that people earn what they’re worth in the market,
and that economic gains should go to those who deserve them?
America is on
the cusp of the largest inter-generational wealth transfer in history. As
rich boomers expire over the next three decades, an estimated $30 trillion
will go to their children.
Those children
will be able to live off of the income these assets generate, and then
leave the bulk of them to their own heirs, tax-free. (Capital gains taxes
don’t apply to the soaring values of stocks, bonds, mansions and other
assets of wealthy people who die before they’re sold.)
After a few
generations of this, almost all of the nation’s wealth will be in the
hands of a few thousand non-working families.
To the
conservative mind, the specter of socialism conjures up a society in which
no one is held accountable, and no one has to work for what they receive.
Yet that’s exactly the society Trump and the Republicans are promoting for
the rich.
Meanwhile, most
Americans are subject to an increasingly harsh and arbitrary capitalism in
which they’re working harder but getting nowhere, and have less security
than ever.
They need
thicker safety nets and deserve a bigger piece of the economic pie. If you
want to call this socialism, fine. I call it fair.
Robert B. Reich is Chancellor's Professor of Public Policy at
the University of California at Berkeley and Senior Fellow at the Blum Center
for Developing Economies. He served as Secretary of Labor in the Clinton
administration, for which Time Magazine named him one of the ten most effective
cabinet secretaries of the twentieth century. He has written fifteen books,
including the best sellers "Aftershock", "The Work of
Nations," and"Beyond Outrage," and, his most recent, "The
Common Good," which is available in bookstores now. He is also a founding
editor of the American Prospect magazine, chairman of Common Cause, a member of
the American Academy of Arts and Sciences, and co-creator of the award-winning
documentary, "Inequality For All." He's co-creator of the Netflix
original documentary "Saving Capitalism," which is streaming now.
