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  June 24, 2015

Sixteen Proposals for Effective Solutions in '16 - Salvatore Babones on Reality Asserts Itself (2/4)

On Reality Asserts Itself, Mr. Babones, author of "Sixteen for '16", argues for a 10 million public sector jobs program and higher taxes on the wealthy
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Dr.Salvatore Babones is the author or editor of eight books and more than two dozen academic research articles. His academic research focuses on income inequality, economic development, and statistical methods for comparative social science research. He writes a weekly column for the website and contributes to progressive websites and newsletters across America.


PAUL JAY, SENIOR EDITOR, TRNN: Welcome back to Reality Asserts Itself on The Real News Network. I'm Paul Jay. And we're continuing our discussion with Salvatore Babones, who's written a book Sixteen for '16. That's 16 proposals that he says would be effective solutions to 16 problems that if a president actually wants to solve the problems running in 2016, well, then he would do these things.

Thanks for joining us again.


JAY: So one more time, Salvatore is an associate professor in sociology and social policy at the University of Sydney, originally an American. He's also a fellow at the Institute for Policy Studies. And as I said, his latest book is Sixteen for '16: A Progressive Agenda for a Better America.

BABONES: Original, and still an American.

JAY: What did I say? You were an American? Actually, if you watch part one, you find out that he's very American. As I always say, scratch any American and most Americans you'll find a little bit American chauvinism there. You just owned up to it.

BABONES: I probably own up to it.

JAY: You own up to it.

BABONES: I own up to it.

JAY: As I say and people know, I grew up in Canada. But you won't find Canadian chauvinism in me anymore. I think I used to, but I think I'm done with it.

So chapter 1.

BABONES: Chapter 1.

JAY: Create jobs. What's the plan?

BABONES: It's that simple. We need to create jobs. We need to create nine or ten million jobs. The private sector is not doing it. The public sector has to. We simply need jobs in America. Employment levels in the United States are lower than they were--well, actually, three months ago they finally reached the level they were at in 2007. Right? It's been, what, eight years now, right? The population has grown. More people need jobs than ever before. The jobs just aren't there. And if the private sector's not creating them, the public sector has to.

JAY: Okay. So this is a no-brainer.

BABONES: It's a no-brainer.

JAY: If you want fuller employment, if you want there to be no jobs [sic], it is a no-brainer that you would do it. Roosevelt did it in the '30s.

BABONES: Absolutely.

JAY: It's clear. But maybe they don't want to. And what I mean by they--and this is kind of, I was saying to you off-camera, a bit of my critique of the book--the Fed has a role,--

BABONES: Absolutely.

JAY: --two-prong role. One is to make sure inflation doesn't get too high, or even too low. And two--they wouldn't state it this way, but one of the objectives of the Fed is to make sure unemployment doesn't get too low.


JAY: They want a pool of unemployed people 'cause it keeps wages down.


JAY: So the idea of a jobs program the way you're proposing it, I can't see any--can you see--let me ask you--is any candidate that could possibly get elected going to shake this? Because it means wages will go up.

BABONES: Right. Well, the Federal Reserve is not elected, and the Federal Reserve is not elected for a reason: that the people who created the Federal Reserve did not want the Federal Reserve creating jobs. Creating jobs is not the job of the Federal Reserve. It's the job our elected officials. Right? We elect them. They should be serving us.

JAY: Yeah, my point was just that there's a conscious effort to make sure there is a certain level of unemployment.

BABONES: Well, a conscious level on the part of the Federal Reserve. But that doesn't mean that the legislative and executive branches of government can't pass jobs legislation and hire people.

Look, since the beginning of the recession, America's governments, federal, state, and local, have actually cut jobs. Now, that makes no sense at all. Right? Cutting jobs during a recession is just dumb social policy.

We have work that needs to be done. And when I say work that needs to be done, I don't mean just makework jobs. I mean, I hear these proposals that you can pay people to dig holes and fill them in. I'm not talking about anything like that. I mean, I'm talking about we need health care assistance. You know, people who are at home who can't get out need someone to come visit them once a day. We need national preschool education. If you have national preschool education, you have to hire the teachers to do it. Every teacher in America could use a teacher's aide in her or his classroom. You know, we have plenty of work for people to do. The problem is that we're unwilling to pay people to do it.

JAY: I mean, I think, as you say, the evidence for that is obvious. I mean, it's clear. But--.

BABONES: Sure. I just visited New York City. Not a single major piece of infrastructure has been built in New York City since the early 1970s. I mean, I think the Verrazano-Narrows Bridge was the last big thing that was built. I passed the Lincoln and Holland tunnels, and they have the sign in front of the tunnel saying "time to New York", and the Lincoln was 65 minutes and the Holland was 70 minutes. Well, if it's going to take you 70 minutes in traffic to get to New York, don't you think we need a new tunnel? You know, I think that our need for work in America, for work to be done that only government can do, is pressing.

JAY: I guess what I'm raising the issue is who is going to actually make this happen. The book kind of suggests that there might be somebody running--and there's a bit of a suggestion that Obama has done some of this during his administration.

BABONES: There's been some.

JAY: And, I mean, Obama had an opportunity in the first two years of his administration to do the jobs program--

BABONES: I agree.

JAY: --exactly as you're saying,--

BABONES: Could've and should've. Absolutely.

JAY: --and instead made almost a mantra out of everything has to be done through the private sector--


JAY: --and continuing the Bush policy of funneling money into the banks.

BABONES: Obama, I think, wanted to avoid the problem that Franklin Roosevelt had when he was elected in 1932. Roosevelt wanted to push through a big jobs program, but he had to deal with a conservative Senate and a conservative Congress that wouldn't pass it.

JAY: Meaning his own people in the first two years.

BABONES: Yes. And so Roosevelt for two years got nothing done because he couldn't get it through Congress. But he then campaigned in 1934 on the platform of get rid of this do-nothing Congress and give me the people who will put in place programs that will improve lives for ordinary Americans.

JAY: Which Obama certainly did not do.

BABONES: And that's what Obama did not do.

JAY: Far from it. One of your chapters on the need for Medicare for all, I mean, Obama hands his Senate hearings committee over to Baucus, who's up to here in the insurance industry and is himself a multi-multimillionaire. They don't even allow a single-payer, Medicare-for-all person to the table--

BABONES: So we got health care reform--.

JAY: --under Obama's auspices.

BABONES: Yeah. We got health care reform without single-payer, without the option, even, of the federal government simply offering Medicare for everybody. And we got that without a single Republican voting for the bill. And I think many of us felt, if you're not going to get a single Republican voting for the bill, then you might as well have the bill you want instead of having the bill that pleases the Republicans.

JAY: But this is what I'm getting at. This is the bill they wanted. He made a deal with pharma not to let Canadian generic drugs in and lower pharma prices. He made a deal with pharma not to use the power of a single negotiating power to bring prices down in the United States. And then, of course, insurance stocks went through the roof when this legislation got passed.

BABONES: Absolutely.

JAY: I mean, and what I'm getting at is the proposals are all good, and--I think, in the book, and well worked out and clear. (And I urge you to go get the book, cause it's a good, succinct way to look at all these issues.) On the other hand, who's going to do this? Because there's a sort of suggestion that an Obama type politician might. And I don't think there's the evidence for that.

BABONES: Look, if I had $100 million, I would run for president myself and put the program forward. I've tried to get the book to every presidential candidate running who's declared. I've had some success with some, less success with others. I think this is an agenda. It's a ready-made agenda for someone who wants to pursue it.

I'm a sociologist. I don't even live in the United States. I'm an American, but I live in Australia. I certainly can't make this program happen. I don't know who can make it happen. As a social scientist, I at least want to tell people what the social science says we need. It's up to the politicians, and, frankly, it's up to the American people to push their representatives to make these things happen.

JAY: Okay. Fair enough.

BABONES: But what I want to do here is I want to give people the tools so that when their friend on the right says that something can't be done or it's impossible or the science doesn't support it, or when someone calls you stupid for wanting kind, respectful government policies, that you can pull out the book, and it's hundreds of citations, and you can say, no, the policies I want, these good, progressive policies, are scientifically valid policies.

JAY: So let's deal with some of the right-wing arguments.


JAY: One of them will be against this massive jobs program.


JAY: I don't know if--sometimes they won't say this out loud, but it's what they're really concerned about is if you're going to pay--I mean, let me ask. What would you pay in this jobs program? Would you pay a living wage?

BABONES: Well, I would like to see us pay a way a living wage. But it doesn't even matter.

I mean, look, I told you at the beginning that I'm conservative. I believe in market mechanisms. If the federal government and state and local governments hire 10 million people, that's going to drive up wages in America. Right? You won't need to have a program that sets a minimum wage artificially at a level that--.

JAY: No, but you're going to have to hire people at a certain wage in your jobs program.

BABONES: But if people are going to become very scarce, right--and that's what we need. We need an America where jobs are plentiful and employees are hard to find.

JAY: And the argument, whether they make it publicly or not, is that will be inflationary. How do you deal with that?

BABONES: Of course it will be inflationary. Modestly so. Right? Inflation may go up from 0.5 percent to 2 or 3 percent, which is where we want inflation to be anyway. I mean, right now we're stuck in a deflationary period. Prices are not rising fast enough. Interest rates have been at zero--not your interest rates or my interest rates; interest rates for banks have been at or close to zero for seven years. Well, in an environment where interest rates are 0 percent, we're suffering deflationary pressures, not inflationary pressures.

JAY: And how do you know it's only 2 or 3 percent? 'Cause I think people on the right would argue it could become even more, even uncontrollable, because wages in theory keep going up.

BABONES: Look, I'll tell you what it will do. It will cut into profits. Right? I mean, it's always a theoretical question in economics: if you raise wages, will it cause inflation or will it cut profits? Well, we have 110 years of history between 1860 and 1970 where wages rose consistently without inflationary pressure but profits were relatively low. Now, since the 1980s, American corporate profits have been through the roof. Right? So where is--you know, if you raise wages, where is it going to come from? Is it going to come from consumers or from profits? My guess is it's going to come from profits.

JAY: Yeah, mostly. I've seen--if you look at the numbers, from what I've seen it's true. The big spikes in inflation were actually more to do with, like, oil shock and all kinds of external factors.

BABONES: Oil shock, the wars, but not due to rising wages.

JAY: It has some effect, but not the big spikes.

BABONES: Average wages have not risen since 1972, by some counts since 1974, depending which statistics you use. Well, I don't care whether it's 1972 or 1974; it's been too long since people have gotten a raise. There's plenty of room to raise wages if wages haven't risen in 40 years.

JAY: And there's been inflation spikes during that period, clearly not caused by wages.

BABONES: Clearly not caused by wages.

JAY: Right. The real concern is loss of profits. And that is a major concern on the right.

BABONES: Absolutely.

JAY: Of course, their argument is: if you have less profit, you have less reinvestment in the economy and so on.

BABONES: Well, that's their argument, but I don't believe it. You know, look, again, I'll go back to the fact that I live in Australia. You know, in Australia, wages are twice as high for people who work in fast food or low-skilled jobs as they are here. I'm sure that fast food companies make a lower profit. But you can still buy a hamburger in Australia. Right? There's no country in the world--I mean, countries all over the world have different wage rates, but there's no country in the world where the market is not served because wages are too high. There are markets in the world where there is more profits than other markets. That's true. But companies will always invest and will always hire people when there's a market to be served. There's nowhere in the world that has the problem that people want to consume things but companies are unwilling to provide those services because wages are too high. It's a theoretical possibility that simply doesn't exist.

JAY: Of course, you get back to the jobs program, the question's going to be: how are you going to pay for it? And in your book you call for higher taxes.


JAY: So what's the argument?

BABONES: Well, first, I keep coming back to this thing you opened up with, that I'm really a conservative, at heart very much a conservative. One way to pay for it is simply to borrow money. The federal government can borrow money at half a percent interest or less than 1 percent interest. It has enormous room to simply borrow and use the money to hire people.

As someone who has a much more conservative personality, I much prefer to tax people today, use the tax receipts to pay for people. That is, instead of letting the future pay for today's jobs, let's make today pay for today's jobs. Rich people in America, wealthy people in America, even simply high-income people in America who are making over half a million dollars a year, can afford to pay more in taxes. They paid more in taxes in the past. They can certainly afford to pay it now.

JAY: Yeah. Do the numbers in what the tax rates were over the last--.

BABONES: In the Eisenhower administration, a conservative Republican president, the marginal tax rate in America on high incomes, on the very highest incomes, was 90 percent. Now, that's only on the very highest incomes, and it's only on their top income; that is, their income after a half million dollars or after a million dollars they pay 90 percent. After John F. Kennedy, in the Kennedy tax reforms--it was John F. Kennedy that lowered taxes down to 70 percent. Under Richard Nixon, they came down to 50 percent. Under Ronald Reagan they came all the way down to 28 percent. They've since bounced back up. We're now looking at a marginal tax rate of 39.6 percent on earned income. People who make their money mainly from stocks and from unearned income of course pay much less, more like--it's very complex, but more in the scale of 15 to 20 percent taxes.

JAY: And one of the big changes has been on the estate tax.

BABONES: The estate tax has declined, and the amount of the estate that you can take tax-free has increased.

Honestly, I don't really discuss the estate tax in the book. I mean, as you know, the estate tax is the tax on your estate if you die, the amount your heirs will pay in tax. I don't see any reason to particularly tax people at the point when they die. I'd much rather see their income taxed year after year while they're alive.

JAY: Well, part of the problem is a lot of people with that kind of money don't have to take it as income. So if you have appreciating assets, it sits in the estate. In fact, a lot of the wealth, when you start getting into the bigger estates and billionaires' estates, even multimillionaire estates, they don't need to take it as income. So that appreciating asset wealth never gets grabbed. And there's been a tremendous lowering of estate tax. In your book you mention that the estate tax is 40 percent now on the bigger, the very highest end.

BABONES: On the very highest end.

JAY: But it's not--the effective tax is more like about 16 percent.

BABONES: The effective estate tax--

JAY: There are so many loopholes.

BABONES: --is very low because there are all sorts of loopholes. And, look, an estate tax is a very efficient and, dare I say, unfair way to tax people. I mean, if you--.

JAY: Why unfair?

BABONES: Oh, if you die at age 40 of a heart attack before you do estate planning, you pay an enormous estate tax, but if you're a rich person who lives to age 90, you don't pay estate tax for 40 more years, 50 more years. I mean, a much better tax system would be to mark to market. In the private sector, companies have to mark their assets to market every year. Right? So why not make rich individuals mark their assets to market and pay taxes based on the appreciation of their assets,--

JAY: Okay, that would deal with it.

BABONES: --then pay taxes every year, right?

JAY: But right now that's not happening. There's nothing close to that.

BABONES: Look, in the book I don't advocate a list of specific tax reforms, because the tax code is so incredibly complex that it's almost impossible to wade into it and come up with the one solution.

But broadly speaking, wealthy Americans need to be paying more in taxes. Look, Warren Buffett says that. Bill Gates Sr. says that. I think that wealthy people who look in the mirror and really examine their lives are aware that they need to be contributing more for the American people and for American society, to make this country run better.

JAY: Okay. We're going to keep working our way through some of the 16 proposals. So please join us on Reality Asserts Itself on The Real News Network as we continue with Salvatore Babones.


DISCLAIMER: Please note that transcripts for The Real News Network are typed from a recording of the program. TRNN cannot guarantee their complete accuracy.


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