The Core Republican Interest (and some Democrats)

by Robert Reich/Fmr. Secretary of Labor; Professor at Berkeley; Author, Aftershock: 'The Next Economy and America's Future'
Posted: December 22, 2010 10:54 AM
Why Obama Wins on Foreign Policy and Gays But Loses on Economics and Taxes

Two important victories for President Obama this week -- the New Start anti-ballistic missile treaty with Russia to reduce weapons and restart inspections, and the end of Don't Ask, Don't Tell after a 17-year ban on gays in the military.

Why have Senate Republicans been willing to break ranks on these two, while not a single Republican went along with Obama's plan to extend the Bush tax cuts only on the first $250,000 of income?

A hint of an answer can be found in another Senate defeat for Obama over the last few weeks that got almost no attention in the media but was a big one: Republicans blocked consideration of the House-passed DISCLOSE Act, which would have required groups that spend money on outside political advertising to disclose the major sources of their funding.

The answer is this. When it comes to protecting the fortunes of America's rich (mostly top corporate executives and Wall Street) and maintaining their stranglehold on the political process, Senate Republicans, along with some Senate Democrats, don't budge.

Bipartisanship is possible on foreign policy. It's even possible on certain social issues, such as gays in the military. But it's not possible when it comes to the core economic and political reality of the United States today -- the almost unprecedented concentration of income and wealth at the top, and the way it's being used to corrupt our democratic system.

In this respect, Democrats are better than Republicans, but not much better. Both parties have rejected efforts to close tax loopholes that would treat much of earnings of hedge-fund and private-equity managers as ordinary income rather than capital gains (taxed at 15 percent). Both parties have refused to cap the size of Wall Street's major banks or force the banks to aid of distressed homeowners whose mortgages they hold.

Neither party has had the intestinal fortitude to suggest that taxes should be permanently raised on multimillionaires. Neither will take the initiative on significant campaign finance reform.

Not even Democrats in Washington will talk about the degree to which the nation's income and wealth are now concentrated in the hands of a relatively few people, who have more power over our democratic system than since the days of the robber barons of the late 19th century.

Republicans have sold out completely to big corporations, their executives, and Wall Street. But when it comes to money for elections, many Democrats drink at the same trough.

Yet until and unless America's vast middle and working classes gain a larger share of the gains of economic growth, our economy will never fully emerge from the doldrums. Top earners can't and won't spend enough to keep everyone else employed.

The New Start treaty is a big and important victory for the Obama administration, as is the end of the ban on openly gay soldiers in the military. But neither signals a new start to cleaning up Washington and turning this economy around.