LOS ANGELES TIMES INTERVIEW : Robert Reich : Fighting for Public Investment Amid a Revolution of Budget Cuts

The Republican revolution is not being kind to President Bill Clinton’s “public investment” strategy. Ever since the 1992 presidential campaign, Clinton and his economic advisers have argued that the nation is not spending enough on its work force or its physical infrastructure--from roads and bridges to the information autobahn--to remain competitive. So while Clinton reduced federal spending in some areas, notably defense, he has consistently sought more money for domestic initiatives that he insists would enhance America’s long-term economic health, in areas from education to research and development to public health.

Labor Secretary Robert B. Reich has been the intellectual force behind that drive. During his years as a lecturer at the Kennedy School of Government before joining the Clinton Administration, Reich wrote widely about many of the economic trends that later became central themes of Clintonomics. Reich has long been influential with the President; diminutive (4 feet, 10 inches) Reich, now 49, is an original FOB. He and Clinton were Rhodes scholars together at Oxford, and then, along with First Lady Hillary Rodham Clinton, all graduated from Yale Law School. Reich’s tale of how Clinton brought him soup when Reich was seasick during their Atlantic crossing to Britain as Rhodes scholars has become part of the Clinton legend.

But now, Clinton and Reich face a new threat from the Republicans on Capitol Hill. As they search for ways to balance the federal budget within seven years, GOP congressional leaders are hungrily eyeing Clinton’s domestic-policy initiatives.

Reich is now campaigning to preserve as much of the Administration’s public investment agenda as possible, and that has placed him in the middle of a philosophical debate over the role Washington should play in economic affairs.

He argues the nation is experiencing a dramatic shift toward greater income inequality that favors those with advanced training and education; he has coined the phrase “the anxious class” to describe those feeling the squeeze from the new economic pressures. He believes federal government must help ease the burden on the anxious class, especially those in the midst of difficult transitions in their working lives.

The government, Reich says, should help young people move from school to the world of work; help laid-off workers find the training they need for new jobs; provide child care for single mothers moving off welfare, and foster an improved labor-management climate that gives corporate America a greater incentive to invest in the training U.S. workers need to remain globally competitive.

Conservative Republicans dismiss many of those notions as government meddling, and believe that Washington should simply get out of the way of the private sector. Yet, during an recent conversation in his office at the Labor Department, Reich worried that in their zeal to eliminate the budget deficit, the GOP will ignore the nation’s other pressing ills.

Question: You have talked about the crisis this nation faces from the growing pressures on the average worker. Could you describe the ways the Administration has tried to deal with both the short- and long-term problems facing workers today?

Answer: Let’s start with the reasons for the downward pressure on wages. There are basically four. The first two, in my view, explain 70% of the problem: They are technological change, and the internationalization of the U.S. economy.

For workers who are well-educated and have the right skills, these forces have opened new opportunities and generated ever higher incomes. If you are well-educated and have the right skills, technology is your friend. You can utilize technology to get, to add value. But if you are poorly educated or lack the right skills, technology can be your enemy. It can take your job away.

For example, we used to have a lot of telephone operators. We now have automated switching equipment. We used to have a lot of bank tellers, we now have automated teller machines. Gas pumps used to have gas-station attendants, now most are automated.

By the same token, however, there is an increasing need for garage mechanics who understand the electronics underneath the hoods of cars, who can diagnose and repair those electronics. These people are not really garage mechanics, they are automotive technicians. And so it is across the economic terrain.

The demand is growing for people with technical skills. The demand is shrinking for people without them. Global competition simply accelerates this trend. Those two factors explain about 70% . . . .

The rest can be explained by the declining bargaining power workers have because of the erosion of labor unions and the ability of unions to set prevailing wages in industries.

Finally, there is the continuing decline of the minimum wage. If you adjust for inflation, the minimum wage is heading toward a 40-year low.

What’s the solution, given these causes? We have attacked the problem of education and job training vigorously. The President’s latest budget increases investments in education and job training. In contrast, the Republican budget cuts education and job training over the next seven years.

Q: They have proposed cuts in the same areas the Administration wants increases.

A: It’s basically the same areas of education and job training: covering school-to-work apprenticeships, education loans for college, school-to-work loans, school-to-work payments, job training for the unemployed, job training for low-income education grants to secondary schools, geared toward working-class, low-income Americans. That accounts for a substantial part of the philosophical difference in approach between Republicans and Democrats.

The President has also supported an increase in the minimum wage--90 cents an hour. The present minimum wage of $4.25 simply does not provide a livable wage. It translates into approximately $8,500 a year. Most minimum-wage workers are adults. The average minimum-wage worker provides half of the family income. If we’re serious about getting people off welfare and into work, we must ensure that work pays.

The earned-income tax credit is another accomplishment of the Administration. Here again, the contrast with the Republicans is stark, because they propose to scale back the earned-income tax credit while we have expanded it.

We have expanded child care for welfare mothers and the working poor. The Republicans want to roll child care back.

I use child care as one example of the kind of prop that working people need. As I travel around the country, again and again I hear from people that they need affordable and safe child care--just as they need job training and good information about what jobs to train for, and just as they need help in affording college and making sure their children and they can get the education they need.

Q: Can you summarize the Administration’s case for increasing the minimum wage in the face of GOP opposition?

A: First of all, there is a strong case for raising the minimum wage. I’ve mentioned several of the arguments . . . . Contrary to what some Republicans say, the minimum wage goes mostly to adults. Most minimum-wage workers are over 20; 60% are women. The average minimum-wage worker is bringing home half the family income. The minimum wage is a significant part, if not the entire part, of the income of a very large number of working families.

Eight-thousand-five-hundred dollars a year--what a full-time minimum-wage earner gets after a year--is hardly enough to support one person, let alone a family. There are approximately 11 million working Americans earning between $4.25 and $5.15--the amount by which the President proposed to raise the minimum wage. An increase of 90 cents an hour in the minimum wage would have a negligible effect on inflation in an economy approaching $7 trillion.

Q: Can you talk about the politics of the minimum-wage issue?

A: It will be very difficult for Republicans to justify arguing for a capital-gains tax cut when we know that way over half of the benefits go to people whose incomes are over $200,000 a year; while at the same time arguing that it is improper to raise people’s wages at the bottom by 90 cents an hour.

Moreover, it’s absurd to think we can get people off welfare and into work without raising the minimum wage. Nobody can be financially independent at a minimum-wage job with the minimum wage where it is right now.

I think [opposing an increase in the minimum wage] puts Republicans in a difficult position. But placed in the larger context, they are even in a more difficult position. Their efforts to reduce the earned-income tax credit; to cut education and job training by 30%; to provide huge tax breaks to the wealthy; all at a time when average working Americans are seeing their wages decline, and the rich are growing richer, adds up to a very difficult message for the Republicans.

Q: Will the President focus on these issues during the presidential campaign next year?

A: The wage gap between people at the top and average working Americans is now the widest of any industrialized nation. We are surging toward more inequality at the most rapid speed of any industrialized nation.

The problem here is one of not just the future prosperity of the nation, but also the future stability of this country.

If we end up during the period leading up to the next presidential election focusing on the question of how big a government we want and how quickly we should reduce or eliminate the budget deficit, we miss the essential reality. The biggest question facing the country is how to lift wages and restore upward mobility.

Balancing the budget or cutting the deficit may be a means to that end, but only one means to that end. We should be debating, and hopefully we will be debating in this country, the more serious and more fundamental question of how to reverse this dangerous trend.

The politics are obvious here. Republicans are in a very difficult position if the question is how to restore upward mobility, because they have offered absolutely no answer to that question.

Q: What about the Republican proposals for welfare reform and their impact on the economy and the labor force?

A: The Republican version simply cuts welfare. It doesn’t help people to get work. The goal is to get people off welfare and into work--not simply to get them off welfare. No reasonable person would advocate a welfare-to-the-street program, or a welfare-to-panhandling program. But that is essentially what the Republicans are proposing.

Q: You have worried publicly about the trend toward declining wages. Can you explain why it’s happening and what Washington can do about it?

A: We don’t know very much why it’s happening. All we know is that it seems to be a continuation of a long-term deterioration in the wage structure of this country and a widening gap between people at the top and everybody else.

People at the top have two big advantages in this new economy. First, they have the education and skills necessary to take advantage of modern technology and global markets. Second, they own financial assets. The value of financial assets has been increasing markedly.

Together, those factors have created enormous wealth at the top.

Let me be clear about this. The problem is not that some people are getting rich. We should celebrate the fact that some people are getting rich.

The problem is that, for the first time in the post-Cold War era, everybody is not gaining as the economy grows. In fact, many people are losing ground.

In the first three decades after World War II, we all grew together. Everybody’s income just about doubled. Even if you were in the bottom fifth of the income ladder and stayed there, your income still doubled, adjusted for inflation, between 1950 and 1978. If you were in the top fifth, your income doubled. If you were in the middle fifth, your income doubled.

But since 1979, we have seen a widening divergence: 97% of all the gain in household wealth since then has gone to the top fifth of income earners. Everybody else shared just 3% of the growth in family incomes, and many people saw their incomes decline.

American families have been trying to cope by doing several things . . . .

The first coping mechanism, beginning in the late ‘70s, was to bring spouses into the work force. I wish I could say that women were in the work force in such great numbers because there are so many wonderful opportunities for American women, but, sad to say, that’s not the primary reason women are in the work force. They are in the work force in such vast numbers because they had to join to make ends meet for their families.

The second coping mechanism was to work longer hours and again, even today, we’re seeing record levels of overtime, and many families having a third shift or even a fourth shift. I’ve met many American workers who are working 50, 60, 70, 80 hours a week.

The third coping mechanism was to have smaller families. Not because people liked children less, but because they couldn’t afford to have children. That has been the pattern over the last 15 years.

Finally, families have had to dip into their savings, whatever savings they may have had, or to go deeper into debt. Again, that has been the pattern in recent years, and it could threaten this economic recovery.