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Focus on the core problems first

Robert Reich

TEXT OF COMMENTARY

Scott Jagow: Congress is back in session for the new year. The new president takes office in a couple weeks. A lot of economic proposals will be on the table. Commentator Robert Reich just hopes they'll address the core problems.


Robert Reich: Over the next weeks and months, you can expect a flurry of new proposals for reviving the economy, reducing climate change, and improving national security. But progress is only possible in each of these areas by addressing the basic problem at its core.

For example, we can't get the economy back on track until we figure out how to raise median incomes, because their decline is the core reason why there's not enough demand to keep businesses humming. No matter how much taxpayer money is pumped into financial markets, banks won't lend when they fear borrowers won't repay, and people can't borrow more without more income.

Or consider climate change. You'll be hearing lots about creating new, alternative sources of energy, as well as pushing the Big Three to make more fuel-efficient cars. But the core problem is fossil fuels like oil are priced too low relative to their effect on the environment. Until we figure out how to permanently raise their costs -- maybe through a carbon tax -- consumers won't switch to non-fossil fuels or demand efficient cars.

And when it comes to national security, no progress will be made with the Arab and Muslim worlds until there's a peaceful resolution of the broiling Israeli-Palestinian conflict. No matter what we try to do elsewhere in the Middle East, the simmering tensions and periodic hostilities in this one place will continue to destabilize everywhere else.

Each of these three core problems is huge. But if they're not solved, just about everything else we try to do to restart the economy, reduce climate change, or improve national security will fail.

Compounding these core problems are tradeoffs among them. For example, a carbon tax may undermine incomes and slow the recovery. And peace in the Middle East is likely to lower oil costs, making it harder to get people to switch to alternative sources of energy.

Get it? Beneath the upcoming flurry of proposals from Washington lie at least three of the most vexing core problems we've ever faced. Keep your hopes up, but your expectations in check.

Jagow: Robert Reich teaches public policy at the University of California, Berkeley. His latest book is "Supercapitalism."

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Funny how Mr. Reich could offer so many simple, easy solutions to all sorts of social and economic problems during the Bush administration. Now, everything is a trade off and we are to keep our expectations low. Do you suppose it has anything to do with the fact that he is an economic advisor to the incoming administration?

One has to wonder too whether Mr. Reich is the friend to the working man as he presents himself. Who is better served by easy consumer credit and overspending by the middle class? Is is the average Joe, who has a ton of credit card debt for new carpet, $600 phones, household knickknacks, and the like, all of which will be pretty much worthless by the time Joe gets though paying them off? Is it Joe, who is paying a bunch of interest every month instead of contributing to his retirement? Or maybe it's the big banks who make all that money off of Joe and make it inevitable that Joe will spend his golden years waiting by the mailbox for his social security check hopeing that it's at least as much as it was the month before?

There you have it.

You don't need to add a tax on gasoline to make it cost more what it really does cost. Simply take the INCOME taxes that subsidise oil and MOVE those over to the pump. That would lower the income tax, and correct the price of gas to it's true cost. No new tax needed. People can then give themselves a tax cut by conserving gas or switching to alternatives.

We would not have our imported oil without lots of things the INCOME tax pays for. Aircraft carrier battle groups to patrol Middle East oil shipping lanes, troops and bases in oil countries, 2 Middle East wars, foreign aid to oil countries, port facilities big enough for supertankers, .....

This is at the start, a tax neutral way to encourage conservation, with the potential to be a tax cut. And would allow alternatives to compete in a fair market instead of a heavily subsidised oil market.

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