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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