[Robert Reich] Defining issue for 2012 isn’t size

The defining political issue of 2012 won’t be the government’s size. It will be who government is for.

Americans have never much liked government. After all, the nation was conceived in a revolution against government.

But the surge of cynicism engulfing America isn’t about how big government has become. It’s a growing perception that our government is no longer working for average people. It’s for big business, Wall Street and the very rich.

In a recent Pew Foundation poll, 77 percent of respondents said too much power is in the hands of a few rich people and corporations. That’s understandable. Wall Street got bailed out, but homeowners caught in the fierce downdraft caused by the Street’s excesses have got almost nothing.

Big Agribusiness continues to rake in hundreds of billions in price supports and ethanol subsidies. Big Pharma gets extended patent protection that drives up everyone’s drug prices. Big Oil gets its own federal subsidy.

But small businesses on the Main Streets of America are barely making it.

American Airlines uses bankruptcy to ward off debtors and renegotiate labor contracts. Donald Trump’s businesses go bankrupt without impinging on Trump’s own personal fortunes.

But the law won’t allow you to use personal bankruptcy to renegotiate your home mortgage.

Not a day goes by without Republicans decrying the budget deficit. But one of the deficit’s biggest drivers ― Medicare ― would be lower if Medicare could use its bargaining leverage to get drug companies to reduce their prices. What’s standing in the way? Big Pharma won’t allow it.

Medicare’s administrative costs are only 3 percent, far below the 10 percent average administrative costs of private insurers. So why not tame rising health-care costs for all Americans by allowing any family to opt in? That was the idea behind the “public option.” Health insurers stopped it in its tracks.

The other big budgetary expense is national defense. America spends more on the military than do China, Russia, Britain, France, Japan and Germany combined.

The basic defense budget ― unrelated to the costs of fighting wars ― keeps growing, now about 25 percent higher than it was a decade ago, adjusted for inflation. That’s because defense contractors have cultivated sponsors on Capitol Hill and located their plants and facilities in politically important congressional districts.

So we keep spending billions on Cold War weapons systems like nuclear attack submarines, aircraft carriers, and manned combat fighters that pump up the bottom lines of Bechtel and Martin Marietta but have nothing to do with 21st-century combat.

Declining tax receipts are also driving the deficit. That’s partly because most Americans have less income to tax these days. Yet the richest Americans are taking home a bigger share of total income than at any time since the 1920s. Their tax payments are down because the Bush tax cuts reduced their top rates to the lowest level in more than half a century, and cut capital gains taxes to 15 percent. Congress hasn’t even closed a loophole that allows mutual-fund and private-equity managers to treat their incomes as capital gains.

So the 400 richest Americans, whose total wealth exceeds the combined wealth of the bottom 150 million Americans put together, pay an average of 17 percent of their income in taxes. That’s lower than the tax rates of most day laborers and child-care workers.

Meanwhile, Social Security payroll taxes continue to climb as a share of total tax revenues. Yet the payroll tax is regressive, applying only to yearly income under $106,800.

And the share of revenues coming from corporations has been dropping. The biggest, like GE, find ways to pay no federal taxes at all. Many shelter their income abroad, and every few years Congress grants them a tax amnesty to bring the money home.

Get it? “Big government” isn’t the problem. The problem is the big money that’s taking over government.

Government is doing less of the things most of us want it to do ― provide good public schools and affordable access to college; improve our roads and bridges and water systems; and maintain safety nets to catch average people who fall ― and more of the things big corporations, Wall Street and the wealthy want it to do.

If we want to get our democracy back, we’ve got to get big money out of politics.

That means real campaign finance reform. And a constitutional amendment reversing the Supreme Court’s bizarre rulings that under the First Amendment money is speech and corporations are people.

By Robert Reich

Robert Reich, former U.S. secretary of labor, is professor of public policy at the University of California at Berkeley and the author of “Aftershock: The Next Economy and America’s Future.” He blogs at www.robertreich.org. ― Ed.

(Tribune Media Services)