Inequality for All (2013) Script

Okay, we're going in my MINI Cooper.

Now, the thing you ought to know about this MINI Cooper is, it is small.

I like having a MINI Cooper.

I sort of identify with it.

You know? It's pretty little.

I feel as if it's proportion... that we are in proportion, you know?

Me and my car, we are sort of... together, facing the rest of the world.

Economic fairness is, "the defining issue of our time, and what the millions..."

This kind of gaping inequality gives lie to the promise that's at the very heart of America.

There is income inequality in America.

There always has been, and hopefully there always will be.

If inequality is at a very much higher level, who cares?

Income inequality has been ticking up.

Income inequality is bull.

I think it's about envy.

I think it's about class warfare.

It's class warfare, and it's the kind of language that you would expect from a leader of a third world country, not the president of the United States.

It's true, because United States of America is not a third world country by any measure, except perhaps income inequality, where we rank...

Worse than the Ivory Coast, worse than Cameroon...


Ah, in your face, Uruguay, Jamaica, and Uganda!


Okay, are we all here?

My name is Robert Reich.

I was secretary of labor under Bill Clinton.

Before that, I was at Harvard.

Before that, I was in the Carter administration.

Do you remember... does anybody...

You don't remember the Carter administration.

Before that, I was a special aide to Abraham Lincoln.

Those were tough times.

We are going to deal with three questions.

The first question is, what is happening in terms of the distribution of income and wealth?

Number two, why?

Number three, is it a problem?

Maybe it's not a problem.

Many of you call yourselves conservatives.

Many of you call yourselves liberals.

Those labels will become increasingly irrelevant as you get deeper and deeper into this subject.

I want you to test your assumptions.

If possible, I want to shake your assumptions a little bit about why the system works as it does.

Some inequality is inevitable.

If people are gonna have the proper incentives to be productive, to work hard, to be inventive... that's the essence of capitalism, and capitalism does generate a lot of good things.

Look, the question is not inequality per se.

The question is, when does inequality become a problem?

How much inequality can we tolerate and still have an economy that's working for everyone and still have a democracy that's functioning?

Of all developed nations today, the United States has the most unequal distribution of income and wealth by far.

And we're surging toward even greater inequality.

One way of looking at and measuring inequality is to look at the earnings of people at the top versus the earnings of the typical worker in the middle.

The typical male worker in 1978 was making around $48,000, adjusted for inflation, while the average person in the top 1% earned $390,000.

Now fast-forward.

By 2010, the typical male worker earned even less than he did then, but the person at the top got more than twice as much as before.

Today the richest 400 Americans have more wealth than the bottom 150 million of us put together.

Now, think about it.

400 people have more wealth than half the population of the United States.

Anger rising over an economic system that has rewarded some but leaves many feeling left behind.

After the economy crashed in 2008, inequality suddenly became front-page news.

Who else wants to join the 1%?

You look like a one percenter.

We're a fabulous percent.

People from both parties were looking for someone to blame.

But most people have no idea how it got this bad or why.

Not until the last few years have we really understood all that much about inequality.

I mean, we knew the top 10% or 20% were moving in one direction and the bottom 10% or 20% was moving in another.

But we didn't know what was happening at the very top, to the top 1%.

Hello. How are you doing?

Good to see you.

And then a few years ago, two researchers, Emmanuel Saez and Thomas Piketty, found a different source of data.

They looked at IRS tax data, not just over the last few years but all the way back to 1913, when the income tax was instituted.

It showed that there were two peak years.

1928 and 2007 become the peak years for income concentration, both of them in which the top 1% is taking home more than 23% of total income.

We knew that inequality had started to increase in the late '70s and the 1980s, but we didn't know how dramatically income concentration had increased, especially within the top 1%.

When you had this study come out in 2003, it sat there for a number of years, and then suddenly it became important.

But you see them starting to recover...

This graph becomes very central for explaining what has happened to the U.S. economy and, indeed, what's happening and has happened to our society.

It looks like a suspension bridge.

What happened the year after 1928?

The Great Crash.

And what happened just after 2007?

Another crash.

The parallels are breathtaking if you look at them carefully.

Leading up to those two peak years, as income got more and more concentrated in fewer and fewer hands, the wealthy turned to the financial sector, and in both periods, the financial sector ballooned.

They focused on a limited number of assets:

Housing, gold, speculative instruments, debt instruments.

And that creates a speculative bubble in both times.

We also know that the middle class, in both periods, their incomes were stagnating, and they went deeper and deeper into debt to maintain their living standards.

And that creates a debt bubble.

That's why you see, in both these periods, economic instability.

What makes an economy stable is a strong middle class.

Look, the most important thing to understand is that consumer spending is 70% of the United States economy.

And the middle class is the heart of that consumer spending.

So it's your middle class that keeps the economy going.

There's no way you can sustain the economy over the long term without a strong and vibrant and growing middle class.

Can't be done.

People are being intimidated. Correct.

I mean, they might lose their jobs if they...

I talk to a lot of different groups.

Some are wealthy. Some are working-class.

Some are conservative. Some are liberal.

And he finally got a full-time job.

The middle class is struggling.

It is going downhill.

I hear it all the time.

Well, everyone tells me that I am, but I don't feel like I'm middle-class, because I'm barely making it.

Middle-class is living comfortably and not having to... not having every week be a struggle.

I'd like to save up and buy a house one day, and, you know, I haven't really been able to do that and been kind of holding back and just trying to make rent right now.

How much do you make an hour?

Right now, I think it went up... $21.50.

$21.50 an hour.

Hola, Alberto.

I think I'm being paid fair.

It got to a point that we were able to afford, you know, a condo on Olivera Road, and we bought it.

We had our own things, our own place.

It was little, you know, two-bedroom.

We bought it in 2004.

Around 2006, start of 2007, the market just dropped like a rock.

And not that long after, actually, I lost my job that I'd been at for a long time.

Luckily we had some really good friends, and one of them said, "Come over here and live with me."

So that's where we are now.

Go with Daddy.

Go with Daddy. I'm hungry.

You're hungry?

Child care for Paulina right now costs me about $400.

I'm, like, undecided whether I should make her walk home... buy her a phone and walk home, making sure she gets home okay, or keep paying a day care.

Bye. Here, Mom.


I have $25 in my checking account right now and just thinking about all the things that we need.

I don't have a way of communicating with Robert right now.

He doesn't have a phone, so we have to wait for that.

I got to figure out... we have to have enough, you know, food on the table for the kids.

$25 in your checking account, that's got to be...

That's not very much.

No, it's not.

But, I mean, it's Tues... it's Wednesday.

I'll survive today.

I'll look up in the pantry, see what else is there to eat.

I have a full tank of gas, so I'm fine on that part.

I don't need to go anywhere right now.

When I was laid off, I decided to go ahead and pursue my degree at that point.

Most of the classmates I have are a lot younger than I am.

It's different when you're reading about it or somebody else's issues.

That's different from when it's your own family's.

So when it hits home, that's probably the hardest part.

There is no official definition of the middle class.

But Alan Krueger, chairman of the Council of Economic Advisors, these are the percentage of households with annual incomes within 50% of the median household.

$50,000, median income, 50% above, 50% below.

If you're in the top 1%, you're earning at least $380,000 a year.

If you're at the lower end of this group, you're probably at the top levels of the professional fields, a top doctor or a top lawyer.

Higher in this group, earning several million dollars a year, are successful entrepreneurs who start profitable companies.

At the highest levels, earning $10 million a year or more, are the CEOs of big companies, the heads of Wall Street banks, top entertainers, and also the top sports stars.

Last year, we made $36,000, and we're a family of three.

I think I probably make in between $45,000 and $50,000 a year working 70 hours a week, six days a week.

Combined income with the army and with my personal job, maybe $55,000 to $60,000 a year.

Probably close to $600,000.

Usually more than $10 million, less than $30 million but, you know, a lot, a ridiculous amount of money.

I am an entrepreneur and venture capitalist.

My family owns a large manufacturer of bed pillows and down comforters called Pacific Coast Feather Company.

We are, in fact, one the largest manufacturers of those things in the world.

The problem with rising inequality is, a person like me, who earns 1,000 times as much as the typical American, doesn't buy 1,000 pillows a year.

Even the richest people only sleep on one or two pillows.

The pillow business is quite tough, as it is for many, many industries, because fewer and fewer people can afford to buy the products that we make.

And I have the nicest Audi you can get, but it's still only one Audi.

I personally hate fancy food.

I would infinitely rather go have a great bowl of pho at the local Vietnamese place than a five-course $300 dinner at some fancy place.

You know, we can only go out to eat so many times a year.

We can only get so many haircuts a year.

We can only get... I can, you know...

Three pairs of jeans will do you, you know?

Like, you don't need 300 pairs.

The problem isn't that the rich spend too much of what they earn.

It's actually, paradoxically, that they spend too little.

They're not generating enough economic activity.

Somebody earning $10 million a year doesn't spend $10 million.

They save it.

And those savings go anywhere around the world.

They can make the most money, get the highest return.

They become part of the global capital market, including a lot of speculative instruments, having gold and real estate and anything else that they're all chasing.

With the exception of the money I personally invest to start companies, I have essentially no idea what happens to my money.

I invest in funds of funds, and those hedge funds do God knows what with it.

But I do believe absolutely that most of the return that's being created isn't creating any kind of social utility other than creating a return for me.

Now, ordinarily we like saving.

I mean, savings are good, but when we have so much unemployment, so much underutilized capacity here in the United States, we need spending.

Every single person there has to process 12 units per hour.

How are we gonna create jobs if you're taxing the very successful people in America who provide those jobs?

Sometimes we think that this is a debate over facts and figures and data.

To raise taxes on the job creators in this country...

I think if you believe that, you're fooling yourself a little bit.

The people that you call rich, I call job creators.

When somebody calls themselves a job creator, they're not describing the economy or how the economy works, although that's what it sounds like.

What they're really doing is making a claim on status, privileges, and power.

If a guy like me is a job creator at the center of the economic universe, the current economic arrangements are righteous and justified.

I know how comfortable this is to believe because I used to believe it.

You know, I grew up kind of believing that.

You know, and when people challenged that idea, I would say things like, "Well, you just don't understand economics."

But of course, if rich business guys like me are not job creators... it's actually our customers that are the job creators... we are not the center of the economic universe.

They are.

We need to replace trickle-down economics with middle-out economics.

And, indeed, every place you look on Earth where you find prosperity, you finds massive investments in the middle class and the poor, because at the end of the day, they are the true job creators.

The most pro-business thing you can do is to help middle-class people thrive.

Okay, I'm gonna get the box.

Now, see, this box is really important.

I travel not only with my MINI Cooper but with my box.

Hello, George. How are you?

You are so kind to bring the box.

We have one for you too.

It's the same room and...

In recent years, I've discovered that I actually have a very, very rare genetic condition.

It's Fairbanks Syndrome that is responsible for me being very short.

Hey, Bob, let me carry that. No, no, no, that's fine.

My parents were normal size.

My grandmother always said to me, "Don't worry," 'cause when I hit about 10 or 11 or 12, I'm gonna, you know, have a real growth spurt.

And then I got to be about 10, 11, and nothing happened, you know?

Right up this way to the right.

Right this way.

Yup, behind you.

I grew up in the shadow of World War II.

My father was in the war.

We were middle-class.

My father sold dresses. My mother helped in the shop.

My first job in Washington was working as a summer intern for Robert Kennedy.

It was a time when there were kind of giants.

Robert F. Kennedy, Martin Luther King, they were all trying to change society.

There was a sense of possibility.

It kind of turned me on to politics.

A few years later, I was picked to be a Rhodes Scholar.

In those days, all the Rhodes Scholars who were selected took a boat to England.

The problem was, you know, when you go over there, the Atlantic Ocean is pretty rough.

You know, I and most of the other Rhodes Scholars were sick, and I went down to my cabin.

You know, I thought I was gonna die.

And then there was a knock on the door, and this fellow was there, this kind of tall, gangly Southerner, and he had chicken soup in one hand and crackers in the other, and he said, "I hear you aren't feeling too well.

"I thought these might help.

My name is Bill Clinton."

At Oxford, we were at the same college.

We kept in touch.

At Oxford, I studied mostly economics and philosophy.

But those experiences really were a study for me of the rules by which markets are organized.

And this is an important point, and it's one that's very often lost, but it was the focus of my attention.

You see, there's no such thing as a perfectly free market anywhere.

Government sets the rules by which the market functions.

All of these rules are necessary in order to construct a free market.

The real question is, who do these rules benefit and who do they hurt?

And in the last 30 years, as the structure of the economy began to shift, many of the rules governing our market began to shift as well.

Today we're going to try to explain the mystery of why inequality has been widening.

Remember, the economy is growing all of this time.

The economy is...

The economy continues to grow.

Look, here is gross domestic product growth from 1929 to 2011.

The economy overall has done extremely well, and productivity keeps on increasing.

We are producing more and more and more and more and more value.

That's a big, big success story.

But here is the problem. Here's the puzzle.

Because if you look at the average hourly earnings of production workers, the average hourly earning continued to rise until the late 1970s, and then something happened, flattening wages.

Look at the gap.

Something happened in the late 1970s.

Something happened in the late 1970s, folks.

In the late 1970s, I was at the Federal Trade Commission.

I was looking at a lot of studies about the direction that the economy was going in.

More of American manufacturing was beginning to move abroad.

There was the beginnings of a technological revolution.

Financial markets were becoming a little bit more powerful.

There was a move to deregulate.

Well, you connect the dots, and all of these begin to look as if they're connected somehow to this widening inequality.

For example, we knew that labor unions were declining.

And that decline mirrored almost exactly the decline in the middle class' share of national income.

The hard part is stepping back and seeing the big picture.

Many people, even to this day, say that the decline of unions really was attributable to Ronald Reagan taking on the air traffic controllers.

Strike, strike, strike, strike, strike, strike...

I must tell those who failed to report for duty this morning, they have forfeited their jobs and will be terminated.

There's no question that beginning in the late '70s but also after Reagan fired the air traffic controllers, there was a major assault on unions.

Employers did try to prevent unions from being formed much more aggressively than before...

I'll go. You don't have to hang on to me.

And employers fought to bust unions that were already there.

But maybe they were doing so because they felt they had to in order to maintain their competitiveness given so many other companies that were nonunion in the United States and also many companies abroad.

The major underlying issue was two interrelated things:

Globalization and technology.

I mean, you hear the word "globalization" over and over and over again.

Globalization, globalization, globalization.

Rarely has a word gone so directly from obscurity to meaninglessness without any intervening period of coherence.

Can anybody lend me their iPhone for a moment?

Anybody have one that... great.

Thank you.

I don't have one, and I've really wanted to have one.

Where do most of your dollars go when you buy an iPhone?

What do you think?

Let's go. Let's do the bidding.

A little over 700 of you have these clickers, which is great.

You say mostly to the United States, some of you say to China, and then some of you say... a few of you say Japan.

11 of you think Germany.

Well, here is where your dollars go.

Most of your dollars are going to Japan.

Some of your dollars are going to Germany.

In fact, Germany is the biggest... is the second-biggest one.

South Korea's the third, and here, 6% of your dollars are going to the United States, and only 3.6% of your dollars are going to China.

Now, it's assembled in China.

Do you get this?

It's assembled in China, but the assembly is of pieces from all over the place.

Everything is coming from everywhere.

I wanted my students to see it's not just cost of wages or labor.

It's also which country's workers add what value.

My MINI Cooper is made by a foreign company.

But where a company's headquartered means less and less in this new global economy.

Technologies like cargo ships, containers, satellite communication technologies, and eventually computers and the internet, these technologies enabled the production process to be parceled out around the world.

Large numbers of American manufacturing workers began to lose their jobs, which meant it inevitably began undercutting the wages of a lot of working Americans.

Even factories remaining in the United States shed workers as they automated.

And we have this romantic idea that we can get manufacturing back.

But you get manufacturing plants back, and they're filled with robots and computers.

The old assembly line is gone.

I was one of the earliest investors in

I consider to be one of the greatest economic achievements of our time and certainly something I'm incredibly proud of.

But make no mistake: employs 60,000 people and does $70 billion, $80 billion in sales.

But if mom-and-pop retailers were doing that $70 billion or $80 billion in sales, it would be 60,000 people employed doing it.

It'd be 600,000 or 800,000 or a million people because those business models are so much less efficient.

So Amazon created a huge economic windfall here in the Pacific Northwest, but all over the country, there are people who are no longer employed in selling stuff who are not happy.

As a manager for Circuit City, it was a look behind the curtain, so to speak, as a manager, to see exactly how everything worked.

So when you got laid off, did you see it coming, or was it sudden?

They did several layoffs while I was there.

People who had been there too long:

"They're making too much money

"because they've been there too long, and we're gonna have to do something to cut the payroll."

The hardest part was thinking, "Is it gonna happen to me?"

Until I became a student, it was pretty dicey.

I mean, it would have been easy for me to just fall into depression, which happens to a lot of people, or go for a lower-paying job, which would have put me in a worse financial situation.

Looking back on it, you can see the pattern.

It's not as easy to see when you're in it, but the signs were there.

I mean, there was a major slowdown in business, and I think a lot of that had to do with things like Amazon.

Because I've been in retail for so long, I don't go through the automated checkout lines.

And one of the main reasons is because I know that every time I go through that, it's taking a little bit of someone's job away.

It's not that I think that I'm going to... save their jobs in the long run.

But I know that I'm gonna slow down the transition a little bit so that maybe they're gonna have a little bit longer to get ready for the transition.

Contrary to popular mythology, globalization and technology haven't really reduced the number of jobs available to Americans.

These transformations have reduced their pay.

I mean, it's not just that wages are stagnating, but when you take into consideration rising costs... the rising costs of rents or homes, dramatically increasing costs of health care, the rising costs of child care, and also the rising costs or higher education, rising much faster than inflation...

Take all of these into consideration, and you find that it's much worse than just stagnating wages.

It's basically middle-class families, often with two wage earners, working harder and harder and harder and getting nowhere.

I work at a law firm as a litigation assistant.

And Moises?

I work as a bus operator.

Do you know how much is in your bank account right now?

Mine is less than 100 bucks.

So I want to say maybe $80.

Yeah, yesterday it was only $30.

And that's with us working.


Car insurance, $125.

Kids' World, $150.

Rent, $1,375.

We felt like we had to write it all down, because how could we not have money?

We make money.

You know, I'm working now.

We don't know how much we're gonna be paying on that.

The Y.

This is my money that I donate.

$16 a month to Children International.

We don't even have here my UCSF bill.

Remember that hospital bill?

It's, like, 200 and something dollars that's not even here that we need to pay.

Oh, yeah.

What about savings?

We haven't been able to.

We don't have a savings account.

I took it off because it... It wasn't working.

Oh, you brought your glove.

Did you guys play baseball?

And she's been playing with you?

When she was born, we had no money.

The refrigerator was empty. The freezer was empty.

I said, "This is not the way I want to raise my daughter."

How was your day? Good.

I've seen single mothers work three jobs just to be able to pay rent.

And I didn't want that.

So I started going to school.

How do you build wealth?

Not that I want to be wealthy.

I just...

How do you do it?

How the heck do you build wealth, like, when you don't have anything, when you don't have any assets, when you don't have nothing?

This is gonna be Mommy's office. Look.

This is gonna be my office.

It's not my office yet, but it's going to be my office really soon.


People, I think, would be less concerned about inequality of income and wealth if everybody had a chance to make it.

As long as there's upward mobility, as long as anybody with enough guts and gumption and hard work can make it in America, can move up the income ladder, then we don't have a problem.

But as income inequality rises, upward mobility is actually less than it was before.

Come on. You want to see the rest?


In the United States, 42% of kids born into poverty will not get out.

Compare that to Denmark, where only 25% of kids born into poverty stay there.

Even Great Britain, a country that still has an aristocracy, has more upward mobility than we do.

You know, people occasionally say to me, "Okay, Reich, if you think it can be done better, "what nation does it better?

Whom should we emulate?"

And the answer is the United States.

In the three decades after World War II, a period that I call "the Great Prosperity," the economy boomed, but not only did the economy boom, but you had very low inequality.

We made education a national priority, particularly higher education.

By 1940, only 5% of adult Americans had a four-year college degree, but that percentage began to explode.

The GI Bill paid college costs for those who returned from war, and the subsequent expansion of public universities made higher education affordable to many.

By the late '50s, we had the best-educated workforce of any country in the world.

We also had labor unions.

By the mid-1950s, more than 1/3 of all workers belonged to a union.

This gave average workers bargaining leverage to get a larger share of the growing pie.

We created the largest middle class the world had ever seen.

And that middle class was part of a virtuous cycle.

The wider their prosperity, the more people were included in that prosperity, the more that prosperity generated more prosperity.


Okay, now, they're gonna be calling in momentarily.

From American Public Media, this is Marketplace.

America's already making it harder for young people of modest means to attend college.

41 states are cutting spending for public higher education, and tuition and fees are rising as a result.

One of the things we've learned about inequality is that it's clearly linked to education, including higher education.

More than anything else, that's what lifted people out of poverty and into the middle class during the Great Prosperity.

But starting in the late 1970s, our college graduation rates began to flatten out.

Countries that kept focusing on higher education were able to deal with globalization better by creating a highly skilled workforce.

Look at South Korea. Look at the Netherlands.

Look at Germany.

They've invested substantially in education, in skill building of all of their workers.

Even though their wages are high, it's worth it to make stuff that goes into the iPhone from Germany because it is so well made and is so precise.

Basically, every other industrialized country...

Japan, Germany, France... they are investing per capita much more public investment in all of the areas:

Roads, bridges, public education.

That's what we're not doing.

That's what we have to be doing.

We're almost out of time.

We can't do it, not with new tech.

For years, I have been writing about the importance of investing in people, in our workforce, so that our people could compete in this new global economy.

And then in 1992, I thought I finally might be able to do something about it.

Today I proudly announce my candidacy for president of the United States of America.

Bill Clinton told me he had read all my books.

They must have influenced him, because it formed the backbone of his 1992 campaign about putting people first.

If you put people first, if you do what works, what we know works in the global economy, you'll do what the Germans do; you'll do what the Japanese do.

You'll put your people first.

You'll expand the middle class.

I mean, here was, you know, somebody I'd known from the age of 22, and he called me one day and said, "Look, Bob, what I really want you to do

"is come down to Washington right now.

I need you to run the economic transition team."

I didn't even know what an economic transition team was.

You can't imagine the headiness, the excitement.

I mean, the chance to actually take these ideas, put them into practice...

I named my economic plan Putting People First to highlight my belief that our nation can only become a high-wage, high-growth economy if we make a commitment to invest in the American people to make the American economy prosper.

That is why I'm naming today one of my most trusted advisors and closest friends to the position of secretary of labor.

Well, modesty aside, I have assumed for months that I was on Bill Clinton's short list.

You can step up on that, Bob. There is a step.

Oh, there is a step here. Okay.

It was a dream job for somebody like me, who had worried about and fretted about and studied and taught about and wrote about what was happening to the American workforce for years.

That long decline in median wages... the wage of that person smack in the middle of the wage scale... that decline started in 1978.

Those wages began to decline in terms of the real purchasing power of the dollar...

You know, on the one side, it was pretty clear that wages were flat for most people.

The flip side was that some people in this country were doing extraordinarily well.

You see, the same new technologies that brought globalization and automation bestowed ever larger rewards on people who had the right education and connections to take advantage of globalization.

Some people say to me, "But wait a minute.

You've got technologies today that you didn't have in 1980."

You know, we didn't have flat-screen televisions.

We didn't have low-cost air travel.

We didn't have Skype.

We didn't have the internet.

So who are the winners and losers from this great shift?

Consumers certainly are winning.

I mean, you guys, as consumers, you are doing very well.

You get wonderful products.

Almost everything you're buying is getting cheaper, and the investors are doing well.

Here is a chart showing the rise and fall of the Dow Jones Industrial Average.

You can see something here.

There is sort of a pattern.


You see, something happened, and I think it happened starting right in these years.

You see these were the... years I was labor secretary.

And investors got very excited.

I mean, we all saw the stock market going like this.

I mean, how...

What in the world was going on?

How could that be possible?

Were companies suddenly that much more profitable?

One of the big reasons corporations were showing higher profits is, they were keeping pay down.

At the same time, corporate CEOs were starting to pay themselves large multiples of what the average worker was earning.

When we, in the fourth quarter of last year, along with a number of other companies, has to consider workforce reductions, it was a difficult time.

You knew that you were impacting people who would have a difficult time, many of them, in finding new jobs, but you had to do it for the organization to, in that day, look to survive.

This chart shows you the compensation of the highest-paid executives in 2010.

These executives are being paid a lot of money.

Executive pay keeps going up.

Here's the ratio of average CEO compensation to the average worker's pay.

Suddenly this ratio goes kablooey.

Bill Clinton in 1992, one of his campaign planks was that no company should be able to deduct the cost of executive compensation in excess of $1 million.

Many big corporate executives raised their own salaries even when their companies were losing money and their workers were being put into the unemployment lines.

I expect the jet-setters and the featherbedders of corporate America to know that if you sell your companies and your workers and your country down the river, you'll be called on the carpet.

That's what the president's bully pulpit is for.

When it came to actually implementing it, the Treasury Department decided that as long as CEO pay was linked to company performance, you could deduct pay over $1 million.

Well, that was the signal to a lot of executives and to their boards of directors to make more and more of executive pay into stock options.

That's where the whole stock option thing came from.

It was kind of a perversion of Bill Clinton's promise in the 1992 election.

Another result of all of this is that you get the third group of people who are doing remarkably well.

They're the people who always do well, particularly in times of high inequality:

The financiers.

Between 1997 and 2007, finance was the fastest-growing part of the American economy.

In 2009, during the depths of the recession, the seven highest-paid hedge fund managers were taking in more than $1 billion each.

Remember that government sets the rules by which the market functions.

We deregulated Wall Street, allowing Wall Street to engage in more and more excessive behavior.

These are the financial sector wages relative to everyone else's.

Does this graph look familiar?

I mean, this is our bridge graph, our old inequality graph.

It's the same pattern.

And meanwhile you've got many working people succumbing to this huge lie that government is bad, that the market is good, that everything government does works against you and everything the market does helps you.

Our Father in heaven, we thank You for this food that's been placed before us.

We ask You to bless it.

Bless the hands that prepared it.

Bless it'll strengthen our bodies.

We ask a special blessing this day, Lord, for those that have no food.

Bless them with comfort and hope.


Ooh, ooh. This looks good.

I am registered as a Republican.

It probably has to do with our religion too, okay, Mormons.

The majority of the Mormons are.

There are those rare Democrats, but the majority of them are Republicans.

Oh, I called them, but you know what it is?

I don't look at myself as someone that's economically troubled.

No way. But I am worried about my kids.

We have paid for doctor bills. We've paid for dental bills.

Two of my children right now do not have health insurance.

Our kids without health care was a big turning point for us.

That really got my attention.

I'm a power plant operator.

Where I work, The Geysers, it's a renewable energy source.

Calpine is a good company.

They are.

So then why are they cutting back on people and cutting sick leave?

Well, the operation will be more profitable if they cut back on personnel.

That's a given.

I've always been pro-union from a philosophical standpoint.

I consider myself part of the labor force.

Therefore I think labor needs a say.

The company brought in anti-union consultants and put on a good campaign to counter the union.

Let me just say I came here...

Some of you were still on the fence.

Some people walked out.

There was tension in the air.

The underlying reality is that if workers don't have power, if they don't have a voice, inevitably their wages and benefits start eroding.

It happens inevitably.

Personally I'm a proud Christian.

I'm a proud Calpine employee.

I think they treat me more fair than I should be treated.

If you have a company that is dependent on shareholders, there is growing and growing pressure on that company to show better and better profits and have higher and higher share prices.

That's just the way capitalism is.

That's not bad.

But what that means inevitably is that there's greater and greater pressure to push wages and benefits down to the minimum.

So you're a capitalist. I'm a capitalist.

I say for these people making their millions, that's fantastic.

I could have done the same thing if I went to school and had the brains for it.

I do not.

So I'm a laborer.

And there's such a burden on the companies in the United States now that the cost of business drives that... them to go elsewhere.

But this right now is the richest country in the world, and we are richer than we've ever been.

Believe me, we as a nation are doing great, and certain people in this country are doing better than anybody has ever done in the world in world history.

It's not just Calpine.

I took a $12-an-hour cut in pay, okay?

My benefits are going down.

I do twice the duties.

I'll be running two plants instead of one.

If you have $10 million or if you have $1 billion, why do you need that little bit that I have?


Big companies are designed not to generate good jobs in the United States.

Big companies are designed to make profits.

And thanks to the members of the administration, Jeff and Cass and others that have worked...

This isn't a matter of fault.

You know, the head of GE is on the president's Jobs Council.

I want to start off by thanking Jeff for his continued outstanding leadership of this Jobs Council.

Well, GE has been creating more jobs abroad than it's been creating jobs in the United States.

So who is taking care of the American worker?

Who is looking out for the American worker as GE and other big companies and Wall Street and the very wealthy, who basically have capital all over the world...

As they have more and more political power, who is actually working in a way in Washington and in state capitals that improves the well-being of the American workforce?

The answer is nobody.

So why didn't the nation respond to the great regression that started around 1980?

Why didn't we take bold steps to make the economy continue to work for just about everyone?

Because we figured out three ways to cope with flattening or declining incomes without reducing our relative standard of living.

Remember, starting in the late '70s, the typical wage is flat.

But a lot of people are buying.

How did they do that?

How does the middle class manage to keep on spending when wages are flat?

The first coping mechanism, starting in the late '70s, is, women go into paid work.

♪ Tumble out of bed and stumble to the kitchen ♪

♪ Pour myself a cup of ambition ♪

♪ And yawn and stretch and try to come to life ♪ Young mothers went into work in huge numbers.

We haven't seen anything like it, a social revolution.

♪ Traffic starts jumpin' ♪

♪ With folks like me on the job from nine to five ♪

♪ Working nine to five ♪

♪ What a way... ♪ Nine to Five.

Dolly Parton?


Dolly Parton, you know, she is only five feet tall.

♪ And they never give you credit ♪

♪ It's enough to drive you crazy if you let it ♪

♪ Nine to five ♪ They didn't go to work because there were all these wonderful professional opportunities open to women.

Some of them did, but that's not the major reason women went to work.

They went to work mainly because they had to prop up family incomes that were dropping because the men in the family, their wages were going nowhere.

But there's only a limit to how many young mothers can go into work.

And so the second strategy used by the 1990s was that families... both men and women... worked longer hours.

♪ Working nine to five ♪

♪ What a way to make a living ♪

♪ Barely getting by ♪ When I was secretary of labor, I remember looking at the data, and I was amazed, and then I'd go out into the field, and I'd go to various cities, and I'd talk with people, and people were working, you know, all hours...

I mean, second jobs, third jobs, overtime.

If they were professionals, billable hours coming out of their ears.

We were working 300 hours a year more than the typical European.

I mean, we were working harder than the industrious... enormously industrious Japanese.

But there's a limit to how hard you can work.

When those were exhausted, the third coping mechanism was borrowing, going into debt, which seemed easy because housing prices were going up.

For 13 years, Americans have enjoyed a housing boom, the longest ever.

This a great time to buy a house in Delray Beach.

You can make, if you have some cash, an unbelievable deal.

From the mid-to late '90s onward, you have this huge rise in housing prices.

People said, "Well, I can take out a loan against my home."

"I could use my home as collateral," or, "I can refinance my home."

And that kept the middle class going.

Homes were like piggy banks.

Americans have been using their home as an ATM, cashing out more than $500 billion in home equity from 2001 to 2005 to cover expenses like health costs, student debt, repairs, and credit cards.

We had a debt bubble prompted by middle-class America trying to maintain its living standard in the face of stagnant wages.

We're seeing more clients every day that, very sadly, they've gotten into a debt hole that is very difficult to dig out of.

But there's a limit to how far you can do that.

You know, that was a speculative bubble, and it burst in 2008.

We know what happened.

And so all of the coping mechanisms that the middle class has used to avoid the inevitable reality that their wages have gone nowhere for 30 years, adjusted for inflation, are now exhausted.

When the middle class doesn't share in the economic gains, you get into this downward vicious cycle.

The problem is, for the last three decades, nothing has fundamentally changed in terms of inequality.

And it wasn't until the Clinton administration that there was an opportunity to reverse all of this.

And that was what was so damn frustrating.

The Senate, I believe, is on the verge of passing the jobs program.

Things are going well.

I mean, we had budget surpluses.

We might have been able to take those surpluses and invest them in education and job training, change the structure, ultimately, of the economy.

But there wasn't the political will to do that.

Before I leave, I also want to say a special word of thanks to my longtime friend Secretary Reich, who's carried on this fight for the minimum wage.

This was an especially sweet day for him as well, and I thank him for his efforts.

I should say something just so it's not misunderstood.

You know, Bill Clinton did preside over one of the best economies we've had in this country in living memory.

The wages of most people went up.

Poverty actually declined.

But we didn't do enough.

We did really alter the underlying trend.

I became a true pain in the ass.

I mean, looking back on it, I'm embarrassed.

In meetings, I would sound off about, you know, inequality, and, "Are we looking at the distributional impacts of this policy or that policy?"

I mean, I became predictable.

People would roll their eyes.

I'm surprised Bill Clinton kept me around.

I did want to bring you up to date on a couple of matters.

First of all, the president was reelected.

The second is that I'm going home.

I am so glad you did not clap.

In the end, I left.

Partly, I was frustrated.

Partly, I just hadn't seen anything in my family.

I hadn't seen the boys.

I said to Bill Clinton I had to go home.

I... I do ask myself whether I've been a total failure.

I've been saying much of the same thing for 30 years.

And some of the trends have grown worse.

Inequality has become worse.

The danger to the economy and democracy have become worse.

But here's what I tell myself in my quiet moments.

I say, close to home, you know, nuts and bolts, over the kitchen sink, dining room table, you know, this is what counts for most people:

Good jobs, good wages, a good opportunity and set of opportunities for their kids.

This is where people live.

Detective Conan O'Brien and Detective Former Secretary of Labor Robert Reich.

I am a cockeyed optimist.

I ask you, do I look like big government?

I wouldn't have spent so much of my adult life banging my head against the wall if I didn't think that ultimately it would pay off in terms of social change.


That's why I teach.

Now, people who are worried about widening inequality are also worried about something else.

It's not upward mobility.

It's not even trust.

They are worried about the undermining of democracy... when so many resources, so much money, so much wealth, so much income accumulates at the very top, that with money comes the capacity to control politics.

There's nothing sinister the way it starts.

Usually they bring in somebody you haven't seen for a few years.

You know, they're paying them 10 grand.

Might be the best man in your wedding or a guy you played football with.

You say, "Eddie, hell, I haven't seen you..."

And then they say, "Now, I'd like to turn it over to old Freckles here..."

And then they give you the whole load.

But money... I mean, do the lobbyists come in and obviously the unspoken reality is, "We can help you win your next election if you cooperate with us"?

There's a guy in every office to say, "So-and-so wants to see you.

"He's from the American Shoe Leather Company.

"They have maxed out," meaning they gave you the maximum in your primary when you first started.

"They gave you the maximum in every general.

"You've run three times now, and they were there for you at every point."

And what for?


This is actually where there is blame, and I think the blame is justifiable.

It's not that people are rich.

It's that they abuse their wealth by lobbying for bailouts and subsidies and taxes that are going to entrench their wealth.

That's the reason why the rules have changed so dramatically.

Look at history.

Inequality and top tax rates have had an inverse relationship.

When inequality was lowest, top tax rates were higher.

When inequality was highest, tax rates on the wealthy went down.

Under Dwight D. Eisenhower... you know, he was a Republican; nobody dared call him a socialist... the top marginal tax rate was 91%.

I mean, even when you consider all deductions and all tax credits, they were still paying way over 50%.

I, John Fitzgerald Kennedy, do solemnly swear...

I will faithfully execute...

The office of president of the United States...

So help me, God.

Taxes on the top were never below 70% until Reagan dropped those taxes on the top.

Read my lips.

No new taxes.

I, William Jefferson Clinton...

I, George Walker Bush...

Do solemnly swear...

I, Barack Hussein Obama, do solemnly swear...

In fact, most of the very rich in this country don't even pay close to that because most of their income is in the form of capital gains, which is now taxed at 15%.

My total taxes paid... payroll taxes plus income tax, mine came to 17.7%.

The average for the office was 32.9%.

There wasn't anybody in the office, from the receptionist on, that paid as low a tax rate.

The taxation system has tilted toward the rich and away from the middle class in the last ten years.

It is dramatic, and I don't think it's appreciated.

What's the effective rate I've been paying?

Well, it's probably closer to the 15% rate than anything.

Mr. Romney's income taxes were finally posted, and he paid 13.9%.

Nancy and I paid 33% or more.

It was in the 30s, and I find that atrocious.

I paid 11% last year on an eight-figure income.

Wowzers. So less than Mitt Romney.

When you give rich businesspeople tax breaks all in the name of job creation, all that really happens is that the fat cats get fatter.

And, of course, that's what's happened over the last 30 years.

That's the signature feature of the economy over the last 30 years.

Look, nobody wants to pay taxes.

But taxes are the price we pay to finance the kinds of things that we can't do individually, that we need to do together.

There's kind of a negative trickle-down effect, and it starts in Washington.

I mean, if the wealthy are not paying their fair share and if the middle class are basically stagnant and are not paying much in taxes because they're not making much money, then you're gonna have a budget crisis somewhere along the line.

That means less revenue sharing with the states.

That means the states have to pull in their belts.

They cannot support public higher education.

As state funding to institutions of higher education went down, tuitions went up to compensate.

I mean, at Berkeley, where I teach, in the 1960s, tuition was free.

In the 1970s, it was $700 a year in today's dollars.

But now it costs $15,000 for in-state residents.

Next week, members of Congress are gonna have a chance to vote on what we call the Buffett Rule, and it's simple.

If you make more money... more than $1 million a year, not if you have $1 million but if you make more than $1 million a year, you should pay at least the same percentage of your income in taxes as middle-class families do.

He is killing the economy, and this is class warfare.

I think Barack Obama is a socialist.

It'll only be a minimum tax on people who make lots of money.

More class warfare from an affable billionaire.

Is he completely a socialist?

Is Warren Buffett a socialist?

You really have no clue what socialism is, do you?

CEOs and Wall Street have been doing terribly... you know, enormously well.

Why should they get continued tax cuts when, in fact, we have a huge deficit way down the line?

Robert Reich. You know Robert Reich?

I do indeed. He's a Communist.

You know that, right? Communist/socialist.

Okay. Confused. He's a confused.

The guy secretly adores Karl Marx and is up there in Cambridge...

Can I just be clear about this?

I am not, nor have I ever been, a member of the Communist Party or a Communist.

A lot of people are watching Fox, and I like Fox.

I like appearing with you, and I like you personally.

I used to be on O'Reilly's show.

In fact, I even substituted for Bill O'Reilly a couple of times.

He asked me.

I was on Fox quite a lot.

Joining us now is former labor secretary, our good friend Robert Reich.

Secretary, how are you, my friend?

Good see you.

But no longer.

They don't ask.

The football field of American politics has kept on shifting to the right.

I just... you know, basically I just stand here.

I've watched it move.

I used to be something of a centrist.

In fact, my first job was in the Ford administration.


That's a Republican administration.

You know, were considered conservative in the 1990s.


You almost became the majority leader of the Senate.

I could have been king.

Our staffs were not terribly happy that we were getting together.

My staff said, "Don't have lunch with this right-winger."

From Wyoming. From Wyoming.

"There's nothing in it."

We were approached about doing a show.


Hello, Robert. Good to see you again.

Good evening. Yeah, here.

Oh, thank you so much.

You're now considered a moderate, if not lefty.

Commie. What happened?

They came in, and they brought with them an antigovernment hatred.

And you don't have adversaries anymore.

You have enemies.

There does seem to be a strong correlation between political polarization on the one hand and widening economic inequality.

Researchers measured the distance between the median voting patterns of one party and the other party, and what they found is that in times of high inequality, you have the highest degree of polarization.

It almost tracks exactly.

You see how totally integrated and connected the issue of inequality is to our democracy.

And you see how the ultimate guardians of our democracy... if Congress doesn't do it and if the executive doesn't do it, the ultimate guardians are up here.

In 2010, the Supreme Court in Citizens United decided that corporations are people.

And as Citizens United was interpreted by lower courts, it basically said that corporations, wealthy individuals, anybody who has a lot of money, can flood the political system, can basically inundate our democracy with their money.

Mr. Wertheimer?

Robert, how are you? How are you?

The idea that a corporation could spend $1 billion in an election to elect a president and it would not have the capacity to have a corrupting influence over government decisions...

That's absurd. I mean...

Is a concept from another planet.

The money isn't new.

The quantity of the money is new.

In the last presidential election, we saw for the first time in this country billionaires...

I mean, a handful of billionaires... contributing huge sums of money to individual candidates, basically keeping those candidates going.

I mean, is this America?

Not in my mind.

I think it's absolutely stupefying.

I think, if you keep going, in the next presidential election, it will be, "Have you got $300 million in your pocket?

'Cause you can buy a president."

There are liberal billionaires.

There are conservative billionaires.

So if you see someone buying a result that you like, someone else can buy a result that you're gonna hate if they can give a huge amount of money.

You cannot have government on the auction block.

When we see the contrast between the values we share and the realities we live in, that is the fundamental foundation for social change.

You work for us! You work for us!

The Tea Party movement was born in the wake of the Wall Street bailout.

We want to make sure that the government is doing what's right for all people, not just for some of the people.

An everyday Tea Partier is an American citizen that is frustrated with the direction the country's going.

The banks got bailed out. We got sold out.

The banks got bailed out.

The Occupy movement has focused its wrath on Wall Street and big corporations.

The White House is really in the pockets of the banks.

It's a plutocracy, basically.

It's not about the money and how much money people have.

It is about people not having their voices heard.

There's so many people who've lost their jobs.

There's so many people who've lost their homes.

It's just totally unfair.

You've got a lot of people who feel like the game is stacked against them.

Can you hear us now?

The game is rigged.

Can you hear us now?

We need to get lobbyists, Goldman Sachs, George Soros, Merrill Lynch, everyone out of our politics.


Why should they be allowed to throw millions at politicians?

They're supposed to be our voice, not their voice.

Losers of rigged games can become very angry.

You don't love America.

You don't love the Constitution.

You don't love anything but your stupid, smarmy-ass, taking little self.

Health care.

Kill the bill! Kill the bill!

Most people are still worried about their jobs.

They are angry. They are frustrated.

They're looking for people to blame.

We think the Muslims are moving in and taking over.

Go back home!

Go back home! Go back home!

One nation under God, not Allah!

These trends are dangerous.

We're seeing an entire society that is starting to pull apart.

Education must be free.

No costs!

No fees!

Education must be...

Oh, my God.

At Cal Berkeley, after being beaten by police and cleared out of their protest site, Occupy Cal was back with a full day of protest activities today.

Joining us now is Cal Berkeley professor Robert Reich.

Well, on campus, there is a kind of mood of restlessness and uncertainty.

A lot of the students don't know if the police are coming back in.

The irony of all of this is that instead of allowing people to peaceably assemble to express their outrage at how much money is now going into politics, we've got mayors and other officials all over the country who are saying, "You can't assemble.

"You can't express yourself.

"But we are going to listen to the money

"from the big corporations that now are basically engulfing American politics."

We are losing equal opportunity in America.

We are losing the moral foundation stone on which this country and our democracy are built.

It undermines our democracy when all that money can come down from the wealthy, from the corporations.

When there are no limits to the amount of money... money they can infect and undermine and corrupt our democracy, then what do we have left?

What do we have left?

If you can permit me a personal note.

Because I was always short for my age and I was always very short... in fact...

When I was a little boy, I was even shorter...

I was always getting beat up.

When I was a kid, the bigger boys would pick on me.

You know, that was what you did.

That's what is done.

So I got an idea that I would make alliances with older boys, you know, like, just one or two who would be my protectors.

The summer when I was about ten, one of the older boys who I depended on to kind of be a protector, his name was Michael Schwerner.

In the summer of '64, I learned that Mickey had been in Mississippi registering voters.

And he and two other people who had been with him registering voters were... were tortured and murdered.

And when I heard that my protector had been murdered by the real bullies...

I think it changed my life.

I had to protect people from the bullies, the people who would beat them up economically or the people who would subject them and their families to real harm.

Because if you don't have a voice, if you don't have power, if you are vulnerable economically in society, you don't have anybody to protect you.

There's no single magic bullet to solving this problem.

I mean, I've written a lot of books.

I've come up with a lot of policy ideas.

I'm not alone. Policy ideas are plentiful.

Remember, we make the rules of the economy.

And we have the power to change those rules.

You've got to mobilize. You've got to organize.

You've got to energize other people.

Politics is not out there.

It starts here.

Today's our last... our last class.


I'll try that again.

Today's our last class.

Remember the first part of the course, we looked at the dynamics of wealth and poverty, and many of you... many of you were a little bit down after that?

And some of you worried that that dynamic was inevitable.

Is this going to be just a partisan fight?

Are we just going to have class warfare in this country?


The rich actually do better with an economy that is growing faster, when everybody else is doing better.

This is not a zero-sum game.

History is on the side of positive social change:

Unemployment insurance, social security, civil rights, and voting rights, environmental protection, the Environmental Protection Act, signed into law by Richard Nixon, of all people.

Any one of you who feels cynical about the possibility of social progress, just consider where we have been.

Roger. Eagle's undocked.

Which sort of comes to you.

To you.

You don't necessarily need to be elected president of the United States or be a secretary of labor to have a huge impact.

You can be a leader in many, many different spheres.

There are a lot of other things I could be doing.

But I choose to be here in this course because I believe in you.

I believe that some of you are going to change the community, our society, maybe even the world.

One final word.

May your lives be filled with passion, and also, may your days be filled with wonder and happiness.

May you do great things with your life, and may you have a wonderful, exuberant, brilliant career.

Thank you.

♪ Tumble out of bed and stumble to the kitchen ♪

♪ Pour myself a cup of ambition ♪

♪ And yawn and stretch and try to come to life ♪

♪ Jump in the shower and the blood starts pumpin' ♪

♪ Out on the street the traffic starts jumpin' ♪

♪ With folks like me on the job from nine to five ♪

♪ Working nine to five ♪

♪ What a way to make a living ♪

♪ Barely getting by ♪ He inspired me, actually, personally to really want to go out and make a difference.

Going to Brazil to work with an NGO in the Favelas.

Oh, you can get a hug.

I know my wife definitely...

Erika wants to go to school too now that she sees that it's possible.

I wanted to become a lawyer.

You know, I've thought about it a lot.

I wrote a couple of books on this stuff.

♪ Move ahead but the boss... ♪ If I knew what to do, I would... on my weekends, I would take a day off to start, okay, not a revolution.

I... But you know what?

Maybe we do need something like that.

♪ They let you dream just to watch them shatter ♪

♪ You're just a step on the boss man's ladder ♪

♪ But you got dreams he'll never take away ♪

♪ In the same boat with a lot of your friends ♪

♪ Waiting for the day your ship will come in ♪

♪ And the tide's gonna turn ♪

♪ And it's all gonna roll your way ♪

♪ Working nine to five ♪

♪ What a way to make a living ♪

♪ Barely getting by ♪

♪ It's all taking and no giving ♪

♪ They just use your mind ♪

♪ And you never get the credit ♪

♪ It's enough to drive you crazy if you let it ♪

♪ Nine to five ♪

♪ Yeah, they got you where they want you ♪

♪ There's a better life ♪

♪ And you think about it don't you ♪

♪ It's a rich man's game ♪

♪ No matter what they call it ♪

♪ And you spend your life ♪

♪ Putting money in his wallet ♪

♪ Nine to five ♪

♪ What a way to make a living ♪

♪ Barely getting by ♪

♪ It's all taking and no giving ♪

♪ They just use your mind ♪

♪ And they never give you credit ♪

♪ It's enough to drive you crazy if you let it ♪

♪ Nine to five ♪

♪ Yeah, they got you where they want you ♪

♪ There's a better life ♪

♪ And you dream about it, don't you ♪

♪ It's a rich man's game ♪

♪ No matter what they call it ♪

♪ And you spend your life ♪

♪ Putting money in his wallet ♪

♪ Nine to five ♪

♪ Ooh, working nine to five ♪

♪ Working nine to five ♪