I'll Be Short: Essentials for a Decent Working Society - Hardcover

Robert B. Reich, professor at Brandeis University and founder and national editor of The American Prospect, is author of eight books, including Locked in the Cabinet and The Future of Success. His radio commentary can be heard biweekly on public radio's Marketplace, and his writing has appeared in The New Yorker, Los Angeles Times, The New York Times, The Washington Post, The Boston Globe, and many other publications. He lives in Cambridge, Massachusetts.

Whatever Happened to the Social Contract?Not since World War II have
Americans felt so unified. We"re fighting a war against terrorism and we"re
fighting to get the economy moving again. And we"re all in this together.
Except when it comes to paying the bill.

Add the cost of fighting the war to the biggest military buildup in two decades
and extra security at home, and you"re talking real money—hundreds of
billions of dollars over the next few years. The Bush administration has also
enacted a mammoth tax cut—$1.35 trillion over the next ten years. At this
writing, the president is proposing almost $600 billion in additional cuts in
income taxes and capital-gains taxes. The bulk of these cuts—those already
enacted and those proposed—benefit large corporations and people who are
already wealthy.

So who"s going to pay? Take a guess. Middle- and lower-income Americans.

Most Americans now pay more in payroll taxes than they do in income
taxes. Payroll taxes include Social Security and Medicare payments. You
pay these taxes on the first $80,000 or so of your income (the ceiling rises
slightly every year). After that you"re home free. Bill Gates stops paying
payroll taxes at a few minutes past midnight on January 1 every year.

None of the enacted or proposed tax cuts affect payroll taxes, even
temporarily. To the contrary, they increase the odds that payroll taxes will
have to be hiked. That"s because the tax cuts, combined with the military
buildup, will drain so much money out of the Treasury that there won"t be
enough money to pay for Social Security and Medicare by the time the early
baby boomers begin retiring, about a decade from now. So payroll taxes
probably will have to rise in order to fill the gap.

Get it? Income and capital-gains tax cuts for the rich now, payroll tax hikes
on middle- and lower-income Americans to come.

Americans like to think we"re all in this together, but the fact is that the
economic fallout from terrorism is hitting some Americans much harder than
others. When the slowdown began, layoffs and pay cuts hit hardest at
manufacturing workers, white-collar managers, and professionals. Since the
terrorist attacks, a different group is experiencing the heaviest job losses: the
low-paid. Many are service workers in retail stores, restaurants, hotels, or
other tourist-industry businesses that have been hard hit. Others are
caregivers—social workers, hospital workers, elder-care workers—whose
jobs and wages are on the line as public budgets are trimmed. The economy
may be rebounding, but these people aren"t.

Government is less helpful this time around. Safety nets are in tatters.
Welfare-to-work programs made sense when work was plentiful, but without
work, those no longer eligible for welfare have nowhere else to turn. Even job
losers who still qualify find that welfare payments in most states are worth
less than before.

Unemployment insurance is also harder for them to get. Since part-time
workers, temps, the self-employed, and people who have moved in and out of
employment often don"t qualify, a large portion of the lower-wage workforce is
excluded. Many who don"t qualify are women with young children.

Meanwhile, federal programs for job training and low-income housing have
been shrunk by budget cuts. State and local governments are in no position
to step in. They"re already strapped by rapidly declining tax revenues. Rather
than beefing up social services, they"re cutting them. Rather than improving
our schools by reducing class size and offering all-day kindergartens and
after-school programs, they"re paring back. Instead of making higher
education more affordable, it"s getting out of reach for many families.
Meanwhile, more Americans are in danger of losing health care or are paying
more for the care they get.

In short, the fat years of the nineties left us woefully unprepared for a slower
economy that"s taking a particularly large toll on hardworking families and the
poor.

In the past, when Americans faced a common problem—the Depression, a
hot war, a cold war—we understood intuitively that we were all in it together.
Someone"s misfortune could be anyone"s: "There but for the grace of God go
I." Social insurance was a natural impulse, a first cousin to patriotism. It was
not difficult to sense mutual dependence and to agree on a set of
responsibilities shared by all members, exacting certain sacrifices for the
common good.

But that sense of commonality is endangered as we drift into separate worlds
of privilege and insecurity. I can"t help asking, if you"ll pardon me for
questioning our newfound unity, whatever happened to the social contract?

The sobering news is that even our ten years of economic expansion didn"t
do much for the bottom half. Sure, they had jobs, but they had jobs before
the last recession, too. The fact is, the median wage—the real take-home
pay of the worker smack in the middle of the earnings ladder—is not much
higher than it was in 1989. In my home state of Massachusetts, the typical
household ended the roaring nineties $4,700 poorer (adjusted for inflation)
than it began. And health and pension benefits for the bottom half continue to
shrivel.

Many families have made up for the steady decline by working longer hours.
The average middle-income married couple with children works almost 4,000
hours a year for pay—about seven weeks more than in 1990. But for most
mortals who do not relish what they do for pay, more hours at work does not
translate into a higher standard of living. On top of that, jobs are less secure.
Health care is more expensive. Working families are shelling out huge bucks
for good child care. And if you"ve got elderly parents who also need help, it"s
even rougher. At the same time, the upper reaches of America have never
had it so good. Their pay and benefits have continued to rise.

Look, I don"t begrudge anyone a fat paycheck or a big dividend check. But
the worrier in me won"t let go. I don"t want my boys to grow up in a two-tiered
society where they"ll have to live in gated communities. Yet that"s the
direction we"re heading in.

The problem is not that some of us are getting rich. That"s the good news.
The problem is that most of us are getting nowhere, even though we"re
working harder than ever before. We are hurtling toward a society composed
of a minority who are profiting from changes in the economy and a majority
who are not.

The consequence of this erosion extends beyond economics. It helps explain
why hard-pressed parents can"t find the time to raise their kids the way they
themselves were raised and to pass on the values they grew up with; why
voters whose family budgets pinch so tightly are outraged about government
inefficiency and waste; why even instinctively generous Americans find their
compassion toward the less fortunate flagging; why our politics have become
so angry, even sometimes ugly.

Perhaps most important are the moral consequences. Put simply, it just isn"t
right. The glaring, grotesque wrongness of what"s happening to hardworking
American families spawns despair and cynicism. It affronts our values,
mocking the American bargain linking effort and reward. It makes people feel
like suckers and gnaws away at the precious ethic of responsibility. It closes
the gate to the very poor. Ultimately, the hollowing-out of the middle class
and the creation of a two-tiered society pose a mortal threat to what"s always
been special about our country.

Why isn"t this being talked about? My guess is that Republicans don"t feel
comfortable with the topic because they don"t have any solutions they"d find
palatable. The right wing of the Democratic party has drifted toward a flaccid
Republicanism, where the basic philosophy is that everyone is on his or her
own. Corporate America isn"t particularly eager to talk about it, or to sponsor
television programs or advertise in magazines that do. But the fact is, as we
proceed with the war on terrorism, our domestic agenda is in shambles. We
need to make the case that we can only be a strong nation if the working
middle class and the less fortunate are brought along. True national security
begins with economic security.

Millions of Americans—myself included—were raised to believe in a simple
bargain: Anybody who worked hard could earn a better life for themselves and
their family. That"s anybody—not just the wellborn, not just the well
connected. Anybody with the drive and discipline to make the most of their
opportunities had a decent chance to make it. Corporate America backed the
bargain, too. Employees who worked hard and gave it their all could share in
the company"s success. If the company did well, their jobs were reasonably
secure, and their wages and benefits rose.

In the 1950s, my mother and father worked six days a week in their small
clothing shop, selling skirts and dresses to the wives of factory workers. I
remember making signs when they had special sales: cotton dresses, $2.99;
blouses, $1.00. As factory wages went up, local families had a bit more to
spend every year, and my parents" little business grew less precarious. They
went upscale. We all did better together. Growing together was the way it
worked in America.

America has got off that track. We"re growing apart—and at a quickening
pace. My parents retired before the new economy elbowed out the old. Most
of those factory jobs are now gone. Jobs like them accounted for over a third
of all American jobs in the 1950s; now, fewer than 16 percent. Many of the
old service jobs have disappeared as well. Telephone operators have been
replaced by automated switching equipment, bank tellers by automated teller
machines, gas station attendants by self-service pumps that accept credit
cards, and secretaries by computers and voice mail. Any job that can be
done more cheaply by a computer is now gone, or pays far less than before.

We can"t bring back the old economy, and shouldn"t try. But that doesn"t
leave us helpless. What we can do is create a new economy in which many
more succeed.

Earnings began splitting between the have-mores and the have-lesses largely
because of two revolutions—one in computer technology, the other in global
economic integration. The combined effect has been to shift demand in favor
of workers with the right education and skills to take advantage of these
changes, and against workers without them. Meanwhile, the unionized
segment of the workforce has shrunk. Today, fewer than 10 percent of private-
sector employees are unionized. In 1955, 35 percent were unionized. At the
same time, the real value of the minimum wage has declined. The drop in
unionization has taken a toll on the wages of men without college degrees.
The drop in the minimum wage has taken the biggest toll on the wages of
working women without college degrees.

The real puzzle is why in recent years we"ve let this happen. If the right
education and skills are so important, why haven"t we done more for our
schools? Why is the federal government cutting back on job training? Why is
college becoming less affordable? If family incomes are under greater and
greater stress, why have we let unions wither and the minimum wage
decline? Why haven"t we widened the circle of prosperity so that more
Americans have a decent shot at it? In short, why has the social contract
come undone? In the world"s preeminent democratic-capitalist society, one
might have expected just the reverse: As the economy grew through
technological progress and global integration, the "winners" from this process
would compensate those who bore the biggest burdens, and still come out
far ahead. Rather than being weakened, the social contract would be
strengthened.

Nations are not passive victims of economic forces. Citizens can, if they so
choose, assert that their mutual obligations extend beyond their economic
usefulness to one another, and act accordingly. Throughout our history the
United States has periodically asserted the public"s interest when market
outcomes threatened social peace—curbing the power of the great trusts,
establishing pure food and drug laws, implementing a progressive federal tax,
imposing a forty-hour workweek, barring child labor, creating a system of
social security, expanding public schooling and access to higher education,
extending health care to the elderly, and so forth. We did part of this through
laws, regulations, and court rulings, and part through social norms and
expectations about how we wanted our people to live and work productively
together. In short, this nation developed and refined a strong social contract,
which gave force to the simple proposition that prosperity could include
almost everyone.

Every society and culture possesses a social contract—sometimes implicit,
sometimes spelled out in detail, but usually a mix of both. The contract sets
out the obligations of members of that society toward one another. Indeed, a
society or culture is defined by its social contract. It is found within the
pronouns "we," "our," and "us." We hold these truths to be self-evident; our
peace and freedom is at stake; the problem affects all of us. A quarter of a
century ago, when the essential provisions of the American social contract
were taken for granted by American society, there was hardly any reason to
state them. Today, as these provisions wither, they deserve closer scrutiny.
To the extent that there"s been a moral core to American capitalism, it"s
consisted of three promises.

First, as companies did better, their employees would too. As long as a
company was profitable, employees knew their jobs were secure. When
profits rose, wages and benefits (health care and pensions) rose, too. In
harder times, companies accepted lower profits to retain their workers. At
worst, if a recession hit hard, companies laid workers off temporarily and then
hired them back as soon as the economy turned up. The communities where
most employees lived were also part of the contract: As long as the company
was profitable, it remained in the community—often underwriting charities
and responding to community needs.

"The job of management," proclaimed Frank Abrams, chairman of Standard
Oil of New Jersey, in a 1951 address typical of the era, "is to maintain an
equitable and working balance among the claims of the various directly
interested groups . . . stockholders, employees, customers, and the public at
large. Business managers are gaining in professional status partly because
they see in their work the basic responsibilities [to the public] that other
professional men have long recognized in theirs."

The second provision of the social contract was that working people were
paid enough to support themselves and their families. No family with a full-
time worker would be in poverty. If there weren"t any jobs or if the breadwinner
was disabled or had died, the family would be kept out of poverty through
social insurance. The nation instituted unemployment insurance, Social
Security for the elderly and disabled, aid to ...