>> Female Presenter: Thanks everyone for coming.
So Jeffrey Sachs is the
director of the Earth Institute and professor
of
sustainable development and health policy
and management
at Columbia University.
He's also a special advisor to
UN secretary general, Ban Ki-moon-- on the
Millennium Development Goals, designed to
reduce extreme
poverty, disease and hunger by the year 2015.
He's been
twice named one of the 100 most influential
leaders in the
world by Time Magazine and is sought worldwide
for his
economic advice and his unique capacity and
global
experience in complex economic problem solving.
Today he
will be talking about his new book the price
of
civilization.
So please join me in welcoming Jeffrey
Sachs.
[Applause]
>>Jeffrey: Thanks Stephanie.
Hi everybody.
Pleasure to be back
here, because each book I write, I get to
come to Google
Downtown.
So it's a good incentive.
That sounds funny.
This book is about the U.S. and we're here
at the center
of American success.
So you have a very particular view
of the U.S. from the position of Google -- one
of the
world's great companies, one of the most dynamic
companies, and the leading sector of technological
change.
But the rest of the U.S. economy -- you're
not
the rest, but a lot of the U.S. economy -- is
in a terrible mess.
And a terrible financial, budget, and, I
claim, moral crisis as well.
So I have tried to write
this book for myself to understand what is
it that got
the U.S., a company capable of producing a
Google and
others like Google, into a situation where
Americans in
general feel dreadful, where 80 to 90 percent
of
Americans feel that the country is way off
track, where
91 percent of Americans disdain Congress.
And I think
the approval rating is about 9 percent.
And where the
police had to vacate the park down the road
here early
this morning and we'll see whether a court
order defends
the First Amendment or whether we really have
a country
where you can't aggregate to protest anymore.
Because
this isn't just about a park; this is about
highly
visible social protest.
And I think it's dreadful that
the police came in to move people out.
Really shoddy
behavior.
And I hope the courts find it
unconstitutional.
So that's the puzzle that I think is
the puzzle that is really before us.
And, as I was
writing this book, I started with the financial
crisis in
2008.
And this is something pretty understandable.
But
it has antecedents and the antecedents were
the
deregulation of the financial markets in the
1990s.
That
has antecedents in the deregulation of the
financial
markets in the 1980s.
And I found myself going back to
try to understand the story of U.S. change
really from
the 1970s onward, because I think the 1970s
was a
transition in American economic history, political
history, as well as a transition in the world
economy.
From the end of World War II, up through the
end of the
1960s, America's economic dominance of the
world was
completely unquestioned.
America's technological
dominance of the world was completely unquestioned.
America's geopolitical dominance of the world
was
questioned only subject to the Cold War arms
race, but
not in any deeper way within the non-Communist
world.
And that began to change in the 1970s.
And I think that
that's where one has to understand what has
happened.
In
my view, what you are living and what the
U.S. is living
is a combination of the geopolitical and technological
revolution that began in the 1970s.
It's the combination
of globalization and the digital revolution.
Each one
makes possible the other.
Without the computer and
digital age, there would have been no globalization
the
way we have it.
And without globalization, the likes of
Google would not really be conceivable in
its current
context.
The 70s opened up the world of globalization
economically.
And it was a very unsettling decade for
the whole world, including for the United
States.
In
1971, the exchange rate system that had dominated
the world
from the end of World War II until [clears
throat] 1971 came to an
end.
It was called the Bretton Woods Exchange Rate
System.
[clears throat] It ended in August
1971.
It set the world's currencies floating against
each other.
It was part of a decade of high inflation.
In 1973, we had the first soaring oil price
increases in a
century, basically.
When OPEC gained control of its oil
stocks from the major oil companies and in
1973, for a lot
of reasons, monetary, resource-based, and
geopolitical --
the oil prices increased roughly a factor
of four times.
And in the same year, 1973, there was a major
El Nino
which was the first time we had a soaring
rise of food
prices.
These are all preludes to things that are
pretty
common to us now.
In the latter half of the 1970s, the
U.S. felt other parts of globalization.
And most
importantly the manufacturing base of the
United States
started to be threatened by international
competition for
the first time.
Japan was the leader of that.
We had a
lot of tumultuous trade negotiations at the
end of the 1970s with Japan.
And of
course, in 1978 the biggest change of all
in the world
economy began but under the radar screen entirely
for
roughly a decade and that was the opening
of China which
began with Deng Xiao Ping's succession to
power.
That
whole process of creating a global economy
[clears throat] in my opinion
has been preeminent in the huge dislocations
that America
has faced over the next 30 years.
But the purpose of my book
is to understand the interplay of those market
forces with politics.
And the politics that accompanied
globalization began in 1981.
And it is the combination
in my view of a path that Ronald Reagan began
and that
became entrenched in this country for 30 years
with
globalization that really explains where we
are today.
So in 1981, president Reagan was elected.
And on January
20, 1981, he made a statement which I think
is one of
the most important statements of modern American
political economy.
One of the stupidest statements I
know, but one of the most important statements
as well.
And the statement was that government is not
the solution
to our problems, government is the problem.
What Reagan
was doing and what brought him to power was
a claim.
The
claim was that the tumult of the 1970s, the
high
inflation, the oil price shocks, the slow
growth, the high
unemployment, the competition or the job losses
that all
of that somehow reflected an overbearing government.
It
was not a hard sell for him in a lot of ways,
because
the -- a lot of the public was fixated on
the war on
poverty and the social programs of the 1960s.
And the
claim, which I view was wholly erroneous,
that somehow
those programs -- the institution of Medicare,
the
implementation of other social policies, the
war on
poverty in its various aspects -- was the
element that
led to the instability of the 1970s.
And so, the essence
of restoring a sound economy for Reagan was
to quote 'roll
back government'.
It's a hypothesis that one would
entertain in a graduate seminar or maybe a
first year
economics class.
I think that it is one that bears no
relation to reality on the substance of fiscal
policy, on
the magnitudes involved, on the possible pathways
from
this kind of -- these programs that Reagan
attacked to
actual outcomes, which in my view were [clears
throat] almost wholly
related to the changing structure of the world
economy,
the changing nature of technology, the integration
of
global production systems, the relative rise
of other
countries in the world economy and so on.
But Reagan
made a diagnosis and he had a political force
behind him
which was mainly the rise of the sun belt
and the
backlash that was continuing to the civil
rights era.
And it was enough to squeak by in the 1980
election.
He
didn't quite squeak by.
There were three candidates,
but he just got a tiny majority over 50 percent
of the
popular vote and won a pretty solid vote of
the electoral
votes.
Reagan started a process in this country that
continues basically to this day and that has
proven to be
impervious to change of administration, change
of
political party, and time.
What Reagan started was a
drastic cut of top tax rates for highest earning
individuals
and wealth holders.
The rate came down from
70 percent top personal marginal tax rate
to 28 percent.
Then it was briefly lifted again.
It's fluctuated in the
30s since then; it's now at 35 percent.
But that was Reagan's lasting
contribution.
Capital gains taxation and other
categories like carried interest which is
applied to
hedge funds and some other financial intermediaries
is at
15 percent.
Capital gains tax rates are now 15 percent.
They fluctuated, but the main thing Reagan
did was make a
long-term, sustained, politically sustained,
transformation of
the top tax rates in the country.
At the same time what
he did was slash one major part of government.
And that
is government services and public investment.
So we have
three kinds of government programs at the
federal level.
We have our war machine, which we call the
defense
budget.
And I call the offense budget, most of the
time.
And that is about a third of the budget.
We have the
entitlements programs, or the transfer programs
which are
social security, Medicare, Medicaid, veterans
benefits
and food stamps as the predominant ones.
And that's --
I'm sorry -- Medicare and Medicaid is about
5 percent of
GDP.
Social Security about 5 percent of GDP.
The
military about 5 percent of GDP.
And then veterans and
food stamps and other two to three percentage
points of
GDP.
Then we have a third category of programs
which are
all the public services -- the direct provision
by
government of services -- whether it's things
like job
training or education, Pell Grants, National
Science
Foundation, NASA, transportation, highway
system and so
on.
Environment -- all of the interior department
programs.
Energy systems and so on that the federal
government maintains.
Reagan tried to cut the transfer
programs and failed.
George Bush, Junior tried to cut the
transfer programs and failed.
They more or less
continued on as -- mostly as programmed with
some
expansion of coverage--, but mainly rising
costs of health
care and rising coverage because of an aging
population
since the 1960s there's been little dent of
that part of
the budget.
The military has tended to vary depending
on
which wars we're in from somewhere between
3 and 6
percent of GDP.
And we're at about 5 percent of GDP right
now.
Not so much different from when Reagan was
in office.
The part where Reagan succeeded in his goal
of rolling
back government was this civilian discretionary
-- or the
non-security discretionary budget.
And that was cut
roughly by half as a share of national income
from the
time that Reagan came in till the end of Reagan's
administration and roughly till now.
And this has been,
in my view one, of the decisive and lasting
elements of
American reality that probably is on par with
the cuts of
the tax rates.
So Reagan -- the Reagan revolution, which
has been 30 years of persistence, has had
three
successful sustained elements.
Successful in terms of
the objectives of the authors of this revolution.
One
was a deep and persistent cut of top tax rates.
The
second was a massive deregulation of the financial
industry of broadcasting and media.
And substantially of
the environment.
So significant deregulation.
And the
third were sharp cuts that have lasted in
the
non-security discretionary budget of the United
States.
We've now done this for 30 years.
The reason I wrote
this book is that I think it's a disaster,
what's come out
of this.
And I just want to show you a little bit of
the
reality of this and then I'm going to turn
it -- open it
to questions.
Of course, one of the things that happened
is a remarkable widening of inequality in
the United
States that began in 1981.
You see that we have a
U-shaped income distribution measured as the
share of the
top one percent of households in household
income.
It
reached a peak in 1929 when the top one percent
of
households in an era of unregulated speculation
and the
tax cuts and other policies of the Harding
Coolidge
Hoover decade of the 1920s brought the share
of the top 1
percent to about 24 percent of total household
income.
Then came the Great Depression.
World War II, the New Deal,
very steep increases of top tax rates.
And you see
that there were about three decades where
that flat line
at the bottom of the U shows that the top
one percent of
households had a share of the income of about
10
percent, 9 to 11 percent of total household
income.
Reagan came in 1981 and that's exactly in
fact when this
curve starts to increase.
There were many parts of it --
globalization would have already driven some
inequality.
We know that because this curve turns up in
just about
every high-income country in the world.
But it's the
United States that has by far the biggest
increase.
Because it's really only in the United States
that
government amplified the forces of globalization
to lead
to this remarkable surge of incomes and, I
should say,
wealth at the top.
The bottom line is -- in red -- is
the share of the top 0.01 percent of households.
We have
120 million households in the United States.
So 0.01
percent is 12,000 households.
Those 12,000 households
take in about 5 percent of total household
income.
And
that is more than the bottom 24 million households
in the
United States.
So we have quite deeply entrenched
poverty at the bottom and extraordinary wealth
at the
top.
What happened in the middle is quite notable.
And
that's shown on the right-hand side.
This is the median
earnings of full-time, year-round, male workers.
They peaked in 1973,
which is a really astounding,
surprising feature of the U.S. economy.
It's been 38
years since there was, since we reached the
peak of the
median male worker.
For women workers, the picture is
different.
It's continued to rise from much lower levels
than men.
And also, for two reasons, which are hard
to
disentangle -- at least hard for me to disentangle.
One
is women faced massive discrimination which
has gradually
eased.
And the second is that women are in the
non-traded goods sector of the economy to
a much higher
extent than men.
So male median workers who are
basically high school grads faced the decline
of the
tradeable sector in response to globalization.
The
peak employment in manufacturing in the United
States
occurred in 1979 when we reached 19 million
workers in
manufacturing.
And since then, it's come down to about
10 million.
So men faced a sharp decline in the sectors
where men predominate whereas women are more
in the
service sector which is mainly a sheltered
sector up to
this point vis-a-vis international trade.
And so,
somehow the combination of reducing discrimination
and
less impact of globalization has meant that
women's
median earnings have continued to rise a bit
whereas male
earnings peaked already in 1973.
I think that these two
pictures basically depict the American phenomenon
pretty clearly.
And that is that the combination of
globalization and Reaganomics has meant stagnation
in the
middle, soaring wealth at the top, and deepening
poverty at the bottom -- other than for the
elderly.
And
recent statistics suggest that the poverty
of the elderly
may be more than is conventionally captured
by the
standard poverty rates.
Now, in normal countries of
which the U.S. is not one, government actually
acted to
do something about these increasing tensions.
In
national economies facing a very radically
changed global
economy.
And the main response that one would like
to
see in response to globalization is rising
skills
accumulation and helping all parts of the
society to gain
a foothold in remunerative work.
One of the facts of
globalization has been a sharp widening of
the wage,
education gradient.
I think I have a picture of it.
Yeah.
Education -- or earnings have risen only for
those
with Bachelor's degrees or above, on average,
in the United States.
And so, one of the responses that one would
have wanted is an
upgrading of educational attainment and skills
attainment.
The conventional way would be a higher
through-put of college graduates.
Probably there are new,
creative, unconventional ways with different
kinds of
skills qualifications.
But on essentially all counts
that we can measure, the United States has
stagnated in
the educational attainments both in terms
of raw numbers
like proportions completing a 4-year's Bachelor's
degree.
And as also stagnated in effective training
of certificate
programs, more focused post-high school skill
programs.
And we have the irony of very high unemployment
and a
huge shortage in the U.S. economy of what
you guys do.
It's very hard to hire programmers.
You know that.
And
it's very hard to hire them at what I would
call
reasonable salaries.
You know that, too.
And that's one
of the facts of our economy, which is that
globalization
has given a premium to skills.
It's given a premium to
educational attainment.
It's given a premium to various
kinds of skill attainment.
But the through-put of U.S.
education system has -- it's budged, but it's
barely
budged in the process.
And what other governments did in
northern Europe, which are the countries I
most admire.
Countries like Korea which have been most
successful in
rapid catching up into becoming high-income
countries.
The government invested very heavily in the
whole life
cycle of education, and human capital development
from
preschool and early childhood development
all the way
through University.
The United States did the opposite,
basically.
We've been cutting spending in this area.
There is lots of political economy why that
is, but
that's the path that Reagan set us on.
So, a summary that
I think is a fair summary is that all high-income
countries experienced rising inequality and
job loss in
the manufacturing sector in response to globalization
and
technological change from the 1980s onward.
The United
States is the country that has ended up with
the
biggest inequality.
The biggest underclass.
The most
dug-in poverty.
And the least public response to this
challenge up until now.
And almost nothing has changed
the direction of actual policies for 30 years.
So let me
just show you the upshot of this.
This is, for me, the
essence of our Washington problem.
We have many other
problems in this country, but this is our
Washington
problem.
Our Washington problem is that we have lots
of
important things to do that we need to do
collectively.
Almost a -- actually not almost -- a very
dirty word in
the United States -- the idea that we should
do things
together as a society.
But there are public goods and
public services, and they're vital for a couple
of
reasons.
One, markets don't provide these goods and
services adequately.
And second, poor people can't avail
themselves of these goods and services without
help.
Education is a classic example of this, already
recognized by Adam Smith as an area of society
where the
government needs to play an important role.
So, these
are all the categories of our non-security
discretionary
budget.
The part I mentioned that Ronald Reagan
slashed -- it includes legislature and the
court system,
agriculture, commerce, the education department,
which I
think two thirds of the Republican candidates
want to
eliminate entirely.
The energy department, which would
be responsible for actually helping America
to make a
transformation to a low carbon future -- something
that
we have no interest in doing it seems at the
moment.
Public health.
Affordable housing which we left to Wall
Street rather than to government policy.
The Interior
Department which is, of course, our public
lands
management.
Justice department, labor department, which
is job training, active labor market programs.
Transport
which would mean high speed rail if we happen
to live in
China, but means Amtrak if you live in the
United
States, which is no speed rail half the time.
Environmental Protection Agency, NASA and
so on.
So
here's what has happened to all of that.
As I said,
Reagan came in, and if you look all the way
on the left,
that sum of activities was between 5 and 6
percent of
national income at the end of the 1970s.
Too small.
Low
compared to other countries.
Because we do very little
in labor market policy.
We do very little for early
childhood development.
We give no family support to
speak of in this country or almost no family
support.
We don't do housing policy and so on other
than the crazy
way that blew up through Fannie Mae/Freddie
Mac and
subprime mortgages, because we don't do direct
budget
outlays as other countries do.
But we were doing 5 to 6
percent.
Then Reagan came and you see the collapse
of
the discretionary programs as a share of national
income
down to about two and a half percent.
It continued all
the way through every administration.
There's really
very little difference between Democrats and
Republicans
in this country in terms of what they really
mean when
they're in office, because the more fundamental
politics
is much more dug-in than the yakking on the
cable news
shows.
And the basics of the Reagan era -- low tax
rates
at the top, low spending for public goods
and services,
and deregulation has been a constant, not
a partisan
variable.
This continued up through 2009.
You see this
little spike, which is in my view one of the
more useless
things our country has tried to do.
That's called the
stimulus legislation.
The idea of the stimulus
legislation was, "we have a crisis; we should
jolt the
economy back to normal."
The mistake of that concept was
the economy wasn't normal.
The economy was in structural
transformation, not in short-term business
cycle crisis.
And a temporary jolt is pretty useless.
And that's what
came out of the stimulus -- very little.
We had a blip.
It came back down.
And what you can see, which I find to
be the most alarming single fact of our politics
today --
something that's almost unremarked upon I
would add in
our political life is that what Congress and
the White House
have agreed to in August is this category
of the budget
should be capped at a rate of increase lower
than
inflation so that the share of this spending
relative to
national income will continue to decline so
that all
those things that I mentioned -- the environment,
science, training, education, affordable housing,
the
justice system -- all of that, transport -- will
be less
than 2 percent of national income.
That's the trajectory
we're on.
So we're basically closing down government
other than those big buildings on Constitution
Avenue, if
you happen to go to Washington for some strange
reason.
And there is no reason to go to Washington
except if you
want to lobby for tax breaks or you're a tourist
to see
those big buildings and wonder what they do
inside.
Because actually, they don't do anything anymore.
And
that's the whole idea of this country.
We want just
those big buildings.
The interior department, great; labor
department, fascinating.
And we even have a debate,
"should we have them?
Should we not have them?
They
could be turned into giant Starbucks or something."
And
that's where we really are.
My view is that we have a very
very deep structural crisis in this country.
We have
half the population not making it.
And feeling the pull
of poverty.
We have people like you and Google making
it.
And making it quite spectacularly.
So we have a
dual economy.
The luxury industry is booming right now.
The money at the top is booming.
Corporate profits are
booming.
You have plenty of tax privileges to keep
those
corporate profits as well.
The share of taxation of
corporate income as a percent of national
income is
basically historic low at this point.
The corporate
sector is only paying 1.5 percent of GNP in
corporate
taxes, because you're able to book the profits
overseas,
keep them overseas at effectively almost 0
taxation.
And
we're told that the only thing we can do in
this country
is follow this curve down to oblivion, which
is the path
that I think we're on if we continue this
way.
And
that's the -- more or less the bipartisan
consensus.
So
the Republicans would like to slash further.
Right now
we're collecting about 15 percent of GDP in
federal
taxation.
Maybe we get back to 17 percent of GDP with
the full business cycle recovery -- if such
a concept is
even meaningful anymore.
The Republican plans are more
or less to try to stabilize at 15 percent
of GDP.
You
just about what that means from a budgetary
point of
view.
The military right now is 5.
Social Security is 5.
Medicare, Medicaid is 5.
That's 15 already.
Interest on the debt is going to be 2 to 3.
That makes
17 and a half or 18 percent.
And all of this stuff which
I call "government," that's all on borrowed
money.
And
they just want to close down as much of that
as possible.
The Democrats basically disagree with that
-- kind of.
But mainly Democrats are the party of hand
wringers.
We
know we need to cut; it's terrible.
And to wring their
hands and to agree on the cuts.
And the Republicans are
the happy party.
We're going to cut.
We're going to cut
six departments, I can't remember what they
are.
[laughter] I know
it is -- whatever it is -- I don't care what
it is.
It
could be interior -- EPA -- fine.
Doesn't matter.
They
can't wait to solidify this income distribution.
That's
the whole goal right now on the Republican
side.
Make
this income inequality permanent.
Put it off bounds of
politics.
Institute a philosophy in this country of
Ayn Rand that not only do you have no right
to ask
anybody anything.
If a rich person gives something,
they're just demeaning and debasing themselves.
That's
Ayn Rand's philosophy.
Not only is there no right, not
only is there no responsibility, anything
that reeks of a
contribution of rich and powerful to the rest
of society
is a debasement of human values.
It's the worst
perversion of philosophy that I know that
is taken
seriously by a segment of the American population.
And
the Democrats don't have the fire power and
the stamina
to resist any of it.
Fundamentally, both political
parties are taking campaign contributions
from the top
one percent.
They're taking campaign contributions from
the major corporations now after Citizens
United.
Obama
doesn't have the guts to fight this.
I don't think he
wants to fight it necessarily, but he doesn't
have really
the guts or the stamina to fight it.
And the
Republicans -- are not only not fighting it,
this is the
whole purpose of the modern Republican party.
And so, I
think it's likely that we're going to continue
on this
kind of trajectory with a meaner and more
divided society
unless there's a break in the politics.
And, from a
programmatic level, I don't think it's too
complicated
what to do.
And my view is that we need to tax several
percent of GDP more in order to be able to
expand
spending on education, on early childhood
development, on
science and technology, on low carbon energy
systems.
On
other environmental protection.
We simply don't have the
means right now in government to be able to
fund basic
public goods and services and public investments
to
modernize the economy and to make sure that
we have an
inclusive society.
So I think we need probably about 4
percentage points of GDP more on the tax side
as a
minimum.
And I recommend a steep increase of top
marginal tax rates.
I recommend a wealth tax on very
high net worth -- above 5 million dollars
-- a 1 percent
net worth tax.
I recommend a -- basically removing the
deferral privileges of companies on their
offshore
profits.
Because this deferral is really an invitation
to serial amnesties, quote unquote, like the
one we're
working up to now that companies park their
profits
abroad, they wait a few years, they're able
to bring them
back, and we're essentially in a system where
we've
gutted the corporate tax rate.
And so, I think we should
claim at least a percentage point more in
corporate
taxation, at least a percentage point more
in income
taxation.
A percentage more in GDP in net worth
taxation.
And then, there are a handful of other taxes.
And simply enforcement of the tax laws, which
by itself
is estimated -- would yield at least another
percentage
point of GDP.
But I favor a carbon tax.
I favor a
financial transactions tax.
And I favor stiffer
enforcement of our tax code.
And the sum in my view
could realistically increase revenues by four
or five
percentage points of GDP and give us a chance
to avoid this decline
to what I think would be a society of locked-in
poverty,
inequality, and increasing unrest.
Now, neither
political party comes close to supporting
this.
Paul
Ryan officially declared my book un-American
and contrary
to the principles of the founding fathers.
I officially
declared him a hack politician who is on the
take of
David Koch and has a few scruples of any sort
that I've
been able to notice.
But, when you do the basic
arithmetic, either we eliminate the government
[clears throat] and we
slash programs for the poor -- which is the
Republican
platform.
Or we just gradually asphyxiate government,
which is the program of Obama, or we change
direction and
admit we can't pay for civilization with the
tax system
we have right now, which has a vote of one
so far.
But
actually more than one, because I think that
the Occupy
Wall Street movement is just on target, in
fact.
It may
be a little inchoate to the lazy pundits in
our
mainstream media.
They may not like painted faces.
They
may not like kids sleeping in tents.
But the truth of
the matter is the Occupy Movement is the first
social
response in this country to a reality that's
been
underway for 30 years, is serious, real, and
almost
completely unreflected in our politics.
My view
moreover, which I expressed in an op ed piece
in the
Sunday New York Times this past Sunday was
that the
Occupy Movement in the end is actually going
to prove to
be something real, more than a sleep in the
park.
It's
really going to prove to be a turning point.
Because
this picture -- while it's possible -- it's
dreadful.
And if it happens, America will be a lot worse
than any
of us wants to imagine as a society.
And I think there's
a growing realization of this -- though not
at all yet in
our public rhetoric.
Our political rhetoric is going to
go one more notch of slashing government probably
in the
next month or two with this super committee.
And par for
the course, it's being done behind closed
doors.
It's
just the antithesis of democracy -- in my
view of
everything that's going on.
And Obama's role is the
antithesis of leadership.
In my opinion.
And he's the
guy I support and voted for, mind you.
I just find him a
profound disappointment in how he's governing.
So, I
think there is a change that is possible,
vital, and I'll
just end with what it means if it comes about.
I
analogize our current situation to roughly
where we were 100
years ago.
Maybe fair to say 115 years ago, when the
Progressive Movement started in the United
States.
There
was a massive financial crisis, in fact in
1893, and
that's what brought Williams Jennings Bryant
to his
famous campaign message that we will not be
crucified on a
cross of gold.
And that was the beginning of the
Progressive Movement at the national level
in fact.
The
Progressives actually got their president
with Teddy
Roosevelt in -- after McKinley's assassination.
And
Roosevelt brought in an era of quite basic
reform that
tamed the financial industry, ended up creating
the Fed,
ended up creating the graduated income tax,
created fair
labor standards, strengthened antitrust legislation.
In
other words made -- made a lot of campaign
finance
reforms also, which -- all of which, like
an arms race, get
beaten by new loopholes and exceptions.
But in the early
years of the 20th century, played an important
role.
Woodrow Wilson was the second great Progressive
president.
And he presided over the introduction of a
number of the constitutional amendments.
Also the direct
election of senators, women's suffrage which
were all
part of the Progressive era.
I think this is like where
we are right now.
That movement took 20 years.
It's not
something that happens overnight.
It doesn't happen by a
walk in the park.
That's kind of an opening shot.
But I
think that this basic idea of the U.S. experiencing
fundamental socio-political change is real.
It's happened
three times in the last century.
The Progressive
Movement, the New Deal, and the 1960s.
I'm old enough to
have seen that one.
It was fun.
It was exciting.
It
was transformative.
It created civil rights and women's
rights.
It opened up society a lot.
It stuck with me.
And I think that that's what we're going to
begin to see
now.
Thanks very much.
[Applause].
>> Jeffrey: Please.
>> Male #1: Yeah, I guess it's a little weird.
I graduated from
high school the year before the peak in 1973.
>> Jeffrey: You're a 72 grad?
>>Male #1: Yeah
\>>Jeffrey: Yeah, me too.
>> Male #1: Okay.
But there's something -- I've had this really
strong impression ever since then, okay?
In that I
remember before getting out of high school
and perhaps it
was just I was a kid, but I used to listen
to politicians
debate stuff.
And I remember always being a Democrat.
I
remember thinking, "the Republicans are wrong,
but
they've got good arguments and what they're
saying is
reasonable, but they're just wrong."
People are
sometimes wrong, and they were consistently
wrong.
But
the farther I've gotten from sort of getting
out of high
school, the more and more when I look to that
side, I
say, "No, it's not that they're wrong, they're
just
disconnected from reality.
This stuff doesn't make
sense.
It's not what I'm being taught in school.
It's
not what's in the economics books.
It's not what's in
history books.
It's just totally disconnected from
reality."
And so, I guess the question I would ask here,
maybe
you've told us what happened, okay?
But why?
How has it
been possible.
And for goodness sakes, particularly here
when we talk about the median income, the
vast majority
of the American people are being totally screwed
by this
process.
And they're being told on a regular basis
that
they're being screwed.
They're being given this voodoo
economics.
Ridiculous economics.
Just insanity.
Laffer and everybody who came after him.
People who
were discredited the moment they came out.
And yet
the -- how can I say this -- the nonsensical
side of this
debate has been given tremendous respect and
tremendous
following ever since it began.
How in the world could
this have happened and how in the world do
we fight what
appears to be a completely irrational opposition?
>>Jeffrey: Yeah.
I think the -- I of course -- I put most of
the
blame on my side.
Maybe your side.
Which is the --
being so ineffective in responding to this.
And I would
say the Democrats got deeply corrupted in
this process.
So when I listen to them, I just see rot rather
than -- I
see something a little bit more rational,
but this
stimulus for example -- I thought that was
a preposterous
response to America's real challenges.
That's my side.
What are we packaging within four weeks -- a
900 billion
dollar mess -- and calling that policy?
And I said to
President Obama that that is the kind of thing
that gets
you in trouble, because you prove that you're
not a
steward of the American people's income.
It's just --
seems to be throwing money at problems.
And I argued
with my former colleague Larry Summers about
this.
I
disagree strongly with Paul Krugman about
this.
I think
the American people look at both sides and
they don't
understand either side.
The Republicans do seem to most
Americans to be absolutely antithetical to
their values
and the American people have it pretty well
pegged that
the Republican party is in the interest of
the rich and
the super rich.
And that's what the opinion surveys show
and the people get it.
But they don't find the Democrats
giving any answers.
And so, the sad part of this was it
was Clinton who brought Robert Rubin into
the White
House.
Why do we have to have the chairman of Goldman
Sachs come in as treasury secretary, lead
deregulation and
Glass-Steagall, and then go be Number 2City
Group.
On my
side, I don't know.
But that's inappropriate.
And so,
the Democrats are deeply tarnished.
Why you have a
financial crisis and Obama brings in Summers
who had
presided over this deregulation ten years
ago.
Brings in
everybody from the investment banks.
And every single
senior person in the White House has come
from an
investment bank basically.
That's my side.
So I don't
think that there's a great alternative on
offer right
now.
The Republicans, I agree with you -- it's
la la land
except they know what they're doing.
You know, they're
playing on a lot of ignorance and propaganda.
But this
whole anti-climate change thing for example
-- this is
David Koch, this is the oil industry, this
is Rupert
Murdock, this is sheer game.
This isn't a science
debate.
This is pure corporate propaganda -- period.
And they're good at it.
Because they got Roger Ailes at
Fox news who was Nixon's image maker.
You know, they
know how to do this kind of propaganda.
But our side
doesn't pick up.
My side.
And so, I have to say we got
one far right party and we got one center
right party.
And we've got the rest of America scratching
their heads
saying, "we don't like Washington, because
nobody's
representing us."
And that to my mind is the biggest
problem that -- you know, one side is really,
as I said
and I think you feel it the same way from
a moral point of
view -- completely un-understandable from
the perspective
of the most -- just modicum of decency, compassion,
basic
standards of values -- but the other side
is dishonest.
>>Male #1: If what you're saying is right,
I spent most of my
youth growing up overseas -- places like Ethiopia
during
revolutions, in Berlin when the Russians were
-- when the
government becomes that disconnected from
the people.
>> Jeffrey: And it's the right and the duty
of the people to
overturn it I think is the expression.
>> Male #1: There is only one thing that happens.
That is not
just people sitting in the park.
That is violence.
How
do we avoid that?
>> Jeffrey: My belief is that we've had -- I
hope we do.
I think
that the path that we're on is incredibly
dangerous.
And
I think the way we avoid it most likely is
to come
together around a set of proposals -- a platform
-- and
elect candidates that are going to carry that
out.
Our
structural problem is our politics on both
sides are on
the take.
And so, they're not offering the median
voter -- answer their happily duopoly on the
right of
keeping taxes low and slashing the rest of
government.
And that's kind of a safe comfortable incumbent
duopoly
that's not capturing the center.
I think a good
political entrepreneur who's clever could
capture the
center and capture power or political movement
could do
so.
The trick is big money can't do that and won't
do
that.
So my view, structurally, is that the solution
is,
"How do you run and win power without campaign
contributions?"
That to my mind is the real structural
challenge.
And my view is that it's possible these days.
If everyone's got their Androids.
If everyone's
tweeting.
If everyone is using YouTube and Facebook
and
every social network -- what we ought to do
is create a
platform that is the free campaign platform
-- the whole
social media platform.
You have a message, we'll retweet
it a million times in a day.
We'll make sure that videos
go viral.
We'll use Facebook network that's created
of a
nationwide friends of progressive ideas.
And enable
candidates to run without being on the take.
So that's
the revolution in campaign tactics that I
think could be
the breakthrough.
And then, if the platform is right,
then I think the rest can follow.
That's my strategy.
What do you think?
You ready?
>> Male #1: The Internet will set you free?
[laughter]
>> Jeffrey: Yes.
What do you think, guys?
You're Google.
[Applause].
>> Jeffrey: All right.
Can you guys make the right platform?
Google dot democracy.org?
All right.
We may tax you a
little bit more in the meantime also, but.
>> Male #2: Jeffrey, thank you for being here.
Thank you for
showing all these graphs.
You talked about your
admiration for the northern European countries
and Korea
in particular.
I don't know if you have the information here.
Will you be able to share some of those
graphs or --
>> Jeffrey: Yeah yeah.
Let me just show you one thing.
>> Male #2: Thank you.
>> Jeffrey: Yeah.
Actually, let me show you one thing.
We watch
a lot of TV in this country.
That's a little bit of a
distraction, but I think it actually is part
of our
distraction as well.
And the countries that I really
like are on the -- well, Italy, that's interesting.
[laughter]
But okay.
Let me show you the -- 
here's the
big difference of what happened in this country.
And
what happened in the rest of -- in other places.
So
basically, on the left-hand side is the change
--
arithmetic change -- of tax to GNP ratio compared
to 2008
minus 1965.
So it's the rise of the tax share of
national income.
And you can see that every high income
country has higher tax collections as a share
of GNP than
the mid 1960s except for one country.
That's us all the
way at the end.
We're the only country that resisted
raising revenues in this country.
That's the whole story that
I'm talking about.
We decided we're not going to pay for
government.
Everyone else pays for government.
And the
social democracies had very -- they were already
high and
they had big increases.
The result was that the United
States, for example, just in one category
-- social
spending -- this includes some of the transfer
programs.
We have the lowest level of social spending
of any
country.
This is basically Medicare/Medicaid, Social
Security, food stamps.
Sweden, Denmark, Belgium, Austria,
France -- they're 10 percentage points of
GDP higher than
we are.
The countries that I really admire most in
their
performance are Netherlands, Sweden, Finland
-- Norway,
Sweden, Finland, Denmark, Netherlands, Germany.
In
general, they're spending 10 percent of GDP
more than
the United States.
They're taxing about 15 percentage
points of GDP more than the United States,
because they
also don't run a budget deficit.
So they're spending a
lot and they're paying their way.
And life is really
nice in those countries by the way.
There's no poverty.
Everybody gets five or six weeks of paid vacation.
Of
course, it's paid within the context of their
jobs and
the state.
Everybody gets maternity and paternity leave
for several months.
Nobody gets super rich.
There's
some inherited wealth, but nobody gets super
rich.
That's the price that they pay.
That's what they want,
which is a society of high affluence, very
superb
education, very competitive industries, internationally
competitive industries, highly innovative.
They pay a
lot of government spending for the innovation.
So Sweden
invests very heavily of public funds as well
as having
companies like Ericsson and others that are
doing private
sector innovation.
And they paid for it basically by --
our taxes are, right now, 27 percent of GDP.
In the normal
time before 2008 were our taxes were about
30 percent of
GDP.
Sweden, Denmark, Norway, Finland, Netherlands
about 45
percent of GDP.
It's a whole different environment.
The
main difference by the way is that in those
countries
there's a lot of support for families.
There's day care.
There's maternity leave.
There's help for low skilled
households.
There's early childhood development support.
There's more investment for poor children
in schooling.
They don't let anyone fall away.
And the result is
evident when you live there as I have in Sweden
or when
you visit, which is infrastructure is very
well
maintained, education levels are uniformly
high, there
are no pockets of poverty and there's very
high social
mobility.
Whereas, by the way the other shocking thing
about the United States -- let me show you
one more
graph.
I'm going to have to stop, also, and I know
you do
as well.
This is a graph showing the correlation of
parental educational attainment and children's
educational attainment in the OECD countries.
So a high
correlation means of course highly educated
parents raise
children who end up with high educational
attainment.
Low education parents end up the opposite.
The countries
over on the left with the lowest correlation
or as
shorthand very high educational mobility
intergenerationally -- Finland, Iceland, Norway,
Canada.
The United States actually has the highest
intergenerational correlation at this point.
So we pride
ourselves as being very highly socially mobile.
But if
you're born to a family where your parents
don't have
a high school degree the chance that you're
going to
graduate Bachelor's degree in this country,
probably under
10%.
You just can't make it.
The combination of
the poverty, the lack of social support, the
neighborhood
factors, the intra-familial factors.
The high tuition
rates.
So this is why we're ending up really as the
most
stratified of all of these countries.
Because we don't
invest in any of this equalization.
And that I think is
going to be our killer.
The data just came out -- if
you're a Hispanic young man in this country
-- 25 to
29 -- only 11 percent have a Bachelor's degree.
African-American young man -- 25 to 29 -- 16
percent.
In
this society, in a world economy, what kind
of incomes,
jobs, life prospects does that mean?
Very poor.
Very
unstable.
Very erratic.
And you know?
Some people say
that's fine.
But I think what it's going to mean for the
corrosion of our society is extremely serious.
And I
think the process is already begun.
And it wouldn't take
a revolution to correct this.
It would just take a few
percent of GDP to correct it.
That's the beauty of it.
And the question is, "are we going to wait
till there is
an explosion or are we actually going to correct
it?"
I
was reading last night about the Bonus Army
in the Great
Depression when the veterans were demanding
some help in
1932.
Hoover sent in the troops.
And many people were
killed and wounded.
And then, in 1933, they struck again
and Roosevelt sent Eleanor Roosevelt to the
camp.
And
she discussed and negotiated with them and
they made a
program so that the veterans would get jobs
in the CCC,
the Civilian Conservation Corps.
And the line that came
out of it was "Hoover sent the troops and
Roosevelt sent
his wife".
And it's the kind of society we want.
If
we're clearing the parks with police with
batons, we're
going to end up in the Hoover world.
And, if we send the
Eleanor Roosevelts of the world and try to
figure out
something, we're going to end up with some
decency.
Thank you very much.
[Applause]
