Robert Reich: Democratic Victory Won't Change Economic Policies Affecting IT Workforce

By Allan Alter  |  Posted 11-08-2006

Robert Reich, who was secretary of labor under president Bill Clinton and is now a professor of public policy at the University of California, Berkeley, is one of the leading experts on economic policy in the Democratic Party. Executive Editor Allan Alter spoke to Reich the morning after the historic 2006 election and asked him what the Democratic victory will mean for business and the IT workforce. His answer: Expect little action on Capitol Hill, but plenty of talk from the Democrats as they prepare for the 2008 presidential election.

CIO Insight: What are the implications of last night's election for economic policy and regulation?

Reich: I don't think the direction of economic policy is going to change very much. The House Democrats will want to do such things as raise the minimum wage and use the bargaining leverage Medicare has to get drug prices down. But even there, I doubt they have the votes to override a presidential veto. We don't know yet what the situation is in the Senate, in terms of Democratic control. Generally speaking, I don't see any substantive change in fiscal policy. The alternative minimum tax is going to be high on the agenda for both Democrats and Republicans. There's no way to reduce that tax on the middle class without getting revenues elsewhere. So I think it's probably likely that there will be an attempt to roll back the Bush tax cuts, particularly those that provide the lion's share of benefits to the wealthy. But here too it's going to be very tough going, because the president will use his veto. It's very unlikely the Democrats will have enough votes to override that.

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Do you see any implications for education and the IT workforce?

There's no money in the budget for major increases in education or job training. Unless there is a concerted effort to reduce non-military discretionary spending in other areas, I don't see that even the Democrats will have the ability to create the budgetary room. And as you know, non-defense discretionary spending is the only place where conceivably, legally, money could come from for enlarging the Pell [college financial aid] grants, or providing more opportunities for post-secondary education. As long as we have the extraordinary expenses of the war in Iraq and the war in Afghanistan, an increasing entitlement budget, particularly in regard to Medicare, and larger and larger interest payments for the federal debt, we're in fiscal trouble.

It sounds like we will have a gridlock on Capitol Hill, given the vetoes you foresee. So what steps would you like to see the Democrats take on economic issues?

Well, I think the Democrats ought to lay out an agenda for the future. They ought to use these two years before the 2008 presidential election to make the case for why America's middle class does not need protectionism with regards to global trade, but does need the ability to adapt to new jobs and new industries. And adaptation requires better social insurance, better job training and education, and wider coverage, for example, for unemployment insurance which now reaches a much smaller proportion of the workforce than unemployment insurance reached thirty years ago, in terms of people who are laid off. Wage insurance, a new idea that I think is a good one. So if your next job pays less than your former job, you get, say, half the difference for six months, until you can reestablish yourself. That will help enable the workforce to get new jobs more quickly. On the minimum wage, Democrats want to raise it. It's popular. But it ought to be raised, and that raise ought to be linked to inflation. It ought to be indexed, so we don't have to keep revisiting the minimum wage issue every few years. The earned income tax credits ought to be expanded. That's a more efficient device than the minimum wage for insuring that low wage workers get to earn enough to get out of poverty.

So lay out an agenda, and take steps that will help workers, particularly lower wage workers, move from job to job and recover if they lose their employment.

That's right. Steps that make the overall labor force more flexible, and give more people an opportunity to get ahead. One of the most damning indictments of the economy over the past six years has been median wages have barely risen while the overall economy has grown quite considerably. This is not sustainable in a democracy. If people don't feel that they are sharing the gains of growth, they will fight those aspects of growth that jeopardize the stability of their jobs and neighborhoods. They will fight against trade. They will resist technological advances and changes. We can already see this happening. The Republican Party used to be, in recent years, a party of free trade. Many House Republicans have become protectionists.