Robert Reich: Poorest Are Most Vulnerable to Fiscal Cliff

Monday, 03 Dec 2012 10:48 AM

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America’s poorest will suffer the most if a deal to steer the country away from the fiscal cliff puts too much emphasis on cutting spending, said Robert Reich, former Labor Secretary under Bill Clinton.

Lawmakers and the White House are currently negotiating ways to avoid the fiscal cliff, a combination of tax hikes and spending cuts due to converge at the same time at the end of this year.

The nonpartisan Congressional Budget Office has warned failure to avoid the cliff could tip the country into a recession next year if Congress fails to prevent both tax hikes and spending cuts from kicking in at the same time.

Editor's Note: I Wish I Were Wrong — Economist Laments Being Right. See Interview.

A compromise would most likely involve tax and spending reforms, but too much emphasis on cutting spending would crimp growth and hurt low-wage workers typically found in fast-food restaurants and at big retailers such as Wal-Mart, where organized movements and work stoppages are already under way to demand higher wages.

“Washington’s obsession with deficit reduction makes it all the more likely these workers will face continuing high unemployment — even higher if the nation succumbs to deficit hysteria,” Reich wrote on his blog.

“That’s because cutting government spending reduces overall demand, which hits low-wage workers hardest. They and their families are the biggest casualties of austerity economics.”

Many low-wage workers aren’t union members, but are organizing to protest what they see as low wages while executives reap more of the windfall.

Unionizing these workers would be difficult as unemployment rates are high and many would fear losing their jobs by risking joining unions.

Still, cuts to government spending that home in too much on programs that benefit the poor, such as food stamps and unemployment insurance, could widen and already large income divide.

“[I]f this nation is to reverse the scourge of widening inequality, Washington needs to start paying attention to them,” Reich wrote.

“And the rest of us should do everything we can to pressure Washington and big-box retailers and fast-food chains to raise their pay.”

Meanwhile, more and more households are relying on government assistance for food these days, with 13 percent of all American households receiving food stamps at some point in 2011, according to a new Census Bureau report.

Some 15 million households were on food stamps at least some point in 2011 compared with 13.6 million in 2010.

Oregon came in with the highest proportion of households on food stamps, at 18.9 percent, while Wyoming had the least at 5.9 percent.

Some 47.1 million people received food stamps in August of this year alone, according to U.S. Department of Agriculture data cited by CNNMoney.

Many policymakers have argued that too many are on the program and that cuts must ensue if the nation is to narrow gaping government deficits and create conditions ripe for growth and job creation again.

“Let’s put in place policies that are actually conducive to economic growth, and you don’t need 47 million Americans depending on someone else for their food,” said Rep. Jim Jordan, R-Ohio, according to The Plain Dealer.

“When you just step back and look at it from a cultural, societal standpoint, when one in seven Americans is dependent on someone else providing their food for them, that is just not healthy for our culture.”

Editor's Note: I Wish I Were Wrong — Economist Laments Being Right. See Interview.

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