Hosted by Christina Ruffini and Sir Richard Dearlove
Guest
Robert Reich
Robert Reich is a former Labor Secretary under President Bill Clinton.
Episode Summary
In this episode of One Decision, hosts Christina Ruffini and former U.S. Defense Secretary Leon Panetta sit down with Robert Reich, former Labor Secretary under President Bill Clinton, to discuss his new book, Coming Up Short. Reich reflects on how decades of widening inequality, corporate money in politics, and missteps in the implementation of the North American Free Trade Agreement (NAFTA)—along with China’s entry into the World Trade Organization (WTO)—paved the way for Donald Trump’s rise. Reich and Panetta reflect on what both political parties missed, why Washington drifted into dysfunction, and how the coming wave of AI could deepen inequality unless new policies—from national service to profit-sharing—take hold.
Episode produced by Situation Room Studios. Original music composed and produced by Leo Sidran.
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Transcript
COLD OPEN
Reich: I mean we were there. We were the people who, among many others, failed to deal with the power structure in the way that it needed to be dealt with.
INTRODUCTION
Raffini: Hello and welcome to One Decision. I'm Christina Raffini joined by, of course, our cohost secretary Leon Panetta, and today we're speaking with professor Robert Reich. He served in three administrations including as secretary of labor under president Bill Clinton during which time Time Magazine named him one of the 10 most effective cabinet secretaries of the twentieth century. That's quite a moniker. We're gonna talk about his new book Coming Up Short about global economic policy, president Trump's tariff policies, and why he may or may not regret NAFTA. Maybe we'll slide in a little AI and some universal basic income while we're there. So professor, thanks for joining us. We really appreciate it and welcome to the podcast.
Reich: Well, you. I'm delighted to be here and especially with my old friend Leon Panetta. And Leon, it is always a true treat to be with you and to talk with you. And we've had some great discussions over the years.
Panetta: We really have, Bob. And it's a great pleasure for me to be with you and to be able to share this platform together, but more importantly, to share a great friendship. Bob Reich is one of the great patriots who I've had the honor of working with in many jobs, and he's somebody who's truly devoted to the American dream, which is something that I've had a chance to live. Bob's had a chance to live. And what we'd like to see happen is others having the same opportunity. So, Bob, great to be with you.
INTERVIEW
Raffini: Well, kind of in that thread, you've written this book, and it touches on that topic. And you talk a little bit about how the boomer generation didn't really set up people my age for economic success. It's a bit of an apology.
Reich: I think it's important to understand that Donald Trump is not by himself the source of a lot of the problems we're now dealing with, the crisis we're now in. I view him as the consequence, the culmination of years of not paying full attention to what we should have been paying full attention to. Now, I think we did a lot of great things. I'm very proud of what we accomplished in the Clinton administration. I'm very proud of what the Democrats did during the Obama administration. I think that the country has, in many ways, done well over the last forty or fifty years. But there was one or two areas that we did not pay enough attention to, in my humble opinion. One was inequality of income and wealth. The other, related to that, is the corruption that flows from money coming from big corporations and very wealthy individuals into our political system, which has increased dramatically over the past forty, fifty years, and I think has contributed to people's sense that the game is rigged against them and their vulnerability to a demagogue who came along and said, well, I will be your tribune, your voice. Leon and I both are old enough to remember how this all began. When I first got into politics, there was not all that money involved in politics. And at the same time, you know, the typical CEO, for example, wasn't earning vast multiples of what the typical worker was earning. There was not that degree of inequality. But what I witnessed and experienced is that widening inequality of income and wealth also correlates with widening inequality of power, which correlates with widening inequality of, well, the degree of corruption. We see payoffs that are essentially legalized bribery to many, many people in Washington, both Democrats and Republicans, that makes it more difficult for them to do their jobs for the people.
Raffini: You talk a lot in the book about NAFTA. You've talked a lot about regrets you have around NAFTA. How did NAFTA happen, and what do you wish you'd pushed back harder against? What were the issues with that, and how did that set us up to get kind of where we are economically?
Reich: We came into office, and NAFTA had already been the North American Free Trade Act had already been pretty much negotiated. The question was to me, and I leave to Bill Clinton and to a lot of the people around him, well, how do you make it work for average people? What can you do to build in labor safeguards? I made a lot of speeches to labor groups, and I was booed off the stage. But the real problem, it seems to me, in retrospect, was in this country, we never had a true reemployment system like other countries have. When you lose a job in many advanced, rich countries, there are systems in place that very quickly give you job search assistance, that give you job counseling, that give you job training. It's not complicated. In this country, we had something called trade adjustment assistance, which was hard to qualify for. Often, because somebody said, well, you didn't lose your job because of trade. You've lost your job for another reason. In other words, we didn't have a reemployment system that would ease the adjustment of the people who were getting shafted by NAFTA and Chinese accession to the World Trade Organization.
Raffini: Was that discussed, though? Was that something that you guys in the moment realized that you needed to work harder at, or was it more of an afterthought that you realized isn't quite working the way we thought it would?
Reich: Well, Leon was there and can talk from his point of view. You know, my memory is I was doing nothing but screaming about it and shouting and slamming doors and telling Bill Clinton, you know, a lot of people are gonna be in big trouble. And no. I think that we tried. We just didn't get there.
Panetta: You know, the reality was that, and it is the reality today, is that we really do live in a global world. Whatever Trump thinks, whatever he's trying to do, the bottom line is this is a global world. We are intertwined. We're intertwined by security, by finances, by communication, by work. We are living in a global world. I think NAFTA was kind of the first step to try to address it in our hemisphere. Inside the White House, I think because of Bob and because of others, there was a recognition that it would have an impact. It would have an impact and that it would hurt people. And so that's why it was really important to develop these strong programs to basically be able to help people who are caught in advice. And I thought the president really felt that putting money into trade adjustment assistance, putting money into those areas could help improve the transition. The problem is, frankly, that you try to develop that kind of medicine, but then you never pay attention to it. You never really stay on it. And the Congress really never stayed on it as well. And so you get through NAFTA, but the safety net that was supposed to be there never really was put in place effectively. And we paid a hell of a price for that, and that's why it became a target in later years is because, frankly, people said, you know, that all it did was hurt people, not help them.
Reich: And Chinese accession to the World Trade Organization even had a bigger impact.
Raffini: Talk to us a little bit about your take on this and why the China WTO first of all, how did that happen? Was it controversial at the time and why you think it was so impactful?
Reich: At the time, Leon, you were there, and you back me up or disagree with me. But at the time, there was a lot of feeling, I think it's fair to say, in the administration that if China were integrated better into the world trading system, we'd have a better chance of avoiding a dictatorship in China, that China would become more moderate, more inclined toward democracy. I think that was an illusion. Certainly, in retrospect, that was a total illusion. But it was a hope, and it seemed to dominate a lot of the discussions that I was involved in. But we didn't really see the tidal wave of inexpensive products of manufacturing goods coming from China that would displace so much of American manufacturing. The other part of the answer, to me at least, is that American manufacturing is not any longer going to produce a lot of good jobs for two big reasons. Number one, you've got technology that is basically automating almost all the jobs inside manufacturing. If you look at factories, the few remaining in the United States, numerically controlled machine tools are doing all the work. We don't have a lot of people along assembly lines. It's not labor intensive any longer in manufacturing. And secondly, you don't have labor unions. Labor unions were the key toward high wages in manufacturing. And, you know, in 1950s and 1960s, 35% of American workers in the private sector were unionized. Now it's down to 6%. If you have automation of your factories and you don't have unionized jobs, you're not going to really get very much by reviving American manufacturing.
Panetta: In order to make this work, you need pressure in a democracy. You need to have political pressure being brought. The easiest thing to do in Washington is what Trump is doing now, is signing decrees and saying things are going to happen. For Democratic and Republican presidents, passing legislation is always a great thing, or issuing a decree to get China into the WTO is a good thing. But the biggest problem is that to make things work, it requires that you kick ass. You've got to be willing to go in, to roll up your sleeves and make sure that it's working. And that's always much more politically difficult to do because you really got to take on people. And the failure to really enforce WTO, the failure to really make sure that we were putting the right pieces in place for what happened on NAFTA. All of that required some very tough leadership to be able to confront people, to challenge people, to challenge China, to actually make them do the right thing. And that's where we failed. And what happens is we then bear the consequences. And that's what Bob's book is about, is that we are now bearing consequences of our failure to exercise strong and tough leadership.
Reich: The word "our" in your sentence, Leon, is a very powerful word itself. I mean, we're talking about you, Leon Panetta, and me, Robert Reich. I mean, we were there. We were the people who, among many others, in my view, and I think, Leon, you just admitted it, failed to deal with the power structure in the way that it needed to be dealt with.
Raffini: Do you think looking at, you know, Clinton, Bush, Obama, Trump, do you think there was a way to hold China to account in the WTO better? With retrospective knowledge, is there something you think could have been effective over that timeline that wasn't done?
Reich: No. Probably not. I mean, I think realistically, in looking at why Trump, why a demagogue like Trump has gained the kind of authority and power he has to destroy, essentially destroy a lot of the democratic institutions, small d, that are so critical to the United States. I think you've got to look not only, Christina, at foreign policy, but also at domestic policy. But more specifically, you've got to look at what happened to the Democratic Party over this forty, fifty year period. The problem occurred in the seventies, eighties, and nineties, when, in my view, and this is just my reading, big money, big corporations, and also very wealthy individuals dominated the Democratic Party such that even antitrust law was relegated to the backwater. We saw monopolization become a big factor in the economy. It is now a huge factor. Labor unions became a tiny factor, in part because corporations were allowed to bash unions and destroy unions and fire people for trying to form unions. We also saw taxes and tax policy flip on its head. We used to have, even under Dwight Eisenhower, the highest marginal income tax rate was in the 90s. The richest people were paying at a marginal rate 90% of their income in taxes. Well, after the 1980s, we saw that the rich were paying less and less, a lower and lower tax rate, to the point where now we have a tax system which even Warren Buffett says is completely unfair. His secretary is paying much higher tax rate than even he is. And that was before the Trump tax cuts. To me, it's a sad tale because I think that there's nobody really representing the working class and the middle class, 70% of whom are working paycheck to paycheck. They have no savings. And the Democrats have turned their backs on the working class. The Republicans are just putting out cultural populism nonsense, you know, about immigrants and about the deep state and about transgender people. I mean, it's all calculated to be red meat to the working class who are confused and angry and upset about not being able to get ahead, even though they played by the rules. But the Democrats have not really been willing, in my view, to tell it like it is to get, you know, big money out of politics, for one thing.
Panetta: The thing that discourages me more than anything is that Democrats are basically running an anti-Trump campaign. Anything Trump does is wrong. But the American people are hungry for a party that can explain to them what is their vision for where this country ought to be. What kind of America do we want for the future? What kind of jobs? What kind of opportunities? What kind of things should we be advocating? And that's not there because they think you win by basically kicking the other party in the rear end. That's what politics have come down to.
TARIFFS AND TRADE
Raffini: I wanna ask about the tariffs, the way they've been rolled out, specifically the tariffs on countries like Canada and Mexico. The interesting thing about this is we talked about NAFTA. During Trump's first term, he renegotiated NAFTA into what is now called the USMCA. Part of that was I don't wanna say it was done with the blessing of auto unions, but they kind of brought some of the auto unions on board and said, like, let's do this in a way that works for Detroit. Right? Because Detroit was coming back from the big crash and it was doing well and they don't wanna screw it up. And so you have these US auto companies who, you know, parts of these trucks are made in Canada, parts of the trucks are made in Mexico. Sometimes an American produced car, quote unquote, will have crossed those borders multiple times in the process. This was a system that by most accounts was working for industry that was still functional, and then you get the tariffs. You know, Trump keeps saying other countries are gonna pay these tariffs. What is the theory if there is one behind why this could work, and why do you think it won't work?
Reich: I think there's a very simple theory here, and I think it's a simple truth. Number one, tariffs are taxes on American consumers, and they are regressive taxes because lower income people have to pay a higher proportion of their income in order to buy the stuff that they used to be able to buy without a tariff. But secondly, the arbitrariness and the capriciousness and the mercurial nature of setting these tariffs. Remember, Article one, Section eight says this is supposed to be Congress's authority setting the terms of trade. But Donald Trump has said right from the beginning, no, I have emergency powers wherever they came from because of what? Because of the trade deficit? I have emergency powers to set each of these tariffs, these consumer taxes, the import taxes, wherever I want. And, again, I think the underlying goal here is Donald Trump wants more and more power vis-à-vis every actor in the world. He wants every actor in the world to come and be a supplicant, to kiss his derriere, to be somebody who Donald Trump can dominate.
Raffini: I think they would argue it was a negotiating tactic. Right? They wanted to shake up the thing and get people to the table so that they could negotiate a better deal. Right?
Panetta: We negotiate a better deal for whom or for what? The problem is that they weren't interested in really trying to negotiate a deal. This was a power play by Trump to basically raise hell. He's been trying to put tariffs in place for a long time. It goes back a long way. And now he had the opportunity to do it, and he's doing it. And he's doing it as a power play, and it raises hell. They argue that that puts people in a negotiating position. The problem is the way our system works, what you do is you talk with these people before you send a torpedo at them. And you say, this is where I think we need to negotiate a deal. That's the way we usually deal with Mexico. It's usually the way we deal with Canada. It's usually the way we deal with other countries when it comes to trade, is we sit down and have a long discussion and negotiation over what would be the right policies to put in place. That's not what's happening here. He's basically said, I'm going to raise your tariffs 20%, 30%, 40%, 50%, and I'm going to do it by a certain date. He puts a gun at their head, and he expects them basically to capitulate. Some of them have capitulated, some have not. So, what's happening is it's raising hell with the American position in the world economy. It is undermining our position in the world economy. If we go abroad, there isn't a country abroad that understands why the hell he's doing this. It is not in the world of rational diplomacy that we are accustomed to.
Reich: A moment ago, you also alluded to letting our trading partners know in advance what you're going to do. Don't torpedo them. This is different. This is a matter of torpedoing for the sake of torpedoing. This is a matter of creating chaos for the sake of chaos. Machiavelli understood this. One of his principles in his, you know, his manual for the prince for gaining power was to be and act like a madman so nobody would know what you were going to do next. And everybody would be afraid of you because they didn't know what you're going to do next. That's exactly what Donald Trump is doing.
Raffini: But what can Congress do to reassert control over trade policy and isn't part of the problem that successive congresses, Republican and Democrat, have ceded so much power to the White House that now a lot of these policies are possible? If you were in congress right now, what would you do? What can you do?
Panetta: Don't look to congress to do it. The courts are probably the only check right now that is in terms of our constitutional system. It's the only check that is doing its job, trying to do its job. But even there, the Supreme Court basically is not something that's totally reliable in terms of whether or not they're gonna stand by the law in these cases. So we are at a time when very frankly, the president is unchecked.
Reich: Well, I think that Democrats face a very interesting dilemma right now because we're not in the same place we were last March, but we're in a very different place. We are much closer to an authoritarian takeover of the United States, and maybe the Democrats should not enable that. I think the question really is how the Democrats use the bargaining leverage that the public doesn't even know they have. For the public, the public, in general, doesn't even know there's a Democratic party. I mean, for all the, you know, the passivity and the quiet, I do think that the Democrats have an opportunity here to be heard for the first time in eight months.
AUTOMATION, AI, AND THE FUTURE OF WORK
Raffini: When you look at the current environment, you know, we talked a little bit about the fact that you can say you're gonna reassure manufacturing all you want, but those jobs don't exist anymore because they're automated. My job is now getting automated. All of our jobs are now getting automated. Is that a good thing or a bad thing for inequality, do you think, the rise of AI in the workforce?
Reich: The way I have categorized jobs is you have making jobs that is manufacturing. You've got thinking jobs that is mostly professional jobs, lawyers and doctors and accountants and so on, and journalists. And you have kind of personal service, caring jobs. And I think that the making jobs have been automated already. AI is going to automate a lot of thinking jobs, leaving a lot of Americans with the caring jobs everything from nursing to childcare to teaching to you name it. But it's personal service. It's personal. It has to have a human at the other side, or there can be a lot of damage done. The question is, how do you make those caring jobs worth more money than they now are? You can't run an economy based upon the kind of wages that caring jobs now summon. And so I think that we are going to see a movement toward universal basic income.
Panetta: I haven't given up on creating jobs for people as a way to earn a living. I just think that we do need to build an economy with the jobs of the twenty first century, and I don't think we ought to walk away from that responsibility. Yes, AI is going to be out there. But the reality is like every invention in our history, I think we've always been able to come up with having to develop the skills that you need in that kind of world. And I think that's what we ought to be focused on. How do we develop the jobs of the 21st century so that young people will have the opportunity to be able to have a job and to be able to have the ability to enjoy the American dream that both of us, all of us, I think, are concerned about. And so I'm not prepared to give up on that. Look, AI is moving fast, but at the same time, I'm still not convinced that AI is going to be able to succeed at replicating human thinking. I really am not.
Reich: I teach in a university where computer science is a big deal, and we have a lot of graduate students in computer science. They are not getting jobs. Now, this is real. I mean, we can talk at the theoretical level, but I want to just point out that AI is already changing the job market dramatically for a lot of these graduate school professional people who never expected that they would be automated out of jobs.
Panetta: I really do think that a future president ought to think long and hard about a national service system for our country, that we ought to be able to provide jobs to young people and require service, whether it's in conservation, whether it's healthcare, whether it's education, whether it's other areas, whether it's in the military, and then provide a GI Bill of Rights that gives them the money they need in order to get an education. I think that's the way to ultimately approach the issue of getting young people to be able to be on track to developing a career for the future and supporting that. I think it would be good for the country to be able to do that. But it's going to take a while, and very frankly, it's going to require a president who really has the creativity and innovation and the ability to convince the American people that there can be a new way to approach the American dream.
Raffini: If you were back in charge and you could initiate one policy that you think would be the most effective in either undoing some of the things you say might have been a mistake or just improving economic equality and the standard of living for average Americans, is there one policy you think could have the most impact on everyday lives?
Reich: Well, besides education and training, which we keep on coming back to, I think profit sharing is a big deal. It used to be a bigger deal. Sears Roebuck, at the turn of the last century, actually was the vanguard of companies that were sharing their profits with their workers. But over the last twenty years, the only companies sharing profits are sharing power with the high-tech, and they're sharing profits with their talent, so called, their high talent. No. We've gotta get back to the notion that if a company is doing well, all of its workers should be doing well as well.
Raffini: Secretary Panetta, secretary and professor Robert Reich, thank you both so much for joining us. That does it for this week's episode of One Decision. For more conversations with leading decision makers and thinkers, check out onedecision.com and our YouTube page where you'll find a lot of additional videos, commentaries, and explainers. I'm Christina Raffini. From the whole team here, thanks so much for listening and we'll catch you next week.
