"Most Americans Are Getting Poorer": Robert Reich on Inequality & the Failures of Corporate Democrats

Guests - Robert Reichformer labor secretary in the Clinton administration, academic and best-selling author. Earlier this month, Treasury Secretary Scott Bessent publicly attacked the former labor secretary under President Clinton, Robert Reich. Reich wrote in a post online that “Trump Treasury Secretary Scott Bessent said this week the K-shaped economy — the widening economic gap between the rich and the poor — is 'dead.' Hogwash. Not only is the K-shaped economy very much alive, even CEOs are admitting it’s a problem.” The treasury secretary went on to suggest the University of California, Berkeley should fire Reich. “There’s something in this administration,” says Reich. “It’s almost a kind of testosterone poisoning in which everybody has to be really nasty, put down everybody else.” Reich goes on to discuss economic inequality, pointing out that while inflation is on the rise, “most Americans are finding that their wages are stagnant … which means that most Americans are getting poorer.” Transcript NERMEEN SHAIKH: This is Democracy Now!, democracynow.org, The War and Peace Report. I’m Nermeen Shaikh. Earlier this week, Treasury Secretary Scott Bessent declared a new economic war against Iran, in what the White House described as “economic D-Day.” While Bessent’s focus this week has been on Iran and the bond market, earlier this month he publicly attacked our next guest, former Labor Secretary Robert Reich. The spat was over the rising price of Big Macs at McDonald’s and the state of the economy. It all began when Robert Reich posted this video online. ROBERT REICH: The Big Mac has a big problem. Robble! Robble! According to the CEO of McDonald’s, fast-food chains saw a double-digit dip in visits from lower- and middle-income customers in the first quarter of 2025. The reason? Customers can’t afford it. While the stock market is riding high and the Trump administration is slashing taxes for corporations and the rich, nothing is trickling down to everyday Americans. CHRIS KEMPCZINSKI: What we see is it’s really kind of a two-tier economy. If you’re upper-income, earning over $100,000, things are good. What we see with middle- and lower-income consumers is actually a different story. NERMEEN SHAIKH: That last voice was the CEO of McDonald’s, Chris Kempczinski. Well, Treasury Secretary Scott Bessent took issue with Robert Reich’s video and posted a message online that read, in part, quote, “McDonald’s problem is called Burger King, Professor.” Bessent went on to suggest the University of California, Berkeley should fire Reich. Bessent’s comment came shortly after he appeared on CNBC and said the economy is shifting. TREASURY SECRETARY SCOTT BESSENT: So, we are starting to see — you know, I got sick of hearing about this K-shaped economy. I can say here definitively the K-shaped economy is over. NERMEEN SHAIKH: Robert Reich joins us now. He’s professor emeritus of public policy at Berkeley University. He served as labor secretary in the Clinton administration from 1993 to 1997. His latest book is just out in paperback titled Coming Up Short: A Memoir of My America. His recent article for The Guardian is headlined “We are finally witnessing the decline of corporate Democrats.” Professor Reich, welcome back to Democracy Now! There are a number of things we want to talk about with you, but let’s discuss first this altercation with Treasury Secretary Scott Bessent. ROBERT REICH: Well, we can — you know, he has the — it’s not really an altercation. I’m a retired professor. I was — I was secretary of labor 30 years ago. He is the secretary of the Treasury. He has the power. And if he’s not willing to acknowledge that we have a K-shaped economy — which is a simple way of saying the rich are getting richer, the poor are getting poorer, wealth is going to the top, while almost no wealth is going downward — if he doesn’t say that and see that and understand that, well, frankly, that worries me. NERMEEN SHAIKH: And, Robert Reich, were you initially taken aback by Bessent responding to your video? ROBERT REICH: Well, I was taken aback by his nastiness. You know, there’s something in this administration. It’s almost a kind of testosterone poisoning in which everybody has to — has to be really nasty, put down everybody else. I think they’re maybe emulating the president, you know, their boss. They maybe want to just look and act tough. So, for Bessent to say Berkeley ought to fire me because I said we still have a K-shaped economy is silly. It’s just — it’s kind of adolescent boy, you know, locker room stuff that a secretary of the Treasury, presumably, you would expect a little bit more intelligence, a little bit more dignity, a little bit more reality. NERMEEN SHAIKH: And, Professor Reich, I mean, let’s talk about this K-shaped economy, the inequality that you’ve pointed to. In your recent Substack piece, you write, for example, and only one figure that I’m quoting is, quote, “The richest 1% holds more than half of the value of stocks listed [in American] stock exchanges; the richest 10% [own] 92%.” So, if you could talk about the significance of this, the value of stocks as opposed to the more common measurements of wealth or income distribution, and how these plain numbers can be disputed? ROBERT REICH: Well, I think this is very, very important, because a lot of the administration, particularly the president, thinks the stock market is the major indicator of the success of the economy. And it’s not. I mean, for years we’ve known that there is a big gap between the Wall Street and Main Street. And that gap is getting larger and larger and larger, because, again, you’ve got the top, the richest 1% of Americans owning almost half all of the shares of stock available in the United States, and you’ve got the richest 10% owning 92% of all the shares of stocks. So, if the stock market goes up, well, that’s nice, I guess, for the people who own shares of stock, but it doesn’t do anything for most Americans. And even if you throw in the 401(k)s and their — you know, their pensions and everything else that may be connected to the stock market, it’s only a very tiny portion of the stock market for most Americans. Most Americans rely on their wages. They don’t rely on capital gains. Most Americans are finding that their wages are stagnant. In fact, the most recent data we have show that inflation — that is, price increases — are rising faster than wages, which means that most Americans are getting poorer. When prices are going up faster than your paychecks, obviously, by — just mathematically, you’re getting poorer. And this is something that this administration, Scott Bessent and others, just don’t either want to admit or don’t want to see. And this is — this is really a huge deal, because I think the way you look at the economy indicates a lot about what you find in an economy. And if you’re only looking at the stock market and if you’re only looking at indications, the indicators that have nothing to do with average working people, you’re going to miss out on the big question, which is: How are average working people doing? And the answer to that big question is they’re doing lousy. NERMEEN SHAIKH: And so, could you speak, elaborate on what the cost-of-living crisis — you’ve written about this extensively, of course, the cost-of-living crisis here in the U.S., and you’ve pointed out some of the causes, more proximate: the Trump’s tariffs, as well as the ongoing war in Iran. ROBERT REICH: Well, the tariffs are obviously pushing up the costs of huge numbers of things. I mean, if we want a lot of new housing in the United States, for example, if you put a tariff on Canadian wood and Canadian wood products and lumber, you can see that the cost of housing is going to be up even higher. If you are running gigantic $40 trillion deficits, and you are, you know, having a war at the same time in the Middle East that is taking billions of dollars a day, you can see that it’s going to affect even mortgage rates that people have to pay. And it’s going to be — it’s going to affect auto loans. You know, there’s a — there’s a negative trickle-down effect from a lot of these policies that are affecting average working people. And this is — this is what’s the heart of this election. I mean, why are — why are Democrats winning, who are progressive Democrats, who call themselves socialists? Why are they winning? Because they are focusing in on these very practical questions of affordability and how — you know, at the kitchen table, how people simply are getting by. And Democrats — I’m happy to say, Democrats are doing that and are not paying attention to the corporate Democrats that Democrats used to pay attention to. NERMEEN SHAIKH: So, that is your piece in The Guardian, “We are finally witnessing the decline of corporate Democrats.” So, you say in the piece also that you witnessed the rise of the corporate Democrats starting in the 1980s, and then you also have some advice to progressive Democrats in the upcoming midterms. Let’s talk about that. ROBERT REICH: Well, what I saw in the early ’80s was the Democratic Party deciding that they would drink from the same trough, in terms of funding their elections, as the Republicans, because the Democrats thought — Tony Coelho is the congressman who was head of the Democratic Congressional Campaign Committee at the time. He thought that since Democrats had been in charge of the House of Representatives since 1955, he would be in charge forever, Democrats would be in charge forever. And therefore, why not make this pact with the Republicans and basically drink the corporate funds, drink from the same trough of corporate funding? Well, it was a pact, unfortunately, an unholy alliance, because it meant that in the '80s and the ’90s and the first decades of this century, the Democratic Party was much more dependent on corporate money than ever before. And in nature and in politics, the same rule holds: You don't bite the hands that feed you. And if you’re dependent on corporate money, you are not going to be as bold in saying, “We need Medicare for All. We need single-payer. We need childcare support. We need to take on these corporations in terms of no more monopolies. We’ve got to have really rough and tough antitrust enforcement.” These are the ways you bring costs down for average working people, and corporate Democrats didn’t want to do it. I think the Democrats now, because they are basically saying no to the corporate Democrats, more and more progressive Democrats are gaining ground. That’s why we are seeing the changes we are seeing. And one final point: By far the largest and most powerful force in politics today is anger at elites that are disregarding what average people need and want. And that takes the form of progressivism and populism. It takes the form in the Democratic Party of this great tide of mostly young progressives who are — who are really, really where the energy is in the Democratic Party. NERMEEN SHAIKH: And finally, we just have 30 seconds, Professor Reich. You’ve pointed out that the U.S. now owes $40 trillion in debt. You write, “Everyone has an opinion about why. But there’s one question you almost never hear asked: Who’s actually getting paid?” Who is getting paid? ROBERT REICH: Well, it’s going to the very wealthy. I mean, you know, the irony here is that 40 years ago, 50 years ago, the very wealthy in this country supported the federal government through their tax payments. Even under General Dwight Eisenhower, President Eisenhower, the marginal — top marginal income tax that were paid by the richest Americans was 91%. Well, after the Reagan tax cuts and the Bush tax cuts and the Trump tax cuts, what you find is that, no, the wealthy are not supporting the federal government with their taxes any longer. They’re supporting the federal government by lending the government money, and we, the rest of the country, are paying interest rates to the wealthy on that — NERMEEN SHAIKH: I’m sorry, Professor Reich, we’re going to have to leave it there, professor emeritus of public policy at the University of California, Berkeley, served as labor secretary in the Clinton administration. I’m Nermeen Shaikh. This is Democracy Now! Media Options