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Robert Reich on minimum wage and why capitalism needs saving

The United States is at war with itself, according to noted political economist and former Labor Secretary under President Clinton, Robert Reich.

In an interview with Yahoo Finance Editor-in-Chief Andy Serwer before a live audience at LiveTalksLA, Reich lays out a bleak picture of the current state of American politics. That, of course, comes as little surprise to most Americans who have watched the disintegration of discourse, compromise and efficacy in Washington.

In his new book, “Saving Capitalism: For the Many, Not the Few”, Reich argues that the center of American politics has shifted so far to the right that the political economic structure is no longer working for the majority of Americans, but rather for the very wealthy.

One example of the shift, in Reich’s eyes, is the clash over raising the minimum wage, a policy he sees as an obvious winner for the economy.

“There’s ample evidence that you can raise the minimum wage and not cause job losses,” he said. “You put more money in more people’s pockets and they turn around, most of them, and they spend it – middle class, lower middle class and the working class – they spend the extra money they get and it creates more jobs.”

There has been intense debate about the level to which the minimum wage should be raised. In a recent essay on the morality of a $15 minimum wage, Reich writes,

“[The] moral case is that no one should be working full time and still remain in poverty. People who work full time are fulfilling their most basic social responsibility. As such, they should earn enough to live on. A full-time worker with two kids needs at least $30,135 this year to be safely out of poverty. That’s $15 an hour for a forty-hour workweek.”

In further defense of that argument, Reich points out that anything below that level ends up leading to taxpayer-funded government assistance in the form of food stamps, Medicaid, housing assistance and other public programs.

46.5 million Americans were on food stamps at a cost of $74 billion for 2014.

There are, of course, equally impassioned arguments against raising the minimum wage. The most vociferous opponents say the change would put so much pressure on small businesses, which create two-thirds of net new jobs in the United States, that it would actually lead to job losses.

A 2014 report from the non-partisan Congressional Budget Office found that increasing the minimum wage to $10.10 an hour, the level President Obama called for, could indeed lift 900,000 workers out of poverty, but could also cause the loss of some 500,000 jobs.

“Raising the minimum wage would increase family income for many low-wage workers, moving some of them out of poverty. But some jobs for low-wage workers would probably be eliminated and the income of those workers would fall substantially.”

That’s just one example of the war currently raging between the right and left, and in some cases, within the political parties themselves.

In his interview with Serwer, Reich says that while the debate about the minimum wage and income inequality are important, they pale in comparison to the bigger, more pressing issue of how the United States arrived at the current situation in which inequality is widening by the day. He believes the way to address these issues is to address the shift in American politics that has fundamentally changed the economy. But it won’t be easy to address those challenges.

Congressman Paul Ryan, if he is elected Speaker of the House, “isn’t going to have an easy time of it,” according to Reich, because of the deep divides that exist in Congress. But Reich does see the early signs of a broader change emerging in the form of a “populist upsurge” exemplified by the rapid rise of outsider candidates like Donald Trump and Bernie Sanders.

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