The Coffee Klatch with Robert Reich

Friends,

Welcome back to my Saturday coffee klatch with Heather Lofthouse (executive director of Inequality Media Civic Action, and my former student), where we examine the lows and even lowers of the preceding week. Today we talk about:

— Trump’s indictment, and what it really means.

— Starbucks’ anti-labor strategy, and what we should do about it.

— The Gwyneth Paltrow case, and why it’s gotten so much attention.

— My course, starting next Friday right here on this Substack.

So grab a cup, pull up a chair, and join us. Also take our poll:

This is a public episode. If you'd like to discuss this with other subscribers or get access to bonus episodes, visit robertreich.substack.com/subscribe

Friends,

Welcome back to my Saturday coffee klatch with Heather Lofthouse (executive director of Inequality Media Civic Action, and my former student), where we talk about the lows and the absurdities of the week. So grab a cup and pull up a chair.

Today, we look at:

— What really happened to Silicon Valley and the other small and medium-sized banks that got bailed out.

— Whether this signals the beginning of a period of financial tumult and chaos on Wall Street, in the stock and bond markets, and for global banks.

— Whether the Fed is likely to raise interest rates next Wednesday.

— What all this means for the bankers and for average people.

What do you think?

This is a public episode. If you'd like to discuss this with other subscribers or get access to bonus episodes, visit robertreich.substack.com/subscribe

Welcome back to today’s coffee klatch, where Heather Lofthouse (executive director of Inequality Media Civic Action and my former student) and I delve into the week’s highs and lows. So grab a cup, pull up a chair, and take our poll (if you wish).

Today’s topics:

— Friday’s jobs report, and why the big news is wages.

— Thursday’s Biden budget, and why the big news is that it’s all a theatrical production designed to counter House Republicans.

— Why Wall Street now regards good economic news as bad news. And what all this might mean for the 2024 presidential election.

— Plus, our special guest ChatGPT!

This is a public episode. If you'd like to discuss this with other subscribers or get access to bonus episodes, visit robertreich.substack.com/subscribe

Friends,

Welcome back to our Saturday coffee klatch with Heather Lofthouse (Executive Director of Inequality Media Civic Action, and my former student), as we plumb the depths of the past week. Grab a cup, pull up a chair, take our poll (if you wish), and join us.

Today we explore:

— Alex Murdaugh’s sentence for murder, and why the country is so fixated on this case.

— The revolt of the citizens of East Palestine, Ohio, against the Norfolk Southern Railway, and how they exemplify what’s gone wrong in America.

— The Conservative Political Action Coalition’s annual blowout, and why the GOP is coming apart.

— Trump’s outrage with Rupert Murdoch for conceding that Trump has been pushing a Big Lie, and what Murdoch’s admission reveals about his non-news organization.

— And more.

This is a public episode. If you'd like to discuss this with other subscribers or get access to bonus episodes, visit robertreich.substack.com/subscribe

Friends,

For nearly two decades, major corporations have touted principles known as E.S.G. (short for environmental, social, and governance factors), ostensibly by focusing their businesses on these concerns as well as on profits.

But now Republicans are taking aim at this approach, calling it “woke capitalism” and using it to demonstrate that Democrats and progressives are trying to impose their views on the rest of society.

In other words, the fight over E.S.G. is extending America’s culture war into the C-suites of big American corporations.

On Wednesday, Senate Republicans, helped by two Democratic defectors, voted to block a Labor Department rule allowing retirement plan managers to include E.S.G. considerations in their investment plans. The vote is likely to draw President Biden’s first veto.

Republicans are right about E.S.G. — but for the wrong reason.  

The problem with E.S.G. isn’t woke capitalism. It’s corporate capitalism. Corporate money has corrupted American politics so much that our democracy cannot effectively deal with environmental and social concerns.

CEOs and pension fund managers who tout their records on E.S.G. are engaged in a kind of social greenwashing — designed to burnish their brands and attract investors (including retirees) who want to believe they’re doing good while they’re also doing well.  

But most of this is baloney. Investors don’t want to do good at the expense of doing well. They’re unwilling to sacrifice shareholder returns to advance their environmental and social values. They want high returns and they want environmental and social goals. But they can’t have both. They’d do more good by donating to nonprofits seeking to protect the environment and advance the social causes in which they believe.

Corporations and institutional investors won’t deviate from maximizing short-term profits and shareholder returns unless they are required to do so by law. And even then, only when the penalty for violating the law multiplied by the probability of getting caught is higher than the profits from continuing with the illegality.

When I was secretary of labor, big corporations would violate laws on worker safety, wages and hours, and pensions whenever doing so was cheaper than obeying the law. And they’d fight like hell against such laws to begin with, all the while telling the public what wonderful citizens they were.

The soothing corporate and Wall Street talk about E.S.G. is designed to forestall such laws by creating the false impression that corporations are already doing what needs to be done for the environment or social issues, so there’s no need for more laws or regulations.

In 2019, the Business Roundtable — one of Washington’s most prestigious corporate groups — issued a widely publicized statement expressing “a fundamental commitment” to the wellbeing of “all of our stakeholders” (emphasis in the original), including employees, communities, and the environment. The statement was widely hailed as marking a new era of E.S.G.

Since then, the Roundtable and its members have issued jejune statements about all they’ve done to reverse climate change and alleviate poverty.

Not incidentally, these were priorities in President Biden’s “American Families Plan” and “Inflation Reduction Act.” But the Business Roundtable didn’t lobby for these bills. It lobbied against them. Hypocrisy? Only if you believed the Roundtable rubbish about corporate social responsibility and E.S.G. in the first place.

The pressures on companies to maximize their profits and share values — social responsibility and E.S.G. be damned — are coming from shareholders, top executives (whose pay is linked to stock performance), and retirement plan managers, even those who tout their commitment to E.S.G.

It’s tempting to chalk this up to “greed,” but neither corporations nor retirement plans are capable of such emotions. They aren’t people, no matter what the Supreme Court says. They’re bundles of contracts. The specific people who enter those contracts on behalf of corporations, shareholders, and retirees have no interest or expertise in the environment or in any particular social issues. They’re simply doing what they understand to be their jobs — maximizing shareholder value.

If we want these transactions to be better aligned with public needs rather than private profits, laws must demand this, and penalties for violating laws must be increased. Corporate taxes must rise to fund public investments in non-fossil fuels and social safety nets. Regulations must be strengthened to protect the public.

But laws and regulations won’t do any of this if corporations continue to spend vast sums on politics.

The most telling trends over the last three decades have been the growing share of the economy going into corporate profits — generating ever-greater compensation packages for top executives and ever-higher payouts for investors — and the declining share going to most Americans as wages and salaries.

Much of the reason is the vast increases in corporate and Wall Street money flowing into the campaigns of lawmakers who cut corporate taxes, enact corporate subsidies, and block or dilute regulations.

The divisive blather over E.S.G. is simply masking these trends.

The most socially responsible action pension plans and corporations can take to allay environmental and social problems is to refrain from putting money into politics and to support campaign finance reform.

What do you think?

This is a public episode. If you'd like to discuss this with other subscribers or get access to bonus episodes, visit robertreich.substack.com/subscribe

Friends,

After Scott Adams, the creator of “Dilbert,” called Black people a “hate group” and said, “I don’t want to have anything to do with them” and that white people should “get the hell away from Black people,” media outlets have dropped his comic strip.

In response, last Sunday Twitter chief Elon Musk blasted the media as being “racist against whites and Asians.” He offered no criticism of Adams’s comments.

Later, Musk agreed with a tweet that said “Adams’ comments weren’t good” but “there’s an element of truth” to them. Musk then suggested that media organizations promote a “false narrative” by giving more coverage to unarmed Black victims of police violence than they do to unarmed white victims of police violence.

Since Musk took over Twitter in October, the platform has seen a spike in virulently racist slurs. In November, Musk met with leaders of civil rights groups to assure them that he would not reinstate banned Twitter accounts until he established a clear process for doing so, and that representatives from civil rights groups would be included on a content moderation council to advise Twitter on these policies.

But Musk never formed the content moderation council. Instead, he reinstated numerous banned accounts, including those of neo-Nazis and others previously banned for hate speech.

Meanwhile, the public is being swamped with Musk tweets. When a tweet that he posted during the Super Bowl failed to achieve as much engagement as a tweet from President Joe Biden, Musk demanded that Twitter staff change its algorithm to artificially inflate Musk’s tweets by a factor of 1,000. Many people who have not chosen to follow Musk are being served his tweets in their feed through the “For you” tab of the app’s homepage.

In sum, the richest person in the world used part of his fortune to buy one of the world’s largest media platforms, then reinstated previously banned neo-Nazis and peddlers of hate speech, then allegedly changed its algorithms to make his posts into the platform’s most popular, and is now defending a racist cartoonist and criticizing the media as being racist against white people.

So today’s Office Hours question (and poll): What, if anything, should be done about this? (As usual, I’ll chime in later today.)

This is a public episode. If you'd like to discuss this with other subscribers or get access to bonus episodes, visit robertreich.substack.com/subscribe

Friends,

Artificial intelligence (AI) is finally hitting the economy and society big time. Bing’s chatbot (Microsoft plans a wide release soon) is capable of long, open-ended text conversations on virtually any topic.

It’s caused a Times columnist to become “deeply unsettled, even frightened.” Google engineer Blake Lemoine was fired after claiming that the firm’s AI model, LaMDA, is “sentient.”

It’s causing professors like me to wonder how to distinguish between student writing on exams and AI writing.

It’s causing people who track online misinformation to worry it will undermine democracy. “This is going to be the most powerful tool for spreading misinformation that has ever been on the internet,” warned Gordon Crovitz, co-chief executive of NewsGuard, which tracks online misinformation.

It’s causing philosophers and biologists to fret that it will eventually destroy human beings and take over the world (Hal? You still there?).

But one aspect we’re not talking about enough is AI’s effect on work.

We all know what happened when complex machines first began taking over jobs. Then mechanization replaced skilled artisans. Then automation replaced repetitive jobs that could be put into software code. Numerically controlled machine tools and robotics replaced assembly lines. More recently, big data processing has replaced much analytic work.

Now comes AI — which will replace almost all professional work.

At every stage, productivity (output per worker) has increased dramatically, so fewer workers have been needed to accomplish what came before. This has reduced the bargaining power of less-skilled workers to obtain high wages, while fueling the compensation of people who produce the labor-replacing technologies.

We’re now approaching an inflection point when the financial returns to AI’s producers are heading into the stratosphere, even as professional jobs disappear.

Wall Street is going nuts over AI. Venture capitalists are pouring hundreds of billions into it, driving up startup valuations. Microsoft’s rally on Bing pushed its market capitalization to above $2 trillion. Alphabet’s stock is expected to soar more than 20 percent on its AI investments.

But after AI takes over almost all remaining jobs (including those of the venture capitalists who finance AI and the engineers who design it), what exactly will human beings be doing to make money?

Or to put the matter more baldly, who will be able to afford any of the wondrous goods and services powered by AI if we no longer have incomes?

My prediction: It will be the high-level professional class, including top business executives and the wizards of finance, who push for the most obvious solution: A guaranteed universal basic minimum income for everyone, financed by a tax on AI.

A universal basic income could be a potential solution to ensure that individuals have a basic income to support themselves and their families. UBI is a system in which every citizen or resident of a country receives a regular, unconditional sum of money from the government, regardless of their employment status. The goal of UBI is to provide individuals with enough income to meet their basic needs, such as food, shelter, and health care.

(The last paragraph, above, was generated entirely by ChatGPT. The rest of this letter came from me. Promise.)

This is a public episode. If you'd like to discuss this with other subscribers or get access to bonus episodes, visit robertreich.substack.com/subscribe

Welcome back to our Saturday coffee klatch, where Heather Lofthouse (executive director of Inequality Media Civic Action, and my former student) and I examine the highlights and lowlights of the week.

Today we look into:

— Kevin McCarthy’s decision to give Fox News’s Tucker Carlson exclusive access to 40 hours of surveillance video from January 6, 2021. Is this a way for House Republicans to plant a “false flag” narrative about what happened on that fateful day?

— Two dangerous illustrations of corporations off the rails — the Norfolk Southern Railway derailment, courtesy of the Trump administration’s decision to trash proposed safety rules, and a Nebraska meatpacker that’s been hiring 13-year-olds to do hazardous work. So why do Republicans continue to demand “deregulation”?

— Yesterday’s one-year anniversary of Putin’s invasion of Ukraine, and Biden’s historic (and dangerous) visit to Kyiv last Monday. Why did Biden do it? What’s his game plan from here onward?

— Special Prosecutor Jack Smith subpoenas Ivanka and Jared to testify. Does this mean the Justice Department’s grand jury is on a fast track to prosecuting Trump?

— Britain’s experiment with a four-day workweek. A good idea?

And some final thoughts about President Jimmy Carter.

Please grab a cup, pull up a chair, and take our poll.

This is a public episode. If you'd like to discuss this with other subscribers or get access to bonus episodes, visit robertreich.substack.com/subscribe

Friends,

The two men most likely to square off for the presidency of the United States next Election Day have held notably different conversations with Ukrainian President Volodymyr Zelensky.

On July 25, 2019, then President Donald Trump spoke with Zelensky from the White House residence, ostensibly to congratulate Zelensky on his election.

During that conversation, Trump reminded Zelensky that “the United States has been very good to Ukraine.”

Trump knew full well that Zelensky was desperate for some demonstration of support from the American president. Some 13,000 of Zelensky’s people already had been killed in the five-year conflict between Russian-backed separatists and government forces in Ukraine. Nonetheless, just days before phoning Zelensky, Trump froze nearly $400 million of U.S. aid to Ukraine. 

Trump continued:

“I would like you to do us a favor, though, because our country has been through a lot and Ukraine knows a lot about it…. There’s a lot of talk about Biden’s son, that Biden stopped the prosecution, and a lot of people want to find out about that so whatever you can do with the attorney general would be great. Biden went around bragging that he stopped the prosecution, so if you can look into it …. It sounds horrible to me.… I will have Mr. Giuliani give you a call and I am also going to have Attorney General Barr call and we will get to the bottom of it.”

Zelensky did not want to offend Trump but did not commit to helping Trump dig up dirt on the son of the person most likely to oppose Trump in the 2020 election.

Fast forward. On February 20, 2023, the first anniversary of the Russian invasion of Ukraine, Joe Biden spoke directly with Zelensky in Kyiv, noting that “Kyiv stands. And Ukraine stands. Democracy stands.”

For Trump, Ukraine was a pawn to get dirt on Biden before the 2020 election.

For Biden, Ukraine is a critical ally in America’s fight against global tyranny.

Trump’s goal in speaking with Zelensky in 2019 was the aggrandizement of Donald Trump. That was to be expected. As president, Trump had no agenda except to feed his monstrous ego. Trump described his 2019 call with Zelensky as “perfect” because Trump saw nothing wrong in suggesting that continuing U.S. support for Ukraine should hinge on Zelensky’s helping him win reelection.

Yet that phone call posed a direct challenge to American democracy. The use of presidential power to solicit a foreign nation’s help in getting reelected is not only barred by law and the Constitution; it undermines public trust in our system of self-government.

Biden’s goal in speaking with Zelensky in Kyiv was the opposite — to strengthen democracy against authoritarianism. As Biden explained, he made the dangerous trip because “I thought it was critical that there not be any doubt, none whatsoever, about U.S. support for Ukraine in the war. It’s not just about freedom in Ukraine. It’s about freedom of democracy at large.”

As Biden said the next day in Warsaw, Putin’s invasion of Ukraine had tested “all democracies.” Over the last year “the democracies of the world have grown stronger, not weaker. But the autocrats of the world have grown weaker, not stronger.”

For Biden, American policy — both foreign and domestic — should be premised on protecting democracy from authoritarian forces seeking to undermine it, whether that force is Vladimir Putin or Donald Trump.  

Biden’s speech in Warsaw came just hours after Putin gave his own address in Moscow. Putin characterized the war in Ukraine as an existential struggle against the West, which he claimed started the war.

In response, Biden charged that “Putin chose this war,” and that “every day the war continues is his choice. "  

By traveling to Kyiv, the oldest president in American history also demonstrated the stamina and grit of someone decades younger. Biden departed Andrews Air Force Base outside Washington D.C. early Sunday morning, landed in Poland, took a 10-hour train ride from the Polish border, and arrived in Kyiv-Pasazhyrsky station roughly 24 hours after leaving Washington.

He then met with Zelensky at Mariinsky Palace, joined him in laying a wreath at the Wall of Remembrance at St. Michael’s Golden-Domed Monastery, and stopped by the U.S. Embassy to meet with staff before heading back to the Polish border by train and then on to Warsaw.

The undertaking required courage and determination. Biden is the first president since Abraham Lincoln to venture into a war zone not under the control of American forces.

Donald Trump’s notorious conversation with Zelensky in 2019 required neither stamina, nor grit, nor courage. It did show determination — but not to protect democracy. It showed Trump’s fanatical resolve to remain in power, democracy be damned.    

This is a public episode. If you'd like to discuss this with other subscribers or get access to bonus episodes, visit robertreich.substack.com/subscribe

Friends,

Welcome back to our Saturday coffee klatch where Heather Lofthouse (executive director of Inequality Media Civic Action, and my former student) and I discuss the highlights and lowlights of the week.

Today we focus on:

— The likely indictment of Donald Trump

— Hypocrisy at Fox News

— Why Nikki Haley doesn’t stand a chance

— Senator John Fetterman’s clinical depression

— Norfolk Southern Railway’s lobbying

— Why the Fed thinks great economic news is awful

— The U.S. Department of Labor

Please grab a cup, pull up a chair, and take our poll:

Thank you to Janet Harsbberger for sending us her personal “visual” when she listens to the klatch, a painting done by her late sister Carol Baumann.

This is a public episode. If you'd like to discuss this with other subscribers or get access to bonus episodes, visit robertreich.substack.com/subscribe