Millennials Are Not Post-Racial: An Ivy League Education

Jun 24, 2015Riley Jones

“I don’t see race” is the oft-heard refrain of many Millennial men and women. Surveys have shown that people of this generation believe themselves to be more tolerant of racial differences than older Americans. These are young people who see the progress America has made in addressing racial disparities as irreversible.

“I don’t see race” is the oft-heard refrain of many Millennial men and women. Surveys have shown that people of this generation believe themselves to be more tolerant of racial differences than older Americans. These are young people who see the progress America has made in addressing racial disparities as irreversible. This sense of finality stems from a belief—proliferated in the 1980s and 1990s—that federal, state, and local governments have made a concerted effort , through measures including the Civil Rights Act, the Voting Rights Act, and affirmative action, to eliminate racial injustice in our society. To some, the election of a Black president in 2008 further symbolized a national transcendence of past prejudices. Because of these assumptions, many Millennials have failed to critically analyze the condition of African-Americans, who continue to face discrimination and inequality. This failure, in turn, has led to a dearth of substantive policy solutions to change the structural foundations of a system that has underserved too many for much too long.

As a low-income Black student at Columbia University from the South Side of Chicago, I am well assured that the breadth and depth of my experiences are not immediately relevant when compared to the experiences of my peers from more affluent places. Discussing Greece based off a literary interpretation is daunting when a majority of the class has seen the islands firsthand. However, I am certain that I belong here just as much as the next person. The influx in recent years of low-income students, most of whom happen to be racial minorities, in elite and selective college environments has provided for a mixture of class and race that has never been experienced on so massive a scale. From 2000 to 2011, the National Center for Education Statistics has measured a 12 and 14 percent increase in college enrollment for Black and Hispanic students, respectively. The wealth of difference between these groups has catalyzed the belief, in Millennial circles, that this is a post-racial generation.

There is a tendency, in the logic of post-racial America, to equate interpersonal racism (i.e. “I don’t like you because you’re Black”) with the racial barriers that structures and institutions have created (i.e. white students graduate from elite and selective colleges at significantly higher rates than Black students). Thus the students of the Millennial generation, and the schools that facilitate their interactions, are treading in uncharted waters when it comes to dealing with subtler racial disparities, and the results have been mediocre at best. The racism of our forefathers took the form of bricks and billy clubs, while today’s prejudices move more like an “invisible hand,” guiding young people—mostly Black and Latino—from urban ghettos to prisons and from impoverished schools to massive student loan debt.

Only by interrogating the structural foundations of American political and economic institutions does one begin to understand the fault in post-racial logic. For example, Columbia explicitly accepts qualified students on the basis of their economic indigence through certain programs. The retention rate, much less the graduation rate, does not even begin to rival that of wealthier students, who also tend to be whiter What is lost is that these students need different kinds of support than the university is used to giving. To say that race plays a role is to draw the ire of administrators who earnestly believe that the system is absolved of doubt because they are not personally racist. This is the work of structural racism: a demonstrated inequality cannot be labeled racial unless there is tangible proof of intent to discriminate based on race.

White Millennials, unlike their forebears, are not typically characterized by active interpersonal racial animosity; they are characterized by their silence in the face of the oppressive structural conditions that society engenders. It is not that people say that they accept me despite the color of my skin; it is that they openly express fear about walking in Harlem in the middle of the day even though the people they fear look like me. It is their acquiescence to and wholesale endorsement of a school that has made gentrification a commodity ready to be sold. The only way to truly root out this inequity is to call racism what it is.

Once the underpinnings of an actively unjust structure are called into question, progress can be made. Perhaps more accurately, policy can be made. The Civil Rights Movement used policy to effectively ban segregation in the United States. Ferguson and Baltimore have shown that the tradition of advocating for justice at the grassroots level has not waned; the challenge moving forward will be creating solutions that ensure unjustified police homicides will be prevented and not go unpunished. The outdated policy measures of the past will not suffice to rid the United States of its racial ills; we must show Millennials—the leaders of today and tomorrow—that racism still exists so they can press on ever more firmly toward its extinction.

Riley Jones is a Roosevelt Institute Campus Network member and a rising junior at Columbia University.

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Why an Inequality Agenda Matters: A Response to John Judis

Jun 24, 2015Mike Konczal

John Judis believes that Democrats are on the wrong path and the Roosevelt Institute is partially to blame. In his recent piece, “Dear Democrats: Populism Will Not Save You,” he attacks the growing liberal consensus on economic issues, using our recent Rewriting the Rules report as an example, on both substantive and electoral grounds.

Judis’s core argument is that it is crucial “to develop a sophisticated politics” to turn economic appeals into electoral success. I couldn’t agree more, though I feel this issue is caught in the crossfire of Judis walking back his previous Democratic demographic triumphalism. His second point is that the economic platform we’ve outlined is a terrible basis for a Democratic majority because voters are “fearful of big government, worried about new taxes, skeptical about programs they think are intended to aid someone else,” and otherwise not motivated by inequality and turned off by economic “populism.”

As a coauthor on our report and as someone involved throughout its creation, I’d like to address these criticisms. I can only speak to our report, which argues that public policy and the rules of the economy are more responsible for our tough economic situation than technology, globalization, sociology, or any of the other factors normally cited. Judis, I think, misses how robust this approach can be, how much it diverges from caricatures of big government liberalism, and how a lot of forces brought us to this point.

A Broader Vision

Roosevelt’s Rewriting the Rules plan isn’t simply centered around fighting inequality, and it’s not just about fairness, which is an argument that Judis says tends to turn off voters. Instead, we view it as tackling central concerns over investment, growth, opportunity, shared prosperity, and economic security. The subtitle of the report is “An Agenda for Growth and Shared Prosperity.” During the creation process, we kept two specific things in mind: First, nobody cares about inequality abstractly, they care about specific economic issues; and second, our vision can’t be simply returning to the past.

We do argue that you can’t address the economic concerns I mentioned without going big. You can’t tackle investment without looking at the financial sector, you can’t address opportunity without looking at structural discrimination, you can’t view economic security without looking at the labor market, and you don’t get growth without doing all of the above. But the liberal economic consensus isn’t about adjusting this or that statistical abstraction, or about building a time machine to return to an era that probably didn’t exist: It’s about solving real problems with long-term consequences for our future.

This is hard to balance, especially for an economic report that wants to highlight the latest research in inequality across fields. The team is full of economists, not political messengers. But since a forward, positive agenda is built into the DNA of these arguments, it is not hard for a talented political movement to use these economic arguments to talk about how Democrats can deliver the goods people care about when it comes to the future of the economy.

Deeper Dive into Markets

But isn’t it all just tax-and-spend and big government liberalism? As a second point, we think looking at the market structures that generate inequality in the first place is a way to both meaningfully address inequality and also move us in a different policy direction. The idea that the rules are rigged isn’t in the current dialogue, and it’s one worth testing out with the public as part of a comprehensive argument about the economy.

The policy section of the report is a call for further discussion (some of which will be elaborated on in future Roosevelt products), but what I think is important is that, in addition to higher top marginal tax rates and income support, there’s an entire suite of policies focused on the rules of the economy itself.

These are not trivial. We examine how changes to corporate governance encourage short-termism, how the ramp-up of the criminal justice system reduces wages and opportunities for people of color, and how the falling value of the minimum wage increases poverty. These “market conditioning” effects complement whatever emphasis political leaders put on tax-and-spend issues.

I think that’s worthwhile, because it gives Democrats an in to talk about economic problems with people who want to become rich or don’t think of themselves as class warriors, but do care about promoting broadly shared opportunity. It also short-circuits many of the libertarian arguments about the state, because people get that the economy needs rules—and that not having rules is still a form of rules.

(Ironically, by calling upon the work of Stephen Rose, who argues everything is fine with the macroeconomy because government transfers can just take care of any weaknesses, Judis is far more reliant on tax-and-spend liberalism that he accuses us of being. I’m fine with transfers, of course, as income support was crucial to fighting the Great Recession. But there are also electoral limits to this strategy.)

As for the electoral appeal, these ideas aren't part of the normal policy discussion, but to the extent that they are, they are quite popular. The minimum wage is winning in red states, and financial reform is broadly popular as a topic.

The Natural Next Step

Judis’s narrative is focused on the idea that the Democrats have been hijacked (with ACORN a culprit, no less) with this agenda. At times, he forces this story into a symmetry with what is happening on the right to get some easy “pox on both houses” points.

But this doesn’t reflect the actual path we’ve taken to get here. One thing we tried to demonstrate in Rewriting the Rules is that the research has been moving in this direction for the past decade. Many of these policy items build on or expand what President Obama has proposed (infrastructure, financial reform, minimum wage, etc.)—proposals that still remain good ideas in 2016. The political success of the Fight for 15 workers has also shown that there’s energy at the local level that people are looking to help scale.

The other reason this agenda has gained traction is that the other approaches have collapsed in the past year. Education doesn’t look like the silver bullet people had believed it to be in the past. The idea that the Great Recession would be a minor hiccup and we’d be back on track has proved false. Centrist claims about the need for immediate austerity and a Grand Bargain have also failed to pan out.

Oddly, I’m not sure I’ve heard a compelling counter-strategy about how to describe the economy, and Judis proposes no such thing. The 2016 nominee won’t be able to run on an “overcoming partisanship” strategy like President Obama in 2008 or a “let’s give Obamacare and the recovery a chance” strategy like in 2012.

One could just downplay the economy, of course, and if next year gives us a large increase in wages the story will change with it. But polls now show economic issues are coming to dominate the discussion, median family incomes are down 7 percent since 2000, and the argument that President Obama pulled us back from an economic collapse and rebuilt jobs, and now we need to turn to a more secure future with better wages, investment, and security, seems the most natural transition.

Economic issues will dominate on the right, and while they mimic our language, their proposals will likely be very regressive. Even the GOP’s leading reformer, Marco Rubio, is calling for eliminating all taxes on capital and inheritances. Whoever wins the Republican nomination is going to be controlled by a base that wants the Ryan Plan immediately. But rather than simply calling out what’s wrong with the right’s approach, it will be essential for liberals to have their own vision of opportunity, investment, growth, and security. We think our report is a crucial building block for this.

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John Judis believes that Democrats are on the wrong path and the Roosevelt Institute is partially to blame. In his recent piece, “Dear Democrats: Populism Will Not Save You,” he attacks the growing liberal consensus on economic issues, using our recent Rewriting the Rules report as an example, on both substantive and electoral grounds.

Judis’s core argument is that it is crucial “to develop a sophisticated politics” to turn economic appeals into electoral success. I couldn’t agree more, though I feel this issue is caught in the crossfire of Judis walking back his previous Democratic demographic triumphalism. His second point is that the economic platform we’ve outlined is a terrible basis for a Democratic majority because voters are “fearful of big government, worried about new taxes, skeptical about programs they think are intended to aid someone else,” and otherwise not motivated by inequality and turned off by economic “populism.”

As a coauthor on our report and as someone involved throughout its creation, I’d like to address these criticisms. I can only speak to our report, which argues that public policy and the rules of the economy are more responsible for our tough economic situation than technology, globalization, sociology, or any of the other factors normally cited. Judis, I think, misses how robust this approach can be, how much it diverges from caricatures of big government liberalism, and how a lot of forces brought us to this point.

A Broader Vision

Roosevelt’s Rewriting the Rules plan isn’t simply centered around fighting inequality, and it’s not just about fairness, which is an argument that Judis says tends to turn off voters. Instead, we view it as tackling central concerns over investment, growth, opportunity, shared prosperity, and economic security. The subtitle of the report is “An Agenda for Growth and Shared Prosperity.” During the creation process, we kept two specific things in mind: First, nobody cares about inequality abstractly, they care about specific economic issues; and second, our vision can’t be simply returning to the past.

We do argue that you can’t address the economic concerns I mentioned without going big. You can’t tackle investment without looking at the financial sector, you can’t address opportunity without looking at structural discrimination, you can’t view economic security without looking at the labor market, and you don’t get growth without doing all of the above. But the liberal economic consensus isn’t about adjusting this or that statistical abstraction, or about building a time machine to return to an era that probably didn’t exist: It’s about solving real problems with long-term consequences for our future.

This is hard to balance, especially for an economic report that wants to highlight the latest research in inequality across fields. The team is full of economists, not political messengers. But since a forward, positive agenda is built into the DNA of these arguments, it is not hard for a talented political movement to use these economic arguments to talk about how Democrats can deliver the goods people care about when it comes to the future of the economy.

Deeper Dive into Markets

But isn’t it all just tax-and-spend and big government liberalism? As a second point, we think looking at the market structures that generate inequality in the first place is a way to both meaningfully address inequality and also move us in a different policy direction. The idea that the rules are rigged isn’t in the current dialogue, and it’s one worth testing out with the public as part of a comprehensive argument about the economy.

The policy section of the report is a call for further discussion (some of which will be elaborated on in future Roosevelt products), but what I think is important is that, in addition to higher top marginal tax rates and income support, there’s an entire suite of policies focused on the rules of the economy itself.

These are not trivial. We examine how changes to corporate governance encourage short-termism, how the ramp-up of the criminal justice system reduces wages and opportunities for people of color, and how the falling value of the minimum wage increases poverty. These “market conditioning” effects complement whatever emphasis political leaders put on tax-and-spend issues.

I think that’s worthwhile, because it gives Democrats an in to talk about economic problems with people who want to become rich or don’t think of themselves as class warriors, but do care about promoting broadly shared opportunity. It also short-circuits many of the libertarian arguments about the state, because people get that the economy needs rules—and that not having rules is still a form of rules.

(Ironically, by calling upon the work of Stephen Rose, who argues everything is fine with the macroeconomy because government transfers can just take care of any weaknesses, Judis is far more reliant on tax-and-spend liberalism that he accuses us of being. I’m fine with transfers, of course, as income support was crucial to fighting the Great Recession. But there are also electoral limits to this strategy.)

As for the electoral appeal, these ideas aren't part of the normal policy discussion, but to the extent that they are, they are quite popular. The minimum wage is winning in red states, and financial reform is broadly popular as a topic.

The Natural Next Step

Judis’s narrative is focused on the idea that the Democrats have been hijacked (with ACORN a culprit, no less) with this agenda. At times, he forces this story into a symmetry with what is happening on the right to get some easy “pox on both houses” points.

But this doesn’t reflect the actual path we’ve taken to get here. One thing we tried to demonstrate in Rewriting the Rules is that the research has been moving in this direction for the past decade. Many of these policy items build on or expand what President Obama has proposed (infrastructure, financial reform, minimum wage, etc.)—proposals that still remain good ideas in 2016. The political success of the Fight for 15 workers has also shown that there’s energy at the local level that people are looking to help scale.

The other reason this agenda has gained traction is that the other approaches have collapsed in the past year. Education doesn’t look like the silver bullet people had believed it to be in the past. The idea that the Great Recession would be a minor hiccup and we’d be back on track has proved false. Centrist claims about the need for immediate austerity and a Grand Bargain have also failed to pan out.

Oddly, I’m not sure I’ve heard a compelling counter-strategy about how to describe the economy, and Judis proposes no such thing. The 2016 nominee won’t be able to run on an “overcoming partisanship” strategy like President Obama in 2008 or a “let’s give Obamacare and the recovery a chance” strategy like in 2012.

One could just downplay the economy, of course, and if next year gives us a large increase in wages the story will change with it. But polls now show economic issues are coming to dominate the discussion, median family incomes are down 7 percent since 2000, and the argument that President Obama pulled us back from an economic collapse and rebuilt jobs, and now we need to turn to a more secure future with better wages, investment, and security, seems the most natural transition.

Economic issues will dominate on the right, and while they mimic our language, their proposals will likely be very regressive. Even the GOP’s leading reformer, Marco Rubio, is calling for eliminating all taxes on capital and inheritances. Whoever wins the Republican nomination is going to be controlled by a base that wants the Ryan Plan immediately. But rather than simply calling out what’s wrong with the right’s approach, it will be essential for liberals to have their own vision of opportunity, investment, growth, and security. We think our report is a crucial building block for this.

Follow or contact the Rortybomb blog:
 
  

 

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King v. Burwell Could Turn Back the Clock for Women's Health

Jun 23, 2015Andrea Flynn

In the coming days the Supreme Court will decide King v. Burwell, a case on which the health coverage of more than 6 million individuals—and in some ways the future of the Affordable Care Act (ACA)—hinges. As we anticipate that ruling, and as conservative lawmakers propose potential solutions to the crisis that will ensue should they “win,” we should pause and remember that the ACA has profoundly improved the quality of women’s health coverage, expanded women’s access to care, and increased women’s economic security.

In the coming days the Supreme Court will decide King v. Burwell, a case on which the health coverage of more than 6 million individuals—and in some ways the future of the Affordable Care Act (ACA)—hinges. As we anticipate that ruling, and as conservative lawmakers propose potential solutions to the crisis that will ensue should they “win,” we should pause and remember that the ACA has profoundly improved the quality of women’s health coverage, expanded women’s access to care, and increased women’s economic security. As I describe in a policy note released today by the Roosevelt Institute, if policymakers are serious about the health and financial wellbeing of women and families, they should expand and strengthen the ACA, not reverse or repeal it.

The ACA expanded coverage to 16.5 million people and elevated the floor of coverage for women. In the pre-ACA system, women were routinely charged more than men, had to pay out of pocket for preventive services like pap smears and breast exams, and many couldn’t afford maternity coverage while they were pregnant. But since President Obama signed the ACA into law, 8.7 million women have gained maternity coverage; 48.5 million women with private insurance can access preventive services with no cost-sharing; and as many as 65 million women are no longer charged higher premiums based on pre-existing conditions. In 2013, the number of women who filled their birth control prescriptions without co-pays grew from 1.3 million to 5.1 million, and the share of women who had access to birth control with no out-of-pocket costs grew from 14 percent to 56 percent .

For millions of women, the ACA has begun to ease the financial burdens of health coverage and care. Before the ACA, women were far more likely than men to have to forgo care because of cost concerns, and for all women—but especially those without coverage—cost was a major barrier to care. Many women had difficulties paying their medical bills (52 percent of uninsured women and 44 percent of low-income women, compared to 28 percent of women overall). This should be no surprise, given that it’s more likely for women—particularly women of color—to live in poverty. Today more than two-thirds of low-wage workers are women—half of them women of color—and many work long hours with no health benefits. Wage inequality causes Black and Latina women to lose approximately $19,000 and $23,279 a year, respectively.

A loss of subsidies would be especially harmful to women of color. In states that are using the federal exchange, women of color represent nearly half of uninsured women eligible for tax credits. Those subsidies are the only path to insurance for 1.1 million Black women, approximately 2 million Latinas, nearly a quarter-million Asian women, and more than 100,000 Native American women. Many of those women live in one of three states: Florida, Georgia, or Texas.

Comprehensive, affordable coverage—and by extension, care—is as much a matter of health as it is economic security. When women have good coverage and access to care, they are able to prevent illnesses that take them out of work, threaten their employment, and force them to lose a paycheck. They are better able to make decisions about the timing and size of their families. They have healthier babies and children, fewer out-of-pocket medical costs, and more money for food, childcare, education, housing, transportation, and savings. Health coverage won’t singlehandedly solve the myriad challenges facing low-income women and families; indeed, the United States’ soaring inequality demands sweeping social and economic reforms. But without the very basic ability to care for their bodies, visit a doctor, plan the timing and size of their families, and make independent reproductive health decisions, women will never be able to take full advantage of other economic opportunities.

The political vitriol of the past five years has blurred our collective memory of just how badly we needed health reform before we got it. Opponents of the ACA argue that we cannot afford for the law to prevail. But the truth is we can’t afford for it not to. In most other countries families are not driven into poverty because they seek needed care, and they don’t avoid seeking care out of fear that doing so will drive them into bankruptcy. The United States is unfortunately exceptional in this regard. For too long the right to health has been unfulfilled in the United States, and the ACA has begun to change that for millions. Neither the Supreme Court nor conservative lawmakers should turn back the clock now.

Andrea Flynn is a Fellow at the Roosevelt Institute. Follow her on Twitter at @dreaflynn.

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Texas's New Gun Law Won't Make Campuses Safer for Women

Jun 23, 2015Emma Copeland

Texas recently passed some of the most conservative, pro-gun legislation in the country, which drastically liberalizes open carry laws on college campuses.

Texas recently passed some of the most conservative, pro-gun legislation in the country, which drastically liberalizes open carry laws on college campuses. With the aid of lobbyists and lawmakers backed by the National Rifle Association (NRA), the legislation is now moving forward in more than fourteen other states as well.

Student policymakers are a vital intellectual constituency, and it is imperative to include them in discussions and decisions regarding student life. The Texas open carry law virtually eliminates any semblance of student control over this issue and their campus environment. Although changes may be made on a campus-by-campus basis, the law expressly states that schools "may not establish provisions that generally prohibit or have [that] effect [on] license holders from carrying concealed handguns on the campus of the institution.” This is a limitation only on Texas's public colleges and universities, meaning students who can afford a private school can also afford personal safety and political choice. Those who enroll in public universities have those rights stripped from them from the start.

The absence of student input and the overwhelming presence of huge financing and pressure from the pro-gun lobby in the state’s original policy proposal is evident. These lobbying firms’ analyses include studies from pro-gun advocacy groups and anti-rape groups, yet students are left out completely.

I come from Virginia, a state with extremely loose open carry laws, and am therefore unfazed by a passing rifle or a handgun in the belt loop of my taxi driver. But as a student, I view my public college campus as a kind of sanctuary from the innate danger and threat that comes with a firearm in the street. New open carry laws on college campuses intended to decrease overall crime or “prevent sexual assault” simply increase the probability of deadly accidents with little hope of decreasing the likelihood of these heinous crimes. There is no evidence from city campuses in states with open carry laws that students are safer from sexual violence as a result of pro-gun legislation.

Constituents and legislators must ask themselves: is this truly responsible legislation? Studies have shown that upwards of 89 percent of sexual assaults occur under the influence of alcohol, and many others involve sedation drugs. Adding guns to an environment of drunkenness, recreational drug use, and violent assault is likely to have deadly consequences.

The Texas law and other bombastic proposals from groups like the NRA are taking advantage of sexual assault survivors and their traumatic stories and experiences. The NRA continues to engage in victim-blaming and guilt instead of responsible advocacy and after-care for survivors of these crimes. This kind of reckless lawmaking only leads to more long-term problems that necessitate further action in the future.

The idea that students need concealed weapons to prevent sexual assault on college campuses is a reminder that right-wing legislators are more concerned about financing their next campaign than creating meaningful and imperative policy for their collegiate constituents. Urging states to adopt these senseless open-carry laws connotes sexual assault as a natural occurrence in a woman’s college career—one that she must simply learn to fend off with a firearm. These pundits and politicians should spend more of their time producing progressive policy concerning the education, prevention, or after-care of students who will most likely encounter sexual assault in college, especially given that one in five collegiate women already have.

I have seen firsthand the ineffectiveness of my university’s efforts to educate and engage students and faculty on sexual assault as well as the failure of student health services in providing after-care to survivors. Inviting weapons onto campus shifts blame to survivors of sexual assault, perpetuating the idea that they are at fault for failing to protect themselves. The propensity for emotional damage to young college minds is astounding.

It is imperative to call for increased education instead of increased armament on campus. It has been proven time and time again that the right preventative measures achieve the desired result more effectively than defensive measures alone. The cycle of violence among students will never stop unless we truly change the policies surrounding our collegiate lives. In order to do that we must be part of the policymaking process.

Emma Copeland is a student at George Mason University, a 10 Ideas author, and a member of the Campus Network's Braintrust.

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Hillary Clinton's Rooseveltian Challenge: Carrying Forward the Four Freedoms

Jun 19, 2015Anna Eleanor Roosevelt

It’s important that Hillary Clinton chose a place that honors my grandfather to officially launch her campaign and unveil her vision for our nation. In doing so, she sought to claim the Rooseveltian style of leadership and to position herself as the person who will carry forward the Roosevelt legacy of action, insight and advancement.

Now that the crowds have gone home, can she live up to the challenge she is setting for herself?

It’s important that Hillary Clinton chose a place that honors my grandfather to officially launch her campaign and unveil her vision for our nation. In doing so, she sought to claim the Rooseveltian style of leadership and to position herself as the person who will carry forward the Roosevelt legacy of action, insight and advancement.

Now that the crowds have gone home, can she live up to the challenge she is setting for herself?

My grandparents shaped our nation and the world in ways that were deeper and further reaching than almost any other figures of the 20th century. Franklin and Eleanor Roosevelt took America from the brink of total economic collapse and laid the groundwork for the greatest stretch of prosperity we’ve ever experienced.

They fought for democracy and against horrific regimes the likes of which the world may never have recovered from and used that moment to form a strong global alliance that is still in place today. They did all of this through the New Deal—by rewriting the rules of our capitalist system so that it works for everybody, and by building the postwar international system linking our economic and security interests as one global family.

They put rules in place to make capitalism work for the many as opposed to a few at the top—including rules for our financial system to protect consumers and control risk. The New Deal invested in America’s future through roads, bridges, modern electric systems, schools, and other essentials of a modern society. The Roosevelt administration expanded protections and rights for workers and families and gave them a seat at the bargaining table and ensured their security after retirement. They created a path to the middle class for millions of Americans.

But the Roosevelt record and so many of the strides we made through the New Deal have been undermined over the past 35 years as so many of those rules, investments, and protections have been rolled back. As a result, the American middle class lifestyle is almost as far out of reach today for most Americans as it was when my grandfather took office, and the future looks dim.

My grandparents took office four years after the Great Depression hit; our next president will be sworn in less than a decade after the Great Recession hit. The gap between those at the top and the rest of us is at a point last seen before the New Deal. Workers and America’s families face an entrenched wealthy class seeking to control who benefits from our economy and our political process. And there is growing unrest in the world as radical militants seek to undermine and destroy the very concept of democracy by taking advantage of our dysfunction.

Just as they were 83 years ago, the American people are desperately hungry for action and leadership to fix the imbalances in our economy and society.

A recent CBS/New York Times poll showed that the majority of Americans—rich and poor, men and women, Republicans and Democrats—agree that income, opportunity, and influence are unfairly concentrated at the top and that these disparities are growing. Further, Americans support government action to address this inequality and rewrite the rules of our economy.

For all my grandparents accomplished, so much of their work is still left unfinished. The beautiful park from which Secretary Clinton spoke celebrates the fundamental Four Freedoms my grandfather laid out in his 1941 speech as essential to democracy and to all of humanity: freedom of speech and expression, freedom of worship, freedom from fear, and freedom from want. Yet for many in our own nation and across the world, those essential freedoms have yet to be fully realized. Another unfinished act proposed by my grandfather was a second bill of rights guaranteeing every American access to the central pillars of economic security—employment and a living wage, decent housing and medical care, public education, adequate food and clothing, and healthy leisure. The work of ensuring that the good ideas of the New Deal are equally available to women and to communities of color also remains incomplete.

Now is truly the time to hand the baton to the next great leader committed to completing this work.

If Hillary Clinton wants to follow in the footsteps of Franklin and Eleanor, then she must not just reflect on their legacy but carry forward their energetic leadership and relentless pursuit of bold solutions.

Clinton must summon the courage to once again fundamentally rewrite the rules of our economy, restore balance, challenge entrenched power, and seek a New Deal for the 21st century.

The American people will follow that kind of leadership.

Anna Eleanor Roosevelt is Chair of the Roosevelt Institute's Board and President and CEO of Goodwill NNE.

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Bail Reform is Key to Addressing Inequality in the Justice System

Jun 18, 2015Jessica Morris

On June 9, 2015, Campus Network Senior Fellow Jessica Morris testified before the Joint Committee on the Judiciary of the Massachusetts General Court on an act reforming pretrial process (H. 1584/S. 802). Her written testimony is reproduced below.

Good afternoon Joint Committee on the Judiciary. My name is Jessica Morris and I am the Senior Fellow for Equal Justice at the Roosevelt Institute Campus Network. I am also a recent graduate of Mount Holyoke College in South Hadley of Western Massachusetts.

On June 9, 2015, Campus Network Senior Fellow Jessica Morris testified before the Joint Committee on the Judiciary of the Massachusetts General Court on an act reforming pretrial process (H. 1584/S. 802). Her written testimony is reproduced below.

Good afternoon Joint Committee on the Judiciary. My name is Jessica Morris and I am the Senior Fellow for Equal Justice at the Roosevelt Institute Campus Network. I am also a recent graduate of Mount Holyoke College in South Hadley of Western Massachusetts.

The Roosevelt Institute Campus Network is a progressive think tank that empowers young people across over 120 college campuses and 38 states to civically engage with policy. As a Senior Fellow, my focus has been devoted to the issues with the money bail system in Massachusetts. I have compiled research on pretrial and bail reform in a white paper, which you can find attached. Thank you for offering the opportunity to consider alternatives to the state’s current criminal justice system, including pretrial and bail reform.

As of January 1, 2015, 606 men and women are awaiting trial in Massachusetts. They have not been convicted, but often because they could not afford the cost of their set bail, they are detained. There are serious consequences to this system. There is risk of losing custody, public housing, drug treatment, and jobs. Nationally recidivism rates are six times higher than those incarcerated during the pretrial period. Even when the defendant is held for only two or three days, they are nearly 40 percent more likely to commit new crimes before their trial compared to those held for just one day. In Massachusetts, pretrial detention is costly to taxpayers. The average cost per year to house an inmate last year is $53,040.87. Additionally, the overcrowding of DOC facilities is at 130%.

This legislation proposes a solution that ensures the Massachusetts justice system remains just. By shifting the otherwise wealth-based bail system into a risk-based system and including a Pretrial Services Division, there are more opportunities for people to transform their lives. Defendants should be assessed for their level of risk and not be disadvantaged if they cannot afford their freedom. The court must maintain the principle of innocent until proven guilty, for Massachusetts people’s lives and well-being are dependent on it.

Last Saturday, 22-year-old Kalief Browder committed suicide in his home in the Bronx. Kalief was an inmate at Rikers Island prison who waited for three years without trial. He was accused of stealing a backpack, which he denied. Because he could not afford his set bail of $10,000, he was detained at the prison. Kalief's tragic death teaches us that as a country we still have a long way to go. Massachusetts must lead the way toward a more just justice system with reasonable risk-based bail reform.

I urge you to pass bill H.1584 as a step toward a more effective and community-driven criminal justice system. Thank you for your time.

Jessica Morris is the Roosevelt Institute | Campus Network Senior Fellow for Equal Justice.

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Statement to Congress: TPP Would Weaken U.S. Economy and Fail to Check China's Rise

Jun 17, 2015Adam Hersh

Roosevelt Institute Senior Economist Adam Hersh will appear today before the United States House Committee on Foreign Affairs' Subcommittee on Asia and the Pacific as part of a hearing on "China's Rise: The Strategic Impact of Its Economic and Military Growth." The following is his prepared testimony.

Roosevelt Institute Senior Economist Adam Hersh will appear today before the United States House Committee on Foreign Affairs' Subcommittee on Asia and the Pacific as part of a hearing on "China's Rise: The Strategic Impact of Its Economic and Military Growth." The following is his prepared testimony.

Chairman Salmon, Ranking Member Sherman, members, thank you for inviting me to testify on this pivotal topic: the geo-economic and geo-political significance of China’s rapid development and the U.S. strategic response, particularly as it pertains to the Trans-Pacific Partnership agreement.

I would like to begin on points of agreement between proponents: it matters a lot who gets to write the rules for how our economy and the international economy work. Last week’s historic vote by you and your colleagues on Trade Promotion Authority and Trade Adjustment Assistance showed how much the rules matter. What this said is that something is broken in the ways the United States makes trade rules: the dysfunction of the implicit agreement between Congress and the President—and his delegated ambassador as United States Trade Representative—in how Constitutional division of authorities to make international agreements will govern in practice.

When the rules matter this much, we should take the time to get them right, rather than bull-doze non-transparent new rules through Congress. What we know about the agreement—from Wikileaks, and from conversations with negotiators of more open TPP countries—is that the Trans-Pacific Partnership (TPP) has less to do with freeing trade, creating jobs, raising wages, or rebalancing geo-politics than it does with rewriting the rules of global trade and investment to favor big businesses at the expense of almost everyone else in society.[i]

These rules do not embody economic principles of open competition so much as the preferences of industry lobbyists that had the best seats at the U.S. Trade Representative’s table. The outcome is an agreement that fails to address America’s economic needs and geostrategic goals. Legitimate concerns have been raised on the left, right, and center of the American political debate, only to be dismissed by conventional wisdom as protectionist, old-fashioned, or naive to the ways of the world. But as Larry Summers wrote in the Washington Post, it’s time to take these concerns seriously.[ii]

Problems with current U.S. model for trade policy do not end with TPP. A multitude of agreements are underway under the same basic template--from a parallel mega-regional agreement with the European Union, to a multilateral agreement on trade in services (TISA), to a bilateral investment treaty with China itself and other countries that will all be critical to the U.S. economic future. They are critical to whether we grow with broadly shared prosperity or continue down the path of an economy producing high and rising inequality, and low economic opportunity.

Proponents of TPP are asking us to believe we can achieve the high road outcomes from a USTR so captured by special interests. But unless Congress acts to change the rules on how the United States government negotiates international economic agreements, we can expect the same confrontational and uncertain political outcomes, rather than a cooperative, inclusive approach to setting national economic priorities.

I will make two points today:

1. The most fundamental element of national security is a strong national economy, and TPP would weaken our economic base, leave us more unequal, and reinforce the global race to the bottom in social, environmental, and commercial standards and taxation.

2. TPP fails the geostrategic rationale for checking China’s rise.

On the first point, the most generous models predicting TPP’s economic impact claim it would raise U.S. GDP by $88 billion (in today’s prices) by 2025.[iii] This amount is less than the rounding error when the Department of Commerce calculates GDP. If you each picked an infrastructure project in your district, together you would create a bigger growth impact in the next year than TPP would have ten years from now.

The United States ranks among the highest of the advanced economy countries in inequality, and among the lowest in terms of upward economic mobility. TPP will lead to higher inequality--adjustment to new terms of trade will focus job and small business elimination in more labor-intensive industries—not just manufacturing, but in services of increasingly higher skill—faster than trade creates them in less labor-intensive export-expanding industries. Recent research by MIT economists Daron Acemoglu, David Autor, and co-authors shows that such import shocks decimate local economies, causing higher unemployment, slower wage growth, and straining social expenditures and tax revenues. Trade with China in particular, they estimate, cost the U.S. economy 2 to 2.4 million jobs over the course of the 2000s.[iv]

TPP goes far beyond mere tariffs and trade. All sides agree TPP’s most significant provisions address “behind the border” measures—not what happens between countries, but how the economic rules will work within countries.

To highlight two major issues, first is TPP’s investor–state dispute settlement mechanism (ISDS). Here, progressives like Senator Elizabeth Warren and a Nobel prize-winning economist Joseph Stiglitz are joined by the likes of Cato Institute and The Economist magazine in raising concerns that ISDS serves to empower global businesses against public regulation.[v] Understandably, global businesses would like assurance against expropriation and discriminatory treatment where rule of law is underdeveloped. But they can already buy private insurance against such risks. That USTR also insists on ISDS in an agreement with Europe, where no one questions legal standards, reveals the lie that this is about protecting investor rights, rather than expanding and subsidizing them.

The distortions created by this change in the rules provide a privilege for foreign investors not accessible to domestic investors in any TPP market, and works against developing country partners growing their own institutions and organically raising standards through more open, democratic policymaking. The combined result is to further incentive production to move offshore.

We also have to be clear about the dangers of TPP’s expansive intellectual property protections. Economic research is clear that patents do not increase innovation or growth. Rather, they serve to raise consumer prices and restrain competition. The agreement reportedly will allow “ever-greening” of drug patents and aim for more stringent exclusivity for biosimilar medicines than even President Obama’s budget proposed, meaning less access to medicines and slower development of new ones in TPP members and in third party countries. For the United States, this outcome would mean more national income will be spent on health care—through private spending and public programs. This is not a question of guns versus butter, but of guns, butter, or life-changing medicines.

On my second major point, that TPP fails the geostrategic rationale for checking China’s rise, proponents argue TPP is needed to buttress Asia-Pacific allies with an implicit economic ring-fence around China’s rising power and influence. This is a Cold War containment strategy, but in the 21st century the United States is no longer the epicenter of the world economy. And the strategy violates a seemingly forgotten long-standing tenet of the open world trading system, built painstakingly under U.S. leadership in the postwar years: the quest for peaceful foreign relations would be built on the principle of not excluding countries from the benefit of economic relations—the opposite of what TPP, and the Trans-Atlantic Trade and Investment Partnership would do.

A strategic agreement countering China’s rising influence, to be effective, requires two things: First, it must truly set high standards for international trade and investment; second, it must largely exclude China from the benefits, diverting investment and trade to TPP countries, thereby enticing China to rise to TPP standards. TPP does neither. China’s economic transformation under authoritarian capitalism, it’s ongoing non-market economic structure, and its expanding geopolitical influence pose real foreign and economic challenges for the United States and for the future of open societies, but TPP doesn’t answer to any of them.

On the first question, the level of standards, TPP clearly does not make any economically meaningful advances over the status quo. Although the agreement reportedly would establish well-sounding obligations on labor rights, environmental protection, and accountability for state-owned enterprises, TPP provides no credible mechanism to enforce these standards.

The lose-lose scenarios created by non-credible enforcement mechanisms are best illustrated in the case of Guatemala. In April 2008, Guatemalan workers first filed complaint of systemic labor abuses with the U.S. Department of Labor, as established by the US-Central American Free Trade Agreement; it took the USTR until December 2014 to open a formal dispute settlement case, and a ruling is still far off. Other recent experiences with partner countries Honduras and Colombia show no better results of improved practices or even an end to the rampant murders of free trade union members. This is the worst of both worlds: U.S. workers and businesses still face race-to-the-bottom competition, while global businesses and developing country governments face little pressure to improve conditions. No one has yet to give a clear answer to how TPP will effect free labor standards in one-party state Vietnam, or deter human trafficking of labor in Malaysia or Mexico?

This toothless model of enforcement for things other than investment and commercial disputes—and the fact that the agreement will not discipline currency manipulation in the Asia-Pacific region show that TPP does not set standards at a level that would pose meaningful constraints on China’s economic behavior.

On the second question, TPP cannot feasibly exclude China from the benefits of the TPP bloc. In fact, Chinese officials and technocrats are as enthusiastic about TPP as any business lobbyist in Washington. That’s because the 1 percent in both countries stand to gain substantially from a deal allowing both to expand supply chains into lower-cost developing Asia. TPP will not lock-in a U.S. export advantage in the region so much as a platform for U.S. and Chinese companies that want to offshore production to TPP member countries. This loophole is found in TPP’s “Rules of Origin,” or the percentage of a product’s value must be created in the TPP member country in order to qualify for preferential access to U.S. markets.

China is already more integrated with TPP countries than the United States. China’s total trade (exports plus imports) with non-Nafta TPP partners is nearly double ours--$780 billion in 2014 for China to our $423 billion.[vi] Beijing is now incentivizing Chinese enterprises in a strategy of “going out”—expanding China’s global footprint and brand recognition through massive foreign direct investment.

Deep and growing integration with TPP countries will mean that Chinese producers can enjoy the agreement’s benefits—either by investing in or trading Chinese-produced content through TPP countries, without reciprocating to TPP’s preferential terms. How big an economy is and its geographical proximity to others—the “gravitational factors”—matter much more for international trade patterns than do agreements like TPP. China’s economy will be bigger, grow faster, and be geographically and culturally closer to Asia-Pacific countries no matter what we do.

What’s more, TPP offers negligible counterbalance to the soft power China is earning in the region with its efforts to develop new models of multilateral infrastructure development financing. Here, America’s own unforced errors in foreign economic relations—from Congress’s failure to enact internationally negotiated IMF reforms, to this administration’s diplomatic debacle in their miscalculated strategy of strong-arming allies into a global boycott of China’s efforts to advance multilateral development finance institutions with the Asian Infrastructure Investment Bank and other projects. This U.S. strategic choice actually lost us an opportunity to write the economic rules with China, instead the strategy left us isolated from the international community and left China to write the rules of these multilateral institutions without us.

When this is how we treat our friends, it’s no wonder the United States has a reputation problem in the region. To illustrate the challenge, consider that Chinese officials and scholars routinely raise the Opium War and 1842 Treaty of Nanjing in conversations on trade and investment relations; they named their regional trade development initiative the “New Silk Road Initiative”—this is an area of the world where reputation holds long historical memory. Between the new BRICs bank, the Asian Infrastructure Investment Bank, and China’s Silk Road investment initiatives, China is committing $300 billion of capital investment, and buying untold foreign influence. TPP simply does not match the same return on investment on the political capital we have spent pressing our partners to ignore the same concerns that make trade such a contentious political issue in the United States.

There is a further lesson here: America’s economic future is tied more to the choices we make in the rules of our own economy rather than joining agreements. This Congress has been reluctant to invest in our own infrastructure. China’s leaders not only recognize the growth value from investing in their own economy, but in helping other countries develop in ways that create mutually-reinforcing trade and growth benefits for China. This is what it means to treat countries like true partners rather than geopolitical pawns.

Conclusion

Strengthening international relationships is essential for ongoing U.S. leadership in the world—be it economic, political, or cultural. No American should relish a failure to build deeper, more open relations with foreign partners, nor should we retreat from trying. But getting to a deal that serves more than the narrow interests of powerful corporations, their CEOs and shareholders will require Americans be willing to walk away from the agreement we have now, and for Congress to change how it exercises input and oversight over USTR’s negotiating priorities.

Adam Hersh is the Roosevelt Institute's Senior Economist and a Visiting Scholar at Columbia University's Initiative for Policy Dialogue.

 


[i] Full disclosure: I have been briefed privately, off the record on a number of occasions by USTR officials, but am similarly prevented from revealing the substance of those discussions.

[ii] Larry Summers, “Rescuing the free-trade deals,” Washington Post, June 14, 2015, available at http://www.washingtonpost.com/opinions/rescuing-the-free-trade-deals/2015/06/14/f10d82c2-1119-11e5-9726-49d6fa26a8c6_story.html.

[iv] Daron Acemoglu, David Autor, David Dorn, Gordon H. Hanson, Brendan Price , 2014, “Import Competition and the Great U.S. Employment Sag of the 2000s,” NBER Working Paper No. 20395, available at http://www.nber.org/papers/w20395.

[v] See Economist, “The Arbitration Game,” October 11, 2104, available at http://www.economist.com/news/finance-and-economics/21623756-governments-are-souring-treaties-protect-foreign-investors-arbitration; Simon Lester, “Does Investor State Dispute Settlement Need Reform?” Cato Unbound: A Journal of Debate, May 11, 2015, available at http://www.cato-unbound.org/2015/05/11/simon-lester/does-investor-state-dispute-settlement-need-reform; Joseph Stiglitz, “Where progressives and conservatives agree on trade: Current investor-state dispute settlement model is bad for the United States,” Letter sent to Congressional leaders, May 18, 2015, available at http://www.rooseveltinstitute.org/joseph-stiglitz-and-trans-pacific-partnership-tpp.

[vi] Analysis of United Nations Comtrade Database data, available at http://comtrade.un.org/data/

 

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To Make Our Communities Safer, We Must Rethink Policing

Jun 17, 2015Pete Haviland-Eduah

The concept of policing and the question of how systems of community safety can be improved across the country have been at the forefront of American consciousness lately. People around the world, from activists and their allies to social media and folks sitting around their dinner table have started a discussion of how communities of color have been both systemically criminalized by policing practices such as “stop and frisk,” “broken windows,” and “jump-outs” and portrayed as enemy combatants by militarized police forces in Ferguson and Baltimore.

The concept of policing and the question of how systems of community safety can be improved across the country have been at the forefront of American consciousness lately. People around the world, from activists and their allies to social media and folks sitting around their dinner table have started a discussion of how communities of color have been both systemically criminalized by policing practices such as “stop and frisk,” “broken windows,” and “jump-outs” and portrayed as enemy combatants by militarized police forces in Ferguson and Baltimore. Reaction nationwide has sparked protests against mass criminalization of Black communities, which have demanded the attention of the federal government.

Recently, the Department of Justice (DOJ) issued a Consent Decree on the Cleveland Police Department, aimed at creating an environment in which police can execute their duties of protection and service in a manner that works for all residents. Further, President Obama announced an executive order (EO) that would limit certain types of military equipment to local police departments. But we must ask the question: Is this enough? The DOJ’s Consent Decree and President Obama’s EO 13688 are steps in the right direction, but if they are to have a sustainable impact, they need to be accompanied by more preventative work in partnership with local communities.

The Cleveland area has a troubled history with police violence that serves to illustrate our nationwide problem. Recently, Cleveland Police Officer Michael Brelo was found not responsible for a 2012 shooting in which the Cleveland police fired 137 bullets at an unarmed Black couple, killing them, Fifteen of those bullets came from Officer Brelo, who was standing on the hood of the couple’s car while shooting the passengers inside. It seems like a grisly scene from Training Day.

Between this 2012 shooting and the subsequent verdict that let Officer Brelo walk, a 12-year-old boy was killed by a police officer for playing with a toy gun, a 22-year-old man was gunned down in a Wal-Mart by a police officer for holding a BB gun, and a 37-year-old mentally ill woman was killed when she was body slammed by police officers outside of her family’s home.

The culture of aggressive policing in Cleveland and the surrounding region have been demonstrated time and again, taking the lives of Timothy Russell, Malissa Williams, Tamir Rice, John Crawford, and Tanesha Anderson, but we have just now reached a point where it is acceptable to acknowledge that there may be a problem.

But is acknowledging the problem and implementing retroactive provisions to potentially correct it enough?

No.

What we need are preventative measures to ensure that this doesn’t happen again. We need to explore more comprehensive screening options to ensure that police who earn their badges are willing and able to uphold their credo of protection and service.

Officer Brelo has shown violent tendencies in the days after his acquittal, and if he was capable of physically assaulting his own brother, its not difficult to believe that he would be capable of using excessive force against community members who are strangers to him. One must ask, why was someone like this trusted in a position to interact with the public with a deadly weapon? Why was he put in a position where he could choose between someone living or someone dying?

Even more recently, we saw police officer Eric Casebolt in McKinney, Texas barrel roll his way into the national spotlight, slamming the head of a teenage girl into the ground and pulling his gun out on other teens for the crime of being at a pool party. Officer Casebolt had a history of questionable tactics and racial discrimination but wasn’t removed from his duties until the world was watching and he thought it best to resign (got fired). The reality of the situation is that those like Officer Casebolt do not deserve to earn a badge in the first place and we need to do better to ensure that doesn’t happen.

Similar to what is happening in Texas and Ohio, as we look closer at EO 13688, we find that although the mandate is a step in the right direction, it does not go far enough. As Natasha Lennard correctly points out in her Fusion article, this is about optics, and “mitigating the optics of warrior cops does not eliminate the fury undergirding revolt.” Like the Consent Decree in Cleveland, the Executive Order seems to be too reactionary.

Under EO 13688, certain types of equipment, like grenade launchers and tanks, are banned, but authority is still ultimately given to local mayors and city councils to determine what type of equipment law enforcement agencies can request and access. On the surface, it doesn’t seem like much of an issue, but would it make a difference in a place such as Ferguson? It is tough to see pictures of Ferguson Mayor James Knowles out on the town with Darren Wilson or those involved in sending racist e-mails and believe that he might deny the local police chief access to equipment that could be used to further demonize Black and Brown people in the community. Even with EO 13688 in place, former Police Chief Tom Jackson could have had mine-resistant, ambush-protected vehicles (MRAPs) on the ground and used tear gas on protesters; he just would have needed to ask his buddy, the mayor, first.

Reactions won’t solve our problems, but proactive steps might give us a chance. We need to get to a place where an officer won’t fear a 12-year-old boy with a fake gun. Extra training won’t prevent six police officers from believing on some level that it was okay to give Freddie Gray a “rough ride.” Banning tear gas won’t stop city officials from hitting send on an email that calls the President of the United States an ape. Stopping a tank rolling down the street won’t stop drunken Baltimore baseball fans, the Mayor, or the President from calling protestors “thugs” or “animals.” Restricting camouflage uniforms won’t stop officers from finding it necessary to unload 137 rounds into a vehicle while one of them hops onto the hood of the car and fires 15 rounds into the windshield. Reexamination of the concept of policing and inherent racial biases is what needs to happen now.

We aren’t addressing the issue of the warrior-cop mentality that is literally killing people on the street. This is costing taxpayer dollars in lawsuits against police departments and cities; the city of Cleveland, for example, settled for $3 million for the deaths of Timothy Russell and Malissa Williams, and between 2011 and 2014 the city of Baltimore paid out nearly $6 million in police misconduct settlements. However, far more importantly, this is costing lives in communities across America.

Aura Rosser, Freddie Gray, Aiyana Jones, Eric Garner, Tamir Rice, Oscar Grant, Amadou Diallo, and a long list of too many others would still be alive today if we looked at policies that prevented warrior-police from earning their uniforms and serving not as agents of public good but the armed guard of systemic racism and implicit bias. It would go light years in the effort to reestablish (or establish, in many cases) communities’ trust in a system that in theory is supposed to keep them safe but in practice is a system that has participated in widespread destruction of Black and Brown communities.

We need to shift away from thinking about police as a force to thinking about policing as a service. We need to do more to break down the walls of the “us versus them” mentality and to improve relationships between community members and law enforcement. Imagine a world in which police officers are required to live in the communities they serve. They would understand the unique challenges of their neighbors and would be a part of the community. Trust could be built, and we could move closer to a system that works for everyone. Imagine what policing would look like if candidates at the police academy spent less time training to use weapons and more time training in non-lethal techniques We might see our officers travelling overseas helping to end conflict instead of the other way around. Imagine what communities could look like if police officers here in the United States had to adhere to the rules of engagement in the Geneva Convention. The positive possibilities are endless.

Nowhere in the executive order or consent decree is there mention of police hiring practices, residency restrictions, or anything else that can work toward ending a culture of police who have viewed themselves as separate from the community they are hired to “protect and serve.” This creates an atmosphere in which we feel and see things in an “other” framework when we need to be shifting the discussion to “us” and “we.” The consequences are lethal, and we have seen how destructive it can be. The divide creates a fracture that allows the stigmatization and criminalization of communities of color.   

It is as if the government sees from afar but cannot fully empathize with the struggle that people are experiencing every day.

It took mass demonstrations and the lives of too many to get to the point where we have the full (public) attention of the highest levels of government, and that has brought us to a unique time and place in American history and culture. The bridge between governments and the people they are put in place to serve has been in need of repair and reconstruction for too long, and in this moment, the Movement must continue. Eliminating the optics of militarization is a good thing but it doesn’t end the thinking behind those optics. Additional proper training for officers can never hurt, but that won’t necessarily weed out a trigger-happy officer who joins the force to have his ego stroked.

In this moment we need to commit to longer-term, more comprehensive policy solutions and practices, because our time will come to define the times in which our children and grandchildren live. If we fail to realize that not all Americans have access to full citizenship, then the moral and social fabric of our nation will be torn asunder forever. The federal government has demonstrated that we have its attention; together, we must now make these reforms come to fruition. 

Pete Haviland-Eduah is the national policy and communications director for the Million Hoodies Movement. Follow Pete on Twitter at @TheNotoriousPHE. 

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The Economic Narrative in Hillary Clinton’s Launch Speech

Jun 16, 2015Richard Kirsch

In her campaign launch speech on Roosevelt Island, Hillary Clinton talked about her fight for an “economy that works for everyday Americans, not just those at the top.” That rallying cry is becoming the core economic message of more and more Democrats.

In her campaign launch speech on Roosevelt Island, Hillary Clinton talked about her fight for an “economy that works for everyday Americans, not just those at the top.” That rallying cry is becoming the core economic message of more and more Democrats. In their announcement speeches, Bernie Sanders called for “an economy that works for all and not just the one percent,” and Martin O’Malley for “an American economy that works again for all of us.”

That may seem just rhetoric, but it’s an important advance. The story of an economy, government, and democracy that work for all of us, not just the wealthy, has proven to have tremendous narrative power. Seeing the Democratic candidates embrace it is a major advance, particularly since a huge communications weakness of Democrats—unlike Republicans—is that they each think they need to say different things.

But stories need more than a quest; they need to be able to explain who the villains are and what they did wrong, who the heroes are and how they realize the quest. What is the rest of the story in Clinton’s address, and how much of it does she get right?

Near the top of her speech, Clinton contrasts an economy that works for all with trickle-down theory: “Instead of an economy built by every Americans, for every Americans, we were told that if we let those at the top pay lower taxes and bend the rules, their success would trickle down to everyone else.”

Who were the ones telling us that—the villains of the story, who were pushing trickle-down? Unfortunately, for a speech that mostly is progressive, Clinton begins by bolstering austerity economics. Her first villains are Republicans, whom she blames for squandering “surpluses that could have eventually paid off our national debt,” noting that “Republicans twice cut taxes for the wealthiest, borrowed from other countries to pay for two wars, and family incomes dropped.”

This is bad economics in a very confused narrative. Tax cuts on the rich and government borrowing are not the causes of stagnant wages. And by putting balanced budgets on a pedestal, Clinton undercuts the centrality of government spending to pulling the economy out of a recession, creating jobs, and investing in the policies she calls for later in her speech. Instead, her story supports austerity policies. Yes, it’s true that tax cuts on the rich rob the government of money to invest in job creation and exacerbate income inequality. But that view is buried under the “balance the budget” frame.

Later in her speech, Clinton blames Republicans who “trip over themselves promising lower taxes for the wealthy and fewer rules for the biggest corporations“ and “pledge to wipe out tough rules on Wall Street, rather than rein in the banks that are still too risky, courting future failures.”

Clinton is looking to tap into popular resentment against the forces behind those Republican actions without assigning those forces responsibility. Another example: “You see corporations making record profits, with CEOs making record pay, but your paychecks have barely budged.” The passive language in that last clause hides what’s really going on: corporations reward CEOs while pushing down wages.

On the other hand, the one time Clinton actually puts the blame squarely on the economic villains is at a key moment in her story. Here, repeating a key theme of the Roosevelt Institute’s “Rewriting the Rules” report, she says that rather than solely blaming “advances in technology and the rise of global trade” on “displaced jobs and undercut wages,” she points her finger at Wall Street. “The financial industry and many multi-national corporations have created huge wealth for a few by focusing too much on short-term profit and too little on long-term value…too much on complex trading schemes and stock buybacks, too little on investments in new businesses, jobs, and fair compensation.”

So if “top-down economics” doesn’t work, what does? Clinton declares, “I’m running to make our economy work for you and for every American.” But while she provides a long list of policies to do that, all of which would be positive, she doesn’t explain an organizing idea that contrasts with trickle-down. Democrats need that, because without it, they don’t have an understandable narrative to compete with the Republican story about businesses being the job creators and government regulations—even those that people like—hurting business and the economy.

Fortunately, we have that organizing idea, which O’Malley supplies in one simple phrase: “A stronger middle class is not the consequence of economic growth—a stronger middle class is the cause of economic growth.”

This is the same powerful, organizing idea that we communicate in the progressive economic narrative when we say, “working families and the middle class are the engines of the economy,” and that billionaire businessman Nick Hanauer and Eric Liu explain by saying, “we build the economy from the middle-out, instead of trickle-down.”

Clinton declares correctly that, “Growth and fairness go together. For lasting prosperity, you can’t have one without the other,” but she doesn’t explain why. It’s an easy but crucial step to make the point that policies that are fair, like raising the minimum wage, are key to boosting the economy by putting more money into people’s pockets to spend in their communities.

This missing explanation would give more umph to the superheroes in Clinton’s story: hard-working Americans. “You worked extra shifts, took second jobs, postponed home repairs… you figured out how to make it work…You brought our country back.” It would be an easy and transformative lift for her to explain to Americans that they are not just heroes for working through the pain. They are heroes because when they have good jobs and can care for and support their families, they drive the economy forward.

Clinton concludes her speech with her version of the progressive meta-narrative, “we all do better when we all do better.” She says, “we’re a better, stronger, more prosperous country when we harness the talent, hard work, and ingenuity of every single American.” That’s not just a statement of values, but a story about how we build that better, stronger, more prosperous country.

This early in the presidential race, Clinton is a few key steps from telling a powerful story about how we can build an America that works for all of us, not just the wealthy and powerful—the kind of story that, like the one told by FDR, can move the country to meet our biggest challenges. Those steps include not repeating conservative economic ideas because they are popular and not flinching from naming today’s “economic royalists,” in FDR’s language. The key is helping everyday Americans understand the economics behind why they are truly the heroes of our story.   

Richard Kirsch is a Senior Fellow at the Roosevelt Institute, a Senior Adviser to USAction, and the author of Fighting for Our Health. He was National Campaign Manager of Health Care for America Now during the legislative battle to pass reform.

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Two Opposing Methods Tell Us the Too Big To Fail Subsidy Has Collapsed

Jun 11, 2015Mike Konczal

Is there a Too Big to Fail (TBTF) subsidy? If so, is it large, sustained, and institutionalized by Dodd-Frank, as many conservatives claim? Since this is always coming up in the discussion over financial reform, and especially since both those who think Dodd-Frank should be repealed and those who think it didn’t go anywhere near far enough have an incentive to argue for it, let me put out my marker.

I think the TBTF subsidy was real in the aftermath of the crisis, when it was an obvious policy to prevent a collapse of the financial system. But, contrary to the conservative argument, the subsidy has been reduced to a small amount, if it still exists at all. I also think the focus on it is a distraction. My reasoning comes less from any single study but instead from the fact that the two primary yet opposite quantitative techniques for determining such a thing both tell the same exact story—a fact that I don’t think has been caught.

This post will be written for general readers, with the financial engineering in the footnotes. A TBTF subsidy just means that the largest firms are viewed by the markets as being safer than they should be. Since they have less credit risk, they have cheaper borrowing costs, and prices of their credit risks, as measured in CDS prices, will be lower.

So how would you go about answering whether a bank has a TBTF subsidy? There are two general quantitative approaches. The first would be to compare that bank to other, non-TBTF banks, controlling for characteristics, and see whether or not it has cheaper funding. The second would be to look at the fundamentals of that bank by itself, estimate its chances of failing, and compare it to the market’s estimates. These approaches are, as a matter of methodology, the opposite of each other [1]. Yet they tell the same story. Let’s take them in turn.

First Method - Compare a Firm to Other Firms

The first approach is to simply compare TBTF firms with other firms and see if they receive lower funding. How do you do this? You get a ton of data across many different types of banks and look at the interest rates those banks get. You assume that the chances of default are random but can change based on characteristics [2]. You then do a lot of statistical regressions while trying to control for relevant variables and see if this TBTF measure provides a lower funding cost. This is what the GAO did last year.

One major problem with this technique is that you have to control for important variables. Is TBTF a matter of the size of assets, the square of the size of assets, or just a $50 billion threshold? How do you control for risks of the firm? Given that all the information comes from comparisons across firms, the way you compare a TBTF firm with a medium-sized firm matters.

This is why you can end up with the GAO estimating 42 different models: they wanted to try all their variables. But which models are really the best? The graph below summarizes their results, where they found a major subsidy in the aftermath (dots below the line reflect models showing a subsidy) of the crisis that went back to near-zero later.

Second Method - Compare a Firm to Itself

Let’s do the exact opposite with the second approach. Instead of comparing across firms, let’s create a “structural” approach that looks at the specific structures of the bank, making an estimate of how likely it is to default [3]. We then compare that estimate with actual market prices of default estimates from credit default swaps. If there’s a TBTF subsidy, that means that our estimate of the price of a credit default swap will be higher than the actual price, since the market thinks a loss is less likely.

How do we do this? We look at the bank’s balance sheet and figure out how likely it is that the value of the firm will be less than the debt. We can even phrase it like an option, which means we can hand it to the physicists to put on their Black-Scholes goggles and find a way to price it [details at 4]. The IMF recently took a crack at using the second approach and comparing the estimate to actual CDS prices.

Here’s what they found, where a positive value means the predicted price is larger than the actual price:

Opposites Strengths, Weaknesses

These two approaches aren’t just the opposite of each other; they also have opposite weaknesses. Where under the first approach it’s not really clear whether or not you are controlling for size and risk well at any moment, the structural model is able to ignore these issues by simply looking at the TBTF firm itself. But structural models need CDS prices, which are often illiquid, introducing numerous pricing problems. The first approach includes the bond market, which is quite deep. The structural model requires a lot of financial engineering modeling assumptions, where the statistical approach requires virtually no assumptions. Let's take a second and chart that out:

Note again that the two approaches are the complete opposite of each other in theory, data, and relative merits, yet they both tell the same story. There was a subsidy that was real in the aftermath of the crisis but has been coming down and is now close to zero. What should we take away from this?

First, the mission isn’t done, but we are on the right path. Higher capital requirements, liquidity requirements, living wills, restructuring, derivatives clearing, and more are paying off, removing much of the concern that the markets believe we have permanent bailouts.

You’ll hear many stories about this subsidy, but they will get all their value from the 2009–2010 period. For those on the right who argued that this would become a permanent GSE regime, this isn’t the case. The only question is whether we will go further to fully eliminate it, not whether it will be a permanent feature.

Second, we should remember that this subsidy focus was always a distraction. If Lehman Brothers had collapsed with no chaos, we’d still have millions of foreclosures, a securitization and credit market designed to rip off unsuspecting consumers, and a system of enforcement that doesn’t hold people accountable. The subsidy is only one of the major problems we have to deal with.

In addition, this subsidy equaling zero doesn’t mean that we can ignore the issue. These models can’t tell the difference between a successful and an unsuccessful resolution. This conclusion just means there would be a credit loss, but doesn’t tell if bankruptcy is an option, or if a resolution is swift, certain, well-funded, and likely to create minimal chaos for the economy. Those are our bigger concerns, which aren’t the same question at all.

Third, rolling back major parts of Dodd-Frank, particularly when it comes to TBTF policy, is a bad idea. These results are fragile; it’s easy for us to return to 2010. It would be a shame to remove the policies that are actually working well.

 

[1] It’s not exactly “reduced-form versus structural”, but if you want to learn more about these two methods (and to confirm I’m not making this up) there’s an extensive literature on it.

[2] In the jargon, defaults are thought of as exogenous, with some characteristics making a random default more likely. This will become more apparent in the second approach, when we model the default as endogenous to the structure of the firm.

[3] Full disclosure, I used to work at Moody’s KMV, a pioneer in structural models. I bleed structural modeling; it is the best.

[4] Equity is worth the firm's assets minus debt, or zero if the assets are less than debt. This is the same exact payout as a call option; the equity of the firm is simply a call option on the firms' assets, with the debt as a strike price, and as such can be modeled and priced like an option.

(For those really wedded to the myth that shareholders "own" the firm, note that in the world of Black-Scholes it's just as true to say that debtholders "own" the firm, except they sell off a derivative on their ownership to someone else.)

Follow or contact the Rortybomb blog:
 
  

 

Is there a Too Big to Fail (TBTF) subsidy? If so, is it large, sustained, and institutionalized by Dodd-Frank, as many conservatives claim? Since this is always coming up in the discussion over financial reform, and especially since both those who think Dodd-Frank should be repealed and those who think it didn’t go anywhere near far enough have an incentive to argue for it, let me put out my marker.

I think the TBTF subsidy was real in the aftermath of the crisis, when it was an obvious policy to prevent a collapse of the financial system. But, contrary to the conservative argument, the subsidy has been reduced to a small amount, if it still exists at all. I also think the focus on it is a distraction. My reasoning comes less from any single study but instead from the fact that the two primary yet opposite quantitative techniques for determining such a thing both tell the same exact story—a fact that I don’t think has been caught.

This post will be written for general readers, with the financial engineering in the footnotes. A TBTF subsidy just means that the largest firms are viewed by the markets as being safer than they should be. Since they have less credit risk, they have cheaper borrowing costs, and prices of their credit risks, as measured in CDS prices, will be lower.

So how would you go about answering whether a bank has a TBTF subsidy? There are two general quantitative approaches. The first would be to compare that bank to other, non-TBTF banks, controlling for characteristics, and see whether or not it has cheaper funding. The second would be to look at the fundamentals of that bank by itself, estimate its chances of failing, and compare it to the market’s estimates. These approaches are, as a matter of methodology, the opposite of each other [1]. Yet they tell the same story. Let’s take them in turn.

First Method - Compare a Firm to Other Firms

The first approach is to simply compare TBTF firms with other firms and see if they receive lower funding. How do you do this? You get a ton of data across many different types of banks and look at the interest rates those banks get. You assume that the chances of default are random but can change based on characteristics [2]. You then do a lot of statistical regressions while trying to control for relevant variables and see if this TBTF measure provides a lower funding cost. This is what the GAO did last year.

One major problem with this technique is that you have to control for important variables. Is TBTF a matter of the size of assets, the square of the size of assets, or just a $50 billion threshold? How do you control for risks of the firm? Given that all the information comes from comparisons across firms, the way you compare a TBTF firm with a medium-sized firm matters.

This is why you can end up with the GAO estimating 42 different models: they wanted to try all their variables. But which models are really the best? The graph below summarizes their results, where they found a major subsidy in the aftermath (dots below the line reflect models showing a subsidy) of the crisis that went back to near-zero later.

Second Method - Compare a Firm to Itself

Let’s do the exact opposite with the second approach. Instead of comparing across firms, let’s create a “structural” approach that looks at the specific structures of the bank, making an estimate of how likely it is to default [3]. We then compare that estimate with actual market prices of default estimates from credit default swaps. If there’s a TBTF subsidy, that means that our estimate of the price of a credit default swap will be higher than the actual price, since the market thinks a loss is less likely.

How do we do this? We look at the bank’s balance sheet and figure out how likely it is that the value of the firm will be less than the debt. We can even phrase it like an option, which means we can hand it to the physicists to put on their Black-Scholes goggles and find a way to price it [details at 4]. The IMF recently took a crack at using the second approach and comparing the estimate to actual CDS prices.

Here’s what they found, where a positive value means the predicted price is larger than the actual price:

Opposites Strengths, Weaknesses

These two approaches aren’t just the opposite of each other; they also have opposite weaknesses. Where under the first approach it’s not really clear whether or not you are controlling for size and risk well at any moment, the structural model is able to ignore these issues by simply looking at the TBTF firm itself. But structural models need CDS prices, which are often illiquid, introducing numerous pricing problems. The first approach includes the bond market, which is quite deep. The structural model requires a lot of financial engineering modeling assumptions, where the statistical approach requires virtually no assumptions. Let's take a second and chart that out:

Note again that the two approaches are the complete opposite of each other in theory, data, and relative merits, yet they both tell the same story. There was a subsidy that was real in the aftermath of the crisis but has been coming down and is now close to zero. What should we take away from this?

First, the mission isn’t done, but we are on the right path. Higher capital requirements, liquidity requirements, living wills, restructuring, derivatives clearing, and more are paying off, removing much of the concern that the markets believe we have permanent bailouts.

You’ll hear many stories about this subsidy, but they will get all their value from the 2009–2010 period. For those on the right who argued that this would become a permanent GSE regime, this isn’t the case. The only question is whether we will go further to fully eliminate it, not whether it will be a permanent feature.

Second, we should remember that this subsidy focus was always a distraction. If Lehman Brothers had collapsed with no chaos, we’d still have millions of foreclosures, a securitization and credit market designed to rip off unsuspecting consumers, and a system of enforcement that doesn’t hold people accountable. The subsidy is only one of the major problems we have to deal with.

In addition, this subsidy equaling zero doesn’t mean that we can ignore the issue. These models can’t tell the difference between a successful and an unsuccessful resolution. This conclusion just means there would be a credit loss, but doesn’t tell if bankruptcy is an option, or if a resolution is swift, certain, well-funded, and likely to create minimal chaos for the economy. Those are our bigger concerns, which aren’t the same question at all.

Third, rolling back major parts of Dodd-Frank, particularly when it comes to TBTF policy, is a bad idea. These results are fragile; it’s easy for us to return to 2010. It would be a shame to remove the policies that are actually working well.

 

[1] It’s not exactly “reduced-form versus structural”, but if you want to learn more about these two methods (and to confirm I’m not making this up) there’s an extensive literature on it.

[2] In the jargon, defaults are thought of as exogenous, with some characteristics making a random default more likely. This will become more apparent in the second approach, when we model the default as endogenous to the structure of the firm.

[3] Full disclosure, I used to work at Moody’s KMV, a pioneer in structural models. I bleed structural modeling; it is the best.

[4] Equity is worth the firm's assets minus debt, or zero if the assets are less than debt. This is the same exact payout as a call option; the equity of the firm is simply a call option on the firms' assets, with the debt as a strike price, and as such can be modeled and priced like an option.

(For those really wedded to the myth that shareholders "own" the firm, note that in the world of Black-Scholes it's just as true to say that debtholders "own" the firm, except they sell off a derivative on their ownership to someone else.)

Follow or contact the Rortybomb blog:
 
  

 

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