Introducing Our Latest Report: Defining Financialization

Jul 27, 2015Mike Konczal

We’re releasing a new report today as part of the Roosevelt Institute’s Financialization Project: Definining Financialization.

Following the well-received Disgorge The Cash, this is really the foundational paper that outlines a working definition of financialization, some of the leading concerns, worries, and research topics in each area, and a plan for future research and action. Since this is what we are building from, we’d love feedback.

Prior to this, I couldn’t find a definition of financialization broad enough to account for several different trends and accessible enough for a general, nonacademic audience. So we set out to create our own solid definition of financialization that can serve as the foundation for future research and policy. That definition includes four core elements: savings, power, wealth, and society. Put another way, financialization is the growth of the financial sector, its increased power over the real economy, the explosion in the power of wealth, and the reduction of all of society to the realm of finance.

Each of these four elements is essential, and together they tell a story about the way the economy has worked, and how it hasn’t, over the past 35 years. This enables us to understand the daunting challenges involved in reforming the financial sector, document the influence of finance over society and the economy as a whole, and clarify how finance has compounded inequality and insecurity while creating an economy that works for fewer people.

Savings: The financial sector is responsible for taking our savings and putting it toward economically productive uses. However, this sector has grown larger, more profitable, and less efficient over the past 35 years. Its goal of providing needed capital to citizens and businesses has been forgotten amid an explosion of toxic mortgage deals and the predatory pursuit of excessive fees. Beyond wasting financial resources, the sector also draws talent and energy away from more productive fields. These changes constitute the first part of our definition of financialization.

Power: Perhaps more importantly, financialization is also about the increasing control and power of finance over our productive economy and traditional businesses. The recent intellectual, ideological, and legal revolutions that have pushed CEOs to prioritize the transfer of cash to shareholders over regular, important investment in productive expansion need to be understood as part of the expansion of finance.

These historically high payouts drain resources away from productive investment. But beyond investment, there are broader worries about firms that are too dominated by the short-term interests of shareholders. These dynamics increase inequality and have a negative impact on innovation. Firms only interested in shareholder returns may be less inclined to take on the long-term, risky investment in innovation that is crucial to growth. This has spillover effects on growth and wages that can create serious long-term problems for our economy. This also makes full employment more difficult to achieve, as the delinking of corporate investment from financing has posed a serious challenge for monetary policy.

Wealth: Wealth inequality has increased dramatically in the past 35 years, and financialization includes the ways in which our laws and regulations have been overhauled to protect and expand the interests of those earning income from their wealth at the expense of everyone else. Together, these factors dramatically redistribute power and wealth upward. They also put the less wealthy at a significant disadvantage.

More important than simply creating and expanding wealth claims, policy has prioritized wealth claims over competing claims on the economy, from labor to debtors to the public. This isn’t just about increasing the power of wealth; it’s about rewriting the rules of the economy to decrease the power of everyone else.

Society: Finally, following the business professor Gerald Davis, we focus on how financialization has brought about a “portfolio society,” one in which “entire categories of social life have been securitized, turned into a kind of capital” or an investment to be managed. We now view our education and labor as “human capital,” and we imagine every person as a little corporation set to manage his or her own investments. In this view, public functions and responsibilities are mere services that should be run for profit or privatized, or both.

This way of thinking results in a radical reworking of society. Social insurance once provided across society is now deemphasized in favor of individual market solutions; for example, students take on an ever-increasing amount of debt to educate themselves. Public functions are increasingly privatized and paid for through fees, creating potential rent-seeking enterprises and further redistributing income and wealth upward. This inequality spiral saps our democracy and our ability to collectively address the nation’s greatest problems.

We have a lot of future work coming from this set of definitions, including a policy agenda and FAQ on short-termism in the near future. I hope you check this out!

Follow or contact the Rortybomb blog:
 
  

 

We’re releasing a new report today as part of the Roosevelt Institute’s Financialization Project: Definining Financialization.

Following the well-received Disgorge The Cash, this is really the foundational paper that outlines a working definition of financialization, some of the leading concerns, worries, and research topics in each area, and a plan for future research and action. Since this is what we are building from, we’d love feedback.

Prior to this, I couldn’t find a definition of financialization broad enough to account for several different trends and accessible enough for a general, nonacademic audience. So we set out to create our own solid definition of financialization that can serve as the foundation for future research and policy. That definition includes four core elements: savings, power, wealth, and society. Put another way, financialization is the growth of the financial sector, its increased power over the real economy, the explosion in the power of wealth, and the reduction of all of society to the realm of finance.

Each of these four elements is essential, and together they tell a story about the way the economy has worked, and how it hasn’t, over the past 35 years. This enables us to understand the daunting challenges involved in reforming the financial sector, document the influence of finance over society and the economy as a whole, and clarify how finance has compounded inequality and insecurity while creating an economy that works for fewer people.

Savings: The financial sector is responsible for taking our savings and putting it toward economically productive uses. However, this sector has grown larger, more profitable, and less efficient over the past 35 years. Its goal of providing needed capital to citizens and businesses has been forgotten amid an explosion of toxic mortgage deals and the predatory pursuit of excessive fees. Beyond wasting financial resources, the sector also draws talent and energy away from more productive fields. These changes constitute the first part of our definition of financialization.

Power: Perhaps more importantly, financialization is also about the increasing control and power of finance over our productive economy and traditional businesses. The recent intellectual, ideological, and legal revolutions that have pushed CEOs to prioritize the transfer of cash to shareholders over regular, important investment in productive expansion need to be understood as part of the expansion of finance.

These historically high payouts drain resources away from productive investment. But beyond investment, there are broader worries about firms that are too dominated by the short-term interests of shareholders. These dynamics increase inequality and have a negative impact on innovation. Firms only interested in shareholder returns may be less inclined to take on the long-term, risky investment in innovation that is crucial to growth. This has spillover effects on growth and wages that can create serious long-term problems for our economy. This also makes full employment more difficult to achieve, as the delinking of corporate investment from financing has posed a serious challenge for monetary policy.

Wealth: Wealth inequality has increased dramatically in the past 35 years, and financialization includes the ways in which our laws and regulations have been overhauled to protect and expand the interests of those earning income from their wealth at the expense of everyone else. Together, these factors dramatically redistribute power and wealth upward. They also put the less wealthy at a significant disadvantage.

More important than simply creating and expanding wealth claims, policy has prioritized wealth claims over competing claims on the economy, from labor to debtors to the public. This isn’t just about increasing the power of wealth; it’s about rewriting the rules of the economy to decrease the power of everyone else.

Society: Finally, following the business professor Gerald Davis, we focus on how financialization has brought about a “portfolio society,” one in which “entire categories of social life have been securitized, turned into a kind of capital” or an investment to be managed. We now view our education and labor as “human capital,” and we imagine every person as a little corporation set to manage his or her own investments. In this view, public functions and responsibilities are mere services that should be run for profit or privatized, or both.

This way of thinking results in a radical reworking of society. Social insurance once provided across society is now deemphasized in favor of individual market solutions; for example, students take on an ever-increasing amount of debt to educate themselves. Public functions are increasingly privatized and paid for through fees, creating potential rent-seeking enterprises and further redistributing income and wealth upward. This inequality spiral saps our democracy and our ability to collectively address the nation’s greatest problems.

We have a lot of future work coming from this set of definitions, including a policy agenda and FAQ on short-termism in the near future. I hope you check this out!

Follow or contact the Rortybomb blog:
 
  

 

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Hillary Clinton's Economic Agenda is Good for Women, But Should Be Even Bolder

Jul 16, 2015Andrea Flynn

Hillary Clinton gave her first major economic policy address earlier this week and outlined her goals for lifting wages for the middle class, expanding social services, and addressing growing economic inequality. She said that an important ingredient to strong economic growth is women’s workforce participation, and promised to knock down many of the barriers that hold women—and our economy—back.

Hillary Clinton gave her first major economic policy address earlier this week and outlined her goals for lifting wages for the middle class, expanding social services, and addressing growing economic inequality. She said that an important ingredient to strong economic growth is women’s workforce participation, and promised to knock down many of the barriers that hold women—and our economy—back. But she failed to mention one issue that is critical to the economic wellbeing of women and their families: access to reproductive health care. 

It was encouraging to hear Clinton acknowledge the important role that women play in the U.S. economy. After all, women’s entrance into the workforce in the 1970s and 1980s is credited with driving a fifth of GDP growth. But over the past 15 years, their participation in the labor market has declined from 60 to 57 percent, not a major decline but certainly a trend in the wrong direction. The U.S. now ranks 19th out of 24 advanced countries on this measure. America’s dismal status can be blamed in large part on the lack of generous and sensible work and family polices we see in other OECD countries. These include paid sick leave, paid family leave, and affordable child care. Another factor is the stubborn wage gap that disadvantages women—and particularly women of color—throughout their working lives and beyond. Clinton indicated that addressing these inequities is a primary focus of her economic agenda. Doing so would significantly improve the lives millions of women and their families. 

But we must do all that and more. Without access to comprehensive, quality, and affordable health care, including the full spectrum of reproductive health care—maternal health care, family planning, and abortion care—women and their families will not be able to take full advantage of the economic opportunities available to them.

I’m not worried that Hillary isn’t going to be a strong supporter of reproductive rights. In her Roosevelt Island campaign launch, she called out Republicans who “shame and blame women, rather than respect our right to make our own reproductive health decisions.” Her campaign sharply criticized House Republicans for passing a 20-week abortion ban earlier this year, saying, "Politicians should not interfere with personal medical decisions, which should be left to a woman, her family and her faith, in consultation with her doctor or health care provider." Historically, she has been an advocate for reproductive rights in both domestic and international policy.

But it would be powerful if she could also articulate reproductive health as a critical component of economic security, as we at the Roosevelt Institute did in our recent blueprint for reversing economic inequality. Voters understand reproductive health as an economic issue. New polling from Virginia shows that 64 percent of voters there believe that a woman’s financial stability is dependent on her ability to control whether and when she has children, and 68 percent believe laws that make it harder to access abortion can have a negative impact on woman’s financial security. Polling conducted in New York and Pennsylvania showed similar results.

This isn’t just a matter of opinion; the evidence illustrates that reproductive health access has economic benefits for families. Studies have shown links between family planning access and greater educational and professional opportunities for women, as well as increased earnings over women’s lifetimes. Women report that using birth control has allowed them to better take care of themselves and their families, to stay in school, to support themselves financially, and to get or keep a job and pursue a career. And when women don’t have access to reproductive health care, they are economically disadvantaged. Take the results of the recent Turnaway Study, which has shown that women who seek but are denied an abortion are three times as likely as those who access the procedure to end up below the federal poverty line two years later.

In light of these findings, a progressive economic agenda will be incomplete if it does not include access to comprehensive reproductive health care. Lack of access to those services has significant health and economic costs. Women of color, immigrant women, and poor women all experience higher rates of chronic disease, unintended pregnancy, and lower life expectancy than women with higher incomes. U.S. women of color are 3–4 times more likely than white women to die of pregnancy-related causes, and infants born to those women are 2.4 times more likely than those born to white women to die in their first year of life. In some regions of the United States, the maternal mortality rate among Black women is comparable to that in some Sub-Saharan African countries. These disparities impact women’s quality of life. They inhibit these women’s ability to care for themselves and their families, to play an active role in their communities, and to participate in the workforce and achieve economic security. There is no more important time than now to advocate for a broader progressive agenda. Attacks on reproductive health access are at an all-time high and access to basic health services is being rolled back at a rapid rate.

The right and ability to make decisions about our bodies is a fundamental building block of our social and economic wellbeing. We can’t expect people to separate the physical, social, and economic demands and stresses they experience. Are women supposed to worry about their need for an abortion without worrying about the job they might lose if they take a day off to get one? Do they stress over needing to put food on the table for their kids without also worrying about how they will pay for birth control, student loans, and rent? No. For the vast majority of people in this country, life is messy and complicated and overwhelming, and everyday families have no choice but to juggle each of these issues simultaneously.

Progressives know that. Now is the time for them to put forth an economic agenda that will address all aspects of our economic wellbeing—not just those that have historically been politically palatable. 

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

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Beyond Fairness: Skyrocketing CEO Pay Is Bad for Our Economy

Jul 16, 2015Susan Holmberg

Next week marks the 5th anniversary of the Dodd-Frank Wall Street Reform and Protection Act. While the law has made some solid strides toward regulating Wall Street (with the creation of the Consumer Financial Protection Bureau arguably the most potent and popular), there is still much work to be done, particularly in the realm of CEO pay reform.

Next week marks the 5th anniversary of the Dodd-Frank Wall Street Reform and Protection Act. While the law has made some solid strides toward regulating Wall Street (with the creation of the Consumer Financial Protection Bureau arguably the most potent and popular), there is still much work to be done, particularly in the realm of CEO pay reform.

From 1978 to 2014, executive compensation at American firms rose 997 percent, compared with a sluggish 10.9 percent growth in worker compensation over the same period.

While CEO pay continues its determined ascent up a seemingly limitless mountain of stock options and other performance pay, the SEC has yet to implement all of the Dodd-Frank rules designed to reform CEO pay practices. The Say-on-Pay provision, which allows shareholders an advisory vote on proposed executive compensation packages, has been in effect since 2011, and Section 954—the clawbacks provision—should soon be finalized. But the SEC continues to delay the disclosure rule on CEO–worker pay gaps, as well as a few other key provisions.

This raises a few obvious questions: Why is it so important to urge the SEC to implement these CEO pay reform rules? Does it really matter how much CEOs are paid? Isn’t this debate really just about people being jealous of, for example, former Oracle chief Larry Ellison and his Hawaiian island?

Hardly. We have to stop talking about the CEO pay issue in terms of fairness, which usually leads to accusations of envy. This conversation just doesn’t get us very far. The truth is that skyrocketing CEO pay is terrible for our economy for two reasons, as we explain in the infographic below.

To elaborate, the problems are as follows:

1. How CEOs Are Paid

The current trend in how CEOs are paid, particularly with stock options, creates a range of economic problems. Several studies show that equity-heavy pay, because it makes executives very wealthy very quickly, distorts CEOs’ incentives, inducing them to take on too much risk. Instead of bearing this risk themselves, they shift it onto the rest of society, as we saw during the financial crisis. This model also encourages executives to behave fraudulently, as in the backdating scandals of a decade ago, and lessens their motivation to invest in their businesses. In addition, according to economist William Lazonick, in order to issue stock options to top executives while avoiding the dilution of their stock, corporations often divert funds to stock buybacks rather than spending on research and development, capital investment, increased wages, or new hiring. To top it all off, these pay packages cost taxpayers billions of dollars due to the performance pay tax loophole instituted by President Clinton.

2. How Much CEOs Are Paid

In addition to its problematic structure, the sheer volume of CEO pay creates an array of economic problems. A handful of high-profile economists—Thomas Piketty, Joseph Stiglitz, and Robert Reich, to name a few—have begun to make the case that a high degree of economic inequality precipitates financial instability because it leads to, for example, a decline in consumer demand, which has tremendous spillover effects in terms of investment, job creation, and tax revenue, not to mention social instability.

The growth of executive pay is a core driver of America’s rising economic inequality. According to the Economic Policy Institute, “[e]xecutives, and workers in finance, accounted for 58 percent of the expansion of income for the top 1 percent and 67 percent of the increase in income for the top 0.1 percent from 1979 to 2005.” Another calculation by economists Ian Dew-Becker and Robert Gordon finds that the large increase in the share of the top .01 percent is mostly explained by the incomes of superstars and CEOs.

Dodd-Frank’s anniversary should remind us that we still have a long way to go to rein in ever-increasing CEO pay, including instituting key provisions like the CEO–worker pay gap. If we move the CEO pay debate beyond the rhetoric of fairness and envy to a conversation about its costs, we could galvanize the public around this issue. The evidence is clear: skyrocketing CEO pay is not just an ethical problem; it’s also simply bad economics.

Susan Holmberg is Director of Research and a Fellow at the Roosevelt Institute.

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Inequality Isn't Just Bad for the Economy—It's Toxic for the Environment

Jul 6, 2015Susan Holmberg

Cross-posted from Grist

Tackling economic inequality is good climate change policy.

Cross-posted from Grist

Tackling economic inequality is good climate change policy.

The pope’s encyclical on climate change was received with both enormous enthusiasm and criticism, reactions that will only intensify as he continues to lead efforts to solve our climate crisis and generate momentum for the UN Climate Conference later this year. His latest move? Inviting Naomi Klein, author most recently of This Changes Everything, to help lead last week’s Vatican conference on climate change.

The most consistent and profound message threaded throughout Pope Francis’s text is how disproportionately vulnerable the poor are to the escalating effects of climate change. Poor communities are on the front lines, particularly susceptible to induced mega-storms, droughts, flooding, and other conditions that make life even more difficult. Because of their economic instability, impoverished communities are also more easily affected by a storm that in itself is not deadly. In 1998, when Hurricane Mitch hit Honduras, the poor were disproportionately devastated; impoverished households lost 15–20 percent of their assets as a result of the storm, while the rich lost only 3 percent. This is why the environmental justice (EJ) movement has long spotlighted the role of structural racism in coercing people of color and the poor into living in vulnerable areas and near the most polluted environments (landfills, industrial plants, etc.) and consequently experiencing worse health and quality of life outcomes.

Yet, to build on the Pope and EJ movement’s message that economic inequality and environmental quality are linked, it is important to point out that the relationship between the economy and environment goes both ways. We’ve become more aware that environmental damage can be especially bad for poor people and people of color. What is less obvious is that high economic inequality—in the case of the United States, we’re almost at pre-Great Depression levels—is also bad for our environment.

Economist James Boyce argues that, because wealth ultimately converts into political power, a society with high levels of wealth and income inequality leaves those at the bottom less able to resist the powerful interests that benefit from pollution. That’s consistent with the EJ movement’s message, but Boyce takes it further by arguing, “the total magnitude of environmental harm depends on the extent of inequality. Societies with wider inequalities of wealth and power tend to have more environmental harm.”

Boyce provides two compelling pieces of evidence for his argument. The first is his study, with colleagues from the Political Economy Research Institute, comparing industrial air pollution across U.S. metro areas. The authors look at the distribution of air pollution impacts across income levels and racial groups and find that in cities where the gaps in pollution exposure between people of color and whites are larger, there tends to be much more pollution in general.

The second study Boyce conducted, with another group of colleagues, looked at environmental quality across the 50 states and asked why it’s better in some states than others. It again turns out that these variations have much to do with differences in wealth and power. “Where income inequalities were greater, where educational inequalities were greater, where the fairness of fiscal policy in terms of both the tax system and access to services like Medicaid was better, you tended to find differences in environmental degradation.” More equal distributions of wealth and power were associated with better environmental outcomes.

Boyce’s results are supported by complementary studies. Economist Jungho Baek and his co-authors also find that more equal income distribution in the U.S. results in better environmental quality in both the short- and long-run. Australian researchers identify similar impacts on the “stability of major systems including the social, terrestrial, water and mineral industry.”

We can imagine a variety of mechanisms for how wider disparities in economic inequality would lead to higher “quantities” of environmental degradation. One is how we make environmental policy decisions. The Reagan administration mandated that cost-benefit analysis (CBAs) would be the primary tool for making these decisions, like allowable use of pesticides and levels of resource extraction. The belief was, and still is, that cost-benefit analysis is always the most objective, transparent, and efficient method.

But in addition to the fact that CBAs are often criticized for being widely inaccurate and politically motivated, benefits are often valued by the willingness to pay for environmental improvements, which is problematic. When surveyed, the rich say they are willing to pay more than the poor for keeping a landfill incinerator out of their communities. Thus, despite the fact that common sense tells us impoverished and disempowered communities would just as much like to live in a clean and safe environment as the more wealthy and powerful, cost-benefit analyses typically say otherwise. The end result is that a CBA survey might recommend a higher level of allowable pollution than if the survey results were based on a more equitable population.

Precipitated by the 2008 global financial crisis, we are finally having a lively debate about economic inequality in the U.S., which, after decades of stability, has been rising for the past 30 years or so. Yet our urgent conversation about climate change and environmental quality is siloed from this broader debate. As we confront the realities of our changing climate, we must recognize that environmental devastation is a distinct byproduct of economic inequality. We need to blend these conversations and also understand that the host of policy ideas coming out of the inequality debate could play an important role in solving our current environmental crisis.

Susan Holmberg is a Fellow and Director of Research at the Roosevelt Institute.

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Shared Security: A New Deal for the New Century

Jul 6, 2015Richard Kirsch

If Social Security, the minimum wage, unemployment insurance, and the 40-hour workweek laid the foundation for the middle class in the 20th century, what would be the equivalent for the 21st century? The odd couple of a billionaire entrepreneur and a labor leader have come up with what could be a breakthrough proposal for rebuilding the middle class.

If Social Security, the minimum wage, unemployment insurance, and the 40-hour workweek laid the foundation for the middle class in the 20th century, what would be the equivalent for the 21st century? The odd couple of a billionaire entrepreneur and a labor leader have come up with what could be a breakthrough proposal for rebuilding the middle class.

Nick Hanauer, who made his fortune as an early Amazon investor, and David Rolf, the head of an SEIU local that has successfully organized tens of thousands of home care workers, detailed their plan for Shared Security in Democracy Journal.  The proposal aims to restore the foundation of the middle class: economic security.

Hanauer and Rolf create a fictional young worker named Zoe to personify how working people in the new economy live in constant economic insecurity. Zoe works part-time as a hotel manager and supplements her income driving for Uber, working as a gardener, and renting her apartment on Airbnb. Still, she has no benefits and struggles to pay the rent and keep her car running. She doesn’t have the time or money to finish her college degree and wonders whether it would be worth the loans even if she did. When Zoe rents out her apartment, she stays with her parents, who also did not go to college. But her parents, who have had regular full-time employment over the course of their lives, look forward to a retirement made secure by a modest pension, some savings, Social Security, and Medicare.

As Hanauer and Rolf write, “Zoe’s parents entered the workforce with the expectation that hard work would be rewarded with decent pay, improving prospects, and a comfortable retirement…This was the social contract of the 1950s, ’60s, and ’70s…But for Zoe’s generation, this contract no longer exists.”

The new 21st century social contract they propose is based on giving Zoe’s generation middle class security, which they emphasize is the engine of our economy.  Hanauer and Rolf write, “the middle class is the source of all growth and prosperity in a modern, technological economy and economic security is the essential feature of what it means to be included in the middle class.”

Just as FDR’s New Deal was founded on raising labor standards and providing social insurance, Hanauer and Rolf’s plan is based on Shared Security Standards and a Shared Security Account. The two combine to modernize basic labor standards and to extend existing and new social insurance to all workers, including part-time employees and those who employers consider independent contractors.

The new labor standards would include: a livable wage (a higher minimum wage) and guarantees of overtime pay; pay equity; fair scheduling of work; and the right to use paid sick time, family leave, and vacations, which would be financed from each employee’s Shared Security Account.

The breakthrough innovation in the proposal is establishing a Shared Security Account for every worker. Each employer would pay the share of benefits earned by each worker into those workers’ accounts based on a 40-hour week. In other words, an employer would pay all the benefits for a full-time employee while paying half the benefits for someone who works for that employer 20 hours a week.

Each employer would pay its share of existing benefits required by the federal government or states, including Social Security, Medicare, an employer contribution toward health care, unemployment insurance, workers’ compensation, and disability. In addition, the employer would be required to pay for new benefits, including paid sick days, family leave and vacation, and a contribution to a 401(k)-type retirement account.

The authors rightly celebrate the positive impact of their proposal for American workers. It would turn the trend toward contingent, part-time, temporary, and shared work from a recipe for continuous financial insecurity to a foundation for middle-class security.

What they don’t explore is how their Shared Security system would significantly slow down the work trends that their proposal addresses. Looking again at Zoe, the hotel management company keeps her at 29 hours a week to avoid paying benefits. But when that financial advantage is taken away, or reduced significantly if the company voluntarily offers a higher benefit level to full-time employees, the company would be much more likely to employ Zoe full-time. In doing so, the company would gain the advantages that come with a full-time employee: less need for training, lower turnover, a better work attitude, and company loyalty.

As The New York Times reported last month, we are already seeing some startup tech companies, which Hanauer and Rolf say use the contingent model to support innovation, realizing that it makes better business sense to hire full-time employees. For both low-wage employers and startups, Shared Security will lead firms to use the contingent work model more when it makes sense for delivering a better product and less as a way to cut labor costs.

All of which reinforces the authors’ potent economic and political analysis, which is that assuring that every job is a good job is not only fair, it is the driver of economic growth. Raising wages, providing time to care for yourself and your family, and having affordable health insurance and retirement security is not just about being fair, and it’s not just about rewarding workers for their contributions to a business. It’s the exact opposite of conservative economic theory. At its root, it recognizes that people with the security of a good, middle-class job drive our economy forward. 

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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Once Again, the ACA Survived SCOTUS -- But the Fight Isn't Over Yet

Jun 25, 2015Andrea Flynn

Today the Supreme Court decided in favor of the government and the more than 6 million individuals who now have health coverage thanks to the Affordable Care Act’s subsidies. The 6–3 King v. Burwell decision—which determined that individuals in all states, not just those that established their own health exchanges, could be eligible for federal subsidies—is a win for President Obama, for the law more broadly, and for the health and economic security of millions of women and their families.

Today the Supreme Court decided in favor of the government and the more than 6 million individuals who now have health coverage thanks to the Affordable Care Act’s subsidies. The 6–3 King v. Burwell decision—which determined that individuals in all states, not just those that established their own health exchanges, could be eligible for federal subsidies—is a win for President Obama, for the law more broadly, and for the health and economic security of millions of women and their families. As I described in my recent policy note, the ACA has expanded women’s access to care, improved the quality of their coverage, and in the process increased women’s economic security. Today’s decision ensures that—for the time being—the law will continue to do all of those things and more.

The ACA expanded coverage to 16.5 million people and elevated the floor of coverage for women. Since 2010, 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. This has been a significant improvement over the pre-ACA system in which women had to pay out of pocket for preventive services like pap smears and breast exams, were routinely charged more than men, and many couldn’t afford maternity coverage during pregnancy.

Over the past five years the ACA has begun to ease the financial burdens of health coverage and care for women, who are more likely than men 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 have been especially harmful to women of color, who represent nearly half of all uninsured women eligible for tax credits in states using the federal exchange. 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.

When women have good coverage and access to care, they are better able to make decisions about the timing and size of their families. They are able to prevent illnesses that cause them to miss work force them to lose a paycheck, and threaten their employment. They have healthier babies and children. Fewer out-of-pocket medical costs free up more money for food, childcare, education, housing, transportation, and savings. Health coverage won’t singlehandedly solve the serious challenges facing low-income women and families. Indeed, our country’s soaring inequality and persistent injustices demand 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.

Today’s decision is especially important for women considering conservative lawmakers’ relentless attempts to roll back access to reproductive health care. Consider that just yesterday House Republicans voted to completely eliminate Title X (the federal family planning program), to expand religious exemptions allowing employers and insurers to opt out of covering anything they find morally or religiously objectionable, to implement new abortion restrictions with no exception for the life or health of pregnant women, and to renew the Hyde Amendment, which prohibits Medicaid coverage of abortion.

So the ACA is safe for now, and the Supreme Court’s ruling will allow the law to become even more ingrained in our social and political fabric. However, we can be sure the vitriolic political opposition is not over. The GOP presidential hopefuls didn’t waste any time letting their constituents know today’s decision wouldn’t stop their attempts to undermine the law. And conservative lawmakers on the Hill will continue to push budget proposals that would unravel the law’s most important components and reduce funding for social programs critical to the wellbeing of low-income families. We should celebrate the King v. Burwell decision, but we must not stop making the case that for women and families, comprehensive, affordable health coverage—and by extension, care—is as much a matter of health as it is economic security.

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

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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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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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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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Connecting Pediatricians to Local Anti-Poverty Resources Can Improve Child Health

Jun 10, 2015Missy BrownEmily Cerciello

Childhood poverty is growing in North Carolina. As of 2012, more than half a million children in the state are living in poverty, and of these, more than half are in extreme poverty.

Childhood poverty is growing in North Carolina. As of 2012, more than half a million children in the state are living in poverty, and of these, more than half are in extreme poverty. The health implications for these children are profound; research shows children born into poor families have higher hospital readmission rates, sick days, rates of chronic illness, and death rates compared to children in non-poor families.

As most pediatricians have patients who fall below the poverty line, they are seeing the negative health consequences of poverty. Pediatricians are looking for ways to address these issues, which are affecting an increasing number of their patients. Unfortunately, conditions of poverty—inadequate housing, lack of access to healthy foods, lack of transportation for appointments—are not easily remedied.

Pediatricians cannot tackle these issues themselves, nor do they have to. Across the state, organizations and agencies across the states are working to address these issues on at the grassroots level. After speaking to North Carolina pediatricians, however, we found that most were unaware of these local resources and the services they provide.

Our team of students at UNC set out to fix this by assembling a community health toolkit—a concise, informative database of local resources, the services they provide, and their contact information. With this toolkit, pediatricians can begin to address these larger issues. For example, if patients come in with asthma symptoms exacerbated by their family’s housing situation, instead of merely addressing the symptoms, the doctor can make referrals to an organization that works to get families better housing. This way, pediatricians can provide more than Band-Aid solutions to the problems they’re seeing. In addition, the toolkit benefits community organizations by helping them reach their target populations.

The idea of connecting pediatricians to these resources is coming at a critical time. The Affordable Care Act aims to shift the health care system to a system of value-based reimbursement instead of volume-based reimbursement. Under a value-based system, pediatricians are paid based on the health of their patients, not the number of medical services they provide. Therefore, pediatricians now have even more reason to look at the health of their patients more holistically and address the larger health factors at play.

What we have done by creating this community health toolkit is only the first step in what we see as a necessary change in how we approach health care. Research shows that the causes of poor health are multifaceted, so our solutions should be, too. We hope to see this toolkit model expanded so pediatricians across the nation can bring in local groups to help address the systemic poverty affecting millions of children.

Missy Brown and Emily Cerciello are recent graduates of the University of North Carolina at Chapel Hill. Emily is the Campus Network's Senior Fellow for Health Care.

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