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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New Polling on Inequality: What We've Learned (or, What We Knew All Along)

Jun 4, 2015Eric Harris Bernstein

New polling confirms what many of us long believed: 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 structural inequality and rewrite the rules of our economy.

New polling confirms what many of us long believed: 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 structural inequality and rewrite the rules of our economy.

Contrary to the popular narrative that concern over inequality divides along partisan lines, the latest CBS/New York Times poll finds bipartisan agreement about numerous dimensions of the problem. 61 percent of respondents feel money and wealth should be more evenly distributed, while 66 percent believe that only the wealthy can get ahead in today's economy. In addition, 57 percent believe the government should do more to reduce the gap between the rich and poor. Perhaps most surprisingly, 74 percent of Americans—the third-largest cohort of the entire poll—agree that corporations have too much influence on American life and politics. That number includes 62 percent of Republicans.

Given the economic reality, these results are unsurprising. Years after the financial crisis, American families are still scraping by. Americans now understand that the fundamentals of our economy are not working to produce shared prosperity. There is popular and bipartisan support, it seems, for policies that will help rebalance our economy so everyone can participate and benefit.

Though the economic reality is grave, the broad consensus is encouraging. It implies the collective will to act and shows that the left–right gap in political ideology is not as large as some in Washington and in the media have suggested.

It also reaffirms what we at Roosevelt have long been sensing: across gender, political ideology, and all income distributions, not a single group feels that most Americans have a fair chance to get ahead and not a single group feels that the situation is improving. A mere 5 percent of those surveyed agree that the gap between rich and poor is shrinking, while a 10-point majority of Republicans agree that opportunity is skewed unequally toward a small minority at the top. 

Some groups are wary of the vague prospect of the government “doing more,” but when it comes to specific initiatives, the numbers shift back in favor of policies that will boost equality. On raising the minimum wage and taxes on earners making over $1 million per year, 71 and 68 percent are in favor, including 50 and 53 percent of Republicans, respectively. 

Issues like these, in addition to fair labor practices like paid sick and family leave, are no-brainers for Washington. At Roosevelt, we believe that reforms need to go deeper and wider, to strike a new balance between shared opportunity and the power that currently dominates our political economy.

At its core, this poll illustrates public desire for comprehensive reform, along the lines of the Rewriting the Rules agenda released by Roosevelt Chief Economist Joseph Stiglitz last month. This includes reforms to monetary policy, trade policy, labor law, and checks on the dominance and dysfunction of the financial sector. Admittedly, some of our proposed reforms, like stronger union rights and a financial transactions tax, underperformed in this poll, but it is our honest assessment that with open dialogue and more public education, these issues would find widespread support. Structural reforms like these will not only shift the balance of power away from the top and toward all Americans, but will spur growth as well.

This is just the latest of indicators that inequality of wealth and opportunity are the defining issues of our time. Candidates from both sides of the aisle must respond to popular demand by delivering policies that will rewrite the rules of the economy for the benefit of all.

Eric Harris Bernstein is a Program Associate at the Roosevelt Institute.

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The Rules are What Matter for Inequality: Our New Report

May 12, 2015Mike Konczal

I’m very excited to announce the release of “Rewriting the Rules of the American Economy” (pdf report), Roosevelt Institute’s new inequality agenda report by Joe Stiglitz. I’m thrilled to be one of the co-authors, as I think this report really tells a compelling story about inequality and the challenges the economy faces.

Recently there’s been a lot of discussion about a “new” conventional wisdom (“a force to be reckoned with” according to one observer), one in which choices about the rules of the economy are a major driver of the outcomes we see. This is in contrast to the normal narrative about inequality we hear, one in which globalization, technology, or individual choices are the only important parts. I like to think this report is a major advancement in this discussion, bringing together the best recent research on this topic.

As we argue, inequality is not inevitable: it is a choice that we’ve made with the rules that structure our economy. Over the past 35 years, the rules, or the regulatory, legal and institutional frameworks, that make up the economy and condition the market have changed. These rules are a major driver of the income distribution we see, including runaway top incomes and weak or precarious income growth for most others. Crucially, however, these changes in the rules have not made our economy better off than we would be otherwise; in many cases we are weaker for these changes. We also now know that “deregulation” is, in fact, “reregulation”—that is, a new set of rules for governing the economy that favor a specific set of actors, and that there's no way out of these difficult choices. But what were these changes?

Financial deregulation exploded both the size of finance and its incomes, roughly doubling the share of finance in the top 1 percent. However, finance grew as a result of intermediating credit in a “shadow banking” sector, which led to disastrous results. It also grew from asset management, a field in which pay is often determined by luck and by fees driven by the increasing prevalence of opaque alternative investment vehicles like hedge funds. For all the resources it uses, finance is no more efficient than it was a century ago.

Corporate governance also radically changed during this period, led by public policy decisions. CEO pay fundamentally shifted toward a high pay model in the 1980s. The shareholder revolution also changed the nature of investment. We now see finance acting as a mechanism for getting money out of firms rather than into them; similarly, private firms are investing more than public firms. CEOs regularly use buybacks to hit earnings targets and say they’d rather hit accounting goals than invest long-term, indicating that short-termism is now a serious problem for investment and its positive spillovers.

High marginal tax rates were cut, but there’s no evidence that the high-end marginal tax rate has any effect on growth; cutting it does, however, raise the share of income the top 1 percent takes home. Low taxes don’t just make the equalizing effects of taxes weaker; they also mean that CEOs and other executives in the top 1 percent have more of an incentive to bargain aggressively with boards or seek opportunities for extracting rents, all zero-sum games for the economy. Lowering capital taxes showed no impact on higher investment, but a positive effect on increased capital payouts; capital income growth is one of the main drivers of inequality during this time period.

During this time, the Federal Reserve’s focus moved toward low and stable inflation at the cost of higher unemployment. Unemployment from weak Federal Reserve action rises the most for low-skilled and minority workers. Inequality generally doesn’t come down unless unemployment is below 6 percent, and this has become less of a priority.

The rules changed, or were not updated, for the labor market as well. Decreasing unionization has taken a toll on workers’ wages. Men’s inequality, in particular, has risen due to collapsing unionization rates. Women’s inequality has suffered due to a falling minimum wage, which went from 54 percent of the average hourly wage in the late 1960s to just 35 percent now. Labor market protections and institutions that give workers voice and power, in general, have not been updated for a new world of service and care work.

Though not an effective driver of lower crime rates, a dramatic turn toward mass and punitive incarceration has reduced the employment prospects for millions of Americans, especially people of color. In particular, there’s a dense web of discriminatory codes for those with a record, which pushes them toward second-class citizenship. One estimate finds 38,000 such punitive statutes, with most of them related to employment and having no end date.

Our institutions and rules haven’t been updated to fully facilitate women’s ability to participate in the labor force. As a result of gender discrimination in the workplace, lack of paid sick and family leave, and the unavailability of affordable child care, women’s participation in the U.S. labor force has declined over the past 15 years, while it increased in most other OECD countries.

Many people agree inequality is a challenge, but would say that this is all driven by technology and globalization. We discuss this at length in the report, but we don’t find these traditional stories either convincing, in the case of technology, or sufficient, in the case of globalization. Both of these forces are playing out, in quite similar ways, in other advanced countries, whose growth of inequality nowhere mirrors our own. Technology and globalization don’t fall from the sky, but instead are determined in important ways by rules and institutions. This is especially important in the era of free trade agreements, which are really managed trade agreements. These agreements are less about trade and more about the regulatory environment corporations face.

But rules matter even in these straightforward stories about supply and demand for labor. Advancements in search theory tell us that supply and demand, rather than strictly determining wages, instead place boundaries or endzones on where wages can go. What determines where wages fall within those boundaries is a whole host of economic rules, including bargaining power, institutions, and social conventions. Even in the strong version of these arguments, the rules matter.

This report describes what has happened, going far deeper than this summary here. It also has a policy agenda focused on both taming the top and growing the rest of the economy. Some may emphasize some pieces more than others; but no matter what this argument about the rules is what is missing in the current debates over the economy. I hope you get a chance to check out the report!

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I’m very excited to announce the release of “Rewriting the Rules of the American Economy” (pdf report), Roosevelt Institute’s new inequality agenda report by Joe Stiglitz. I’m thrilled to be one of the co-authors, as I think this report really tells a compelling story about inequality and the challenges the economy faces.

Recently there’s been a lot of discussion about a “new” conventional wisdom (“a force to be reckoned with” according to one observer), one in which choices about the rules of the economy are a major driver of the outcomes we see. This is in contrast to the normal narrative about inequality we hear, one in which globalization, technology, or individual choices are the only important parts. I like to think this report is a major advancement in this discussion, bringing together the best recent research on this topic.

As we argue, inequality is not inevitable: it is a choice that we’ve made with the rules that structure our economy. Over the past 35 years, the rules, or the regulatory, legal and institutional frameworks, that make up the economy and condition the market have changed. These rules are a major driver of the income distribution we see, including runaway top incomes and weak or precarious income growth for most others. Crucially, however, these changes in the rules have not made our economy better off than we would be otherwise; in many cases we are weaker for these changes. We also now know that “deregulation” is, in fact, “reregulation”—that is, a new set of rules for governing the economy that favor a specific set of actors, and that there's no way out of these difficult choices. But what were these changes?

Financial deregulation exploded both the size of finance and its incomes, roughly doubling the share of finance in the top 1 percent. However, finance grew as a result of intermediating credit in a “shadow banking” sector, which led to disastrous results. It also grew from asset management, a field in which pay is often determined by luck and by fees driven by the increasing prevalence of opaque alternative investment vehicles like hedge funds. For all the resources it uses, finance is no more efficient than it was a century ago.

Corporate governance also radically changed during this period, led by public policy decisions. CEO pay fundamentally shifted toward a high pay model in the 1980s. The shareholder revolution also changed the nature of investment. We now see finance acting as a mechanism for getting money out of firms rather than into them; similarly, private firms are investing more than public firms. CEOs regularly use buybacks to hit earnings targets and say they’d rather hit accounting goals than invest long-term, indicating that short-termism is now a serious problem for investment and its positive spillovers.

High marginal tax rates were cut, but there’s no evidence that the high-end marginal tax rate has any effect on growth; cutting it does, however, raise the share of income the top 1 percent takes home. Low taxes don’t just make the equalizing effects of taxes weaker; they also mean that CEOs and other executives in the top 1 percent have more of an incentive to bargain aggressively with boards or seek opportunities for extracting rents, all zero-sum games for the economy. Lowering capital taxes showed no impact on higher investment, but a positive effect on increased capital payouts; capital income growth is one of the main drivers of inequality during this time period.

During this time, the Federal Reserve’s focus moved toward low and stable inflation at the cost of higher unemployment. Unemployment from weak Federal Reserve action rises the most for low-skilled and minority workers. Inequality generally doesn’t come down unless unemployment is below 6 percent, and this has become less of a priority.

The rules changed, or were not updated, for the labor market as well. Decreasing unionization has taken a toll on workers’ wages. Men’s inequality, in particular, has risen due to collapsing unionization rates. Women’s inequality has suffered due to a falling minimum wage, which went from 54 percent of the average hourly wage in the late 1960s to just 35 percent now. Labor market protections and institutions that give workers voice and power, in general, have not been updated for a new world of service and care work.

Though not an effective driver of lower crime rates, a dramatic turn toward mass and punitive incarceration has reduced the employment prospects for millions of Americans, especially people of color. In particular, there’s a dense web of discriminatory codes for those with a record, which pushes them toward second-class citizenship. One estimate finds 38,000 such punitive statutes, with most of them related to employment and having no end date.

Our institutions and rules haven’t been updated to fully facilitate women’s ability to participate in the labor force. As a result of gender discrimination in the workplace, lack of paid sick and family leave, and the unavailability of affordable child care, women’s participation in the U.S. labor force has declined over the past 15 years, while it increased in most other OECD countries.

Many people agree inequality is a challenge, but would say that this is all driven by technology and globalization. We discuss this at length in the report, but we don’t find these traditional stories either convincing, in the case of technology, or sufficient, in the case of globalization. Both of these forces are playing out, in quite similar ways, in other advanced countries, whose growth of inequality nowhere mirrors our own. Technology and globalization don’t fall from the sky, but instead are determined in important ways by rules and institutions. This is especially important in the era of free trade agreements, which are really managed trade agreements. These agreements are less about trade and more about the regulatory environment corporations face.

But rules matter even in these straightforward stories about supply and demand for labor. Advancements in search theory tell us that supply and demand, rather than strictly determining wages, instead place boundaries or endzones on where wages can go. What determines where wages fall within those boundaries is a whole host of economic rules, including bargaining power, institutions, and social conventions. Even in the strong version of these arguments, the rules matter.

This report describes what has happened, going far deeper than this summary here. It also has a policy agenda focused on both taming the top and growing the rest of the economy. Some may emphasize some pieces more than others; but no matter what this argument about the rules is what is missing in the current debates over the economy. I hope you get a chance to check out the report!

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Why Democrats Should Worry About Republicans' Newfound Economic Populism

May 7, 2015Richard Kirsch

It would be a huge mistake for Democrats to dismiss the newfound economic populism of Republican presidential candidates as obviously laughable given Republicans’ deep alliance with corporate America. Republicans are aiming to pull off a populist jiu jitsu, using anger at corporate influence over government to justify even more dismantling of government. It could work.

It would be a huge mistake for Democrats to dismiss the newfound economic populism of Republican presidential candidates as obviously laughable given Republicans’ deep alliance with corporate America. Republicans are aiming to pull off a populist jiu jitsu, using anger at corporate influence over government to justify even more dismantling of government. It could work.

The good news for progressives is that attention to the squeeze on the middle class and the capture of government by corporations is finally taking center stage in American politics. Pollsters for both political parties are advising candidates to recognize the struggle of families to meet the basics, and the cynicism about government being able to do anything about their problems because it's under the control of the rich and powerful corporations.

This should be a huge opening for Democrats who are aggressive in assigning blame to corporations and pushing for what should be the obvious solution: stand up to those powerful forces with tough measures. If the banks are screwing homeowners, government should enact regulations that stop bank rip-offs and make housing affordable. If corporations and the rich are profiting from huge loopholes in the tax code, close those loopholes and raise their taxes.

But Republicans on the campaign trail are offering a different solution: if government is captured, then shrink government. Marco Rubio laid it out most clearly in an interview on NPR:

And so I hope the Republican Party can become the champion of the working class because I think our policy proposals of limited government and free enterprise are better for the people who are trying to make it than big government is. The fact is that big government helps the people who have made it. If you can afford to hire an army of lawyers, lobbyists and others to help you navigate and sometimes influence the law, you'll benefit. And so that's why you see big banks, big companies, keep winning. And everybody else is stuck and being left behind.

Rand Paul, who champions free-market, anti-regulatory economics, began his announcement speech for president by declaring, "We have come to take our country back from the special interests that use Washington as their personal piggy bank, the special interests that are more concerned with their personal welfare than the general welfare."

And Carly Fiorina bounced off the scourge of Wall Street abuses, Elizabeth Warren, to turn around Warren’s argument: “Crony capitalism is alive and well. Elizabeth Warren, of course, is wrong about what to do about it. She claims that the way to solve crony capitalism is more complexity, more regulations, more legislation, worse tax codes. And of course the more complicated government gets — and it's really complicated now — the less the small and the powerless can deal with it."

It’s easy to laugh at their argument, which can be reduced to “if the fox is getting into the hen house, tear down the hen house.” But it would be foolish to do so. It starts where people are at, as one Republican message guru wrote after the election last fall: “[F]rom the reddest rural towns to the bluest big cities, the sentiment is the same. People say Washington is broken and on the decline, that government no longer works for them — only for the rich and powerful.”

The argument takes advantage of the record-high public distrust of government, reached in no small part because of decades of Republicans stripping government’s effectiveness at tackling problems and championing shrinking government and cutting taxes as the solutions for everything.

Having said that, the current political environment should still be winning turf for Democrats who are willing to tell their own version of the problem and solution. After all, building a hen house that keeps out the foxes is clearly a better way to be sure you get fresh eggs for breakfast. But winning the debate will take something Democrats are not always willing to do: naming villains and pushing solutions that will really address the problems facing American families.

As I wrote in a column analyzing the messages that Democrats who won used last fall, naming specific villains is essential to demonstrating that the candidate understands who is responsible for the problem and is willing to stand up to those powerful forces. Because of our campaign finance system, this is more of a challenge for Democrats. If they actually take on the rich and powerful, it will result in less campaign cash. Republicans don’t have to worry about that, since their patrons understand the game.

Having named the villains, Democrats then need to propose bold solutions that demonstrate that they understand the depth of the problems people face, solutions that people can imagine might actually help. Naming bold solutions is another way to demonstrate to people that you are willing to take on the status quo.

In a debate—whether real or the virtual debates of ad campaigns—Democrats will win if they point out that what Republicans want to do is tear down the hen house, and then name the foxes and describe the fortified, fox-slaying house.

Of course, that’s the biggest question for Hillary Rodham Clinton. Will she name the villains and keep naming them, even though many of them will supply her campaign with funds? Will she advance bold solutions or try to duck tough issues? We know one thing: Vermont Senator Bernie Sanders and the Draft Warren campaign will be making it tough for her to hide.

It’s a question not just for Clinton, but for every Democrat. Will Democrats be bold enough to advance a politics that meets the despair and cynicism of Americans with directness, honesty, and hope for a better future?

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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Will the 2016 Election Include a Real Debate About Racial Justice in America?

May 1, 2015Andrea Flynn

Hillary Clinton's bold speech was a good start, but events in Baltimore show we're still a long way from addressing inequities.

Earlier this week Hillary Clinton used the first major policy address of her campaign to speak passionately about the systemic inequities and injustices that afflict communities of color in the United States, and presented herself as a markedly more progressive, empathetic, and authentic candidate than we’ve seen in the past.

Hillary Clinton's bold speech was a good start, but events in Baltimore show we're still a long way from addressing inequities.

Earlier this week Hillary Clinton used the first major policy address of her campaign to speak passionately about the systemic inequities and injustices that afflict communities of color in the United States, and presented herself as a markedly more progressive, empathetic, and authentic candidate than we’ve seen in the past.

Clinton’s remarks at Columbia University come against the backdrop of protests and unrest in the streets of Baltimore following the death of Freddie Gray, whose spine was nearly severed while in police custody. As Andrew Rosenthal wrote in The New York Times yesterday, our nation’s leaders should be at the forefront of a national conversation on “race, policing, and the crisis that exists in so many of our cities.” In many ways, Clinton’s remarks show she knows what the contours of that conversation should be, and that she has what it takes to elevate it to the forefront of our national consciousness.

“From Ferguson to Staten Island to Baltimore, the patterns have become unmistakable and undeniable,” she began, as she listed a handful of the men whose lives have been cut short as a result of police violence. Walter Scott of Charleston. Tamir Rice, the 12-year-old from Cleveland. Eric Garner of Staten Island. And now Freddie Gray in Baltimore.

“We have to come to terms with some hard truths about race and justice in America,” she said, adding that there is something “profoundly wrong” when Black men are more likely to be stopped and searched by police, charged with crimes, and handed longer prison sentences than their white peers; when 1-in-3 young Black men in Baltimore are unemployed and approximately 1.5 million Black men are missing from their families and communities as a result of incarceration and premature death.

Clinton could have kept her remarks limited to the broken criminal justice system, but she ventured further, acknowledging that the fractures in that system are just one cause—and also a symptom—of deep social and economic injustices that must be corrected if communities of color are to live safe, healthy, and economically secure lives. 

We also have to be honest about the gaps that exist across our country, the inequality that stalks our streets. Because you cannot talk about smart policing and reforming the criminal justice system if you also don't talk about what's needed to provide economic opportunity, better educational chances for young people, more support to families so they can do the best jobs they are capable of doing to help support their own children…

You don't have to look too far from this magnificent hall to find children still living in poverty or trapped in failing schools. Families who work hard but can't afford the rising prices in their neighborhood. Mothers and fathers who fear for their sons' safety when they go off to school—or just to go buy a pack of Skittles. These challenges are all woven together. And they all must be tackled together.

She enumerated the real marks of a nation’s prosperity: how many children can escape poverty and stay out of prison; how many can go to college without being saddled with debt; how many new immigrants can start small businesses; and how many parents can get and keep jobs that allow them to “balance the demands of work and family.” These indicators, she said, are a far better measurement of our prosperity “than the size of the bonuses handed out in downtown office buildings.”

In many ways, it is a sad commentary on the state of our nation’s politics that Clinton’s speech feels significant. But given our political discourse on race (or lack thereof), and the gender, race, and social and economic inequities that continue to rage on unchecked, it did indeed feel significant.

Of course, Hillary didn’t have far to climb to pass the low, low bar that has been set by Republicans. This week we saw members of the GOP blame the protests and uprising in Baltimore on everything from President Obama inflaming racial tensions (thank you, Ted Cruz) to the legalization of same-sex marriage (that gem of wisdom from Representative Bill Flores of Texas). GOP presidential hopeful Rand Paul blamed the “breakdown of the family structure, the lack of fathers, the lack of sort of a moral code in our society” and remarked on how glad he was that his train didn’t stop in Baltimore because it’s depressing, sad, and scary. And Jeb Bush proposed that there be a rapid investigation into the death of Freddie Gray “so that people know the system works for them” (even though—as Rosenthal pointed out—it clearly doesn’t).  

Clinton’s remarks were of an entirely different caliber than we’re hearing from the GOP (not that rising above that nonsense alone should win one points). But she still has a steep road ahead to convince justifiably cynical voters that she will run her campaign—and the nation, should she become our next president—with the same commitment to racial and economic justice that she espoused yesterday. The 2008 campaign left a bitter taste in the mouths of many progressives, especially those in communities of color. And, as Bill Clinton himself said yesterday, it was the tough-on-crime policies of his own administration that led to the over-policing and mass incarceration that his wife criticized.

It remains to be seen if yesterday’s speech will mark a real evolution in her long political career, and not, as some suspect, a calculated political pivot to appease the voters she will need to win this campaign. All things considered, it was a bold start to what will be a long campaign. This is the Hillary many have been waiting for. This moment requires a leader who will boldly challenge the inequities and injustice in our society—whether at the voting booth, on the job, in our neighborhoods, or within our criminal justice system—and lay out a clear path forward. That's the challenge and opportunity for Hillary; we don't yet know if she will accept it.

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

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Clinton's Executive Pay Comments Show We're Still Too Focused on Fairness

Apr 17, 2015Susan Holmberg

Hillary Clinton surprised many progressives earlier this week with her remarks on a model populist issue. "There’s something wrong when CEOs make 300 times more than the typical worker. There’s something wrong when American workers keep getting more productive…but that productivity is not matched in their paychecks.”

Hillary Clinton surprised many progressives earlier this week with her remarks on a model populist issue. "There’s something wrong when CEOs make 300 times more than the typical worker. There’s something wrong when American workers keep getting more productive…but that productivity is not matched in their paychecks.”

Indeed. From 1978 to 2013, executive compensation at American firms rose 937 percent, compared with a sluggish 10.2 percent growth in worker compensation over the same period. In 2013, the average CEO pay package at S&P 500 Index companies was worth $11.7 million. Numbers for 2014 are just starting to be released, but Microsoft’s Satya Nadella is thus far topping the list at $84 million in mostly stock awards.

Too often the CEO pay debate, which tends to come into focus during our annual rite of corporate proxy season, hinges on a question of ethics. Is paying CEOs excessive amounts fair to workers? No, of course not, as so many fast food workers, whose CEOs make approximately 1,200 times more than they do, rightfully voiced yesterday.

One of the problems, however, with expressing CEO pay as a fairness issue is that it is too often countered with accusations of envy. And this doesn’t get us very far. (Note that Clinton’s language—“there’s something wrong”—plays into the fairness framing.) Our efforts to reform CEO pay would be much stronger if we also talked about how bad the status quo is for our economy and thus our society.

There are two main reasons CEO pay should be a concern to anyone who cares about economic prosperity in the United States, including Hillary Clinton. One reason stems from the total amount CEOs are paid. The other relates to the structure of CEO pay, in particular that the bulk of their compensation comes in the form of stock options and stock grants.

Total Amount of CEO Pay

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 a decline in consumer demand, which has tremendous spillover effects in terms of investment, job creation, and tax revenue, not to mention social instability.

Research clearly demonstrates that 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 share of the 99.99th percentile is mostly explained by the incomes of superstars and CEOs.

The Structure of CEO Pay

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. 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.

Hillary Clinton’s comments on CEO pay could be a signal that she is willing to adopt at least some of the progressive messaging championed by Senator Elizabeth Warren. We can enhance that message by making better economic arguments for why we need to reform skyrocketing CEO pay.

For more, see my primer on the executive pay debate.

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

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