Four Crazy Economic Ideas You Might Hear at Tonight’s GOP Primary Debate

Aug 6, 2015Roosevelt Institute

The Republican presidential candidates will have their first televised debate of the 2016 cycle tonight. Here's what they're likely to say about the economy:

1. Cutting taxes on big corporations and top earners is the best way to grow the economy.

The Republican presidential candidates will have their first televised debate of the 2016 cycle tonight. Here's what they're likely to say about the economy:

1. Cutting taxes on big corporations and top earners is the best way to grow the economy.

All the candidates on stage tonight at the GOP primary debate will express some flavor of “trickle-down economics”—the failed idea that low taxes for the most well-off is the best policy for economic growth. Through a series of policies implemented over the past 35 years, we have already tried this tax-cutting strategy—in fact, some would say we are still in the midst of a 35-year trickle-down experiment—and as a result economic growth and business investment have slowed while inequality has risen.

To defend their position, Republican candidates will point out that America’s nominal corporate tax rate is among the highest in the world, but this is misleading. American corporations pay an effective tax rate of just 12 percent. Such a low rate could be justified if corporations were using the proceeds to fund productive investment, but the evidence does not support a connection between lower tax rates and higher investment. Today, U.S. corporations are holding more than $2 trillion sitting in offshore tax shelters, and a growing body of research shows that excess profits are used to enrich shareholders rather than improve a company’s long-term prospects for success.

Taxes on top incomes have fallen precipitously, from nearly 70 percent in 1980 to 39 percent today. While top earners have benefited from lower rates and a growing share of deductions and have captured nearly all of the economic gains of the recovery, median wages and family incomes have stagnated.

Thirty-five years of evidence is clear: the main result of cutting taxes at the top and for big corporations is more inequality, not more economic growth.

2. Supply-side policies will make the economy grow at 4 percent and solve America’s economic problems.

Jeb Bush and Chris Christie pledged to boost the economy to 4 percent growth. Historically, the United States has grown at an average annual rate of 2.9 percent, typically only growing above this trend when the economy is coming out of recession.

As we’ve seen, growth is not synonymous with broadly rising economic wellbeing. U.S. economic growth from 1979 to 2007 certainly benefited the top 1 percent of households, who saw incomes increase by 275 percent; however, compensation for the median households increased just 15 percent over this time—largely because families are working more hours, not because wages are broadly rising. 

The deck is stacked against candidates pledging 4 percent growth: The Congressional Budget Office forecasts that U.S. growth will slow to 2.1 percent by the end of the decade as the native-born labor force ages and shrinks. Not only is a 4 percent growth goal unprecedented in advanced economies like the U.S., but there is no credible way to reach 4 percent without building a more inclusive economy.

3. The United States is nearing a Greek-style debt crisis and needs more spending cuts.

The United States is not Greece. Greece’s main pitfalls were being part of a fundamentally flawed European monetary union, combined with Europe’s fundamentally flawed policy response to the financial crisis: sharp public spending cuts that plunged Greece’s economy into a tailspin, causing it to contract by 25 percent, and ballooned the debt burden, which is on track to exceed 170 percent of GDP by 2022.

Yes, the United States has debt, but at an eminently manageable level. And unlike Greece, which does not control the euro, the United States issues government bonds in a currency over which it has monetary policy control. More importantly, it matters a lot what we spend borrowed money on: war and tax cuts for corporations and the wealthy, or investments in education, infrastructure, and science that would strengthen our long-run potential for growth.

4. The Affordable Care Act and Dodd-Frank financial reform are crippling the economy and must be repealed.

A well-functioning economy needs healthy people to drive innovation and growth and a well-functioning financial system that efficiently channels savings into investment without causing systemic crises. Before the Affordable Care Act (ACA) and the Dodd-Frank Wall Street Reform and Consumer Protection Act, America lacked for both.

The ACA extended health care to 16 million people and lowered health costs for those with public and private insurance. Repealing the ACA would cast millions out from the health care system, raise health care costs across the board, kill the hallmark improvements that ended restrictions on people with pre-existing health conditions, and increase federal budget deficits by $137 billion.

Americans are still suffering the hangover of the financial crisis and housing market collapse that led to $8 trillion in lost household wealth, double-digit unemployment, and a taxpayer-subsidized bailout of the world’s largest financial institutions. Five years after Dodd-Frank, many new rules intended to prevent such a catastrophe from happening again are still yet to be implemented due to rampant opposition, such as the rule for corporations to publish CEO pay ratios.

Photo by Gage Skidmore

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Planned Parenthood Vote Highlights the GOP's Broken Moral Compass

Aug 4, 2015Andrea Flynn

Senate Republicans failed yesterday to advance a bill that would have defunded Planned Parenthood, but their crusade against the organization and others like it is far from over.

Senate Republicans failed yesterday to advance a bill that would have defunded Planned Parenthood, but their crusade against the organization and others like it is far from over. Speaking in support of the legislation she sponsored, Iowa Senator Joni Ernst said the Planned Parenthood videos have “shaken the moral compass of our country." But given that members of the “pro-life” party are willing to shut down the government over reproductive health access even as they ignore and exacerbate the actual crises that threaten our families and communities, we must question the alignment of the compass they’re following.

The video saga has now been proven to be complete nonsense. Two state investigations have cleared Planned Parenthood of any wrongdoing. Planned Parenthood is not, as the video’s editors portrayed, harvesting fetal tissue for profit, and their donation of such tissue and their compensation for related costs is, it turns out, perfectly legal. In fact, some of the senators leading this crusade (including Mitch McConnell) signed the very piece of 1993 legislation that legalized tissue donation. There are a number of issues shaking the moral compass of this country, but Planned Parenthood is not one of them.

Child poverty should shake our moral compass. Today, 22 percent of all children live in poverty, including 40 percent of Black children, and almost half live in low-income families. The U.S. child poverty rate is higher than all but one other OECD country. Poor children are more likely to drop out and perform poorly in school, to have developmental delays, and to experience behavioral, physical, and socioemotional problems. Yet conservatives still love to hate on the safety net programs that help keep these kids and their families afloat. In recent years, they have threated to cut funding for SNAP (food stamps) and WIC (the supplemental nutrition program that serves nearly 10 million low-income women and children) and have opposed legislation that would make it more affordable for low-income kids to go to college.

Maternal mortality should shake our moral compass. Today, more U.S. women die in childbirth and from pregnancy-related causes than at almost any point in the last 25 years, and the U.S. is one of only seven countries to see its maternal mortality rate increase over the last decade. Black women are three to four times more likely to die from pregnancy-related causes than white women, and in some communities experience a maternal mortality rate equal to that in some Sub-Saharan African countries. But instead of expanding access to quality, affordable, and comprehensive health care, conservatives are busy closing clinics that predominantly serve women of color, low-income women, and young women. They remain steadfast in their refusal to participate in Medicaid expansion under the Affordable Care Act (ACA), which would extend coverage and care to millions more low-income women. And they are still intent on repealing the ACA in its entirety, despite the fact that it has brought coverage to more than 16 million individuals.

Structural racism should shake our moral compass. The conservatives accusing Planned Parenthood of devaluing human life have been pretty quiet on the systemic violence and discrimination against communities of color. Where’s the outrage over Sandra Bland, Freddie Gray, Trayvon Martin, and the countless others who have died at the hands of law enforcement? Where’s the outrage from the supposed “pro-family” party over the school-to-prison pipeline that has torn apart families and communities across the country? Where’s the outrage over our imbalanced and unjust criminal justice system? Where is the space for these lives under the conservative pro-life umbrella?

Pay inequity should shake our moral compass. The gender pay gap in the United States is alive and well, with women still making 78 percent of the earnings of white men (Black and Latina women make 64 and 56 percent, respectively). This gap results in a significant loss of income for women and their families over the life cycle and contributes to the high rates of poverty among women and single mothers as well as children. If equal pay were realized, it would mean a raise for nearly 60 percent of U.S. women and two-thirds of single mothers. The increase in earnings would expand access to health care, food and housing security, and educational opportunities, and would have countless long-term benefits for children. But GOP senators have voted four times since 2012 to block the Paycheck Fairness Act, which would make it easier for employees to identify and address pay inequities. They are also consistently opposed to raising the minimum wage, a move that would benefit more than one-fifth of all children in the United States.

Income inequality—today greater than at any point since the Great Depression—should shake our moral compass. Thanks to our broken economic rules, the incomes of the top 1 percent increased by as much as 200 percent over the past 30 years while the net worth of the poorest Americans has decreased and stagnant wages and increased debt have pushed more middle-class families into poverty. After the 2008 recession, millions of Americans lost their homes, their jobs and their health care, and they are still struggling to regain their footing. The vast majority of Americans now believe a middle-class lifestyle is well beyond their reach. Yet conservatives continue to support the very policies that got us here in the first place: tax cuts for the wealthy; the erosion of unions and labor protections; and corporate structures that encourage a short-term focus on stock prices instead of long-term investments in growth and innovation.

The inability of individuals to access basic health services should shake our moral compass. Conservatives insist their efforts would not actually impact health access, because Planned Parenthood’s funding would simply be reallocated to other providers. But there are not actually enough providers to fill the void that would be left by Planned Parenthood. As Senator Patty Murray said, “you can’t pour a bucket of water into a cup.” Even with Planned Parenthood and the gains of the ACA, conservative laws have left women across this country reeling. We need more Planned Parenthoods and more of their sister clinics, not fewer.

Conservatives insist they care about the health of women and their families, but their actions indicate otherwise. They have proposed the elimination of Title X, the nation’s only program dedicated to providing family planning care and services. They are threatening—for the third time in four years—to shut down the federal government over reproductive health funding. They continue to support legislation that is closing clinics across the country, cutting access not only to abortion but also to basic preventive health services. The list goes on. This party is more interested in advancing its antiquated, harmful agenda than it is in the health of women—and men, young people, immigrants, trans folks, and low-income families—who rely on Planned Parenthood and other such providers. Their moral compass needs a good shaking up. 

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

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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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Transforming Education to Close the Creativity Gap

Jul 14, 2015Joe HallgartenRoisin Ellison

This week, the Roosevelt Institute's Next American Economy project is releasing a series of thought briefs in which experts examine how the economy will change over the next 25 years. Read the introduction here.

This week, the Roosevelt Institute's Next American Economy project is releasing a series of thought briefs in which experts examine how the economy will change over the next 25 years. Read the introduction here.

“Education should equip young people to shape an uncertain future so they can live more successful lives, on their own terms and together. They need the confidence and the capabilities to make their world together, in the face of tightening constraints on resources, rising aspirations, exploding opportunities for collaboration and pervasive institutional upheaval. They need an education that prepares them to be collaborative agents of change rather than atomised victims of change, to respond to frustration with creativity and innovation.”

—Leadbeater, C., Learning to Make a Difference: School as a Creative Community (2014)

The Royal Society for the Encouragement of Arts, Manufacturing, and Commerce (RSA) proposes that we live in an unprecedented time of rapid social, political, and technological change, with increased access to the tools and networks that generate potential for many more people to realize their ideas and aspirations. This is our “Power to Create” approach. And yet, much of this creative opportunity is untapped, leading to a “creativity gap” where inequalities of wealth and skills and differing levels of confidence mean not all can access the resources required.

The stakes are high when it comes to tapping into this potential, as we face immense and complex global challenges that require innovative and collaborative solutions. At the RSA, we believe that public, professional, and political attitudes toward creativity need to be rethought in order to prioritize the development of creative capacities in schools and educational institutions. This is both an end in itself and an economic and social imperative if young people are to thrive and flourish in the 21st century.

As such, when approached by the Roosevelt Institute to identify, through an educational lens, the trends and challenges that will affect our economy in the next 25 years, we saw an opportunity to collaborate with a like-minded organisation on exploring the issue of closing the creativity gap. In contributing to the Roosevelt’s Next American Economy project, we were given the space to reflect on more long-term considerations of redesign and reform—something from which the education sector itself could benefit.

Our thought brief examines how school systems could be designed to maximize students’ creative capacities such that learning is geared more clearly toward equipping students to meet the demand for creativity. It presents the trends, challenges, and potential solutions to the problems faced by our current education system in this regard, arguing that there is an increasingly strong economic rationale for schools to prioritize fostering creative capacities to ensure a future creative workforce. We conclude by outlining 12 design principles with related case studies, intended for use by school leaders, teachers, and systems to inform policy ideas within their particular context.

Having avoided prescriptive policy recommendations, we aim to stimulate conversation and debate around our 12 principles on creative learners, creative educators, and creative institutions from which a vision of school systems that would best equip young people for the 21st century can be realized.

Joe Hallgarten is the RSA's Director of Creative Learning and Development. Roisin Ellison is Programme Coordinator for RSA Academies.

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Paths to Prosperity: What Workforce Development Will Look Like in 2040

Jul 14, 2015Chelsea Barabas

This week, the Roosevelt Institute's Next American Economy project is releasing a series of thought briefs in which experts examine how the economy will change over the next 25 years. Read the introduction here.

Fifty years ago, the path to professional success and economic stability was pretty clear:

This week, the Roosevelt Institute's Next American Economy project is releasing a series of thought briefs in which experts examine how the economy will change over the next 25 years. Read the introduction here.

Fifty years ago, the path to professional success and economic stability was pretty clear:

Get good grades -> Go to college -> Find a well-paying job -> Climb the corporate ladder -> Retire

Today, this path is much more ambiguous. Many icons of modern-day success—Zuckerberg, Gates, Jobs—are college dropouts. In lieu of lifelong employment, young people are encouraged to develop “entrepreneurial skills” so that they can launch their own startups or, in other words, create their own jobs where there are none. But what will those jobs look like?

Recent technological breakthroughs in the fields of machine learning and robotics engineering have led to dramatic changes in the nature of work across many different sectors. Some researchers predict that over the next 20 years, 45 percent of jobs in the U.S. will be “computerized,” meaning that they will be broken down into automatable tasks that can be carried out by robots of one form or another.

Against this backdrop, it is no longer clear what skills, experiences, and knowledge are necessary in order to succeed in today’s rapidly evolving economy.

A few months ago, the Roosevelt Institute invited me to speculate on what the future of workforce development will look like in the coming decades, as technology continues to drive fundamental shifts in the nature of work in the U.S. economy. In my thought brief, I explore the following questions:

What skills and competencies should we focus on equipping the workforce with in order to meet the labor demands of the future economy?

Are university degrees dead? How will we demonstrate and package our competencies in order to find gainful employment in the future?

How will companies find skilled workers in the future? What institutions are needed in order to mediate fair relationships between potential employees and employers in the labor market?

In order to answer these questions, I outline a few specific trends currently underway in the arenas of workforce development, recruitment, and hiring. I examine the emergence of alternative higher education programs that seek to foster metacognitive competencies alongside the training of in-demand technical skills. In addition, I discuss the rise of online platforms like Khan Academy and Degreed, which could provide more customized educational experiences to a wide range of students. And finally, I touch on the opportunities and challenges that accompany the rise of recruitment methods that are driven by big data analysis.

These trends serve as an anchor for a much broader discussion on what the pathways to prosperity could look like in the rapidly changing U.S. economy. Although the future of workforce development remains highly ambiguous, my hope is that this thought brief can serve as a guide to thinking about the immense set of opportunities and risks that lie before us as we figure out how to prepare coming generations for the future of work.

Chelsea Barabas is the Senior Advisor for Social Impact at MIT Media Lab's Digital Currency Initiative.

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Working in the Cloud: How the Platform Economy Will Transform Employment

Jul 13, 2015John ZysmanMartin Kenney

This week, the Roosevelt Institute's Next American Economy project is releasing a series of thought briefs in which experts examine how the economy will change over the next 25 years. Read the introduction here.

This week, the Roosevelt Institute's Next American Economy project is releasing a series of thought briefs in which experts examine how the economy will change over the next 25 years. Read the introduction here.

Digital platforms are the base upon which an increasing number of activities—economic, social, and political—are being organized. If the Industrial Revolution was organized around the factory, today’s changes are organized around the algorithms running in the cloud. The salience of these digital platforms suggests that we are in the midst of a reorganization of our economy in which the platform firms are developing power roughly equivalent to that of Ford, General Motors, and General Electric of earlier eras.

Like the Industrial Revolution, this “platform economy” is already having a profound impact on firm organization, employment relationships, and types of work available across a wide variety of economic activities. Will the digital economy in this current manifestation, based ultimately on the operation of algorithms in cloud computing, inexorably lead to the elimination of jobs and work? Or are new opportunities for work emerging? In what new ways is value being created and captured?

In our thought brief, we maintain that even as algorithms automate work, "new work" is being created. App stores, YouTube, Uber, TaskRabbit, Homejoy, and many other platform firms are transforming industries by linking together "workers" with customers in new ways. In some cases, this is displacing or threatening existing, often regulated, service providers such as taxis and hotels. In other cases, it is formalizing previously less organized or locally organized work. Finally, other platforms, such as app stores and YouTube, are creating entirely new occupations or occupational branches.

And yet, everywhere "employment" appears to be more precarious than ever, with the emergence of the Gig/1099 Economy and non-monetarily-compensated value creation such as user-created content on Facebook or YouTube. Paradoxically, it could be argued that more value than ever is being created, even while traditional notions of employment are challenged. These changes are not likely to result in the "workerless" society, but rather in a society within which the preponderance of the work and value creation is more dispersed than ever before, even as the platform owner centralizes the transactions and captures value from them.

The particular configuration of the platform economy will vary greatly across countries and across sectors, both in service and traditional manufacturing sectors. W know from examining previous technological changes that the manner in which technology is deployed and utilized powerfully shapes the employment outcomes, both in terms of the number and character of jobs. As existing firms and new firms are established to deploy these new ICT technologies, they are overturning existing domestic employment and challenging social policies. This creates conundrums for policymakers concerned about employment and equality as they are pushed to support these transformations, but also to prepare for what are likely disconcerting outcomes. Supporting the transformation requires, for example, not only building the information infrastructure but also creating the market rules to encourage experimentation and new methods of value creation. This will engender intense political fights about who captures the value and who suffers the consequences of these transformations. 

John Zysman is a professor of political science at the University of California, Berkeley. Martin Kenney is a professor in community and regional development at the University of California, Davis. 

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The Role of Cities in the 2040 Economy

Jul 13, 2015Julia Root

This week, the Roosevelt Institute's Next American Economy project is releasing a series of thought briefs in which experts examine how the economy will change over the next 25 years. Read the introduction here.

This week, the Roosevelt Institute's Next American Economy project is releasing a series of thought briefs in which experts examine how the economy will change over the next 25 years. Read the introduction here.

2014 was the year of Big Data (a term that has now fallen out of favor), the Sharing Economy (think Uber and Airbnb), the Internet of Things (your mobile device), and the explosion of data from sensors and daily transactions that are quantifying our everyday lives. In mid-2015, these trends are now a part of our everyday lexicon and daily rituals whether we think about them or not—when we hail a car service, use an app to route our travel itinerary, monitor our fitness levels using Fitbit, or check out energy usage at home.

But behind the scenes it’s all still a bit messy, and there are many unanswered questions. Academics, policymakers, urban thinkers, and citizen advocates are still interpreting and vigorously debating what these trends mean for people, our cities, and how we govern.

In May 2014, the Roosevelt Institute convened a group of economists, researchers, data scientists, policymakers, and academics to speculate on the future of our economy. Drawing on expert projections, my thought brief starts with a focus on our rapidly changing world in 2015 and then looks forward to 2040. It seeks to evaluate how the city is evolving into an urban platform and how new tech-enabled governance models and digital infrastructure will play an important role in supporting new economic growth.

In this thought brief, I explore what the role of cities could and should look like in 2040 and how cities could evolve to address a complex future. I discuss the promising developments and trends that have occurred during the last year and offer two speculations for what the city will look like in 2040 as a dynamic urban platform. There will be a new organizational structure for how municipal governments solve public problems and a new regional, mega-city approach for economic development that is ripe for entrepreneurism. I return to 2015 to present the infrastructure investments—in data, talent, technology, and broadband Internet—that will be required to advance a progressive agenda. I also present a list of questions to be considered. Lastly, I offer a set of recommendations to a fictional mayoral chief of staff on what ideas could be implemented now.

Julia Root is a Fellow at the Governance Lab at NYU and project lead for Open NYU and the Open Data 500 Global Network.

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A Policy Agenda for Stronger, Fairer, and More Sustainable Growth

Jul 13, 2015Roosevelt Institute

The Roosevelt Institute today released the following statement in response to Hillary Clinton’s economic speech at the New School:

The Roosevelt Institute today released the following statement in response to Hillary Clinton’s economic speech at the New School:

Today, Hillary Clinton began outlining a comprehensive framework for tackling America’s problems of slow economic growth, low investment, and stagnant wages. Secretary Clinton’s speech reinforced an argument made by the Roosevelt Institute and supported by the economic evidence: inequality is a choice determined by the rules that structure how our economy works—the laws, regulations, and institutions that shape market behaviors and outcomes. Changes we have made to the economic rules over the past 35 years have left the U.S. with a weaker economy, higher inequality, and greater concentration of economic power. This cannot stand if the U.S. economy is to be put on track for long-term prosperity.

It is encouraging to hear Secretary Clinton focus so clearly on this central cause of America’s economic problems as she articulates a three-pronged approach to putting the U.S. economy back on track: making economic growth stronger, fairer, and oriented toward the long term. Delivering on the sweeping vision offered today will require a detailed policy agenda that addresses a number of issues ranging from family-friendly work policies to financial reform. Below, we’ve offered an outline of specific policies that we urge all presidential candidates to consider as they build their platforms.

But beyond any specific policies, an effective agenda must take a comprehensive approach to reforming the economy—an approach built on the evidence that our economy works best when it is working for everyone, not on the faith that prosperity will trickle down from a wealthy few at the very top. We cannot achieve strong, sustainable growth so long as the majority of economic gains remain concentrated in so few hands. To put it simply, stronger growth, fairer growth, and more sustainable growth are interconnected. We can’t have one without the others.

As we discussed in detail in our Rewriting the Rules of the American Economy report, there is a long list of policies that America can choose to implement in order to promote stronger, fairer, and more sustainable growth. We have summarized those policies below.

Making growth stronger

This means breaking down barriers to work: creating good jobs, sustaining good jobs, and ensuring that more Americans can obtain good jobs.

1)     Expand access to labor markets and opportunities for advancement

  • Enact paid sick and family leave so that more people can have the security to work while still caring for their children and family members.
  • Subsidize child care to benefit children and improve women's workforce participation and economic mobility.
  • Open Medicare to all to make health care more affordable for families and employers.
  • Expand public transportation to promote equal access to jobs and opportunities.
  • Reform the criminal justice system to reduce incarceration rates and penalize employers for discriminating against people with an incarceration history.
  • Enact comprehensive Immigration reform, recognizing immigrant families for their contributions to America’s economic success.
  • Protect women's access to reproductive health services so all individuals can access comprehensive, affordable, and quality care.

2)     Make public investments needed for private sector growth

  • Invest in large-scale infrastructure renovation with a 10-year campaign to make the U.S. a world leader in infrastructure manufacturing, jobs, and innovation that raises efficiency and cuts the cost of doing business in the U.S.
  • Enact universal early childhood education and a universal child benefit, ensuring that every child in America has access to pre-school starting at age 3 and that parents have the resources to invest in their children’s futures.
  • Make higher education accessible and affordable by reforming tuition financing, restoring consumer protections to student loans, and adopting universal income-based repayment.

3)     Make full employment the goal

  • Appoint members to the Federal Reserve who prioritize the Fed’s full employment mandate.
  • Restore balance to trade agreements to ensure that U.S. businesses and workers can compete with the world on a level playing field.

Making growth fairer

This means rewarding work fairly and crafting a tax code and compensation system that incentivizes investment and innovation in the real economy. 

1)    Empower workers

  • Close the pay equity gap to ensure equal pay for equal work.
  • Raise the national minimum wage and expand enforcement to ensure that work pays a living wage.
  • Strengthen the right to collective bargaining by easing legal barriers to unionization, requiring mandatory arbitration for first contracts, imposing stricter penalties on illegal anti-union activities, and amending laws to reflect the changing workplace in America.
  • Leverage government to set workplace standards by attaching strong pro-worker stipulations for private government contractors.

2)  Make taxes more progressive

  • Ensure top earners pay their fair share by raising top marginal income tax rates, replacing tax expenditures with capped credits, and taxing capital gains at least as much as labor income, with a much higher tax rate on short-term capital gains.
  • Enact revenue-positive corporate tax reform that ends the indefinite overseas deferral of corporate profits  in foreign tax havens, eliminates the incentive for offshoring by taxing corporations as unified entities on the basis of their global income, establishes a global minimum tax, and reduces corporate welfare within the tax code.

Focusing growth on the long term

This means ensuring that our financial system focuses on creating long-term value and minimizes the risks of a major financial crash.

1)     Fix the financial sector

  • Eliminate hidden subsidies to big banks that create too much risk and then hold taxpayers hostage to the need for bailouts.
  • Appoint officials to key federal agencies with a track record of enforcing regulations rather than lobbying for the industry.
  • Level the playing field between large financial institutions and community banks with increased leverage requirements and leverage surcharge.
  • Address the “shadow banking system” that eludes existing rules and regulations designed to make our economic system safe, stable, and accountable.
  • Eliminate the loopholes promoting offshore banking centers and tax havens.
  • Increase transparency throughout the financial sector so we can finally understand the risks and conflicts of interest that tip the scale of fairness and threaten to destabilize the economy.

2)    Focus corporate executives on long-term investment

  • Eliminate the CEO performance pay loophole, i.e. Section 162(m), that ties incentives to short-term stock prices rather than long-term performance; increase disclosure requirements on executive compensation and stock options; and implement the Dodd-Frank rule requiring disclosure of the CEO–median worker pay ratio.
  • Enact tax reform to combat short-termism for shareholders, first by raising tax rates on capital gains to the same level as the rates on labor income and then by raising the rate on short-term capital gains and non-productive long-term capital gains (land speculation) even higher.

3)     Rewrite the rules of trade to put all U.S. workers and businesses on a level playing field

  • Restrain the scope of the investor–state dispute settlement procedures for future agreements (and revise the myriad prior agreements) and build in safeguards so that public interest regulations cannot be undermined by private international courts.
  • Rebalance intellectual property protections to encourage innovation and lower consumer prices.
  • Make U.S. market access benefits contingent on firm audits of compliance with labor and environmental standards—a social standards export license—to give real meaning to a high-standard global economy.

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The Future of Small Business Financing: Where We're Going, We Don't Need Banks

Jul 9, 2015Richard Swart

This week, the Roosevelt Institute's Next American Economy project is releasing a series of thought briefs in which experts examine how the economy will change over the next 25 years. Read the introduction here.

“We need banking, but we don’t need banks.” 

—Bill Gates, 1996

This week, the Roosevelt Institute's Next American Economy project is releasing a series of thought briefs in which experts examine how the economy will change over the next 25 years. Read the introduction here.

“We need banking, but we don’t need banks.” 

—Bill Gates, 1996

When asked to think about challenges facing small businesses as they attempt to access capital, I could not help but think of the famous quip above, which essentially predicts the end of banking as we know it. None could predict the calamitous rise and fall of the stock market, but with the near death—and eventual resurrection—of the “too big to fail” institutions, it is not hard to see the roots of this crisis running through the last 30 years.

The nature of our relationship to institutions has fundamentally changed. Whereas financial and corporate institutions held the public’s trust in the past, that trust has now shifted to networks—to shared risk, collaborative capitalism, and peer-based lending models. To future generations, the idea of one financial company providing all of our financial needs will seem foreign.

Often, crowds can better predict elections and stock prices than markets; similarly, social intelligence and signals often are more predictive of consumer behavior than past financial history. Today, credit risk can be inferred from one’s peer network, the health of a business better predicted by Yelp than by a balance sheet.

Contemporary fund-based approaches to providing access to capital often fail. Most of the funds are unprofitable, and the expectations and pressure put on early firms is antithetical to the goal of funding and supporting innovative new businesses.

In my thought brief, I speculate that the various forms of collaborative and social finance evolving since the Great Recession will build a new financial system—one that can provide a range of affordable, fast, and transparent financial services to the businesses that need them. These new models will supplant the finance industry that has systematically failed to ensure businesses have access to needed capital.

By 2040, people may read Bill Gates’s quote and wonder, what did he mean by “banks”? The future is bright. The convergence of technology, big data, and social networks has empowered a dynamic generation of fintech entrepreneurs who will create an unimaginable array of new financial products and services. In response, all but the incumbent institutions will celebrate.

Richard Swart is Crowdfunding and Alternative Finance Researcher and Scholar-in-Residence in the Institute for Business and Social Impact at the University of California, Berkeley.

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What Will Unions Look Like in 25 Years?

Jul 9, 2015Michelle Miller

This week, the Roosevelt Institute's Next American Economy project is releasing a series of thought briefs in which experts examine how the economy will change over the next 25 years. Read the introduction here.

This week, the Roosevelt Institute's Next American Economy project is releasing a series of thought briefs in which experts examine how the economy will change over the next 25 years. Read the introduction here.

We can only envision the union of the future by imagining the experiences of the worker of the future. Who is she? How does she work? Who is her boss? And, most importantly, what does she need to have power over her own economic future?

The rapid growth of cloud technology platforms that enable new models for the distribution of work signals that the worker of the future will be performing a series of tasks instead of a single job. It’s possible that her “workplace” will not be a fixed geography but multiple points on a map, including a space in her own home. As even senior managers may be replaced by intelligent technology, she may never see her boss or receive performance feedback in person. And while she’ll certainly have coworkers, it will be difficult to gather around a water cooler and discuss the day’s events when they are scattered around the world, accessing their work one gig at a time.

As I worked on cobbling together a vision for the union of the future, I kept this worker in mind. And, as the co-founder of a digital platform dedicated to supporting people who are experimenting with new forms of workplace power, I get to see glimpses of this future every day: Self-sustaining Facebook groups run by workers through their OURWalmart affiliation; Starbucks baristas connecting globally through worker-led campaigns; Mechanical Turkers building plug-ins to rate task requesters and collaborating on campaigns through Dynamo; Etsy sellers supporting one another through teams; Uber drivers sharing information on Reddit. Workers are already making this future real by leveraging popular technology tools to connect with each other; it’s up to our existing institutions to create the infrastructure to make their efforts more effective, powerful, and lasting.

What I lay out in my thought brief are some ideas for how we might do just that. As the employee–employer relationship crumbles, we must accept that our policies and structures for building worker power require radical reform. Embracing platform technology by investing in its connective and collaborative potential for workers opens unprecedented opportunities for building global collective power. Thoughtfully reimagining how we enable resource-sharing to create new, worker-owned safety nets that offset precarity while recognizing the inherent power of our existing institutions can instill stability and support. And recognizing these new kinds of workers by advancing expansive, inclusive policy solutions rounds out the basic infrastructure for building worker power over the next 25 years.

A decade ago, I was part of a conversation with a homecare worker who had helped organize her union. In describing what this meant to her, she said, “the union is a thousand, a million dreams, waiting to become real.” It is not an NLRA-defined bargaining agreement or adherence to a rigid set of classifications. For workers, it is some amount of agency over their lives. It’s a way to connect, a way to shelter each other, and, ultimately, a way to ensure that our millions of dreams have the chance to become real.

Michelle Miller is the co-founder of Coworker.org, a digital platform that matches campaigning tools with organizing, media, and legal support to help people change their working conditions.

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