Daily Digest - January 16: Internet Access is the Next Tennessee Valley Authority

Jan 16, 2015Rachel Goldfarb

There will be no new Daily Digest on Monday, January 19 in observance of Martin Luther King, Jr. Day. The Daily Digest will return on Tuesday, January 20.

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Barack Obama: The FDR of Internet Access? (Moyers & Company)

There will be no new Daily Digest on Monday, January 19 in observance of Martin Luther King, Jr. Day. The Daily Digest will return on Tuesday, January 20.

Click here to subscribe to Roosevelt First, our weekday morning email featuring the Daily Digest.

Barack Obama: The FDR of Internet Access? (Moyers & Company)

Roosevelt Institute Fellow Susan Crawford compares the president's recent push for fiber-optic Internet access to FDR's work on electricity during the New Deal.

Obama Tells Agencies to Advance Sick Leave For Feds’ New Children (WaPo)

Joe Davidson reports that the sick leave would be paired with paid administrative leave, so that federal employees with a new child could have parental leave as well as sick time to follow.

Trying to Solve the Great Wage Slowdown (NYT)

David Leonhardt looks at a new report that considers what could get wages rising again. It focuses in particular on Canada and Australia, countries similar to the U.S. that have seen wage growth.

How Elizabeth Warren Is Yanking Hillary Clinton to the Left (TIME)

Rana Foroohar says that Senator Warren is already shifting the conversation on economics, citing a new report on wages and the middle class from relatively centrist Larry Summers as proof.

Home Care Workers Denied the Right to Make Minimum Wage and Overtime (ThinkProgress)

Bryce Covert reports on a ruling that has overturned a 2013 Department of Labor rule change on the "companionship exception," which allows home care workers to be paid sub-minimum wages.

New on Next New Deal

A Battle Map for the Republican War Against Dodd-Frank

Roosevelt Institute Fellow Mike Konczal looks at the three fronts in this surprisingly sophisticated GOP war: guerilla deregulation, administrative siege, and reactionary rhetoric.

The Van Hollen Plan Takes on Soaring CEO Pay: A Debate We Need to Have

Roosevelt Institute Fellow Susan Holmberg points out that Rep. Van Hollen's plan has great political messaging around CEO pay, though it doesn't fully close the performance pay loophole.

For Now, Excitement of Free Community College Program Raises Lots of Questions

David Bevevino, a Campus Network alumnus who now researches community college best practices, poses questions about how schools will implement this program, and what extraneous costs it might have.

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The Van Hollen Plan Takes on Soaring CEO Pay: A Debate We Need to Have

Jan 15, 2015Susan Holmberg

Taxpayers are subsidizing ever-larger executive pay packages while their own wages stagnate. For the middle class to prosper, that needs to change.

Taxpayers are subsidizing ever-larger executive pay packages while their own wages stagnate. For the middle class to prosper, that needs to change.

The intrepid economic proposals in Rep. Chris Van Hollen’s action plan “to grow the paychecks of all, not just the wealth of a few” may not win over a Republican Congress, but they will reinforce the progressive economic messaging championed by Senator Elizabeth Warren and conceivably embolden more Democrats to finally take command of our economic debate in advance of the 2016 presidential election. Though Van Hollen’s tax credits for working families and dilution of tax breaks for the rich have grabbed the most headlines, another controversial but important piece of his plan is the CEO-Employee Paycheck Fairness Act, which aims to address one of the key contributing factors to soaring inequality and economic volatility in the U.S.

The CEO-Employee Paycheck Fairness Act stops corporations from claiming tax deductions for “performance pay” for executives – e.g. stock options and stock grants – “unless their workers are getting paycheck increases that reflect increases in worker productivity and the cost of living.”

The logic of this law is simple. Since 1979, productivity growth in the U.S. has risen eight times faster than the typical worker’s pay. At the same time, corporations have enjoyed a tax deduction for CEO pay levels (and compensation for other top executives) that are now 296 times median worker pay. Van Hollen’s proposal says that corporations can no longer continue to take these unlimited tax deductions for CEO and executive pay unless they are also giving their employees a raise that reflects worker productivity as well as cost of living increases. Specifically, to enjoy the tax benefit, corporations must raise the average pay of their workers earning below $115,000 by the U.S.’s average annual net productivity growth since 2000, which is about 2 percent, plus the annual inflation rate.

Most of us think of skyrocketing CEO pay as an ethical problem, not an economic one. But in fact, the problems that come with skyrocketing CEO pay – in 2013, the average CEO at S&P 500 Index companies was worth $11.7 million – are well beyond the issue of basic fairness. Exorbitant CEO pay comes with enormous economic costs to all of us.

Many of the problems stem from the tax deduction Van Hollen is referring to, the notorious “performance pay” loophole created by Section 162(m) of the U.S. tax code. Section 162(m) prohibits corporate tax deductions for executive pay over $1 million unless that pay is rewarded for meeting performance goals. This was supposed to curb skyrocketing executive pay, but after it became law in the 1990s, the predictable happened: companies started dispensing more compensation that qualified as performance pay, particularly stock options. Median executive compensation levels for S&P 500 Industrial companies almost tripled from less than $2 million in 1992 to more than $5 million six years later, mainly driven by a dramatic growth in stock options, which doubled in frequency. For more background on this issue, I recommend my primer, “Understanding the CEO Pay Debate.”

Because it makes executives very wealthy, very quickly, performance pay is not only a major driver of the U.S. inequality problem, which in itself wreaks havoc on our economy, but also encourages shortsighted, excessively high-risk, and occasionally fraudulent decisions in order to boost stock prices. What kind of effect does this behavior have on the economy at large? Many economists argue that executive compensation policies in the financial industry led to the global economic crisis. Performance pay also diminishes long-term business investments. 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, and new hiring. And the rest of us are footing the bill: the Economic Policy Institute calculated that taxpayers have subsidized $30 billion to corporations through the performance pay loophole between 2007 and 2010. Let me rephrase that: in a three-year period, taxpayers have subsidized $30 billion for executive pay, all while seeing their own wages stagnate.

Van Hollen’s proposal to make performance pay contingent on workers’ pay is good political messaging that draws attention to the ways in which executive pay practices impact middle class wages. And if we think about it in light of Lazonick’s story about stock buybacks, it’s clear how Van Hollen’s plan could have a positive impact: either corporations would not pay their workers more, which would preclude them from using a loophole that has shaped their executive compensation strategy for the last two decades and been a core driver of the rise in CEO pay, or they would have to spend money to raise wages that would have otherwise been spent on stock buybacks, which could reduce the amount of performance pay issued. In other words, the condition on which corporations could use the performance pay loophole might force them to use it less.

But there is also a potential drawback to Van Hollen’s CEO pay proposal. Because it doesn’t fully close the problematic loophole, but instead adds another condition, it may create further complexity in a corporate tax scenario that is already hyper-complicated and thus open to manipulation by corporate accountants. A more straightforward approach can be found in the Reed-Blumenthal and Doggett bills that would close the performance pay loophole entirely and cap the tax deductibility of executive pay at $1 million.

Another idea that would match the boldness of the financial transactions tax in Van Hollen’s action plan is to peg corporate tax rates to the ratio of CEO pay to worker pay. Last year, California state Senators Mark DeSaulnier and Loni Hancock introduced SB 1372, which raised the tax rate on companies that pay their CEO 100 times more than the median worker. According to the senators, “A CEO would have to make 300 to 400 times more than the median worker for a company to see a 3% increase in the corporate tax rate.” Companies with ratios less than 100 would see their tax rates decrease. DeSaulnier and Hancock’s bill got a majority of votes in the state senate, but did not move to the other chamber because, in California, a tax bill requires a two-thirds vote to advance. Nevertheless, the idea of holding corporations accountable for the relative amounts they pay their executives and their workers has been circulating in the U.S. Dodd-Frank already includes a requirement that companies disclose this pay ratio, though the SEC has been slow to put it into effect.

Van Hollen’s action plan is an exciting set of ideas for moving the country toward a more prosperous future. Ultimately, we need policy that erases the performance pay loophole entirely, but the CEO-Employee Paycheck Fairness is important in terms of drawing attention to executive pay practices and the way they affect working families and middle class wage earners, the engines of our economy. It’s time to have the debate about how we can effectively curb soaring CEO pay while building a broad middle class.

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

Image via Shutterstock

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Daily Digest - January 15: Free Community College Is "A Better Way" For Financial Aid

Jan 15, 2015Rachel Goldfarb

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The Daily Report (AM950 Radio)

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The Daily Report (AM950 Radio)

Roosevelt Institute Fellow Mike Konczal discusses his recent article about the benefits of the president's free community college plan. Mike's segment begins at 28:00.

How Congress is Crippling Our Tax Collection System, in Charts (WaPo)

Catherine Rampell breaks down a report explaining how cuts to the IRS budget are impacting its ability to actually collect the taxes that are owed, with fewer staff to investigate tax evasion.

Republicans Use 'Death by a Thousand Cuts' Strategy to Deregulate Wall Street (The Guardian)

Republicans in the House have passed their first bill to weaken Dodd-Frank, and David Dayen says there are more to come as the GOP attaches deregulation to all kinds of unrelated must-pass bills.

Obama Stands At Crossroads On Financial Reform (ProPublica)

Jesse Eisinger says that with Republicans in control of Congress, it's time for the Obama administration to go big to protect the modest reforms created by Dodd-Frank.

As Profits Fall, JPMorgan Rejects Calls To Break Up The Megabank (Buzzfeed)

Matthew Zeitlin reports on recent suggestions that JPMorgan could be more profitable if it were split up. CEO Jamie Dimon instead blames regulators for drops in profits.

We Don’t Just Need ‘More Jobs’—We Need Higher Wages (In These Times)

Leo Gerard, President of United Steelworkers, says that the new jobs showing up on the jobs report aren't enough without higher wages for workers whose wages have been nearly stagnant for 35 years.

New on Next New Deal

Is Inequality Killing U.S. Mothers?

Roosevelt Institute Fellow Andrea Flynn ties the United States' embarrassingly high maternal mortality rates to economic inequality's broader impact on health and mortality.

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Daily Digest - January 14: Advice From Mario Cuomo for Today's Democrats

Jan 14, 2015Rachel Goldfarb

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Mario Cuomo, the Speech and the Challenge to Democrats Today (In These Times)

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Mario Cuomo, the Speech and the Challenge to Democrats Today (In These Times)

Roosevelt Institute Senior Fellow Richard Kirsch and Dan Cantor point to Mario Cuomo's vision of mutuality laid out at the 1984 Democratic National Convention as an example today's Democrats should follow.

5 Books: Reading Race and Economics (The Nation)

Joelle Gamble, National Director of the Roosevelt Institute | Campus Network, recommends books on the intersection of race and economics to accompany an article on the economic dimension of #BlackLivesMatter.

Plunge In Wall Street Money Bolsters Populist Shift Among Democrats (HuffPo)

Paul Blumenthal says Wall Street's dramatic shift of campaign resources away from the Democrats isn't the cause of recent populist moves, but less campaign donations creates less industry pressure on the party.

  • Roosevelt Take: Blumenthal links to Roosevelt Institute Senior Fellow Thomas Ferguson's work on where different industries make their political donations; read his most recent paper on that topic here.

Calls for 'A Living Wage' (Times Union)

Matthew Hamilton reports on a Schuyler Center for Analysis and Advocacy forum, "New York's Cities: Confronting Income Inequality," which featured Roosevelt Institute Fellow Mike Konczal.

Labor at a Crossroads: How We Know We Haven't Yet Found the Right Model for the Worker Organizations (TAP)

Sejal Parikh cites the recent closing of hundreds of Wet Seal clothing stores and subsequent brief worker outburst online as proof that with the right organization, these stories wouldn't fizzle out.

How Medicaid for Children Recoups Much of Its Cost in the Long Run (NYT)

Margot Sanger-Katz looks at a new study that shows a correlation between Medicaid eligibility and future earnings. Higher earnings means higher taxes, repaying the investment in childhood health.

Elizabeth Warren Is Taking Control of the Democratic Agenda (TNR)

David Dayen writes that Antonio Weiss's withdrawal from his Treasury nomination is proof that Senator Warren has quickly learned how to exert her power over all aspects of the Senate's work.

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Daily Digest - January 13: A Tax Plan to Fight Inequality

Jan 13, 2015Rachel Goldfarb

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Democrats, in a Stark Shift in Messaging, to Make Big Tax-Break Pitch for Middle Class (WaPo)

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Democrats, in a Stark Shift in Messaging, to Make Big Tax-Break Pitch for Middle Class (WaPo)

Lori Montgomery and Paul Kane explain Rep. Chris Van Hollen's proposal, which is being pitched as the Democrats' "action plan" for fighting income inequality.

  • Roosevelt Take: Roosevelt Institute Chief Economist Joseph Stiglitz also promotes tax reform as a way reach broadly shared prosperity in this white paper.

Congress's Financial Plan for 2015: Curb Your Enthusiasm (The Guardian)

Siri Srinivas looks at the legislation that is likely to reach the House floor in 2015, and explains how Republican control of the Senate will impact this year's agenda.

Elizabeth Warren Wins on Antonio Weiss Nomination (Politico)

Ben White reports that Weiss has asked the president not to resubmit his nomination, instead accepting a position in Treasury that doesn't require Senate confirmation and carries less authority.

  • Roosevelt Take: Roosevelt Institute Senior Fellow Brad Miller argued that Weiss's nomination was indicative of a larger anti-democratic approach to economic policy.

The House Is Set to Pass a GOP Bill Wiping Out Wall Street Reforms (MoJo)

Erika Eichelberger explains how the legislation, expected to pass this week, would weaken key provisions of Dodd-Frank, including delaying the Volcker Rule and weakening transparency rules.

Labor at a Crossroads: Can Broadened Civil Rights Law Offer Workers a True Right to Organize? (TAP)

Richard D. Kahlenberg and Moshe Z. Marvit explain why individual-focused civil rights law can and should be used on behalf of union organizing to promote the collective welfare of all workers.

Investors Shift Bets on Fed Rate Increase (WSJ)

Min Zeng writes that current market patterns indicate that investors think the Federal Reserve is going to hold off on increasing interest rates for longer than was initially planned.

New on Next New Deal

Van Hollen Tax Proposal An Economic and Political Home Run

Roosevelt Institute Senior Fellow Richard Kirsch praises Van Hollen's plan for forcing Republicans to admit that they are supporting Wall Street over working-class families.

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Van Hollen Tax Proposal An Economic and Political Home Run

Jan 12, 2015Richard Kirsch

By forcing Republicans to admit their support for Wall Street over working families, Van Hollen's proposal opens the economic debate the Democrats need.

By forcing Republicans to admit their support for Wall Street over working families, Van Hollen's proposal opens the economic debate the Democrats need.

Rep. Chris Van Hollen’s (D-MD) proposal to tax Wall Street speculators and CEO millionaires to put money in the pockets of working families and the middle class, the engines of our economy, is a political and economic home run. It allows Democrats to focus on economic growth and fairness at the same time, sharply defining the debate on the key question voters ask: “Which side are you on?”

Leading politicians from both parties are all expressing sympathy for the stagnant prospects of the middle class. If you need evidence, here is Jeb Bush sounding like Elizabeth Warren: “Millions of our fellow citizens across the broad middle class feel as if the American Dream is now out of their reach … that the playing field is no longer fair or level.”

Where the two parties split – and where the core debate that will define the next two years and the 2016 election lies – is on who is to blame and what to do about it.

Americans believe we need economic growth, but they are more likely to place the blame for stagnant wages on the super-rich and powerful who game the system at their expense. That is why they told pollsters they prefer “an economy that works for all of us, not just the wealthy” over “growing the economy” by 22 points.

Van Hollen claims both grounds – growth and fairness. As he says, “What our country needs is a growing economy that works for all Americans, not just the wealthy few.”

The heart of the plan is providing a $1,000 tax credit for workers, phased out as income rises, along with an additional $250 tax credit when workers save. He would pay for that by taxing Wall Street speculation (with a tiny financial transactions tax) and closing loopholes that allow millionaires to pay lower taxes than average people.

It’s clear that this is great politics: taxing Wall Street gambling and the super-rich to put more money in the pockets of working families and the middle class.

Republicans tell another story, placing the blame for middle-class woes on government and focusing on lowering taxes and cutting government regulation to grow the economy. In opposing the Van Hollen proposal, they are forced to defend the wealthy and deny tax breaks to the middle-class, as we saw from Speaker John Boehner’s spokesperson's comment opposing the Van Hollen plan.

This is the economic argument Democrats want to have. Republicans say we grow the economy by taking the side of the Wall Street banks that wrecked the economy and the corporate CEOs who cut our wages and shipped our jobs overseas. Democrats say we move the economy forward by putting more money in the pockets of working families and the middle class.

Van Hollen adds another proposal, which is also brilliant politics and sharp economics. He would not allow corporations to get tax breaks for million-dollar executive pay unless they shared the rewards of soaring corporate profits with their workers. Van Hollen accomplishes this by proposing to end corporate tax deductions for executive compensation of over $1 million, unless the corporation’s wages are raised enough to keep up with worker productivity and the cost of living. Another way that corporations could deduct higher executive pay is by providing employees with ownership and profit-sharing opportunities.

With this proposal, Van Hollen puts the focus squarely on the corporate behavior that has driven down wages and crushed middle-class aspirations. His proposal would boost worker income, which drives the economy forward. When Republicans oppose this, the choice will again be clear to Americans: CEO millionaires or working families.

As Van Hollen recognizes, his proposal is not the complete solution to creating an economy of broadly shared, sustainable prosperity. He recognizes the need to raise wages and job standards, which directly turn today’s low-wage, economy busting jobs into economy boosting jobs. He reinforces the necessity of investment in infrastructure, research and education.

It will be important to do all these things. We need to raise wage standards and strengthen the ability of workers to organize, to make sure that every job pays enough to care and support a family in dignity. It is essential that we make huge investments in transportation, clean energy, communications, and research to build a powerful economic foundation for the future. That investment will take revenues, which can be raised from closing corporate loopholes, raising tax rates on the wealthy, or other progressive tax measures. We can also discuss whether some of the revenues Van Hollen raises would be better spent on infrastructure rather than tax breaks for upper-middle income people.

Simplicity is key to political communication. In its simplest terms, Van Hollen is saying that we drive the economy forward by putting money in the pockets of working families and the middle-class, not Wall Street and the super wealthy. And then his proposal invites Americans to ask their elected officials: “which side are you on?”

If Democrats around the country are willing to stand up to their big campaign contributors and ask that question with such a powerful proposal in 2016, they will triumph. And in triumphing, they will move the country toward an America that works for all of us, not just the wealthy. 

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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Daily Digest - January 12: Free Community College is Simpler Than Financial Aid

Jan 12, 2015Rachel Goldfarb

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Did Obama Just Introduce a ‘Public Option’ for Higher Education? (The Nation)

Click here to subscribe to Roosevelt First, our weekday morning email featuring the Daily Digest.

Did Obama Just Introduce a ‘Public Option’ for Higher Education? (The Nation)

Roosevelt Institute Fellow Mike Konczal says free community college for all would be easier to run and more popular than means-tested financial aid models like Pell Grants.

Why Is the Financial Industry So Afraid of This Man? (Salon)

Sean McElwee and Lenore Palladino say blocking Roosevelt Institute Chief Economist Joseph Stiglitz from an advisory panel is just one sign of the financial industry's influence over its regulators.

December Caps Off a Year of Strong Job Growth But Stagnant Wages (Working Economics)

Elise Gould looks at the 2014 data and says that while the numbers are mostly positive, it's concerning that at this rate, we won't reach pre-recession labor market health until August 2017.

There's An Awful Side to the Jobs Report (Business Insider)

Shane Ferro says that while the December jobs report was largely good, the drop in average hourly earnings is a sign of trouble, especially with basically flat wage growth since early 2010.

Kicking Dodd-Frank in the Teeth (NYT)

Gretchen Morgenson breaks down the details of a Republican bill that claims to make "technical corrections" to Dodd-Frank, but would actually seriously weaken financial reform.

As White House Defends Unions, States Go on the Attack (AJAM)

Republican midterm victories at the state level will mean more anti-union "right to work" laws and other policies that weaken the labor movement, writes Ned Resnikoff.

New on Next New Deal

Can Community College Systems and Infrastructure Handle Free Tuition?

Rachel Kanakaole, New Chapters Coordinator for the Western Region of the Campus Network, questions whether community colleges can handle the increased enrollment that will come with free tuition.

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Daily Digest - January 9: Charity and Government Are Not Interchangeable

Jan 9, 2015Rachel Goldfarb

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Mike Konczal and David Beito Debate Charity vs. Government (Stossel)

Roosevelt Institute Fellow Mike Konczal counters right-wing arguments that charity can take the place of government in protecting social welfare.

Click here to subscribe to Roosevelt First, our weekday morning email featuring the Daily Digest.

Mike Konczal and David Beito Debate Charity vs. Government (Stossel)

Roosevelt Institute Fellow Mike Konczal counters right-wing arguments that charity can take the place of government in protecting social welfare.

  • Roosevelt Take: Mike explained his argument on the "voluntarism fantasy" in greater depth in Democracy last year.

Europe’s Lapse of Reason (Project Syndicate)

Roosevelt Institute Chief Economist Joseph Stiglitz says that even as Europeans elect new leaders in their countries, their governments continue on a failed path of austerity, which must change.

House Democrats Swiftly Kill a Quiet Republican Plot to Protect Wall Street (The Guardian)

David Dayen says the work to stop this Republican anti-financial reform bill package demonstrates the Democratic strategy of making these economic fights very public.

Obama Plan Would Help Many Go to Community College Free (NYT)

The president's proposal would cover tuition for full- and half-time students who maintain a 2.5 GPA, report Julie Hirschfeld Davis and Tamar Lewin. It's a hard sell with a Republican Congress.

This Boehner/McConnell Obamacare 'Fix' Could Hurt Millions of Americans (LA Times)

Michael Hiltzik says readers shouldn't believe a GOP-authored op-ed's claims about changing the definition of full-time work under Obamacare. It's really a handout to employers.

America’s Workplaces Are Hostile to Families (The Nation)

Michelle Chen explores the ways that American employers make it difficult for workers to have children, as well as policy proposals that could fill the gaps.

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Daily Digest - January 8: A Limited Internet? That's No Internet at All.

Jan 8, 2015Rachel Goldfarb

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Zero for Conduct (Medium)

Roosevelt Institute Fellow Susan Crawford says "zero rating," a practice of allowing mobile users to access a limited network of apps without data charges, is monopolistic and anti-innovation.

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Zero for Conduct (Medium)

Roosevelt Institute Fellow Susan Crawford says "zero rating," a practice of allowing mobile users to access a limited network of apps without data charges, is monopolistic and anti-innovation.

Food Stamp Benefit Cut May Force a Million People Into 'Serious Hardship' (AJAM)

As some states end their waiver allowing unemployed childless adults access to food stamps, Ned Resnikoff reports that food banks and other charities don't feel able to fill the gap.

America is Optimistic About Jobs in 2015 Despite Stubbornly Low Wages (The Guardian)

Jana Kasperkevic looks at the wide range of data available about the economy and especially the labor market to explain why Americans should perhaps be more cautious in their optimism.

Why the Republican Congress’s First Act Was to Declare War on Math (NY Mag)

Jonathan Chait accuses the GOP of destroying the Congressional Budget Office's greatest power – its ideological neutrality – for the sake of passing tax cuts that won't fix the economy.

Soaring Bond Prices May Sound an Economic Warning (NYT)

Peter Eavis cautions that incredibly low yield rates on U.S. Treasury notes could indicate a coming economic stall or downturn, according to historic patterns.

Workers' Wages Have Barely Grown in Decades. Here's What Obama's Doing About It. (TNR)

Danny Vinik speaks to Lawrence Mishel and Ross Eisenbrey of the Economic Policy Institute, who suggest the "Obama wage initiative" package of executive actions are making a difference.

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Guest Post: Will Wall Street Win Again with Antonio Weiss Nomination?

Jan 7, 2015Brad Miller

Mike here. This post is from my colleague Brad Miller over the important debate on the Antonio Weiss nomination. Brad is a former U.S. Representative who recently joined the Roosevelt Institute as a Senior Fellow, so he has firsthand knowledge of the internal negotiations around financial reform. Check it out below.

The opposition to the nomination of another investment banker, Antonio Weiss, to a top position in the U.S. Treasury is not just a demagogic appeal to anti-Wall Street prejudices, as his supporters argue.

Weiss’s actual experience appears to be a poor match for the specific duties of the position in question, and may be less laudable than his supporters claim. Weiss’s principal credential appears to be that he is a product of the same culture that produced our other recent economic policymakers.

And that is the real problem for opponents, who believe that economic policies should be subject to democratic debate and require the consent of the governed.

The response to the financial crisis was the most consequential economic policy in generations. Wall Street and Washington insiders alike argue that those policies, endlessly indulgent of banks and pitiless to homeowners, were technocratic decisions that required the recondite knowledge of Wall Street professionals.

To Weiss’s supporters, disregard for public opinion is a virtue. “Making economic policy isn’t a popularity contest,” David Ignatius wrote in The Washington Post, “especially when financial markets are in a panic.” “Our job was to fix it,“ former Treasury Secretary Timothy Geithner said, “not make people like us.”

Criticism did not just come from politicians pandering to the great unwashed, however.

Most economists argued that the lesson of past financial crises was to take economic pain quickly, recognize losses on distressed debt, and take insolvent banks through an orderly receivership. The standard playbook” for financial crises since the 1870s was to “shut down insolvent institutions so executives and shareholders in the future do not think they will escape the consequences of the moral hazard they created.” “Zombie” banks, economists argued, only delay recovery.

The Bush and Obama Administrations instead helped too-big-to-fail banks pretend to be solvent and provided subsidies and other dispensations until the banks became profitable, an effort that continues.

Unfortunately, any effective effort to reduce foreclosures required banks to recognize losses on mortgages. Insiders regarded foreclosures as a lesser concern. Geithner said that even if the government used federal funds “to wipe out every dollar of negative equity in the U.S. housing market…it would have increased annual consumption by just 0.1 to 0.2 percent.”

According to Atif Mian and Amir Sufi, two prominent economists, “that is dead wrong.” Household wealth fell by $9 trillion after the housing bubble burst in 2006, which greatly reduced consumer demand. “The evidence,” Amir and Sufi said, “is pretty clear: an aggressive bold attack on household debt would have significantly reduced the horrible impact of the Great Recession on Americans.”

Wall Street’s critics did not lose that debate. There was no debate.

Senator Obama endorsed legislation in his presidential campaign to allow the judicial modification of mortgages in bankruptcy. President Obama never publicly wavered from that position, but Treasury officials privately lobbied against the legislation in the Senate, where the legislation died. The determination by economic policymakers to protect their immaculate policies from tawdry politics may extend to attempts by the President to intrude.

Meddling by Members of Congress was certainly unwelcome. In a private meeting between Administration officials and disgruntled House Democrats, I said that foreclosure relief efforts appeared designed to help banks absorb losses gradually, not to help homeowners. Geithner was offended—indignant—at the suggestion. Neil Barofsky, then the Special Inspector General for the Troubled Asset Recovery Program, later confirmed that was exactly the purpose of the programs—in Geithner’s words, to “foam the runway” for the banks.

The success of policies that are unacknowledged or even denied is difficult to measure. Since the financial crisis, however, the financial sector, from whence our unguarded platonic guardians came and soon will return, has prospered. Others fared less well. Wealth and income inequality widened dramatically.

Weiss has not served in government, so opposition to his nomination may punish him for the sins of others, perhaps unfairly. There is nothing to indicate, however, that Weiss questions the assumption that the North Star of economic policy should be the prosperity of the financial sector, or that policies should be freely debated unless there’s money involved.

The presidential campaign in 2016 will undoubtedly largely be about economic policy. Voters may assume that the election of one candidate or another will result in implementation of that candidate’s economic policies.

If the culture of economic policymakers remains unchanged, the public positions of candidates and the votes of citizens may not matter much.

Brad Miller is a Senior Fellow at the Roosevelt Institute. Previously, he served for a decade in the U.S. House of Representatives.

Mike here. This post is from my colleague Brad Miller over the important debate on the Antonio Weiss nomination. Brad is a former U.S. Representative who recently joined the Roosevelt Institute as a Senior Fellow, so he has firsthand knowledge of the internal negotiations around financial reform. Check it out below.

The opposition to the nomination of another investment banker, Antonio Weiss, to a top position in the U.S. Treasury is not just a demagogic appeal to anti-Wall Street prejudices, as his supporters argue.

Weiss’s actual experience appears to be a poor match for the specific duties of the position in question, and may be less laudable than his supporters claim. Weiss’s principal credential appears to be that he is a product of the same culture that produced our other recent economic policymakers.

And that is the real problem for opponents, who believe that economic policies should be subject to democratic debate and require the consent of the governed.

The response to the financial crisis was the most consequential economic policy in generations. Wall Street and Washington insiders alike argue that those policies, endlessly indulgent of banks and pitiless to homeowners, were technocratic decisions that required the recondite knowledge of Wall Street professionals.

To Weiss’s supporters, disregard for public opinion is a virtue. “Making economic policy isn’t a popularity contest,” David Ignatius wrote in The Washington Post, “especially when financial markets are in a panic.” “Our job was to fix it,“ former Treasury Secretary Timothy Geithner said, “not make people like us.”

Criticism did not just come from politicians pandering to the great unwashed, however.

Most economists argued that the lesson of past financial crises was to take economic pain quickly, recognize losses on distressed debt, and take insolvent banks through an orderly receivership. The standard playbook” for financial crises since the 1870s was to “shut down insolvent institutions so executives and shareholders in the future do not think they will escape the consequences of the moral hazard they created.” “Zombie” banks, economists argued, only delay recovery.

The Bush and Obama Administrations instead helped too-big-to-fail banks pretend to be solvent and provided subsidies and other dispensations until the banks became profitable, an effort that continues.

Unfortunately, any effective effort to reduce foreclosures required banks to recognize losses on mortgages. Insiders regarded foreclosures as a lesser concern. Geithner said that even if the government used federal funds “to wipe out every dollar of negative equity in the U.S. housing market…it would have increased annual consumption by just 0.1 to 0.2 percent.”

According to Atif Mian and Amir Sufi, two prominent economists, “that is dead wrong.” Household wealth fell by $9 trillion after the housing bubble burst in 2006, which greatly reduced consumer demand. “The evidence,” Amir and Sufi said, “is pretty clear: an aggressive bold attack on household debt would have significantly reduced the horrible impact of the Great Recession on Americans.”

Wall Street’s critics did not lose that debate. There was no debate.

Senator Obama endorsed legislation in his presidential campaign to allow the judicial modification of mortgages in bankruptcy. President Obama never publicly wavered from that position, but Treasury officials privately lobbied against the legislation in the Senate, where the legislation died. The determination by economic policymakers to protect their immaculate policies from tawdry politics may extend to attempts by the President to intrude.

Meddling by Members of Congress was certainly unwelcome. In a private meeting between Administration officials and disgruntled House Democrats, I said that foreclosure relief efforts appeared designed to help banks absorb losses gradually, not to help homeowners. Geithner was offended—indignant—at the suggestion. Neil Barofsky, then the Special Inspector General for the Troubled Asset Recovery Program, later confirmed that was exactly the purpose of the programs—in Geithner’s words, to “foam the runway” for the banks.

The success of policies that are unacknowledged or even denied is difficult to measure. Since the financial crisis, however, the financial sector, from whence our unguarded platonic guardians came and soon will return, has prospered. Others fared less well. Wealth and income inequality widened dramatically.

Weiss has not served in government, so opposition to his nomination may punish him for the sins of others, perhaps unfairly. There is nothing to indicate, however, that Weiss questions the assumption that the North Star of economic policy should be the prosperity of the financial sector, or that policies should be freely debated unless there’s money involved.

The presidential campaign in 2016 will undoubtedly largely be about economic policy. Voters may assume that the election of one candidate or another will result in implementation of that candidate’s economic policies.

If the culture of economic policymakers remains unchanged, the public positions of candidates and the votes of citizens may not matter much.

Brad Miller is a Senior Fellow at the Roosevelt Institute. Previously, he served for a decade in the U.S. House of Representatives.

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