The Stiglitz Code: How Taxing Capital Can Counter Inequality

May 28, 2014Felicia Wong

Nobel-winning economist Joseph Stiglitz argues that tax reform is the key to addressing inequality in a new Roosevelt Institute paper released today. Click here to listen to Stiglitz describe the key arguments of the paper.

Nobel-winning economist Joseph Stiglitz argues that tax reform is the key to addressing inequality in a new Roosevelt Institute paper released today. Click here to listen to Stiglitz describe the key arguments of the paper. Click here to read his recent congressional testimony on why inequality matters and what can be done about it.

The American economy is at a crossroads. One of the questions that will determine which path we take is whether and how the government can use taxes to meet social needs. In recent years there have been countless calls to overhaul the tax code, but few have offered a robust set of objectives framed around providing and supporting public goods. The vision of active and effective government in support of the economic common good that President Franklin D. Roosevelt advanced through the New Deal is fading from sight.

That changes with today’s release of “Reforming Taxation to Promote Growth and Equity” by Roosevelt Institute Senior Fellow and Chief Economist Joseph Stiglitz. In this transformative new white paper, the Nobel-winning economist who foresaw the economic crisis and the rise of the Occupy movement sets out to reshape the debate around the role of taxation in our society.

The ideas proposed in the paper are premised on core economic principles – taxing bads, encouraging goods – on which the vast majority of economists agree.  The policy toolkit Stiglitz describes applies across the entire economic landscape. With growing wealth inequality and the political power of the top 1 percent in the spotlight thanks to the success of Thomas Piketty’s bestseller Capital in the 21st Century, Stiglitz calls for taxing capital as if it were regular income and boosting inheritance taxes. He overhauls corporate taxation for the age of globalization and international tax havens, bringing money back to where it was made. He also proposes taxes on negative externalities to ensure that those whose actions do harm, whether in the form of environmental pollution or a financial crisis, pay the price.

The specifics are cogent and compelling. Stiglitz’s truly innovative idea is that we can raise tax revenue while also creating a better, more equal and just economy that works for all – the kind of economy that FDR believed in and fought for. Stiglitz makes the case that tax policy can and should counter some of the country’s biggest challenges: runaway inequality, the threat of climate change, and a business sector warped by bad incentives.

This will not be easy. The transition to a smarter, better tax code would require careful implementation. Tax expenditures would need to be replaced with a better mechanism to ensure that homeowners build equity and that the tax code doesn’t just subsidize the rich. The financial sector, too, would be subject to new taxes that, according to Stiglitz, “would not only raise substantial revenues, but also encourage that sector to better serve the needs of society.” Lobbyists would be out in force to resist and undermine these policy changes, as they have done with the new regulations imposed by Dodd-Frank.

But in an era when the debate over taxation is still dominated by austerity economics and a slash-and-burn approach, Stiglitz lays out a tax policy that would grow the economy. And instead of treating taxation as value-neutral or a necessary evil, he tells us that it can be a means to address important problems. This represents a fundamental and long-overdue shift in our public dialogue about the economy. The American people deserve a tax code that works for them. With this paper, we have the blueprint to create it.

Felicia Wong is the President and CEO of the Roosevelt Institute. Follow her on Twitter @FeliciaWongRI.

Banner photo via OurWorld2.0, Creative Commons.

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Turning Students' Vision Into Reality: Roosevelt's Campus Network at 10

May 6, 2014Tarsi Dunlop

As the nation's largest student policy organization approaches its 10th anniversary, an alumna and former staffer reflects on how it has evolved and what lies ahead.

As the nation's largest student policy organization approaches its 10th anniversary, an alumna and former staffer reflects on how it has evolved and what lies ahead.

It was September 2005, a few weeks into my first year at Middlebury College, and I was visiting tables at the student activities fair. I had already signed up for several clubs when I heard someone say something, rather loudly, about getting my ideas published and in front of policymakers. I got the pitch: it was the nation’s first ever student-run think tank, then called the Roosevelt Institution, and it was committed to getting student ideas into the policy process. I had no idea how that 10-minute conversation would shape the next 10 years of my life. The organization that would become the Roosevelt Institute | Campus Network was still in its infancy; I showed up to the first general interest meeting and was promptly given a chapter leadership role. In the months to follow, I learned how to run meetings, facilitate research, and write policy recommendations. I knew I had found something bigger than myself, or even my school.

The Campus Network turns 10 years old in December 2014. This past weekend, a group of former Roosevelt students gathered for the first of many meetings in New York City to talk about the 10th anniversary celebration, which will set the stage for a longer-term effort to re-engage former members around shared aspects of our incredible story. As we sat together and learned about the more recent Campus Network initiatives, we were, frankly, proud and impressed.

The evolution of the Campus Network is evident in the ambition and scope of the work students are doing. Over the years, the Campus Network has spread to more than 125 campuses, including 13 community colleges. The Summer Academy program, which allows students to develop policy proposals while working alongside government, think tanks, and non-profits, started in Washington, D.C. in 2008; it now operates in four cities and receives a growing number of applications. We used to publish eight or nine student-generated ideas a year in the Roosevelt Review; now the organization publishes 60 a year in the 10 Ideas journal series. And though the organization has changed names and headquarters, it has remained student-run and student-driven. 

The mentality of the students has evolved along with the work. They realized their ideas had more relevance and potential when designed for and implemented in their local communities. They began to think about how to put their ideas into action themselves, in collaboration with the important stakeholders, instead of simply pitching them to elected leaders. And at the same time, they expressed a desire for a national narrative to connect their work across the country. This led to the creation of Think 2040, an initiative designed to identify students' values and how they relate to their generation's policy goals. Conversations were held and data was compiled at campuses across the country, which led to a series of documents that established a clear vision for a Millennial-driven future: the Blueprint for Millennial America, the Budget for Millennial America, and Government By and For Millennial America. The Campus Network is now taking this model to the local level through initiatives like Rethinking Communities and NextGen Illinois.

As the alumni gathered to learn about the state of the Campus Network and where the organization is heading, we were all reminded of particular moments and events that resonated with us. We all identified with different parts of the story: which publications did we write for, which Hyde Park summit did we attend, did we apply to the Summer Academy? We are still fundamentally connected to this journey and invested in this idea space, and we share certain values because we were shaped by this experience. We recognize that we all embraced the same mission and pitch: that young people and their ideas matter, that those ideas can be put to work now, and that students don’t have to wait until they’re in positions of power to make an impact.

In the coming years, the Campus Network wants to reconnect with alumni, support them in their work, and offer them a greater array of opportunities to stay up to date and engaged with the network moving forward. We want to encourage more intentional connections between alumni and current students, offer professional development for former members, recognize contributions from students and chapters over the last 10 years, create alumni profiles and features, and foster connections at the local level. Above all, we want to create a space that reflects the needs and interests of the broader Roosevelt community. In celebrating such growth and success at the organization’s 10th anniversary, we can also look ahead to its 25th. What do we want for Roosevelt then?

We are excited to reach out and build something great for all generations of Roosevelt members. Every success on every level made us what we are today. If you're interested in staying in touch, let us know! And if you’re not a current or former Campus Network member but are interested in our work, stay tuned: there’s much more to come.

Tarsi Dunlop is the former Director of Operations for the Roosevelt Institute | Campus Network. She currently works at an education nonprofit in Alexandria.

Photos: Campus Network alumni gather in New York City for a 10th anniversary celebration; the author with Roosevelt Institute VP of Networks and Campus Network National Director Taylor Jo Isenberg.

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Good News for Progressive Economics: Big Thinkers Like Piketty Are Back in Vogue

May 2, 2014Felicia Wong

Thomas Piketty's success is no fluke; he and other progressive thinkers have redefined the public debate around inequality.

Thomas Piketty's success is no fluke; he and other progressive thinkers have redefined the public debate around inequality.

Inequality suddenly is the topic of the moment. Last weekend the French economist Thomas Piketty – whose recently published Capital in the 21st Century is now #1 on the Amazon best seller list, shocking for a 690-page macroeconomic tome – was not only the subject of dueling Paul Krugman/David Brooks op-ed columns in the New York Times. Piketty was also top of the fold in the Times’ Sunday Styles section (headline: “Hey, Big Thinker”), which made note of his “boyishly handsome” looks. Clearly, something is up.

At Boston Review, Roosevelt Institute Fellow Mike Konczal provides an excellent overview of the response to Piketty from both left and right. (You can also listen to him discuss it with WNYC’s Brian Lehrer.) Much of the commentary seems to have gone, in only two or three weeks, from economic and policy questions (about his core formula, r>g, or about whether his recommendation of a global tax on capital is actually realistic) to observations that he is a “sign of his times.” In my view, this observation is absolutely right. Piketty’s argument about increasing returns to capital, relatively weak returns to labor, sluggish growth, and the overall rise of both income inequality and wealth inequality, is in fact perfectly in tune with our political and economic concerns today. 

However, I would go much farther than to say that Piketty is merely a sign of his times. I would say that he and other economists have actually defined these times — or at least helped create today’s environment. Piketty and his colleague Emmanuel Saez have been developing their top incomes database for the last 15 years, and publishing results along the way. Since 2003, Piketty’s data, based on an exhaustive review of tax records, has been setting the agenda and driving a tremendous amount of research. I first encountered the data in Winner-Take-All Politicsalso a best-seller, by political scientists Jacob Hacker and Paul Pierson. 

Moreover, a number of those involved credit Piketty’s data with sparking the fall 2011 rise of Occupy Wall Street and the 99 percent framing, which remains a central part of our national conversation. (Credit, according to many others, also goes to Roosevelt Institute’s Chief Economist Joe Stiglitz and his widely read April 2011 Vanity Fair piece, “Of the 1%, By the 1%, For the 1%.” )

My point is this: Big Thinkers, whether Thomas Piketty or Joe Stiglitz or others, are not just reflections of the times. They are creating today’s debate. Ideas really matter.

In congressional testimony on inequality Stiglitz gave three weeks ago, he noticed a real change in attitude among senators, who are open to everything from a carbon tax to changes in corporate taxation, carried income, and the like. 

We are at a unique moment, thanks to Piketty, Stiglitz, the Occupy Wall Street organizers, and many others. Think tanks like Roosevelt Institute’s Four Freedoms Center have a window within which these ideas and arguments can make a very big difference – in the media, in Congress, and, I hope, in cities and towns nationwide. We are pushing hard here to create to a new normal in our understanding of the political economy. Our argument: you can increase economic growth and decrease inequality simultaneously. 

But forces are also arraying against us. The conservatives have yet to fully organize their arguments against Piketty, but already the American Enterprise Institute is arguing that he is promoting the end of capitalism. (He isn’t.) Moreover, I am hearing from Washington sources that over the next year, and especially leading into the midterms, destroying any burgeoning inequality agenda is a central goal of the right wing.

If we want a new normal in our understanding of inequality, we need to be ready to go on the offensive – strategically and systematically. We have solutions. Recent evidence shows they can work. Now: can we put muscle behind the ideas?

Felicia Wong is President and CEO of the Roosevelt Institute. Follow her on Twitter at @FeliciaWongRI.

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Paul Ryan and the Voluntarism Fantasy

Apr 28, 2014Mike Konczal

When I wrote a long piece about the Voluntarism Fantasy at Democracy Journal, several people accused me of attacking a strawman. My argument was that there's an influential, yet never clearly articulated, position on the conservative right that we jettison much of the federal government's role in providing for economic security. In response, private charities, churches and "civil society" will rush in and do a better job. Who, complained conservatives, actually argues this?

Well, here's McKay Coppins with a quite flattering 7,000 word piece on how Paul Ryan has a "newfound passion for the poor." What is the animating core and idea of his new passion?

Ryan’s broad vision for curing American poverty is one that conservatives have been championing for the last half-century, more or less. He imagines a diverse network of local churches, charities, and service organizations doing much of the work the federal government took on in the 20th century. Rather than supplying jobless Americans with a never-ending stream of unemployment checks, for example, Ryan thinks the federal government should funnell resources toward community-based work programs like Pastor Webster’s.

Many are rightfully pointing out that this doesn't square with his budget, which plans to eliminate a lot of spending on the poor in order to fund tax cuts for the rich. But in the same way that budget shenanigans like dynamic scoring is supposed to make his numbers work, there's an invisible work of charity that will simply fill in however much that is cut from the federal budget.
 
There's a dead giveaway here. Note the "in the 20th century" rather than the normal "since the War on Poverty" as when things went wrong. Ryan doesn't think the War on Poverty is a problem, or doesn't just think that. He thinks the evolution of the state during the entire 20th century is the problem, and wants to return to the freer and better 19th century.
 
But as I emphasized in the piece, this idea is not true in history, theory or practice. The state has always played a role in providing economic security through things like poorhouses and soldier pensions well before the New Deal. When the Great Depression happened, the old system collapsed. Service organizations called on the government to take over things like old-age pensions, unemployment insurance and income support because they realized they couldn't do it themselves. Freed of the heavy lifting of these major pieces of social insurance, they could focus in a more nimble manner on individual and targeted needs.
 
And the reasons this doesn't work out are quite clear - charity is uncoordinated, very vulnerable to stress (charitable giving fell in the recession just as it was most needed), and tied to the whims and interests of the rich. And charitable organizations aren't calling for the Ryan Budget, and they don't think that they'll run better and with better resources if Ryan's cuts happen. They know firsthand they won't have the resources to balance out the gigantic increase in need that would result.
 
(Elizabeth Stoker has more on attempts to link this this fantasy up with Christianity broadly and Catholic subsidiarity specifically.)
 
Ideas have consequences. The fact that Ryan's are fundamentally flawed on so many levels will have consequences too for the poor if they come to pass.
 
Follow or contact the Rortybomb blog:
  

 

When I wrote a long piece about the Voluntarism Fantasy at Democracy Journal, several people accused me of attacking a strawman. My argument was that there's an influential, yet never clearly articulated, position on the conservative right that we jettison much of the federal government's role in providing for economic security. In response, private charities, churches and "civil society" will rush in and do a better job. Who, complained conservatives, actually argues this?

Well, here's McKay Coppins with a quite flattering 7,000 word piece on how Paul Ryan has a "newfound passion for the poor." What is the animating core and idea of his new passion?

Ryan’s broad vision for curing American poverty is one that conservatives have been championing for the last half-century, more or less. He imagines a diverse network of local churches, charities, and service organizations doing much of the work the federal government took on in the 20th century. Rather than supplying jobless Americans with a never-ending stream of unemployment checks, for example, Ryan thinks the federal government should funnell resources toward community-based work programs like Pastor Webster’s.

Many are rightfully pointing out that this doesn't square with his budget, which plans to eliminate a lot of spending on the poor in order to fund tax cuts for the rich. But in the same way that budget shenanigans like dynamic scoring is supposed to make his numbers work, there's an invisible work of charity that will simply fill in however much that is cut from the federal budget.
 
There's a dead giveaway here. Note the "in the 20th century" rather than the normal "since the War on Poverty" as when things went wrong. Ryan doesn't think the War on Poverty is a problem, or doesn't just think that. He thinks the evolution of the state during the entire 20th century is the problem, and wants to return to the freer and better 19th century.
 
But as I emphasized in the piece, this idea is not true in history, theory or practice. The state has always played a role in providing economic security through things like poorhouses and soldier pensions well before the New Deal. When the Great Depression happened, the old system collapsed. Service organizations called on the government to take over things like old-age pensions, unemployment insurance and income support because they realized they couldn't do it themselves. Freed of the heavy lifting of these major pieces of social insurance, they could focus in a more nimble manner on individual and targeted needs.
 
And the reasons this doesn't work out are quite clear - charity is uncoordinated, very vulnerable to stress (charitable giving fell in the recession just as it was most needed), and tied to the whims and interests of the rich. And charitable organizations aren't calling for the Ryan Budget, and they don't think that they'll run better and with better resources if Ryan's cuts happen. They know firsthand they won't have the resources to balance out the gigantic increase in need that would result.
 
(Elizabeth Stoker has more on attempts to link this this fantasy up with Christianity broadly and Catholic subsidiarity specifically.)
 
Ideas have consequences. The fact that Ryan's are fundamentally flawed on so many levels will have consequences too for the poor if they come to pass.
 
Follow or contact the Rortybomb blog:
  

 

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Millennials Are Shifting the Public Debate with the Power of Their Ideas

Apr 16, 2014Taylor Jo Isenberg

The Roosevelt Institute | Campus Network's annual 10 Ideas series collects the top student policy proposals from across the country. This year's journals are now available online; read them here.

The Roosevelt Institute | Campus Network's annual 10 Ideas series collects the top student policy proposals from across the country. This year's journals are now available online; read them here.

December 2014 will mark 10 years since a group of college students united behind a new model for engaging young people in the political process, a model that became the Roosevelt Institute | Campus Network. Deeply grounded in the belief that young people have more to offer than just showing up on Election Day, the Campus Network has continued to evolve and grow from its visionary beginning into the nation’s largest student policy organization, with a membership capable of shifting dialogue and effecting policy at the local, state, and national levels.

We believe that in the context of a stagnant public discourse and increasing disillusionment with a political system incapable of tackling our complex collective challenges, it is more important than ever to invest in a generation of leaders committed to active problem-solving and concrete change in the public sphere. As the Campus Network expands to more than 120 chapters in 38 states, we serve as a vehicle for fresh ideas, exciting talent, and real progress.

You will find our commitment to bold experimentation on display in the 2014 edition of the Campus Network’s 10 Ideas journals, collecting our members’ best policy proposals on issues including economic development, defense and diplomacy, energy and the environment, health care, education, and equal justice. From reforming western water rights to supporting green infrastructure, students are envisioning and acting on better solutions.

The variety and scope of the ideas in these journals are indicative of our network’s larger impact. In the past year, we’ve leveraged the effectiveness of our model to work with and inform dozens of other organizations on how to engage Millennials on critical issues, ranging from campaign finance to inequality to climate change. We’ve elevated a fresh, Millennial-driven vision for government in an otherwise stale public debate, and launched an initiative that taps into our generation’s unfettered thinking and ambition to reimagine the role of citizens in shaping fairer and more equitable local economies. Our members have continued to substantively engage in local processes to shape and shift the policy outcomes that directly impact their communities, from introducing new mapping systems to improve health outcomes in low-income neighborhoods to consulting local governments on flood prevention.

These ideas are just the starting place, because ideas are only powerful when acted upon. Yet this work is occurring in a dramatically shifting political and social context. The ways citizens engage their government, participate locally, and advocate for their communities are changing every day. As a vibrant, evolving network driven by our active members nationwide, we believe there is immense potential to capture these innovations and ensure better and more progressive ideas take hold. We believe that:

  • Millennials are turning away from traditional institutions and are looking to build new ones as vehicles for social change. We believe there is an opportunity to channel this reform-mindedness into building a healthier, more inclusive system that’s responsive to citizen engagement and evidence-based solutions.  
  • To jump-start political engagement and combat disillusionment, the focus needs to be on pragmatic problem-solving and intersectional thinking across key issues. For example, we can no longer tackle economic mobility separately from climate change.
  • There is immense potential (and need) for scalable policy innovation at the local and state levels, and much of the most effective and important policy change in the coming decade will be local.
  • With the shift from top-down institutions to networked approaches and collective problem-solving, it is more important than ever before to invest in the development of informed, engaged community leaders capable of driving engagement and action on ideas.

As you engage with the ideas, ambitions, and goals in these journals, I encourage you to dig in and explore how our country’s future leaders are taking the initiative to create the change they know we desperately need. You won’t be disappointed. 

Taylor Jo Isenberg is the Roosevelt Institute's Vice President of Networks.

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Daily Digest - April 3: Once Upon a Time There Was No Safety Net

Apr 3, 2014Rachel Goldfarb

Click here to receive the Daily Digest via email.

Faith in Values: The Conservative Fairy Tale About Government (CAP)

Click here to receive the Daily Digest via email.

Faith in Values: The Conservative Fairy Tale About Government (CAP)

Sally Steenland draws on Roosevelt Institute Fellow Mike Konczal's argument against "the voluntarism fantasy" to argue for the strength of the progressive narrative, in which government and private entities work together to help society.

  • Roosevelt Take: Mike debunked the idea that private charity could take the place of government in fighting poverty in Democracy Journal.

The Supreme Court’s Ideology: More Money, Less Voting (The Nation)

Connecting the dots between yesterday's decision in McCutcheon v. FEC and other recent decisions on voting and campaign finance, Ari Berman says that the same groups are favoring secret money and voting restriction.

  • Roosevelt Take: Jeff Raines, Chair of the Student Board of Advisors for Roosevelt Institute | Campus Network, argued in October that McCutcheon was really about how much influence we allow the wealthiest Americans to have over our elected officials.

Will Disclosure Save Us From the Corrupting Influence of Big Money? (TAP)

Paul Waldman raises the question of whether campaign finance disclosure is enough to limit political corruption, because he thinks the courts could one day use disclosure as justification to eliminate all contribution limits.

Are The Views Of America's Wealthiest Undermining Democracy? (Forbes)

A new study on the opinions of the top 0.1 percent of Americans shows that they hold substantially different political views, and their high rate of campaign contributions may mean those views get more attention from policymakers.

A Union Aims at Pittsburgh’s Biggest Employer (NYT)

Steven Greenhouse reports on the Service Employees International Union's efforts to unionize the University of Pittsburgh Medical Center, where workers say great benefits don't matter when they can't afford the health insurance.

New on Next New Deal

Labor Law that That Would Support Organizing in Today’s Economy

In the fifth piece in his series on his new report on labor reform, Roosevelt Institute Senior Fellow Richard Kirsch begins to lay out some of the possible ways to strengthen labor laws.

Taking on Big Business Wage Theft

Harmony Goldberg, the Program Manager for the Roosevelt Institute's Future of Work Initiative, argues that government needs to strengthen enforcement and change laws so that workers aren't forced to sue in order to get their fair wages.

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In Seattle, Calls for a Higher Minimum Wage are Calls for Democracy

Mar 28, 2014Felicia Wong

Roosevelt Institute President and CEO Felicia Wong spoke yesterday at the Income Inequality Symposium in Seattle, where she gave the closing remarks, calling on our memories of President Franklin D. Roosevelt and the New Deal to urge Seattle into action on raising the minimum wage. Her prepared remarks are below.

Roosevelt Institute President and CEO Felicia Wong spoke yesterday at the Income Inequality Symposium in Seattle, where she gave the closing remarks, calling on our memories of President Franklin D. Roosevelt and the New Deal to urge Seattle into action on raising the minimum wage. Her prepared remarks are below.

Thank you so much, Mayor Murray, David Rolf from SEIU 775NW, Howard Wright, and all of you who have served on the Mayor’s Task Force or spent so much of your time fighting for economic growth and economic justice.

Today – we feel like a nation at the crossroads, on the brink.  But let’s remember: we’ve been here before. The story is familiar. Poverty and income inequality are on the rise throughout the United States. Even if you’re fortunate enough to have a job, you’re struggling to make ends meet. Meanwhile, a select few do very, very well for themselves. The President, facing a critical midterm election, addresses the nation. Raise standards for workers, he says, and he calls for laws to raise the national minimum wage, too.

I’m talking about 1938, when the President was Franklin Delano Roosevelt. When FDR took office, there was no federal law guaranteeing a minimum wage for American workers – and in fact throughout the 1930s the President battled a recalcitrant and conservative Supreme Court, and conservative business establishment, on behalf of workers. In his 1938 address to Congress, FDR said such a law was long overdue. He said it was morally unacceptable and economically unsustainable for so many people in the United States to earn poverty wages. To quote Roosevelt: “Aside from the undoubted fact that the people thereby suffer great human hardship, they are unable to buy adequate food and shelter, to maintain health, or to buy their share of manufactured goods.”

That’s the key. FDR understood that the minimum wage was an issue for our hearts and for our wallets. Again and again, he returned to the point that businesses could not thrive unless workers did. Without workers, an economy cannot grow.

It was a tough fight, and FDR didn’t go it alone. He had what he called his Brains Trust -- lawmakers, academics, activists, and business leaders. Their job was to figure out economic policies under which everyone could prosper. FDR went to Congress with their proposals. The result: the Fair Labor Standards Act, a keystone of the New Deal, along with the Social Security Act. With the FLSA we got a federal minimum wage as well as the 40-hour workweek and standards for overtime pay. These underlie modern labor policy.  These are issues that are hotly debated even today.

As we’ve seen over the course of this day’s symposium, fixing our country’s inequality and wage problems will – once again – need the good ideas and expertise of a brain trust. We have been fortunate to hear from important partners such as Maud Daudon from the Chamber of Commerce, Saru Jayaraman from Restaurant Opportunities Center - United, and leaders from other cities such as Supervisor John Avalos from my hometown of San Francisco and Wilson Goode from Philadelphia.  Innovation is a team sport. FDR understood this, and so does Mayor Murray.

I work at the Roosevelt Institute in New York City.  And I am here today because Seattle is at the center of the nation’s most important fight.  

At Roosevelt, we think of ourselves as an ideas and leadership shop. I won’t claim that we ask ourselves “What Would FDR Do?” in every situation. But we certainly try to capture his spirit of innovation and collaboration in our work. We support public intellectuals like Dorian Warren, whom you’ve heard from today, and Mike Konczal, Joe Stiglitz, Annette Bernhardt, Richard Kirsch, and others. They plunge into all facets of the inequality problem – which President Obama has rightly called the defining problem of our time.  They envision solutions, including a new labor agenda for the 21st century.  This includes raising the minimum wage and providing paid sick leave, and also includes new standards for the right to organize, the enforcement of labor laws, and strategies to combat labor market segregation by race and gender.  At Roosevelt we also support some 10,000 undergraduates across the U.S. who dig in deep in their local communities – designing and fighting for policy solutions at the city level.

We at the Roosevelt Institute believe – as does everyone here – that we all do better when we all do better. But: wages have been backsliding for decades now. The typical American family makes less today than it did 25 years ago. I know we have heard a lot of statistics today, and they can seem overwhelming, but consider this for just a moment: 16 million children live in homes where their families are not sure where the next meal is coming from. Five years after the Great Recession officially ended, there are still three times as many Americans looking for work as there are job openings. And, as we’ve discussed today, new jobs aren’t good jobs.  The most recent BLS statistics forecast a low-wage trajectory through at least 2020.  Only one of the 20 occupations expected to add new jobs requires a college degree, and most of the kinds of jobs we will be creating offer low or moderate pay.

From FDR to President Obama to each and every one of us here today, whether right or left or center: we can all agree that no one should work a full-time job and worry about putting food on the table for their family.  

But this is not just about morality, not just about the “we should” and the “we shouldn’t.”  This is about economic fundamentals. When people can’t even buy groceries at the end of the month, they can’t do all of the things – go to a baseball game, go to dinner at a restaurant – that drive economic growth and make our towns and cities strong.

Now, consider the other half of the coin: times are not tough for everyone. In 2012 alone, the richest 1 percent of Americans took home more than 20 percent of all income – one of their biggest hauls since the Gilded Age. Corporate profits are at record levels, and corporations are sitting on huge cash reserves. Many will tell us that corporations and wealthy owners are the job creators, the engines of the economy.  Now, none of us begrudge real success. But the question is, if they’re doing so well, why isn’t the rest of the economy doing better?

And the answer is clear: As FDR once argued, the people – middle class, working families – are the real job creators. These aren’t just strangers, or statistics. I’m talking about our friends and family and co-workers. I’m talking about us. As more and more Americans struggle to keep up - businesses can’t function.  Companies need customers, people to spend money on those products and services. That’s why holding down wages is more than just unfair. It’s also bad economics.

Let me take a minute to tackle the arguments on the other side: that raising the minimum wage will cause unemployment, business flight, or higher prices.  But empirical research looking at decades of data – much of which we have heard today – shows that on balance raising wages has little or no negative employment effects, and in fact there is significant evidence to show that businesses – and cities and towns – flourish with higher wages, rather than lower.

This also should make sense to any of us who manage other people. Making decisions to pay employees enough so they aren’t stressed in the rest of their lives makes good business sense, and good common sense.

And, we are learning from very recent research.  I will cite just two important pieces.  The first is a massive study of 200 years of capital accumulation, incomes, and growth just published here in the United States.  The research suggests the problem is very big, and in fact lies in the structure of today’s entire global economy. Too much capital is concentrated in the hands of too few, and the global economy has gone awry.

The second piece is a recent IMF study of inequality and growth in hundreds of countries showing that many equality-enhancing redistributive policies – higher taxes, more public investment – can increase growth. Win-wins are possible.  

So these findings should give us courage. And should push us to act – because recalibrating the minimum wage is one very big step towards fixing the broken economic system and promoting growth in ways that will work for everyone.

Let me be clear: raising the minimum wage isn’t anti-democratic, isn’t anti-capitalist, isn’t anti-free market.  FDR saved capitalism from itself.  That is what you are trying to do here today.

It’s no surprise that we’re having this conversation in Seattle. Your city is a great hub of American business and social innovation. This city has brought to life trends and technologies, from Starbucks coffee to Excel spreadsheets, which revolutionize the way we live. And you in Seattle know that people are at the center of that innovation. Companies like Costco have built their business models on paying decent wages and benefits, retaining valued employees, and fostering strong communities.

It’s not a top-down, trickle-down proposition. Economies grow, as our friend Nick Hanauer said this morning, from the middle out.  You have seen it work in Seattle, and that’s why Seattle is the right incubator for the sound labor policies that will shape the American economy of the future.

By voting for a 15 dollar an hour wage floor, Seattle can move the entire region’s economy forward.  You can also set the trend for the whole country – in addition to possible federal legislation, at least eight states are considering minimum wage increases this year. You can show all of us how to build the kind of economy that grows, that is stable, and that spreads prosperity broadly.  It is a virtuous cycle.  

If adopted nationwide, the Economic Policy Institute estimates that the raise in the minimum wage proposed by President Obama could affect more than 28 million people and lift many of them out of poverty. 28 million people. At a time when the American Dream of opportunity for all is rapidly fading, those are 28 million reasons to support this proposal.

Beyond the potential economic impact, this policy would show what government can achieve when it responds to the needs of working families. As Justice Louis Brandeis once said, “We can have democracy in this country, or we can have great wealth concentrated in the hands of a few, but we can’t have both.” Individual companies, as great as they are, can’t do this alone.  Our fates are linked, and we have to act together.  By raising the minimum wage to fifteen-dollars-an-hour, Seattle can choose democracy and start to reverse the trends that have been crushing the middle class.

Let me close by urging the members of Seattle’s City Council to approve the 15 dollar an hour minimum wage. And as FDR told his own supporters, it is up to all of us to make them do it. A lot has changed about our country since the days of the New Deal, but one thing remains the same: Progress is possible when we commit to it and fight for it. Now is the time for us to decide what kind of economy, what kind of government, and what kind of future we want for ourselves. Now is the time for Seattle to lead the way. Thank you.

Felicia Wong is President and CEO of the Roosevelt Institute.

 

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Daily Digest - March 18: Society Doesn't Work on a Volunteer Basis

Mar 18, 2014Rachel Goldfarb

Click here to receive the Daily Digest via email.

The Voluntarism Fantasy (Democracy Journal)

Roosevelt Institute Fellow Mike Konczal looks to the history of public and private social insurance in the U.S. to explain why the conservative belief that private charity could take the place of government is deeply misguided.

Click here to receive the Daily Digest via email.

The Voluntarism Fantasy (Democracy Journal)

Roosevelt Institute Fellow Mike Konczal looks to the history of public and private social insurance in the U.S. to explain why the conservative belief that private charity could take the place of government is deeply misguided.

In City's Job Growth, Faces of the Working Poor (WNYC)

New York City now has 237,000 more jobs than it did before the recession, reports Mirela Iverac, but too many of those jobs aren't paying enough to live on.

Hunger Crisis: Charities are Strained as Nearly 1 in 5 New Yorkers Depend on Aid for Food (NY Daily News)

Over five years, the number of people relying on food aid has increased by 200,000, and Barry Paddock and Ginger Adams Otis report that charities have seen even more need since November's food stamp cuts.

Low-Wage Workers Are Finding Poverty Harder to Escape (NYT)

Steven Greenhouse reports on the lives of the working poor in Chattanooga, Tennessee, where workers with many years of experience can still make only $9 per hour.

Inside Low-Wage Workers’ Plan to Sue McDonald’s — and Win (MSNBC)

Timothy Noah explains that these workers are targeting the franchise system, arguing that McDonald's as a corporation created the conditions that led to wage theft, not just the franchise owners.

New on Next New Deal

Florida Election Shows Danger and Promise in Obamacare Debate

Roosevelt Institute Senior Fellow Richard Kirsch says polling from the recent special election for Florida's 13th congressional district shows that standing up to "keep and fix" Obamacare is a path for Democratic success.

The Progressive Budget Reminds Us That Government Can Create Jobs

The Congressional Progressive Caucus's budget is a reminder that an aggressive approach is still needed to push job growth, writes Nell Abernathy, Program Manager for the Bernard L. Schwartz Rediscovering Government Initiative.

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Daily Digest - March 13: What Sets Liberals Apart?

Mar 13, 2014Rachel Goldfarb

Click here to receive the Daily Digest via email.

An Incoherent Harper's Essay Suggests There's No Difference Between Obama and Republicans (TNR)

Click here to receive the Daily Digest via email.

An Incoherent Harper's Essay Suggests There's No Difference Between Obama and Republicans (TNR)

Roosevelt Institute Fellow Mike Konczal responds to Adolph Reed's piece on the exhaustion of liberals, arguing that the issues that drive liberals and the outcomes they seek easily distinguish them from conservatives.

The Inequality Puzzle (TAP)

Robert Kuttner asks how it's possible that intergenerational economic mobility has remained flat over the past 30 years rather than declining, and whether that fact is really worth celebrating.

What Talent Shortage? The Great American Brain Waste of Our Captive Labor Market (Pacific Standard)

Jim Russell sees an easy solution to any lack of skilled labor: policies, at work and in politics, that are more supportive of the groups whose talents are being wasted, namely women and immigrants.

My Life as a Retail Worker: Nasty, Brutish, and Poor (The Atlantic)

Joseph Williams writes about his experiences working at a sporting goods store after losing his job in journalism. He got first-hand experience in retail's wage theft and surveillance practices.

New on Next New Deal

The Progressive Caucus Budget Makes the Right Decisions

The budget shows that the country can afford to properly invest in job creation and achieve faster growth, says Roosevelt Institute Senior Fellow Jeff Madrick, Director of the Bernard L. Schwartz Rediscovering Government Initiative.

Quits Won't Tell Us Anything About the True Unemployment Rate (Vacancy Chains 1/2)

Mike Konczal argues that the interesting data from the quits rate is already represented in wage growth and the number of job openings relative to unemployment. We should be watching that data anyway.

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The Progressive Caucus Budget Makes the Right Decisions

Mar 12, 2014Jeff Madrick

The "Better Off Budget" is the only budget proposal in Congress that really places people's needs ahead of political compromise.

The "Better Off Budget" is the only budget proposal in Congress that really places people's needs ahead of political compromise.

The Congressional Progressive Caucus has issued its annual budget and it is in different ways the antithesis of what both the Republicans and Democrats are offering. The Caucus calls it the “Better Off Budget," and it puts its money where its mouth is. Thank goodness they’ve issued it, because it puts in perspective how much is actually within our nation’s reach. It is aimed right where it should be: at creating jobs. The budget acknowledges that our jobs crisis is far from over (I’d call it the jobs emergency budget, of course). And it rightly says we can solve our problems.

The proposals errs slightly on the side of economic optimism, but that is as it should be. It stands in contrast to the modest improvements in social policy proposed by the Democrats, which won’t get unemployment down to 5 percent in the foreseeable future, and to the insensitive regression proposed by Paul Ryan and the Republicans. Those proposals are all politics, with little caring about the people’s thirst for jobs and opportunity. The progressives toss political compromise aside to do the right thing.

Their proposed budget does a lot of good in a lot of areas. It refuses to reduce entitlements; it provides a middle class tax break; it raises income tax rates on the wealthy; it provides a lot of money for infrastructure investment. I could go on.

But in this brief analysis I want to focus on the question of how much stimulus the economy can stand, which is really a question about how much slack there is in the economy. Conventional analyses say that slack—the potential to grow—has fallen. It’s mostly not because the economy is growing and catching up with its potential. The reason is that people are dropping out of the work force, maybe for good. They are losing skills. Some are retiring or getting close to retirement. Capital investment has been okay, but it has been far from stellar and therefore not likely to create exciting new products and industries that also increase productivity.

If the potential is not as high as typical economists, including the Congressional Budget Office, thought just a couple of years ago, we can’t push the economy up as fast as we might like, they argue.

The irony is that potential is down, as conventional economists measure it, because of the Great Recession and historically slow recovery, not because of a structural change in the economy. In particular, labor productivity growth is not very good. Total factor productivity, which (allegedly) measures the productivity of capital and labor combined, is somewhat stronger by historical comparison. I say allegedly because total factor productivity is a pretty flaky number.

Now, there is a pretty good relationship between how fast demand is growing and productivity growth, both labor and total factor productivity. In any case, if the potential of the economy is reduced because growth is slower, people can’t get jobs, and investment in research is far from hot—well, then potential would likely rise if we got the economy growing rapidly again. There is good theory, partly Keynesian but also something called Verdoorn’s Law, to suggest this could well be the case. 

So, in sum, that’s what this debate turns on. Will stimulus bump up against a genuine GDP ceiling and cause inflation, or is that ceiling only an artificial one based on recent data generated in a very slow economic recovery? I’d argue the CBO analysis and that of others is proposing an artificial ceiling. We can growth much faster, and we can get unemployment down to 5 percent. More demand can and often has led to faster productivity growth and more aggressive capital investment.

That’s what the Progressive Caucus Budget is all about. The nation can afford a decent social safety net and adequate investment in its future, and can get five to 10 million more people working again. If the progressives’ budget overstates the possibilities, it is not by much. 

Jeff Madrick is a Senior Fellow at the Roosevelt Institute and Director of the Bernard L. Schwartz Rediscovering Government Initiative.

 

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