Table Of ContentUntil economic and social rules work for all
Americans, they’re not working. Inspired
by the legacy of Franklin and Eleanor, the
Roosevelt Institute reimagines the rules to
create a nation where everyone enjoys a fair
share of our collective prosperity.
We are a 21st century think tank bringing
together multiple generations of thinkers and
leaders to help drive key economic and social
debates and have local and national impact.
TABLE OF CONTENTS
EXECUTIVE SUMMARY 7
INTRODUCTION 11
THE CURRENT RULES 23
More market power, less competition 24
The growth of the financial sector 28
The ‘shareholder revolution,’ the rise of CEO pay, and the squeezing of workers 33
Lower taxes for the wealthy 36
The end of full-employment monetary policy 40
THE STIFLING OF WORKER VOICE 43
The sinking floor of labor standards 46
Racial discrimination 49
REWRITING THE RULES 57
Make Markets Competitive 58
Fix the financial sector 62
Incentivize long-term business growth 68
Rebalance the tax and transfer system 70
Make full employment the goal 73
Empower workers 77
Expand access to labor markets and opportunities for advancement 80
Expand economic security and opportunity 84
APPENDIX:
OVERVIEW OF RECENT INEQUALITY TRENDS 93
ENDNOTES 100
This paper is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License.
ACKNOWLEDGEMENTS
This report was authored by
» Axel Aubrun, Topos Partnership
» Dean Baker, Center for Economic Policy
Joseph E. Stiglitz,
and Research
Chief Economist & Senior Fellow,
» Mark Barenberg, Columbia University
Roosevelt Institute
School of Law
with coauthors » Craig Becker, AFL-CIO
» Suzanne Berger, MIT
(in alphabetical order)
» Jared Bernstein, Center on Budget and
Policy Priorities
» Nell Abernathy, Roosevelt Institute » Josh Bivens, Economic Policy Institute
» Adam Hersh, Roosevelt Institute » Kate Black, American Women
» Susan Holmberg, Roosevelt Institute » Raphael Bostic, University of Southern
» Mike Konczal, Roosevelt Institute California Price School
» Heather Boushey, Washington Center for
and research assistant
Equitable Growth
» Beth Ann Bovino, Standard & Poor’s
» Eric Harris Bernstein, Roosevelt Institute » Julia Bowling, Brennan Center for Justice
» Ellen Bravo, Family Values @ Work
and with contributions from Consortium
(in alphabetical order) » David Card, University of California
Berkeley
» Frank Clemente, Americans for Tax
» Carola Binder, University of California Fairness
Berkeley » Michael Cragg, The Brattle Group
» Andrea Flynn, Roosevelt Institute » Sheldon Danziger, Russell Sage
» Violetta Kuzmova, Columbia University Foundation
» Tim Price, Roosevelt Institute » Mike Darner, Congressional Progressive
» Mark Stelzner, University of Caucus
Massachusetts Amherst » Xavier de Souza Briggs, Ford Foundation
» Anastasia Wilson, University of » Brad DeLong, University of California
Massachusetts Amherst Berkeley
» David desJardins, Consultant and Investor
Joseph Stiglitz and the Roosevelt Institute » Geert Dhondt, John Jay College of
Criminal Justice
would like to acknowledge the following people
» Lisa Donner, Americans for Financial
(in alphabetical order) for their input and/or Reform
» Steven Fazzari, Washington University in
participation in convenings that helped to inform
St. Louis
this work. This is not a list of endorsers, and » Amanda Fischer, Office of Representative
Maxine Waters
mistakes are the authors’ alone.
» Sarah Fleisch Fink, National Partnership
for Women and Families
» Nancy Folbre, University of Massachusetts
Organizations are listed for affiliation
Amherst
purposes only.
4
REWRITING THE RULES OF THE AMERICAN ECONOMY: AN AGENDA FOR SHARED PROSPERITY
ACKNOWLEDGEMENTS
» Daniel Geldon, Consultant » Christina Romer, University of California
» Richard Gilbert, University of California Berkeley
Berkeley » Emmaneul Saez, University of California
» Michelle Holder, John Jay College of Berkeley
Criminal Justice » Aimee Santos-Lyons, Western States
» Olivier Giovannoni, Bard College Center
» Stanley Greenberg, Greenberg Quinlan » Steve Savner, Center for Community
Rosner Research Change
» Robert Greenstein, Center on Budget and » John Schmitt, Center for Economic and
Policy Priorities Policy Research
» Martin Guzman, Columbia University » Dan Schwerin, Office of Hillary Rodham
» Jody Heymann, University of California Clinton
Los Angeles » Adrianne Shropshire, Black Civic
» Bart Hobijn, Federal Reserve Bank of San Engagement Fund
Francisco » Zach Silk, Silk Strategic
» Matt Hollamby, Wyss Foundation » Damon Silvers, AFL-CIO
» Chye-Ching Huang, Center on Budget and » William Spriggs, AFL-CIO
Policy Priorities » Graham Steele, U.S. Senate Banking
» Taylor Jo Isenberg, Roosevelt Institute Committee
» Arun Ivatury, SEIU » Lynn Stout, Cornell University Law School
» Elizabeth Jacobs, Washington Center for » Dorian Warren, Roosevelt Institute
Equitable Growth » Felicia Wong, Roosevelt Institute
» Simon Johnson, MIT Sloan School » David Woolner, Roosevelt Institute
» Ianna Kachoris, MacArthur Foundation
» Julie Kashen, Make it Work Campaign
Special thanks to Roosevelt staff, Initiative
» Stephanie Kelton, U.S. Senate Budget
for Policy Dialogue staff, and consultants
Committee
for their support and contributions: Hannah
» Richard Kirsch, Roosevelt Institute
Assadi, Aman Banerji, Johanna Bonewitz,
» Anna Lefer Kuhn, Arca Foundation
» Mark Levinson, SEIU Lydia Bowers, Brenna Conway, Samantha
» Tara Magner, MacArthur Foundation Diaz, Renée Fidz, Joelle Gamble, Kathryn
» Brad Miller, Roosevelt Institute Greenberg, Laurie Ignacio, Jiaming Ju,
» Larry Mishel, Economic Policy Institute Eamon Kircher-Allen, Gabriel Matthews, Joe
» Markos Zúniga Moulitsas, DailyKos McManus, Camellia Phillips, Marybeth Seitz-
» Marcus Mrowka, Roosevelt Institute Brown, Liz Sisson, Alan Smith, Kevin Stump,
» Jessica Gordon Nembhard, John Jay
Alexandra Tempus, and Patrick Watson.
College of Criminal Justice
» Dave Palmer, Roosevelt Institute
» Manuel Pastor, University of Southern
California This report was made possible
» Aaron Pickrell, Remington Road Group, on
with generous support from the
behalf of NYC Mayor Bill de Blasio
» Kalen Pruss, Office of Martin O’Malley Ford Foundation, the MacArthur
» Robert Reich, University of California Foundation, and Bernard L.
Berkeley
Schwartz.
» Rashad Robinson, Color of Change
5
REWRITING THE RULES OF THE AMERICAN ECONOMY: AN AGENDA FOR SHARED PROSPERITY
EXECUTIVE SUMMARY
6
REWRITING THE RULES OF THE AMERICAN ECONOMY: AN AGENDA FOR SHARED PROSPERITY
EXECUTIVE SUMMARY
Inequality is not inevitable: it is a choice we make with the rules we create to structure
our economy. Over the last 35 years, America’s policy choices have been grounded in false
assumptions, and the result is a weakened economy in which most Americans struggle to
achieve or maintain a middle-class lifestyle while a small percentage enjoy an increasingly
large share of the nation’s wealth. Though these lived experiences and personal challenges
are important, they are only the tip of the iceberg that is the crisis of slow income growth and
rising inequality. To fully understand the scope of the problem, we must also examine the
array of laws and policies that lie beneath the surface—the rules that determine the balance
of power between public and private,
employers and workers, innovation and
shared growth, and all the other interests
Dominant economic frameworks over
the past 35 years—like “trickle-down”
that make up the modern economy.
economics, and the idea that markets
work perfectly on their own—paved the
Given the scale and interconnected nature way for an onslaught of policies that
of the issues we face, a tentative, piecemeal decimated America’s middle class. This
response will not suffice. Instead, this paper presents an evidence-backed
report lays out both a new framework for
alternative framework:
understanding the current structure of our
economy and a comprehensive policy agenda
u Markets are shaped by laws,
that rewrites the rules to promote stronger
growth and broadly shared prosperity. regulations, and institutions. Rules
matter.
The United States bills itself as the land u The rules determine how fast the
of opportunity, a place where anyone can
economy grows, and who shares in
achieve success and a better life through
the benefits of that prosperity.
hard work and determination. But in fact,
u Concentrated wealth can hurt
the U.S. today lags behind most other
developed nations in measures of inequality economic performance. Under the
and economic mobility. For decades, wages right rules, shared prosperity and
have stagnated for the majority of workers strong economic performance
while economic gains have disproportionately
reinforce each other. There is no
gone to the top 1 percent. Good jobs that
trade-off.
provide access to the middle class are
u A tentative, piecemeal policy
increasingly scarce, while essentials like
education, housing, and health care are response to help the neediest will
growing ever more expensive. Deeply rooted not suffice. We must rewrite the
structural discrimination continues to hold rules of the economy with a focus on
down women and people of color, and more
restoring a balance of power between
than one-fifth of all American children now
the competing interests that make up
live in poverty, meaning that these trends
the modern economy.
are on track to become even worse in the
future. To solve these problems, we must
better understand the causes of today’s
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REWRITING THE RULES OF THE AMERICAN ECONOMY: AN AGENDA FOR SHARED PROSPERITY
EXECUTIVE SUMMARY
TAMING THE TOP
inequality, and traditional economics provides
little guidance.
For decades, economists have claimed that there FIX THE FINANCIAL SECTOR
is a tradeoff between inequality and economic
performance; in other words, that we can only
promote greater equality by sacrificing growth. u End “too big to fail” by imposing additional
Further, they have argued that overarching
capital surcharges on systemically risky
trends including globalization and technological
financial institutions and breaking up firms
progress make increased inequality inevitable.
that cannot produce credible living wills.
Their answer, then, is not to redistribute wealth
to those at the bottom but to implement policies u Better regulate the shadow banking sector.
that direct more income to those at the top—the u Bring greater transparency to all financial
true drivers of the economy. markets by requiring all alternative asset
managers to publicly disclose holdings,
Since the late 1970s, U.S. policymakers have returns, and fee structures.
tailored the rules to suit this old economic u Reduce credit and debit card fees through
model. As a result, we have a tax system that
improved regulation of card providers and
raises insufficient revenue and encourages the
enhanced competition.
pursuit of short-term gains over long-term u Enforce existing rules with stricter penalties
investment; weak and unenforced regulation of
for companies and corporate officials that
corporations; a de facto public safety net for
break the law.
too-big-to-fail financial institutions; a dwindling
u Reform Federal Reserve governance to reduce
support system for workers and families; and a
reorientation of monetary and fiscal policy to conflicts of interest and institute more open
promote wealth rather than full employment. and accountable elections.
Rather than strengthening the economy, these
choices have led to lower growth, repeated INCENTIVIZE LONG-TERM
downturns including the worst crisis since the
Great Depression, the shrinking of the middle BUSINESS GROWTH
class, and increased concentration of wealth at
the top. It’s time for something different.
u Restructure CEO pay by closing the
Our economy is a large and complex system, and
performance-pay tax loophole and increasing
in order to solve the problems with that system,
transparency on the size of compensation
we must aim to fix the economy as a whole. The
packages relative to performance and median
financial crisis of 2008 and the Great Recession
worker pay and on the dilution as a result of
that followed exposed the inadequacy of the
grants of stock options.
old economic models; the new research and
thinking that has emerged as a result suggests u Enact a financial transaction tax to reduce
that equality and economic performance are in short-term trading and encourage more
fact complementary rather than opposing forces. productive long-term investment.
No more false choices: changing course won’t u Empower long-term stakeholders through
be easy in the current environment, but we can the tax code, the use of so-called “loyalty
choose to fix the rules structuring our system. shares,” and greater accountability for
By doing so, we can restore the balance between
managers of retirement funds.
government, business, and labor to create an
economy that works for everyone. Building on
MAKE MARKETS COMPETITIVE
the innovative legacy of the New Deal, this
report describes a far-reaching, two-fold agenda
to tame the growth of wealth among the top 1
percent and establish rules and institutions that u Restore balance to intellectual property
ensure security and opportunity for the middle rights to encourage innovation and
class. Highlights of this agenda include: entrepreneurship.
8
REWRITING THE RULES OF THE AMERICAN ECONOMY: AN AGENDA FOR SHARED PROSPERITY
EXECUTIVE SUMMARY
u Restore balance to global trade agreements by penalties on illegal anti-union intimidation
ensuring investor protections are not prioritized tactics, and amending laws to reflect the
above protections on the environment and changing workplace.
labor, and increasing transparency in the u Have government set the standards by
negotiation process. attaching strong pro-worker stipulations to its
u Provide health care cost controls by allowing contracts and development subsidies.
government bargaining. u Increase funding for enforcement and raise
u Expand a variant of chapter 11 bankruptcy to penalties for violating labor standards.
homeowners and student borrowers. u Raise the nationwide minimum wage and
increase the salary threshold for overtime pay.
REBALANCE THE
EXPAND ACCESS TO LABOR
TAX AND TRANSFER SYSTEM
MARKETS AND OPPORTUNITIES FOR
u Raise the top marginal rate by converting all ADVANCEMENT
reductions to tax credits and limiting the use of
credits.
u Raise taxes on capital gains and dividends. u Reform the criminal justice system to reduce
u Encourage U.S. investment by taxing incarceration rates and related financial
corporations on global income. burdens for the poor.
u Tax undesirable behavior such as short-term u Reform immigration law to provide a pathway
trading or polluting and eliminate corporate to citizenship for undocumented workers.
welfare and other tax expenditures that foster u Legislate universal paid sick and family leave.
inefficiency and inequality. u Subsidize child care to benefit children and
improve women’s workforce participation.
u Promote pay equity and eliminate legal
GROWING THE MIDDLE
obstacles that prevent employees from sharing
salary information.
u Protect women’s access to reproductive health
MAKE FULL EMPLOYMENT THE GOAL services.
EXPAND ECONOMIC SECURITY
u Reform monetary policy to give higher priority
to full employment. AND OPPORTUNITY
u Reinvigorate public investment to lay
the foundation for long-term economic
performance and job growth, including u Invest in young children through child benefits,
by investing in large-scale infrastructure early education, and universal pre-K.
renovation: a 10-year campaign to make u Increase access to higher education by
the U.S. a world leader in innovation, reforming tuition financing, restoring
manufacturing, and jobs. protections to student loans, and adopting
u Invest in large-scale infrastructure renovation universal income-based repayment.
with a 10-year campaign to make the U.S. a u Make health care affordable and universal by
world infrastructure innovation, manufacturing, opening Medicare to all.
and jobs leader. u Expand access to banking services through a
u Expand public transportation to promote equal postal savings bank.
access to jobs and opportunity. u Create a public option for the supply of
mortgages.
EMPOWER WORKERS u Expand Social Security with a supplemental
public investment program modeled on private
Individual Retirement Accounts, and raise the
u Strengthen the right to bargain by easing payroll cap to increase revenue.
legal barriers to unionization, imposing stricter
9
REWRITING THE RULES OF THE AMERICAN ECONOMY: AN AGENDA FOR SHARED PROSPERITY
INTRODUCTION
10
REWRITING THE RULES OF THE AMERICAN ECONOMY: AN AGENDA FOR SHARED PROSPERITY
