Symposium | Unfinished Business

Still Too Many Left Behind

By E.J. Dionne Jr.

Tagged economyEmploymentHealth CareInequalityObama AdministrationprogressivismTaxesUnions

Progressives have a hard time celebrating their successes because they always believe that they have so much more to do. This does not mean that progressives are immune to arrogance or an untoward sense of superiority. To err is human, not ideological. But it is in the nature of the left to focus on injustices that remain unrelieved, problems that are unsolved, and goals that have not been met.

It’s not entirely a bad habit, since all societies need substantial improvement and complacency is a worse habit. But the tendency of reformers to concentrate on unfinished business makes them easy to parody. Richard Scammon and Ben Wattenberg suggested in the 1970s that liberals seemed to revel in the slogan: “Our programs have failed. Let us continue.”

This problem has been especially acute in the Obama years. Members of the President’s party have been badly divided over how much to brag about what are his authentic economic achievements. Inheriting an economy in freefall, Obama—with real help from the Federal Reserve, but in the face of unwavering resistance from congressional Republicans—presided over a remarkable recovery. As of April, the country had seen 73 consecutive months of private sector job growth and the creation of 14.4 million jobs. The unemployment rate was halved in the course of the President’s term, from a peak of 10 percent in October 2009 to 5 percent in March 2016.

In normal circumstances, such a record would have called forth much pride and at least some bragging. The model political slogan for parties that had presided over good times was Harold Macmillan’s jaunty 1959 boast on behalf of the British Conservative Party: You’ve “never had it so good.” Macmillan won a famous victory that year.

The 2016 primaries in both parties were a measure of our discontent.

The problem is that neither Obama nor any of his supporters can honestly say to the vast majority of Americans that they’ve never had it so good. And many liberals have worried that touting progress would only make them look out of touch with large parts of the country not experiencing the broadly good news, as it is measured in the overall economic statistics.

Although Americans are, on the whole, better off now than they were when Obama’s term started, stagnating and in many cases declining wages—they are the product of globalization, technological change, and the decline of unions—have left many of our fellow citizens hurting. Two groups that often find themselves on opposite sides of politics, the white working class, particularly but not only men, and African Americans in the inner cities have been hit especially hard. These negative trends go back at least 15 years and in some cases can be traced to as long ago as the early 1970s. The 2016 primaries in both parties were a measure of our discontent. Donald Trump’s support among Republican working-class voters and the political potency among Democrats of Bernie Sanders’s attacks on inequality, Wall Street, and the power of big money in politics have highlighted quite distinct but at least partly overlapping constituencies of protest and anger.

The challenge for those who would move the country forward is now, as it always has been, to find a way to acknowledge simultaneously the progress that reform has brought about and the large challenges that remain. In particular, it’s useful to look to the measures that have made things better—in President Obama’s case, these include Obamacare, the important if still incomplete financial restructuring wrought by Dodd-Frank, and the restoration of a more progressive tax system—for clues as to what needs to happen next.

The case of Obamacare is particularly instructive. No one, including Obama himself, believes that Obamacare is either perfect or has solved all of the problems of cost and access in the health care system—rate increases are still widely variable, and deductibles in many of the individual-market plans are far too high. On the other hand, it is simply true that the percentage of uninsured Americans has dropped to an all-time low (11 percent in the first quarter of 2016, according to Gallup) and that tens of million enjoy coverage who would not otherwise have it. If the old saw about not making the perfect the enemy of the good is a wise principle of public policy, it’s also true that the good but imperfect should be a prod to making things better still.

This is the spirit of the essays that follow. They look at particular areas of policy and ask two straightforward questions: what has been accomplished in the years since Obama took office, and what needs to be done next? This collection does not pretend to be a comprehensive list of all the problems we face and the solutions to every one of them. Rather, in the spirit that has animated Democracy over its decade of existence, we have asked a group of thinkers to identify particular areas where public policy could make things better, and to propose reforms that would move our country in the right direction. We will continue our work in other areas in future issues.

The idea of holding large publicly traded companies both socially accountable and accountable to their shareholders is appealing well beyond progressive circles. But as Adam Zurofsky notes in his thoughtful piece on corporate governance, these two objectives are often in tension with each other.

The Obama Administration, he writes, has laid heavy stress on shareholder democracy, including popular initiatives such as “say on pay,” the view that “shareholders should, periodically, have the right to vote on compensation packages for senior executives,” and “proxy access,” which involves shareholders being able “to include board nominees of their own in company proxy materials.”

There are virtues to both, Zurofsky argues, but also practical barriers to their meaningful adoption. And he raises the important question of whether shareholder democracy achieves the larger goal of encouraging companies to invest in research and development, and in their employees. There is little incentive for companies to take into account the “social harm” their activities might cause. Zurofsky points to companies like Unilever, which has gone beyond short-term shareholder value standards and to two promising reforms that might encourage other companies down this path.

If Zurofsky’s contribution focuses on incentives for companies to embrace social responsibility and to undertake activities that could lead to more widely shared prosperity, the essays by Amy Dean and Caroline Fredrickson both point to how changes in the balance of power between workers and their employers could also push in these directions.

Dean deals with one of the essential causes of rising inequality: the declining rates of unionization, particularly in the private sector, and the barriers that have been erected against workers who want to organize. She credits the Obama Administration with a variety of administrative and regulatory steps that have benefitted workers and made union organization marginally easier. She also praises executive orders raising the minimum wage for those who work for federal contractors, expanding their access to paid sick leave, and offering new protections against sexual discrimination.

But much more needs to be done by statute, Dean argues, to strengthen union organizing rights, to clarify the obligations of employers who outsource work, and to make workers’ rights and interests central to new trade agreements. Dean’s essay is notable for dealing with the economy as it is structured now, not with the economy as it existed three decades ago. The era of permatemps and the rise in what might be called the “TaskRabbit” economy demand creative public policy and a realistic view of what bargaining looks like in a very different work environment.

Fredrickson offers parallel arguments to Dean’s. She points explicitly to the Affordable Care Act as a major achievement for workers during the Obama years; to the Lilly Ledbetter Fair Pay Restoration Act, which made it easier for women who lost wages because of discrimination to win them back in court; and to regulatory changes that restored overtime rights to millions of workers who had been misclassified (or, perhaps more accurately, opportunistically classified) as managers. She argues that the next president should pursue an aggressive agenda. It must include paid leave laws; expanded access to high-quality child care; a minimum wage increase; control over “on demand” scheduling by the retail and restaurant industries; and improvements in Social Security to assist Americans—they are disproportionately women—who were lower-paid workers throughout their lives.

Lenny Mendonca and Laura Tyson move the discussion to entrepreneurship and they point out how resiliently it bounced back from the Great Recession. Again, there is good news in the economy. The Kauffman Foundation’s Index of Startup Activity, they note, “rebounded strongly in 2015, registering its biggest increase in the past two decades.” There is also a boom in start-up accelerators, from 16 in 2008 to 172 in 2015. They also note that the Affordable Care Act “liberates entrepreneurs by decoupling insurance from employment.”

But if you wonder why, in the face of this news, the economy is still struggling in many places, Mendonca and Tyson offer a surprising answer: If venture capital funding is now near record highs, “the funding boom is not widely spread across America.” They offer this quite shocking piece of data: “at the moment, 78 percent of venture capital flows into just three states – California, Massachusetts and New York.” For the other 47 states, venture capital funding has actually declined over the past 20 years. The concentration is even more extreme than that: The San Francisco Bay Area alone, they note, accounts for 40 percent of all venture capital investment.

If the geography of venture capital is hardly diverse, the venture capitalists themselves aren’t either.

If the geography of venture capital is hardly diverse, the venture capitalists themselves aren’t either: 95 percent of the decision-makers, they note, are male, and only 3 percent of venture capital partners are people of color.

Mendonca and Tyson suggest that the Community Reinvestment Act—it requires banks that take deposits in low income communities to reinvest some of the money there—could be used not simply for affordable housing, as it generally is now, but also for start-up businesses and start-up accelerators. Philanthropic foundations could also help close the investment gap by devoting more of their endowments to neighborhoods and regions starved for capital. Government regulations, they argue, should be reviewed to eliminate “intentional or unintentional biases that favor incumbent industries and companies over new entrants.” Finally, they propose finding ways of providing portable pension benefits to workers in the contingent of “gig economy.”

Mehrsa Baradaran turns to one of the major accomplishments of the Obama years, the Dodd-Frank financial reforms. The law, she argues, favored incremental over structural changes in the financial system, the exception to this being the Consumer Financial Protection Bureau (a proposal by Elizabeth Warren first offered in these pages in 2007). Baradaran suggests a more fundamental approach that recognizes what our forebears from Hamilton to Jackson to Wilson realized: that banking policy is always about more than banking policy. It affects social policy, “the creation or elimination of inequality,” and democracy itself. We currently have a social contract, she argues, that sees the success or failure of the banks as implicated in the well-being of us all, but it is an imbalanced deal. “Wall Street’s gains are not Main Street’s gains,” she writes, “but Wall Street’s losses are Main Street’s losses.”

Baradaran advocates for a more muscular Dodd-Frank Act, one that brings shadow banking to heel and a paradigmatic shift in regulatory thinking that embraces the idea of government intervention even when bank profits may be significantly threatened.

And, finally, there is always the question of taxes. David Cay Johnston highlights what, from a progressive perspective at least, is an authetic achievement that has received shockingly little attention (except, perhaps from conservatives outraged by it): “the dramatic turnaround in tax policy that began when Barack Obama took office.” Taxes, quite simply, are significantly more progressive now than they were eight years ago—at both ends of the distribution.

On the one side, Johnston shows how, in response to the Great Recession, the administration pushed for policies that put more money into the hands of Americans with low and moderate incomes. He highlights the Making Work Pay tax credit that was fully available to the bottom 80 percent of American taxpayers—and, notably, even to the very poor who did not pay income taxes at all. Some of the Obama tax benefits were allowed to lapse, but a deal with Republicans at the end of 2015 made many of his progressive tax policies (the child tax credit, expansions of the earned income tax credit and a college tuition credit) permanent.

On the other side, Johnston outlines the ways in which Obama significantly raised taxes on the best-off with the restoration of the Clinton Era tax rate of 39.6 percent for families earning over $450,000 a year. Capital gains rates were also increased after many years of cuts. And this year, the president used his executive authority to discourage companies from dodging taxes by shifting profits offshore.

But taxes are always a moving target, and conservatives in Congress and the presidential campaign are pressing to reverse the gains in progressivity made over the last decade.

But taxes are always a moving target, and conservatives in Congress and the presidential campaign are pressing to reverse the gains in progressivity made over the last decade. All the Republican candidates, including the sometimes populist-sounding Donald Trump, are proposing large tax cuts on the wealthy. Both Hillary Clinton and Bernie Sanders, to different degrees, proposed tax increases on the better-off to finance new programs and control the deficit. The battle over progressivity will continue indefinitely.

Johnston has his own agenda that includes modernizing the tax code in ways that recognize how wealth is created and kept today and sharpening the definition of income that must be reported annually. And most of all, he argues forcefully that the next president must fully fund the Internal Revenue Service, which has been starved of resources by recent Congresses.

These essays demonstrate that those who would make the American economy both more just and more productive have practical ways of achieving their ends. They also show that it is possible simultaneously to celebrate successes while acknowledging that the job of creating a genuinely inclusive prosperity is far from complete.

Reformers might take a lesson from a Republican, New York Governor Nelson Rockefeller, whose 1970 campaign slogan jauntily declared: “He’s Done a Lot. He’ll Do More.” Progressives have achieved a great deal. They have much left to do.

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From the Symposium

Unfinished Business

The economy's made halting progress, but the recovery's leaving too many behind. A series of contributors take stock of where we've come in one part of the economy, and what's left to be done. E.J. Dionne Jr. introduces the symposiumDavid Cay Johnston on TaxesMehrsa Baradaran on Banks Caroline Fredrickson on Families Lenny Mendonca & Laura Tyson on Entrepreneurs Adam Zurofsky on Corporations Amy B. Dean on Workers

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Read more about economyEmploymentHealth CareInequalityObama AdministrationprogressivismTaxesUnions

E.J. Dionne Jr. is the chair of Democracy’s Editorial Committee, a Washington Post columnist, a Georgetown University professor, and a Senior Fellow at the Brookings Institution. His most recent book is Why the Right Went Wrong.

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