Policy Shop

Policy as if people mattered

Why Does the Center for American Progress' Budget Plan Embrace the Bush Tax Cuts?

(Center for American Progress)
The Center for American Progress (CAP) is out with a budget plan that would reduce deficits by $4.1 trillion over the next decade and, at first glance, seems to makes a good deal of sense. Two former Treasury secretaries—Larry Summers and Robert Rubin—are listed as co-authors of the plan, along with Roger Altman, William Daley, John Podesta, Leslie Samuels, Neera Tanden, Antonio Weiss, Michael Ettlinger, Seth Hanlon, and Michael Linden. An impressive brain trust by any measure. The plan would raise about $1.8 trillion in revenue over the next decade, which is about $200 billion more than what President Obama is asking for. It would do this by raising the top tax bracket back to 39.6 percent, where it was under Clinton, and also raising the top rate for capital gains to 28 percent—nearly double what it is today—as well as treating dividends as ordinary income. CAP's plan would also simplify today's labyrinth of tax deductions and exemptions, and limit the value of some deductions for...

Wall Street's Creative Extraction

The financial sector provides a crucial function to society. It accommodates the movement of funds from investors to businesses, governments and individuals who use the capital for productive purposes. If the financial sector does this efficiently, the cost to the users of capital will be close to the price demanded by investors. The financial sector will have extracted amounts for providing the “capital intermediation pipeline” that are commensurate with the service provided. If asked, most people would say that the cost of capital intermediation must have gone down in recent decades. After all, advances in technology and quantitative analysis must have made the process less expensive. But they have not. Capital intermediation is now more costly than it was in the days of James Pierpont Morgan. My new research points out that capital intermediation costs have been rising since 1980, coincident with the beginning of three and a half decades of deregulation. At the same time, the...

One Share, One Vote

(Flickr/Simon Greig)
In response to my short primer on the corporation , Professor Colleen Dunlavy of the University of Wisconsin-Madison sent her interesting article, From Citizens to Plutocrats: Nineteenth-century Shareholder Voting Rights and Theories of the Corporation . Given the explosion in income inequality between America’s managerial class and its average employees , the article a useful corrective to the idea that such outcomes are a natural product of market forces. The historical account she provides goes a long way in contesting the “tendency to treat plutocratic governance as natural,” and it reveals how exceptional the United States has been in authorizing such uniquely in-egalitarian distributions of power within the corporation. In the article, Dunlavy describes how the corporation was transformed, over the course of several decades, from a relatively democratic institution built on a principle of “one shareholder, one vote” into the more plutocratic “one share, one vote” institution we...

ALEC’s Worthless Recommendations for Prosperity in the States

(Good Jobs First & The Iowa Policy Project)
For most of its history ALEC has operated in the background, but its influence recently drew the spotlight when its promotion of “Stand Your Ground” laws came to light in the wake of the killing of Trayvon Martin in Florida. Faced with the potential of consumer boycotts, corporate sponsors such as McDonald’s and Pepsi withdrew their support . Henceforth, the organization announced, it would concentrate on state economic policy. State legislators who might look to the organization for leadership on economic policies should be wary of following ALEC’s lead in this arena. A startlingly candid report, “ Selling Snake Oil to the States ,” just released by the Iowa Policy Project and the Washington-based Good Jobs First, shows that ALEC’s recommendations for producing economic growth in the states are essentially worthless. This is a strong claim, but the researchers support their conclusion neatly by putting under the microscope the implicit predictions in the 2007 edition of Rich States,...

Win, Win, Win: The Case for a Carbon Tax

(Flickr/sidknee23)
As deficit talks continue to make little progress, we should revisit how a carbon tax would not only help raise badly needed revenue but could also be essential to fighting the climate crisis. A recent Congressional Research Service report found that a tax of $20 per metric ton of carbon dioxide would generate enough revenue to cut the 10-year budget deficit in half. This price is actually less than the carbon tax in British Columbia , which rose to $30 per metric ton of carbon dioxide in July 2012. Not only has BC’s carbon tax resulted in substantial decline of greenhouse gases, it has not negatively impacted economic growth—the province has slightly higher GDP growth than the rest of the country. As I wrote yesterday, a carbon tax is a better approach to emissions reductions than an emissions trading scheme. With emissions trading, carbon credits are often priced too low and/or too many credits are given away. As a result, the market-based emissions trading has not been as...

Fast Food Shouldn't Mean Low Wages

(Flickr/GenBug)
From Burger King to Walmart , the low-wage workers we depend on to staff America’s consumption-driven economy are tired of being overworked and underpaid, and they are letting their bosses know. Early this morning, fast-food workers in New York City went on strike across more than half a dozen chains, including McDonald’s, Burger King, Domino’s, KFC, Taco Bell, Wendy’s and Papa John’s. Backed by community groups like New York Communities for Change , United NY , and the Black Institute , as well as various representatives of religious organizations, fast food workers are asking for a chance to work with dignity in an industry notorious for its fast pace, low wages , and often erratic scheduling. Also notorious for high turnover , fast food workers have historically had a difficult time organizing for better conditions. As reported by Steve Greenhouse at The New York Times : Leaders of the effort said that workers were walking off the job to protest what they said were low wages and...

Limits of a Libertarian First Amendment

I had a few thoughts I wanted to share in response to Glenn Greenwald’s thoughtful reply to Mike Konczal and Jeremey Kessler’s Bloggingheads discussion re Citizens United . 1) I certainly agree that there’s something distinguishable between right-wing libertarianism and the First Amendment views of Mr. Greenwald, the ACLU, and Eliot Spitzer. The support for public financing is an extremely important difference, and I would be very curious to know what types of public matching or leveling, if any, Mr. Greenwald believes would be consistent with the First Amendment. The word “libertarianism” is not entirely out of place though. There was a pretty clear turn toward civil libertarianism in First Amendment doctrine in the 1920s and 30s, led by one of the most liberal justices to ever sit on the Court, Louis Brandeis. And it’s a view that won over many on the Roosevelt Court and Warren Court as they made First Amendment into the highly speech-protective doctrine we currently recognize. In...

Subprime Students: How Wall Street Profits from the College Loan Mess

(rollingjubilee.org)
Five years after Wall Street crashed the economy by irresponsibly securitizing and peddling mortgage debt, the financial industry is coming under growing scrutiny for its shady involvement in student loan debt. For a host of reasons, including a major decline in public dollars for higher education, going to college today means borrowing—and all that borrowing has resulted in a growing and heavy hand for Wall Street in the lending, packaging, buying, servicing, and collection of student loans. Now, with $1 trillion of student loans currently outstanding, it’s becoming increasingly clear that many of the same problems found in the subprime mortgage market—rapacious and predatory lending practices, sloppy and inefficient customer service and aggressive debt collection practices—are also cropping up in the student loan industrial complex. This similarity is especially striking in the market for private student loans—which currently make up $150 billion of the $1 trillion of existing...

Your Retirement For A Thousand Fees

One of the many parts of the financial sector that the crisis exposed as desperately in need of reform was the 401(k) industry. In 2008 alone, the securities industry lost over $2 trillion in workers’ hard-earned 401(k) and IRA savings. This loss was problematic enough for the millions of American families who watched their balances plunge in horror, but the number that really drives home the need for reform is the more than $120 billion that the industry took home in compensation and commissions the same year it lost $2 trillion in savers’ wealth. Clearly, there must be something wrong with the rules and incentives for the securities industry if it's able to pay itself so much while performing so poorly. There are, however, several relatively simple rules that could be implemented to insure that the industry responsible for millions of Americans’ retirement works to help them retire comfortably—as opposed to simply lining its own pockets at their expense. One rule would be to require...

Finishing the Job: Next Steps on Financial Reform

(Flickr/Medill DC)
Now that we know that the president will not be someone who pledged openly to repeal Dodd-Frank, it's time to look forward to the agenda for the next four years. One thing is certain: The job of reforming Wall Street is far from finished. The most profitable investments for the big banks continue to be Washington lobbyists chipping away at reform and litigators challenging every major rule in court . I see three topics on the agenda: Unfinished Business; Defending Won Territory; and New Initiatives. A few of the major agenda items for each are described below. Unfinished Business The single most important holdover from the Dodd-Frank implementation process is completion of the Volcker Rule regulations . Unlike other financial reform that curbs activities, the Volcker Rule prohibits federally insured banks from engaging in specific business lines: proprietary trading and investment in hedge funds and private-equity funds. It should have been completed in July, but the war of words and...

A Mandate for a Conservative Victory on Taxes?

The tax cuts enacted by Congress under George W. Bush in 2001 and 2003 stand as the greatest achievement ever for small government conservatives. While a good chunk of Reagan's historic tax cuts had been cancelled out before he even left office, Bush's tax cuts have lived on and on, draining trillions from the U.S. Treasury. These cuts have not, as hoped, triggered deep cuts in government spending and "starved the beast." Instead, they have simply fed the debt. Now, though, the stage may finally be set for the Bush tax cuts to start achieving their goal of downsizing government—all with the acquiescence of a Democratic president and Congress. That's because, bizarrely, the mainstream Democratic position is that the bulk of the Bush tax cuts should stand and, instead of repealing those cuts in their entirety, the U.S. should only end tax breaks for the rich and then make up the rest of the lost revenue by enacting deep cuts in government spending. As I wrote yesterday in a Reuters:...

Just How Bad Was Citizens United For Business?

(Flickr/billy_pilgrim)
Tuesday’s race was the first presidential election to take place since Citizens United , and campaign spending this cycle exceeded $6 billion . With fundraising split roughly evenly between the two major parties, it was inevitable that some donors wouldn’t be able to buy the electoral outcomes they were hoping for. Tuesday’s election did offer a number of encouraging signs that coalitions of grassroots activists, volunteers, and voters can, in fact, stand up to SuperPACs, 501(c)4 groups, and other powerful aggregations of wealth that have been empowered as a result of America’s deregulated campaign finance system. Despite these positive developments, it would be a mistake to think that the fight against money in politics is over. As my colleague Heather McGhee wrote yesterday, millionaire political donors still ended the night with far more political access and influence than the vast majority of American voters. Inequality in political spending continues to undermine the principle of...

Workers Won! An Election Fly-Around

(Flickr/uusc4all)
There’s no question that Tuesday’s elections brought some significant wins for working people. I’m not talking about the candidates—although national political reporters are busy acknowledging Obama’s reelection as a clear sign that “ labor ain’t dead ” and pondering the policy implications of victories for pro-worker politicians like Ohio Senator Sherrod Brown—but rather thinking about the ballot initiatives, where in several votes across the country voters spoke out clearly in favor of raising workplace standards and preserving rights on the job. We can speculate about exactly what candidates will do once in office, but it seems certain that many working people will benefit from higher wages, improved benefits, and a right to a voice at work as a direct result of the following ballot measures: In Albuquerque, New Mexico, 40,000 low-wage workers in will get a pay boost as voters in the city overwhelmingly cast their ballots in favor of an increase in the municipal minimum wage. In...

It's Wrong to Think Big Money Lost Last Night

With the election over, pundits and other race watchers are attempting to write the final word on the most expensive, secret, and billionaire-friendly election in history. Many are starting to take the position that in the end, the $6 billion in spending didn’t matter much because swing states voters got so saturated with ads that they tuned out. If the balance of power doesn’t change, some are even saying, that tsunami of spending will have been for naught. These folks are missing the point. In the game of high-dollar financing of political campaigns, it’s not about the spending—it’s about the giving. No matter how a campaign spends the check written by a millionaire donor, that millionaire donor has purchased exactly what he or she wanted: influence. Today, November 7th, the real game begins—when those who purchased a full term of access to their favored candidate begin to exercise an undemocratic advantage over the millions of Americans who merely voted, to shape the laws and...

Segregation Forever?

(Flickr/agentvladimir)
Nikole Hannah-Jones has written an important article for ProPublica about how the Fair Housing Act has failed to reduce racial segregation in America's housing market since its passage in 1968—or more accurately, how the FHA has been failed by a bipartisan political consensus against activist integration polic y from the federal level. Nikole's piece focuses on the betrayal of the spirit of the law at federal level, but it's also worth remembering what kinds of policies and behaviors the federal law was trying to combat at the local and state level. Then as now, the primary tool of segregationists is land use policy. Back in the heyday of de jure segregation, people used to pass cartoonishly racist zoning laws. Stuff like: Cities and towns began adopting zoning codes that designated neighborhoods as all-white and all-black. When the U.S. Supreme Court struck down those laws as unconstitutional, real estate agents wrote "codes of ethics" that included bans on selling homes to African...

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