On Thursday, I had the honor of testifying for the Democratic Platform Committee. Here’s what I said policymakers need to consider as they think about economic policy-making:
“As I look at the economic evidence—which is what my organization, the Washington Center for Equitable Growth does every day—it’s clear, that the defining economic problem of our time is creating good jobs and boosting middle class incomes in an era of high and rising inequality.
Output remains below trend, firms continue to sit on profits rather than invest, and we are stalked by the scepter of debt. The long-term trend is that productivity rises but wages and family incomes do not keep pace.
Yet, costs keep rising. Over the past decade, public university tuition is up by 42 percent, childcare costs are up by 25 percent, and, while the Affordable Care Act has helped, health care costs still pinch families.
Even as profits soar, families struggle to find good jobs and afford a middle lifestyle, especially for families of color and those headed by a single parent, most often a mother. This is an issue of fairness and one of economic growth.
I will spend my time on the multifaceted economic problem of inequality and the key pieces of the evidence-backed solutions that should be our nation’s economic policy agenda.
First, address the income squeeze by supporting economic recovery and creating good jobs. Full employment—like we saw in the late 1990s—is the best way to reduce wage inequality, including and especially across racial and ethnic groups.
The private sector has added jobs for 75 straight months. But our work is not done. The employment rate remains 3.7 percentage points below its peak just before the onset of the financial crisis and 5.0 percentage points below its peak in 2000. We need to do more to invest in infrastructure and ensure that states maintain—and increase—their investments in education from pre-k up through college.
Economic policy should focus on growing clean energy jobs and not give up on the idea that the US is and continue to be a leader in manufacturing. All three candidates in the race now argue that we can do better than the Trans Pacific Partnership. Removing the systemic imbalance where corporations get rights that labor and the environment don’t have would be a good start.
Second, address the time squeeze. Families are coping with flat incomes even though most put in more hours at work than older generations and few have a full-time, stay-at-home caregiver. Families work, but they do so without adequate labor standards or social protections, like paid family leave, paid sick days, or sensible scheduling practices. This causes stress up and down the income ladder.
We can learn from the four states that have implemented universal paid family and medical leave and the nearly three dozen places that have implemented paid sick days and call for a federal paid family and medical leave program, alongside paid sick days. We now know that these policies improve health and economic outcomes for workers and their families, are good for the economy, and addresses inequality.
Families also need safe, affordable, and enriching options for care for children and the aged during the work-day. This starts with increasing the compensation and training of child care providers and early educators and helping families afford that care. These policies keep people employed and out of poverty, which means they keep families driving our consumption-based economy.
Let me be clear: To get at what ails our economy, we must focus on where the money goes. For too long, the rules governing our economy have allowed those at the top to siphon off the gains of growth for themselves, enfeebling our economy. So, third, ensure the financial sector serves the real economy
Over the past 25 years, finance’s share of all jobs has grown from 4 to 7 percent, while its share of all corporate profits rose from 10 percent to nearly a third. That’s unbalanced. Wall Street prioritizes short-term gains over long-term growth. At the same time, firms have pursued debt-financing over plowing profits back into R&D, investing too-little in America and our economic capacity.
Economic incentives must push in the right direction. Finance works when it puts savings into the hands of people who invest in building up economic capacity and new ideas. Dodd-Frank was an important first step and it must be fully implemented.
And, fourth, don’t be afraid to tax the top. We’ve experimented with trickle-down economics. We now know that low tax rates for those with the highest incomes did not create greater economic investment and growth. They only created incentives for ever-higher incomes and starved our federal government of needed funds for investments. The evidence supports an economic agenda that raises capital gains taxes, raises inheritance taxes, imposes a surcharge on millionaires, and imposes a financial transaction tax.
Without reining in the top, our economy will continue to suffer from a lack of investment and innovation, and the gains of all we’ve created will be squandered on cake for a chosen few. Without strong incomes, our nation’s middle class cannot drive consumption. We have to attend to both.
Let me remind you: The United States continues to be one of the richest nations the world has ever seen. We can take action to solve our economic problems—if we can come together to do so.”