The New PopulismA Movement and Agenda To Transform America’s Economy and Politics

By ROBERT L. BOROSAGEFOR

 

This paper was written for The New Populism Conference in Washington, D.C., May 22, 2014.

The Campaign for America’s Future is a center for ideas and action that works to build an enduring majority for progressive change. The Campaign advances a progressive economic agenda and a vision of the future that works for all, not simply the few. We are leading the fight for America’s kitchen-table priorities – good jobs, a sustainable economy and lifelong financial security.

The Populist Majority is a project of the Campaign for America’s Future that compiles the most recent public opinion research on economic and political issues, exposing the gulf between American opinion and conventional wisdom.

  PopulistMajorityPopulistMajority.orgFOR

OurFuture.org

1825 K Street NW • Suite 400 • Washington D.C. 20006 • 202.955.5665

The New Populism | 1

Moral Mondays demonstration in Raleigh, N.C. (Photo by Will Thomas via Flickr/Creative Commons)

e live in a populist moment. We are witnessing the first stirrings of an upheaval that will challenge business as usual from Washington to Wall Street. This moment is grounded in the reality that the economy no longer

works for working people. The American middle class continues to lose ground, even as the wealthiest few capture more and more of the economic gains. Extreme and growing inequality mocks the American promise of equal opportunity for all.

The Great Recession shattered the myths and the legitimacy of the conservative era. As President Obama declared, the growth of Gilded Age inequality while the majority of Americans struggle to keep their heads above water is the “defining challenge of our time.”1 Denial is no longer possible.

The current reality is no longer seen as inevitable, an act of God or nature. People understand that it is the result of deliberate policy choices. “The game is rigged,” Senator Elizabeth Warren concluded, “and the American people know that. They get it right down to their toes.”2

Bailed-out bankers can no longer pose as masters of the universe. Multinationals that stash trillions abroad can no longer pretend to be national assets. Congress, with millionaires constituting more than half of its members3, is increasingly seen as serving donors rather than constituents. As detailed at PopulistMajority.org, broad majorities of Americans support populist positions – on taxes, Social Security and Medicare, investments, Wall Street, multinationals, trade, money in politics – that are a far remove from elite opinion.

The first stirrings of a populist movement are apparent. Occupy Wall Street exposed the 1 percent and put inequality on the national agenda. Strikes and walkouts by low-wage

1 "Remarks by the President on Economic Mobility." The White House. December 4, 2013. Accessed May 16,

2 Borosage, Robert. "Corporate Tax Breaks: How Congress Rigs the Rules." Campaign for America's Future.

April 28, 2014. Retrieved May 15, 2014, http://ourfuture.org/20140428/corporate-tax-breaks-how-congress-rigs-the-rules 3 Cody, Carly. "Majority In Congress Are Millionaires." NPR. January 10, 2014. Accessed May 15, 2014.

http://www.npr.org/blogs/itsallpolitics/2014/01/10/261398205/majority-in-congress-are-millionaires.

W

2 | The New Populism

workers, from fast food restaurants to Wal-Mart, in over 150 cities4 dramatize the growing anger at lousy wages and benefits in the fastest growing sectors of the economy. With Washington gridlocked, cities and states from Seattle to Newark, Hawaii to Vermont have moved to hike the minimum wage,5 mandate paid family leave6 and crack down on wage theft.7 Voters from California8 to New Jersey9 support hiking taxes on the wealthy to invest in schools and infrastructure.

Progressive populist attitudes are now finding champions in Washington. Attractive emerging leaders in the Senate – such as Warren, Sherrod Brown, Jeff Merkley, Tammy Baldwin, Sheldon Whitehouse, Al Franken and Bernie Sanders – support bold challenges to the old order. In the House, members of the Congressional Progressive Caucus have put forth a comprehensive plan for rebuilding the nation, financed by progressive tax reforms. At the local level, progressive mayors – New York’s Bill de Blasio, Pittsburgh’s Bill Peduto, Minnesota’s Betsy Hodges, and more – are pushing populist reforms.10

The rising American electorate – the millennials, single women, and people of color who form the heart of the Obama majority – have been hit the hardest in this economy and are most supportive of change. The activist base of the Democratic Party – labor unions, community organizations, online activists – also supports a more populist agenda than that now under debate in Washington.

The new populist politics have only begun to find expression. As of yet, citizens see few vehicles for their anger. The president has been reluctant to use his “bully pulpit” to mobilize opinion. The two parties seem to be part of the problem. Unions are under siege and increasingly absent from the workplace. Not surprisingly, the public’s outrage takes different forms. On the right, well-funded Tea Party groups target big government and crony capitalism, while mining the old politics of racial division and distraction. Conservative governors focus anger at public unions and pensions. Big money invests in the establishment of both parties that still controls and constricts the debate. The off-year elections in 2014 are likely to feature low turnouts, as many put little hope in elections.

4 Greenhouse, Steven. "Fast Food Protests Spread Overseas." The New York Times. May 14, 2014. Accessed

May 16, 2014. http://www.nytimes.com/2014/05/15/business/fast-food-protests-spread-overseas.html?hp. 5 USA Today. "Minimum Wage Hikes Possible in Many States." USA Today. September 17, 2013. Accessed

May 16, 2014. http://www.usatoday.com/story/news/nation/2013/09/17/stateline-minimum-wage/2826727/. 6 Ludden, Jennifer. "Paid Leave Laws Catch On Across the Nation." NPR. January 28, 2014. Accessed May

16, 2014. http://www.npr.org/2014/01/28/267488576/more-states-offer-paid-leave. 7 "Can My Boss Do That?" Wage Theft. Accessed May 16, 2014. http://wagetheft.org/wordpress/.

8 Luhby, Tami. "Californians Approve Massive Tax Hike on the Wealthy." CNN Money. November 7, 2012.

Accessed May 16, 2014. http://money.cnn.com/2012/11/07/news/economy/california-tax-wealthy/ 9 George, Andrew. "Poll: N.J. Voters against Further Taxes on Middle Class but Support 'Millionaires Tax'".

NJBIZ. March 17, 2014. Accessed May 16, 2014. http://www.njbiz.com/article/20140317/NJBIZ01/140319816/Poll:-NJ-voters-against-further-taxes-on-middle-class-but-support-%27millionaires-tax 10

Meyerson, Harold. "The Revolt of the Cities." The American Prospect. May 2014. Accessed May 16, 2014. http://prospect.org/article/revolt-cities

The New Populism | 3

But these stirrings will continue to build. In 2016, presidential contenders in both parties will have to address this reality and make the case that they represent real change. Meanwhile, the most direct expression of public frustration is likely to be found in growing upheaval – strikes, protests, and disruptions. And as the economic and political systems fail to deliver, more and more Americans will start to demand answers about why the deck has been stacked against them.

An Economy For the Few, Not the Many

In the fifth year after the Great Recession, Americans are struggling in an economy that does not work for working people. Families are losing ground as incomes stagnate and the prices of necessities – health, housing, education and retirement security – keep rising. The top 1 percent has captured a staggering 95 percent of the income gains in the faltering recovery. The top 1 percent now possesses as much wealth as the bottom 90 percent. Twenty million people remain in need of full-time work. The jobs being created are worse than the jobs that were lost. Students are graduating with record debt burdens as they enter the worst jobs market since the Great Depression. One in four children are born into poverty. The American dream is becoming a fantasy, if not a nightmare.

This is not a cyclical or transitory reality. Inequality accompanied by income stagnation for the majority has been building since the 1980s.

Thomas Piketty, in his magisterial work Capital in the Twenty-first Century, argues that extreme inequality is the natural order of capitalism, suggesting that the broad middle class that emerged in the middle of the 20th century was an anomaly, a product of the Great Depression and the World War that devastated wealth, opening space for more equitable growth.

But the middle class that was built after World War II was constructed by public policy. The New Deal put curbs on banks that allowed 40 years without a financial crisis. Mobilization for war, much more than the New Deal, created full employment. President Franklin D. Roosevelt required defense contractors to recognize unions, dramatically increasing union membership and power. Progressive income taxes – with top rates over 90 percent and limits on executive compensation – reduced inequality dramatically.

After the war, shared sacrifice made shared prosperity a social norm. The GI Bill educated a generation, and helped spur the home ownership boom that built the suburbs. Government financed the conversion of wartime factories, aiding U.S. dominance in the emerging industries, from airplanes to autos. Continued high income tax rates and broad union membership insured that the rewards of growth were widely shared, while providing funds for building the new infrastructure – interstate highways, airports and water systems – vital to growth. For 30 years, America grew together, with wages rising with productivity. With that growth came the confidence to respond to the civil rights movement and end legal segregation, and to mobilize to lift Americans from poverty, seeking to extend opportunity to all.

4 | The New Populism

The Stacked Deck

What went wrong? The growing inequality was not an act of God. It wasn’t like the weather, something we simply have to live with. It wasn’t an inevitable product of technological advance or globalization, as the president suggests. One of the greatest periods of technological advance came after World War II when the broad middle class was built. Other industrial nations have navigated global markets without running up unprecedented trade deficits or shipping the best manufacturing jobs abroad.

The growing inequality was as much the result of policy as the post-war shared prosperity had been. Corporations launched a fierce attack on unions and regulation. Wall Street lobbied to dismantle the New Deal restraints. Inflation – significantly the product of failed wars and energy politics – was the excuse to abandon full employment policies. Multinational banks and corporations defined our globalization and trade strategy, leading to unprecedented deficits, as companies shipped good jobs abroad and used the threat of offshoring to squelch wage demands at home. Conservatives railed against big government, and lowered taxes on the wealthy, even while hiking payroll taxes on workers. Government was painted as the problem; markets as the solution.

As private wealth exploded, vital public services were starved or corrupted.

Private insurance and drug companies dominate a health care system that costs twice as much per capita as other industrial nations, with worse results. Our decrepit and outmoded infrastructure poses an increasing threat to the lives and safety of Americans, and an increasing obstacle on our ability to compete. Catastrophic climate change wreaks more and more damage, with no coherent national drive to forestall much worse. Our schools fail to provide children with the basics – from quality pre-school, to smaller classes in the early years, to robust after-school programs, respected and skilled teachers and affordable college. Investment in research and development, which has helped the U.S. invent and capture new markets, is being cut back even as global competition grows.

This wasn’t a failure of policy. It was a power grab. We weren’t broke; we were robbed. They rigged the rules to benefit the few and they succeeded. As Sen. Elizabeth Warren argues, “People feel like the system is rigged against them. And here's the painful part: they're right. The system is rigged. Look around. Oil companies guzzle down billions in subsidies. Billionaires pay lower tax rates than their secretaries. Wall Street CEOs – the same ones who wrecked our economy and destroyed millions of jobs – still strut around Congress, no shame, demanding favors, and acting like we should thank them.”

The Emerging Populist Agenda

Conservatives claim that there are no alternatives to today’s failing economic system. Companies treat their subsides and their tax breaks as an inherent right. But there are clear policies that could rebuild a broad middle class and provide the basis for shared prosperity. The emerging populist agenda is focused on the rules that define markets. It challenges directly entrenched and powerful interests. It assumes that growth is

The New Populism | 5

necessary, but not sufficient to generate opportunity and shared prosperity. It aims to make government an instrument of the many and not a captive of the few.

An Economy for Workers, Not Bankers

As we witnessed at the end of the 1990s, full employment is vital to more widely shared prosperity. When jobs are plentiful and workers are in demand, they can demand higher wages and better benefits. The Federal Reserve has a mandate to manage money to reduce unemployment as low as possible without generating destabilizing inflation. But as a creature of the banks, the Fed has largely served the interests of bankers rather than workers. For years, exaggerated fears of inflation led it to limit growth when wages began to rise. And in the run-up to the collapse, when Wall Street’s wilding inflated the housing bubble, it failed abjectly as a regulator of the banking system.

When the Fed did act boldly in the wake of the Great Recession, Washington failed. With an economy desperately needing public demand, the White House and the Congress embraced a premature turn to austerity. The result was the weakest recovery since the Great Depression, with mass unemployment continuing for what may well become a lost decade. Populists demand that the measure of the economy is a job for everyone able and willing to work. If the private sector fails to provide that, the government should take action to get Americans working and spending. Unemployment is a human calamity. Mass unemployment is a national disgrace.

Make Work Pay

The reforms that currently have the greatest momentum are those that directly address “lifting the floor” under workers. Raise the minimum wage so that a full-time worker can lift his or her family from poverty, and then index that to inflation so that it rises with prices. Mandate pay equity, paid family leave, and paid vacation – bringing America closer to other industrial nations – providing sensible minimum standards for workers. Crack down on wage theft. Democrats have moved to champion this agenda at the national level, even as it gains traction in cities and states across the country.

It is not a coincidence that the middle class grew when unions were at their peak, and declined as they came under withering attack. All Americans will benefit when we empower workers once more to bargain collectively to gain a fair share of the profits and productivity that they help to produce. Putting teeth into enforcing current labor laws would help. Reviving the wartime requirement that government contractors recognize their unions would provide an impetus. Populists should be as aggressive in defense of collective bargaining as employers and their allies are in assaulting it.

Empowering workers would also help crack down on perverse executive compensation policies. CEOs and the four other top executives in large corporations now pocket more than 10 percent of corporate earnings.11 Current packages give executives multimillion- 11

Bebchuk, Lucian, and Yaniv Grinstein. "The growth of executive pay." Oxford review of economic policy 21, no. 2 (2005): 283-303.

6 | The New Populism

dollar personal incentives to loot their own companies, using profits for stock buybacks to hike stock prices, shipping jobs abroad, taking on debt, merging or breaking up companies for short-term rewards. A sensible first start would be to require consumer and worker representatives on the board of directors and the compensation committees. A second would be to require companies with high disparities in pay between the CEO and the average worker to pay a higher rate of taxes, giving shareholder and corporate boards an incentive to curb current excesses. A bill to this effect has recently been introduced in the California Senate.12

Rebuild America

The accumulation of extreme private wealth has been accompanied by the spread of public squalor. The U.S. is starving public investments vital to our future. To be a competitive high-wage country in a global economy requires a modern, sustainable, and competitive infrastructure. The most recent estimate of the American Society of Civil Engineers is that it will cost $3.6 trillion simply to repair current infrastructure.13 That does not include the cost of modernization, such as fast trains, a smart grid, a competitive high-speed Internet. Nor does it include the costs of responding to the damage caused by catastrophic climate change, which is inescapable – unless we act now replace our carbon-based energy and power systems with renewable technologies. Rebuilding America would not only make our economy more efficient and more resilient in the face of change, it can create the green industries and jobs that will provide sustainable prosperity in the 21st century.

Second, all agree education is essential both to our democracy and our economy. Every child should be guaranteed the opportunity to learn with access to a high-quality public education. Yet we are not providing even the basics in public education. Instead, a new breed of corporate conservative “reformers” have imposed so much privatization, compulsory testing and budget austerity on our school systems that a parent-teacher-student rebellion is building, demanding real reforms. That would include new investments in universal pre-kindergarten programs, smaller classes in early grades, better rewards and preparation for teachers, modernizing schools and equipment, and comprehensive afterschool programs. A similar rebellion is brewing among millennial-generation. post-high school youth, who are buried in massive education debt. Their demand: debt relief, plus affordable college and advanced training in every state in the U.S.

Third, to compete on the high end of a global economy, the U.S. should lead the world in research, development and innovation. We should be expanding rather than cutting basic research budgets, and driving innovation in areas of promise. 12

Young, Allen. "Bill proposes higher taxes on CEOs with high wage disparity." Sacramento Business Journal. April 24, 2014. Accessed May 16, 2014. http://www.bizjournals.com/sacramento/news/2014/04/24/calif-wage-disparity-ceo-workers-bill-taxes.html?page=all 13

American Society of Civil Engineers. "2013 Report Card for America's Infrastructure." 2013 Report Card for Americas Infrastructure. Accessed May 16, 2014. http://www.infrastructurereportcard.org/.

The New Populism | 7

Shared Security

Among the industrial countries, the U.S. is a laggard in providing shared security to its citizens. Health care reform will provide health insurance to millions of Americans, but our system, dominated by private insurance and drug companies, remains twice as expensive as that of other industrial nations while providing worse results. A higher percentage of American mothers die in childbirth. Europeans live longer than Americans. Reform can begin by eliminating outrages, like the ban on government from negotiating bulk discounts on drugs. As the limits of the current wave of health care reform become clear, populists will demand extending Medicare to all, insuring access to affordable, high quality care.

Americans also face a looming retirement crisis, as companies abandon pensions and retirement savings plans fall short. Increasingly, Social Security, designed as a modest floor for retirees, is becoming the primary source of retirement income. Americans have rejected elite calls to raise the retirement age or cut back Social Security benefits. Now populists are joining to champion lifting the lid on Social Security taxes to expand benefits and provide a greater measure of guaranteed security for workers in the dusk of life.

Fair Taxes

We aren’t broke. Progressive tax reform can provide resources for investments we need, while helping to reduce inequality. Today, tax rates on the rich are among the lowest in the developed world.

Rep. Jan Schakowsky has called for progressive tax rates for wealthy Americans, rising to a top rate of 49% similar to the rate under Ronald Reagan in the early 1980s, that is still far lower than it was during the post war era when the economy enjoyed its fastest growth and the broad middle class was built.

We should tax income from wealth at the same rates at income from work, and raise rates on top-end incomes. An expanded estate tax, with higher rates on multimillion-dollar estates, would reduce the threat of an entrenched and growing plutocratic class. Ending deferral of taxes on corporate profits stashed overseas would insure that multinationals pay the same tax rates as domestic companies. Cracking down on tax evasion as well as tax havens would collect hundreds of billions in revenues now lost.

Other taxes are needed for the public good. A financial transaction tax, similar to that now moving forward in the European Union, would help curb speculative trading practices and raise billions of dollars. A tax on carbon would create incentives for the transition to clean energy, with proceeds rebated to working and poor families to avoid adding to their expenses.

8 | The New Populism

Fair and Balanced Trade

Current corporate trade policies have racked up over $7 trillion in trade deficits from 2000 to 2012. Our trade deficits with China, unprecedented in the annals of time, cost an estimated 2.9 million jobs.14 A growing populist outrage has helped build opposition to fast-track trade authority, and raised alarms about the current closed-door negotiations of the Trans-Pacific and Trans-Atlantic trade accords.

We want more but balanced trade. The next president should announce that the U.S. will balance our trade over the next decade, putting companies on notice that if they want to sell in America, they had better build in America. We should then crack down on the countries like China that manipulate their currencies, and abandon the bloated dollar policy so our exports are not priced out of the market. Let’s reward companies that manufacture here at home, and end the subsidies and tax dodges that rewards companies that ship jobs abroad.

Lead the Green Industrial Revolution

Catastrophic climate change is a clear and present danger. But the green energy solution to that threat will drive the next industrial revolution – with inventions in renewable energy, energy efficiency, sustainable agriculture that inevitably will sweep the world.

We should adopt a comprehensive strategy to capture the lead in these growing markets – expanding R&D, requiring growing percentage of energy to come from renewable sources, raising efficiency standards, making our infrastructure more resilient, providing tax incentives for clean energy and more. This will generate jobs, global markets, and a safer world. And we surely should end the subsidies to big oil companies, the most profitable companies in world history.

Curb Wall Street

The big banks that blew up the economy emerged from the bailout bigger and more concentrated than before. Working people are the first casualties of Wall Street’s boom-and-bust speculation.

We should require big banks to raise far higher capital reserves. House Ways and Means Chair Dave Camp (R-Mich.) has proposed taxing the 10 biggest banks and financial institutions, recouping at least part of the subsidy they pocket from being too big to fail. Senators Elizabeth Warren and John McCain have called for restoring Glass-Steagall restrictions, insuring that banks do not speculate with government-guaranteed deposits.

14

Mathews, Rick. "U.S. Trade Deficit: How Our Negative Balance of Trade Is Harming the Recovery." PolicyMic. September 25, 2012. Accessed May 16, 2014. http://www.policymic.com/articles/15337/us-trade-deficit-how-our-negative-balance-of-trade-is-harming-the-recovery.

The New Populism | 9

And Sen. Sherrod Brown has proposed legislation that would end “too big to fail” financial institutions.15

It is simply an outrage that no leading banker has faced either criminal or civil liability for the pandemic of fraud and other crimes that their banks have been charged with. Bank fraud cannot simply be a cost of doing business.

Get Big Money Out of Politics

Wall Street is the largest financial contributor to both parties. Freshmen legislators flock to the House Finance Committee because, as one said, “the banks pay big.” Corporate lobbies deploy literally millions of dollars and thousands of lobbyists to make their case. At the height of financial reform after the crash, Wall Street arrayed some 3,000 lobbyists and spent an estimated $1 billion to influence the legislation.16 And unlimited funds now flow to support ersatz think tanks that churn out industry arguments, shadowy non-profits that fund issue campaigns and attack ads, mega-PACS that savage any politician who dares challenge the status quo.

Any reform movement must overcome big money – and must curb the role of big money in politics. We need elections financed by public matches to small donations, with strict limits on what can be contributed. Secret money in elections should be outlawed. We have to overturn Supreme Court decisions that corporations are people, that money is speech, and that no limits can be put on billionaires looking to buy elections.

The revolving door between Washington and Wall Street should be closed, with legislators and high executive and regulatory officials prohibited from becoming lobbyists or lawyers of the regulated on leaving office. Public service should not be a prelude to cashing in.

It Takes A Movement

These reforms would put people to work, raise wages, expand opportunity, strengthen family security, curb financial crises, drive innovation and expand democracy. They are a beginning towards rebuilding an economy that works for working people.

Virtually all of these reforms have broad majority support. Most have strong champions in the House and Senate. None has been able to move forward in a Washington corrupted by money and corroded by partisan division.

15

Doughtery, Carter and Cheyenne Hopkins. "Warren Joins McCain to Push New Glass-Steagall Law for Banks." Bloomberg. June 12, 2013. Accessed May 16, 2014. http://www.bloomberg.com/news/2013-07-11/warren-joins-mccain-to-push-new-glass-steagall-bill-for-banks.html 16

Rivlin, Gary. "How Wall Street Defanged Dodd-Frank." The Nation. April 30, 2013. Accessed May 16, 2014. http://www.thenation.com/article/174113/how-wall-street-defanged-dodd-frank.

10 | The New Populism

For progress to be made, the demand must come from outside the Beltway, from the people up, not Washington down. This will take a movement. And that new populist movement is already being built.

Modern-day muckrakers are revealing just how the game is fixed and who is on take. Popular mobilizations – online and in communities – are rising up to challenge the powers that be, in the streets and in the boardrooms. Workers all over America are standing up for decent pay and benefits on the job. Citizens of conscience are raising a moral voice at injustices that need not be. The impoverished, the young, and the locked out are starting to demand jobs and justice. We need new leaders to join the sturdy band willing to take on special interests and big money.

This won’t get built in a day, or in one election, or in one administration. But this is America’s hope. America’s founders were deeply suspicious of the dangers of entrenched privilege. The question always was whether the people could use the instruments of democracy to counter the influence of the plutocrats. In an 1825 letter, Thomas Jefferson warned against those who would create “a single and splendid government of an Aristocracy, founded on banking institutions and moneyed incorporations under the guise and cloak of their favored branches of manufactures commerce and navigation, riding and ruling over the plundered ploughman and beggared yeomanry."

Nearly a century later, Supreme Court Justice Louis Brandeis, a leading progressive in the Gilded Age, warned that “we may have democracy or we may have wealth concentrated in the hands of a few, but we cannot have both.”

Over the next years, Americans will choose. The debate will be a donnybrook. The wealthy will fight fiercely to defend their privileges. The big corporations will resist efforts to limit their subsidies or curb their predatory deals. The defenders of the stacked deck will mobilize big money, and armies of paid advocates, networks of false fronts and ersatz people’s movements. Only a broad popular movement can help Americans sort out who is on their side and who is not. Only popular upheaval and protests will be able to shake the forces against change. The outcome is not defined, but the debate has already begun.