Published on Mar 25, 2018
Reproduced from: https://www.huffingtonpost.com/entry/stephanie-kelton-economy-washington_us_5afee5eae4b0463cdba15121
Table of Contents
Stephanie Kelton Has The Biggest Idea In Washington
Once an outsider, her radical economic thinking won over Wall Street. Now she’s changing the Democratic Party.
For most of her career, Stephanie Kelton was accustomed to being ridiculed. It started in grad school.
At Cambridge University in the late 1990s, she signed up for an economics course taught by Willem Buiter, who later became the chief economist at Citigroup. When she asked a question about money in a particular model, he turned, red-faced with fury, and unloaded on her. “If you are the type of person who thinks money is important,” she recalls him saying, “then you are probably the same type of person who enjoys sitting in your basement and beating yourself with a rubber hose.”
The words obviously left an impression. Kelton ― who is now 48 and has been teaching economics herself for more than 16 years ― repeats them, twice, to make sure they’re transcribed correctly. Buiter didn’t respond to a request for comment.
She’s been receiving (slightly) more polite versions of the same dressing down ever since. Conservatives have accused her of worshipping a “magic money tree,” and Paul Krugman dismissed her ideas in a 2011 New York Times column as a naive blueprint for hyperinflation that carried “a sort of eerie resemblance to John Galt’s speech in Atlas Shrugged” ― a ruthless insult among her left-leaning friends.
Kelton’s core idea ― that the government can’t run out of money or go bankrupt, no matter how much it spends ― hasn’t really changed since the days when Buiter and Krugman were trashing her thinking. But it seems the world has. Today she is a full-fledged member of the American power elite, juggling television bookings with MSNBC’s Chris Hayes and Bloomberg TV’s Joe Wiesenthal, writing op-eds for The New York Times and being quoted in The Wall Street Journal.
Pod Save America and Financial Times want her on their podcasts. She’s got a book deal with Public Affairs, and Bloomberg View has signed her up as its newest columnist ― but she isn’t sure that gig is worth the time, given her packed speaking schedule. In May alone, she’s being flown to Las Vegas to debate a former International Monetary Fund chief economist before heading to Monaco to moderate a panel on artificial intelligence. After that, the House of Lords in London.
Everybody wants a piece of Kelton these days because a simple, radical idea she has been workshopping her entire career is the next big thing in Democratic Party politics. She calls it the job guarantee ― a federal program offering a decent job to every American who wants to work, in every county in the country, at any phase of the business cycle.
It’s a practical expression of her monetary thinking. To her, governments aren’t directly constrained by how much programs cost. The serious concern is inflation, and a job guarantee would revolutionize the way the United States manages the value of the dollar, forcing the Federal Reserve to stop creating unemployment when it wants to keep prices down.
Politicians like the job guarantee for a simpler reason: Everybody gets a decent job. The idea is getting traction in the Senate. Bernie Sanders’ office is writing a bill that would create such a program, with help from Elizabeth Warren’s office and support from Kirsten Gillibrand. Even supercentrist Cory Booker has signed off on a pilot version. The Center for American Progress, a leading Democratic think tank, is subtly trying to take credit for the concept (while watering it down).
The sudden respect for Kelton’s big idea isn’t the result of a public clamor for cutting-edge economic theory or an impromptu burst of self-reflection among Washington policymakers. It is instead a story about power and political legitimacy, about the way public officials use economists to block or advance social change and about how economists build credibility by circulating through the cocktail parties, expense-account dinners and conference rooms of high finance.
A onetime college dropout at California State University in Sacramento, Kelton has managed to earn the esteem of both Sanders and an oddball clique of multimillionaire Wall Street traders. Even in hindsight, her journey through this heady milieu seems improbable, almost impossible.
Money doesn’t grow on rich people. Stephanie Kelton
Five years ago, Kelton had a teaching position at the University of Missouri at Kansas City that was partly financed by Warren Mosler, a Wall Street veteran who lives in the Virgin Islands to keep his tax bill down. His politics were flexible. He calls himself a progressive today, but he started pitching his economic ideas to Donald Rumsfeld in the steam room of a racquetball club in the early 1990s.
Mosler’s true passion is for proving smart people wrong, and his work at Bankers Trust in the 1970s instilled in him some unorthodox ideas about money. When people didn’t take those ideas seriously, he had an ax to grind.
So he started putting up funding for academic research at the Center for Full Employment and Price Stability in Kansas City and Bard College’s Levy Institute, hoping to flesh out his observations into a more formalized school of thought. The economists he helped support ― Kelton, L. Randall Wray, Pavlina Tcherneva, Scott Fullwiler, Mathew Forstater ― eventually called their ideas modern monetary theory, or MMT.
Modern monetary theorists believe that confusion around money has distracted economists from the real things that affect the economic health of society ― natural resources, technology, available labor. Money is a tool governments use to manage these variables and solve social problems. It is not a scarce resource that governments have to track down in order to pay for projects.
Mosler figured this out by making enormous amounts of money placing big bets on deeply indebted governments. “Insolvency is never an issue with nonconvertible currency and floating exchange rates,” he argued in a HuffPost blog.
Kelton’s version is simpler: “Money doesn’t grow on rich people.”
But influence does. And Mosler knew a lot of rich people from his days in high finance, including Maurice Samuels, who made millions for himself and Harvard University when he helped manage its endowment during the George W. Bush years. Samuels was MMT-friendly. He made a killing betting on the Italian lira in a Mosler-inspired trade in the 1990s, and in 2013, he talked another Wall Street alum, Andres Drobny, into hosting a dinner on MMT and suggested he invite Kelton to explain the doctrine.
Kelton didn’t come to MMT through glitzy banking connections. Her father served in the military, and she spent her childhood roaming between Illinois, California and North Carolina. She left Cal State in 1991 when the pay at a local furniture store seemed enough to fulfill her modest ambitions. When she went back to school a couple of years later, she became fascinated by ideas that mainstream economists had long since abandoned. After graduation, she traveled to Cambridge, England, to get her master’s at the temple of John Maynard Keynes.
Studying Keynesian economics was not a fast track to power and wealth in the 1990s. At the time, even top Democrats in Washington considered Keynes little more than a curiosity from the Great Depression. The hot topics in the field were innovation, creative destruction and a future in which information technology rendered the political problems of the 20th century obsolete.
Over the years, Kelton grew accustomed to working among professional outsiders ― liberal bloggers, obscure economists and nerdy political activists. Even today, with the book deal and a house in New York on Long Island’s North Shore with a private kayak dock, there’s still more than a little wide-eyed Midwesterner to her personality. Her favorite spot in Stony Brook ― she teaches at the Center for the Study of Inequalities, Social Justice and Policy at the State University of New York campus there ― is a kitschy diner called Crazy Beans with red-glitter vinyl upholstery.
When Drobny reached out to her, Kelton agreed to stop by the 21 Club in Manhattan to talk about MMT, expecting a small event with a few friends.
“Instead, I show up and there are dozens of people, and they wanted me to talk for two hours,” said Kelton. “I had no speaking notes, nothing.”
The 21 Club is not Crazy Beans. Frequented by presidents, CEOs and celebrities from Ernest Hemingway to Jay-Z, its private dining menu features $180 sea bass and four-figure wine bottles. Drobny’s firm bills itself as a macroeconomic research outfit, but it’s more like an expensive, exclusive club for very rich, very eccentric intellectuals, including Peter Thiel — people who own private islands and financial gurus who leave jobs at Goldman Sachs because the money isn’t good enough.
After a few deep breaths, Kelton started her talk. It was a hit. “One guy wanted to take her to Congress,” Drobny recalled. Another wrote a note to all of Drobny’s clients saying Kelton could revolutionize the way the Fed managed the economy and wanted to start popularizing a new economic metric called the Kelton curve. Her inbox was flooded with follow-up questions, including a note from BNP Paribas chief economist Julia Coronado requesting a private briefing.
If you listen to Kelton long enough, you notice that she never refers to “bankers” or “Wall Street” with the derisive tone common among her political allies. She talks instead about “the financial community.” She’s perfectly aware of how far to the right the politics of Big Finance skew, but she views it more like a peculiar subculture than a dark underworld. After all, Wall Street took her under its wing before Democrats took her seriously.
“The financial community ― if you can be persuasive with an unconventional argument, they don’t care about it being unconventional,” she said. “They want to be right.” There’s real money on the line, and fresh ideas can provide a competitive advantage.
In Washington, by contrast, being right rarely matters. Politicians don’t generally turn to economists for new insight into how the world works. Economists instead serve as a kind of credibility shield ― experts who can be trotted out to assure the public that there are very complex and sophisticated reasons political leaders should be doing the things they do. A big part of any Washington economics job is providing a sense of scientific certainty to political judgments that are, by their very nature, uncertain. This is true for big policy changes as well as straightforward tasks like projecting growth rates and government revenue.
The job, in other words, is to back up your team. Getting a policy decision wrong isn’t such a big deal, as long as everyone else on the team blows the same call. The Democratic Party today, for instance, generally regards the bank deregulation it pursued during Bill Clinton’s presidency as a mistake ― but plenty of economists who advocated it ended up with important jobs in Barack Obama’s administration.
As a result, politically relevant economists fetishize orthodoxy. Nobody with political experience really welcomes a new idea that explains why previous economic policies were wrong. And if Kelton’s MMT doctrine is right, then the way nearly every politician talks about government debt, deficits and even money itself is mostly wrong.
“The basic idea is that the government can’t run out of money,” Kelton said. “It creates money just by spending.”
When people talk about government profligacy bankrupting their grandchildren or triggering a cataclysmic debt crisis, Kelton argues, they’re conflating the experience of a typical family, which has to get money from somewhere outside the household to meet expenses, with that of a sovereign government, which creates money as part of its basic operation.
In one of her most important academic papers, published in 2000, Kelton maintains that government doesn’t actually finance its activity by levying taxes or issuing bonds. Instead, it creates money by spending it into existence. If a government wants to build a road, it calls some contractors and puts money in their bank accounts to pay for it. Where does this money come from? The same place all money comes from: thin air.
This means, among other things, that the government can always pay for whatever it wants ― housing, health care, tanks, whatever. But it doesn’t mean governments can just spend infinite amounts without any consequences, she emphasized. Eventually inflation becomes an issue when the amount of money in circulation gets ahead of the productive capacity of the workforce.
But even inflation doesn’t impose a hard limit on policy options. The Federal Reserve can raise interest rates to deal with it, Congress can raise taxes to pull money out of circulation or even impose price controls. All those have their drawbacks, but depending on circumstances, any of them might be preferable to reducing government spending. It all depends on what a society needs. Those needs, Kelton thinks, should be the primary focus of study ― not the immediate impact on the federal budget deficit, a metric that dominates policy discourse in Washington.
The left-wing appeal of these ideas is obvious. With inflation stubbornly low over the past 35 years, Kelton’s work suggests Democrats have plenty of fiscal room to not only protect Social Security and Medicare but also expand them and propose ambitious new programs. But MMT is also attractive to certain elements of the superrich. Because if we don’t have to worry so much about how much these programs cost, then there is no pressing need to raise taxes in order to pay for them.
After the 21 Club dinner, Drobny invited Kelton to a small, select conference he was hosting in Santa Monica, California, where she met Larry Summers, a Clinton treasury secretary and Obama economic adviser, who asked her to send him the best 40 pages of material on MMT available. By October 2013, Kelton was on stage explaining MMT at Columbia University alongside Nobel laureate and former Clinton adviser Joseph Stiglitz. Charles Schwab wanted her to present at its Impact conference the next month. The month after that, she spoke at Harvard.
Her career had changed tracks. She wasn’t just a clever economist with some quirky ideas anymore. Her credibility with Wall Street began to register as academic clout.
Kelton never refers to ‘bankers’ or ‘Wall Street’ with the derisive tone common among her political allies.
The great irony of Kelton’s career is that her breakthrough with the financial elite created her breakthrough with the American left. In the fall of 2014, she got a call from Sanders. He was taking over as the ranking minority member of the Senate budget committee and needed a chief economist.
“We wanted somebody who could walk into a room with establishment economists and tell them that they were wrong,” said Warren Gunnels, Sanders’ policy director.
That was essentially what Kelton did every time she addressed Wall Streeters about MMT. “I never speak to audiences that are already on board,” she said. “It always feels like going into the lion’s den. But then they love it.”
There are thousands of left-wing economists. But it’s hard for the economically inexpert to distinguish brilliant creativity from quackery. Kelton’s social credentials with Wall Street helped her stand out.
And Sanders liked the ambition of her policy vision. Perhaps more important, he liked the way she talked about Franklin D. Roosevelt. When Sanders asked her what he should do on the budget committee, she said he should pick up FDR’s unfinished agenda from 1944 ― an economic bill of rights. The top item on that agenda was a good job for everyone, guaranteed.
Sanders hired her as the minority’s chief economist on the budget committee, and when he started his presidential run, she agreed to serve as an adviser to the campaign.
Like most politicians, Sanders doesn’t get his economic ideas from studying economic theory. They’re an extension of his moral intuitions, according to several former staffers. He’s much more interested in Pope Francis than in Thomas Piketty. Sanders likes FDR because he spoke clearly and forcefully about economic justice as a moral and political right, and Sanders likes Kelton because she can communicate not just about inflation but also about rights and justice.
When she teaches at Stony Brook, she supplements the chart-and-graph drudgery of economic analysis with current events and a strong dose of history. This year she’s going over the Freedom Budget proposed by A. Philip Randolph, a civil rights leader who organized the 1963 March on Washington. The Freedom Budget ― first presented in 1966 ― is an “almost perfect document,” Kelton says after class. She particularly likes that its author doesn’t force the government to choose between providing a job as a civil right, and providing other priorities, like funding the military.
“The jobs pay for themselves,” she says, by creating new socially productive stuff that makes its way into the economy. What matters isn’t the deficit but whether these new work hours can generate something useful.
Kelton thinks it’s obvious that there’s plenty of room for more work today. Poverty and unemployment are tricks played on the economy by money ― there are no material or productive barriers to eliminating either one.
But it’s hard for many to believe that achieving such ambitious goals wouldn’t come with some other searing social price. While she got Sanders’ attention talking about economic rights and social justice, he balked at the implications of her broader theory. He had been pounding Republicans on the deficit for years and didn’t want to give it up. He had voted against the expensive Iraq War, the George W. Bush administration’s Big Pharma–friendly Medicare prescription drug benefit and the Bush tax cuts, arguing they were too expensive and diverted resources from programs that would genuinely help the middle class. While Kelton the radical theorist wanted Sanders to shrug off deficits, Sanders the politician wanted to pay for his plan by taxing the rich.
Gunnels said Sanders “does believe that the wealthy and large corporations need to pay their fair share in taxes and we can use that to rebuild our crumbling infrastructure and Medicare and tuition for all Americans.” And Kelton and Sanders discussed their theoretical differences before she was hired. “He wanted to make sure that Stephanie understood that ― that when she came on she was working to advance the agenda of Sen. Sanders,” said Gunnels.
For all its ambition, Sanders’ agenda wasn’t very creative. It just expanded the scope of existing programs that liberals already liked. The minimum wage would be higher. Tuition at public universities would be not just reduced, but free. Medicare would be available to everyone, with better coverage. Kelton didn’t have a problem with any of it, but almost nothing distinctive about her economic thinking ended up in the platform.
She thought her boss was walking into a trap by insisting that higher taxes on the rich and economic growth could pay for everything he wanted to do. She was right. When the campaign enlisted University of Massachusetts at Amherst economist Gerald Friedman to calculate the cost of Sanders’ platform, Friedman relied on overly optimistic assumptions in his modeling. Economists aligned with rival Democratic candidate Hillary Clinton pounced, accusing the Sanders operation of fiscal irresponsibility and economic illiteracy. Sanders staffers still wince at the memory. The numbers shouldn’t have mattered, but they didn’t add up.
To project some intellectual legitimacy for the campaign, Kelton corralled economists into signing letters in support of individual Sanders policies. She got over 200 signatures from people backing a $15 minimum wage and 170 endorsinghis plan to break up the banks. This was not an easy task, since nearly every economist with political experience expected Sanders to lose and most saw little reason to get themselves on Clinton’s bad side a few months before she secured the Democratic nomination. Even Friedman endorsed Clinton.
But by 2016, Kelton had some impressive connections. When she noticed Columbia University economist Jeffrey Sachs criticizing Clinton’s foreign policy on cable news, she reached out to see if he could find other common ground with Sanders. It should not have been a natural fit. During the 1990s, Sachs was a proponent of shock-therapy neoliberal economics ― a swift transition from state-dominated economies to market-based pricing and delivery. It proved a disaster in Russia, where he was a top adviser to the government. He has since drifted leftward, but remains a card-carrying member of the D.C. establishment, a mainstay of MSNBC’s “Morning Joe” and superelite conferences like the Aspen Ideas Festival and the World Economic Forum in Davos, Switzerland.
Sachs endorsed Sanders and invited him to a conference at the Vatican, where the senator got to meet one of his heroes, Pope Francis. In one of the oddest political unions of the past 30 years, Sanders returned the favor by writing the introduction to Sachs’ latest book. The Sachs connection boosted Sanders’ credibility in Washington, and the campaign relished getting him in front of the camera. Economics is as much about prestige as it is about math.
Kelton refuses to criticize Sanders or her time in his employ. She likes him, and she’s proud of her work for the campaign. But other staffers say she was obviously underutilized by the three white men at the top of the organization. The Sanders camp’s struggles with race and gender aren’t exactly breaking news, but in Kelton’s case, it’s hard to distinguish the campaign’s gender trouble from general incompetence or the sexism that pervades the economics profession.
Male economists dominate senior positions internationally and hold 86 percent of tenured jobs in academic doctoral programs, while the number of women entering graduate programs has flatlined at about 33 percent for nearly two decades. The pattern overflows into journalism: The people who cover economic policy for majornews outlets tend to look like this. (Hi!) Power and expertise are heavily gendered ideas in America, and so economics, the most powerful form of modern expertise, is a heavily gendered discipline.
Economists don’t like to acknowledge this because it undermines the status of male economists ― who tend to hold more conservative views than their female colleagues ― and the intellectual primacy of the field. It’s a reminder that politics are ultimately governed by social relations, not financial abstractions. In 2005, Summers, the most prominent Democratic Party economist of this generation, gave a lecture downplaying sexism in academic sciences while positing that “issues of intrinsic aptitude” might account for the dearth of female science professors.
He quickly apologized amid a tremendous outcry. But econ is still a bro’s world. A study published last year analyzed the words that were most closely associated with women economists on the popular message board Economics Job Market Rumors. The results are gross: “hotter,” “lesbian,” “bb,” “sexism,” “tits,” “anal,” “marrying,” “feminazi,” “slut.”
Kelton hasn’t been immune to this. She knows men don’t get lectured about rubber hoses, but she doesn’t volunteer complaints about the discipline in casual conversation. Her passion is for economic theory ― probably the most male-dominated sector of the field ― and she’d rather explain to Summers why he’s wrong about Keynes than why he’s wrong about women.
When pressed, she acknowledges the profession can be a minefield. Kelton teaches plenty of feminist economics in her courses, but early in her career, she avoided publishing research on policies that are obviously gendered, like child care and the pay gap.
“It’s easy to get pigeonholed as a women’s economist,” she said. “I’m an economist.”
The basic idea is that the government can’t run out of money. It creates money just by spending. Stephanie Kelton
Usually, being on the losing end of a lefty Democratic Party presidential run is a career blow. But Clinton’s loss to Donald Trump exploded the existing hierarchy of party experts. Her team of economists, which had expected to be running various government agencies, is instead plugging away at think tanks and universities just like the Sanders crew.
As a result, a new class of intellectuals is getting a shot at crafting the next slate of Democratic priorities, and Kelton is one of the most important economists in their ranks.
When she isn’t busy teaching or working out the economic effects of eliminating student debt, she gets invited to strategy sessions with Senate Minority Leader Chuck Schumer (D-N.Y.), and maintains a strong relationship with the Sanders team. She’s no longer working for his Senate office, but she’s a fellow at the new Sanders Institute, a think tank devoted to progressive policy ideas. In February she connected Sanders with Darrick Hamilton and Sandy Darity, two economists who specialize in the economics of racial inequality. Darity, who teaches at Duke in North Carolina, and Hamilton, who works at the New School in New York, had been putting together a proposal for one of Kelton’s favorite ideas: the job guarantee.
Kelton was already developing a similar proposal with MMT economists. But Hamilton and Darity’s work, which had a stronger focus on infrastructure than Kelton’s, intrigued Sanders, as did their more straightforward focus on economic and racial inequality. Both proposals envision the government’s hiring more than 10 million people who are currently sitting on the economic sidelines, though they differ in the way the program is administered and what kinds of jobs are offered.
After the call, Sanders announced that the job guarantee will be his next major policy initiative. Though the legislative details haven’t been announced, anybody in the job guarantee program would receive at least a $15-an-hour wage and health insurance. Just about everyone in Washington expects it to be the centerpiece of a 2020 Sanders presidential run.
Plenty of liberal economists are skeptical. Even if Kelton doesn’t like focusing on the cost of the plan, the price tag is big: Hamilton and Darrity’s version would run $543 billion a year, or about 3 percent of the U.S. economy, and Kelton’s would come in at about $378 billion a year for the first five years before rising modestly. It would reshuffle labor markets, automatically raising the minimum wage to $15 an hour, requiring significant corporate reorganizations and unpredictable price increases.
The logistics are also formidable: The federal government would need to coordinate with states, municipalities and nonprofits all over the country to get millions of people into new jobs and establish an effective bureaucracy to manage the enterprise through the ups and downs of the business cycle.
Kelton isn’t too worried. People are debating the idea seriously. Some lawmakers are thinking beyond the deficit and asking how much it would grow the economy (hundreds of billions of dollars a year), or improve productivity by developing and maintaining new skills. In April, freshman Rep. Ro Khanna (D-Calif.) called Kelton “one of the most thoughtful and creative economists of our generation,” saying her ideas had “moved the entire debate in Congress.”
It’s too early to know if she can move the country, as well. But nobody is screaming about rubber hoses.
“I believe employment should be a right,” she insists. “Values come first, technical details are next.”
Reproduced from: http://www.levyinstitute.org/publications/a-consensus-strategy-for-a-universal-job-guarantee-program
Publications
A Consensus Strategy for a Universal Job Guarantee Program
Related Publications
- Public Service Employment: A Path to Full Employment Research Project Reports, April 2018
- Guaranteed Jobs through a Public Service Employment Program Policy Note 2018/2 March 2018
- The Job Guarantee Working Paper, No. 902 April 2018
- Unemployment: The Silent Epidemic Working Paper, No. 895 August 2017
Reproduced from: http://prospect.org/article/economic-bill-rights-21st-century
It’s time to think big. The rules that govern our economy are working best for far too few, at the expense of far too many. While Republicans have sought to dismantle the New Deal and the regulatory apparatus that was developed to protect Americans from an unfettered private sector, Democrats in recent decade have mustered no more than incremental changes to an increasingly unequal and unfair economy. The rise of Donald Trump provides a political lesson for both Democrats and Republicans: People are looking outside the box. Despite the vast gulf between the two major political parties on many issues, on fundamentals both have adhered to a neoliberal agenda of deregulation, reliance on market-based solutions to our social problems, and a devolution of the role of government in ensuring and enforcing Americans’ right to a decent standard of living, economic dignity and economic mobility.
Direct government intervention for full employment, a cornerstone of the Democratic Party Platform for almost half a century, has been all but forgotten, replaced by a commitment to market liberalization or tax incentives and other subsidies for corporate America to cajole them into hiring more workers. Policies put forth by Hillary Clinton in 2016, which included raising the minimum wage and promoting equal pay for equal work for women, would have improvde the lives of many working Americans – but they do not go nearly far enough. They do not address the fundamental problem of increasing risk and vulnerability—employment “precarity”—confronting the American workforce.
Let us be clear: Our economic reality is not mere circumstance; these are the result of policy choices.
We envision moving far beyond marginal or incremental steps. We envision reforms aimed at building an inclusive economy that works for all, enshrining a national obligation to provide every American with economic security and opportunity. While many will spend the next four years fighting the Trump administration in an attempt to preserve the limited economic and civil rights that still remain unequally distributed, we want to build a real alternative that will produce fundamental change.
We want to resurrect a bold idea, an Economic Bill of Rights for all Americans—more specifically, an inclusive Economic Bill of Rights tailored to the conditions of the 21st century.
In his groundbreaking 1944 State of the Union address, President Franklin Roosevelt called for an expansion of the Bill of Rights to recognize economic rights as well. “Necessitous men,” Roosevelt observed, “are not free men.” Those “who are hungry and out of a job are the stuff of which dictatorships are made.” Moreover, real freedom, freedom to “pursue happiness,” he said, required a “second Bill of Rights under which a new basis of security and prosperity can be established for all.” For Roosevelt, full citizenship demanded more than the political rights designated in the nation’s original Bill of Rights: It required economic rights. Roosevelt outlined those rights as follows:
1. The right to a useful and remunerative job in the industries or shops or farms or mines of the nation.
2. The right to earn enough to provide adequate food and clothing and recreation.
3. The right of every family to a decent home.
4. The right to adequate medical care and the opportunity to achieve and enjoy good health.
5. The right to adequate protection from the economic fears of old age, sickness, accident, and unemployment.
6. The right to a good education.
Roosevelt died before he could begin a national movement to enshrine these economic rights as a constitutional commitment. In subsequent decades, though prominent politicians and civil rights leaders continued building on Roosevelt’s pursuit of economic justice. Seeking to extend the scope of the Civil Rights movement in the mid-1960s, A. Phillip Randolph, Bayard Rustin, and the New Deal economist Leon Keyserling drafted “Freedom Budgets” that recognized that poverty remained a great barrier to opportunity and expressed the need for strong federal action to bring economic equity to all Americans. Martin Luther King Jr. joined this campaign for jobs, education, health care, housing, and income for all Americans, and before he was assassinated, he planned a new march on Washington, the Poor People’s Campaign of 1968, to demand economic rights for all, linking the civil rights movement directly to a movement for economic rights.
Today, how far we still remain from anything that resembles equality as fact and result.
We need to rethink public policies, breaking out of the straightjacket that overemphasizes market-based solutions. We have thought big before—but have compromised big as well. During the Great Depression, FDR and liberals made a Faustian bargain with southern segregationists to provide a New Deal and beyond, rewriting the rules of our economy. But only for some of our citizens. Ira Katznelson’s excellent book When Affirmative Action Was White: An Untold History of Racial Inequality in Twentieth-Century America documents how U.S. public policy implicitly and sometimes explicitly excluded black people from opportunity during the so called ‘golden age’ that followed. The racial apartheid that existed under slavery war renewed under another name—Jim Crow—for decades. The exclusions from the guarantees of the New Deal contributed to the highly unequal outcomes we observe today.
Today, we must transcend the racial, ethnic, and regional divisions exacerbated by post-Depression and post-World War II-era policies by building universal policies that are cognizant of identities and intersectionality, and inclusive of race, gender, nationality, sexuality, and ability.
The first six rights outlined by FDR above are still all too germane today, but to update these economic rights to facilitate an inclusive economy for the 21st century, we add:
7. The right to sound banking and financial services.
8. The right to a safe and clean environment.
9. The right to a meaningful endowment of resources as a birthright.
Let us briefly explore each of these rights—those proposed in 1944 and those we’re proposing now—in turn.
The Right to Employment
As a onetime centerpiece of progressive politics, a Federal Job Guarantee received tremendous support from the likes of Eleanor Roosevelt, Martin Luther King, and civil-rights leader Bayard Rustin. The provision of a job for all was central to the Freedom Budget, crafted for the A. Philip Randolph Institute in the wake of the 1963 March on Washington. (Let us not forget that the march—chaired by Randolph, organized by Rustin—was named “The March on Washington for Jobs and Freedom.”)
Today, despite the recovery from the Great Recession, the problem of inadequate employment continues to plague our society. Not only are there millions more Americans seeking jobs than there are available openings, but many Americans who are working remain in poverty because of woefully inadequate wages.
These conditions warrant the resurrection of a bold idea, an Economic Bill of Rights for all Americans, tailored to the conditions of the 21st century. Below, we turn our attention to the first article of a new Economic Bill of Rights—a federal job guarantee.
Why the need for such a guarantee? First, we invariably have major economic crisis that drive people out of work; the most recent episode is the Great Recession. Second, even in “good” economic times, the United States has more people seeking employment than the private sector is willing to employ. And third, not only do we generally have an inadequate number of jobs, but we have a tier of jobs that are of extremely low quality. They are low-paid, have uncertain hours, and have few or no benefits.
What the nation needs is a program, established through federal legislation, that would guarantee employment to every American at non-poverty wages. Similar legislation to what we envision has already been introduced to Congress (House Resolution 1000 – Jobs for All Act, which has 29 co-sponsors). In our proposal, we would first establish the National Investment Employment Corps (NIEC), a permanent agency to oversee direct employment of all Americans seeking a job. If individuals were unable to find adequate employment in the private sector, they could turn to the government for employment. In return, the government would provide employment at non-poverty wages. The minimum salary would be at least $24,600 per annum. Advancement in the program would be possible, resulting in a mean salary of $32,500.
Provision of a reasonable floor for compensation in the labor market must be a critical feature of the program. If employers are unwilling to provide employment, or are offering terms inferior to those offered under the NIEC, individuals can simply take the public sector job. However, to provide genuine economic security, workers will need more than a non-poverty wage—they need benefits. The program will include health insurance for full-time workers (35-40 hours per week) of the same quality that is received by civil servants and elected officials in the federal government.
Such a program, which will transform the labor market as we know it, will come with a price tag. We estimate that the federal job guarantee, inclusive of total compensation, training, and materials, will have an annual cost of about $575 billion, which is nearly 3 percent of GDP. But that will not be the net expense of the program. Since the program functions both as a full employment and as an anti-poverty program, a portion of the expenditures the United States currently devotes to a variety of entitlement programs could be reduced significantly. This would include lower expenditures for unemployment insurance, SNAP, or other types of means-tested social programs.
Moreover, it is not extraordinarily difficult for governments to fund large-scale programs. The fact that at the outset of the great recession, huge amounts of public funds quickly were turned over to the banking community, suggests that there is a huge capacity on the part of the federal government to meet large, new expenses. A federal job guarantee would enable the nation to fund the well-being of all of our citizens, rather than support, narrowly, the folks who produced our most recent economic crisis.
The specific types of work undertaken in the program would be developed in conjunction with local and state governments. The needs of a rural community in West Virginia may be different from the community needs in the city of Milwaukee. Local and state governments would work with the federal government to develop jobs that would serve the needs of specific communities while taking into consideration what would be appropriate for workers in need in the region. Ultimate administrative authority and funding would be provided at the federal level, and priority would be given to the most distressed communities and to infrastructure projects in areas with the most need.
We envision an array of jobs that would address both our nation’s physical and human infrastructure needs. Such a program could rebuild our crumbling roads and bridges, and they also could provide vital services, like elder care and child care. Imagine if the government mobilized resources to provide universal, high quality elder care. Its positive impact would not be limited to the direct recipients of the service, but it could also reduce dramatically the stress, time, and monetary expenses now borne by relatives who now have to provide or pay for all of the care work themselves.
Additional socially beneficial goods and services could also be provided through the program. For instance, this map by the Living New Deal project highlights the outstanding accomplishments achieved through direct employment projects during the New Deal, many of which still improve our lives today.
Beyond building roads, bridges, schools, and other public infrastructure, the program could also play a fundamental role in transforming areas of our economy, hastening, for instance, a transition to a “green,” decarbonized economy.
One of the major benefits of such a program is its transformative effect on the U.S. economy away from low-wage work toward decent jobs for all. The program will reshape the power dynamics between labor and capital, enabling workers to have more bargaining power by removing the threat of unemployment. This will likely lead to a shift in the income away from capital towards labor. As a result, corporations and their shareholders do stand to incur a loss on that score.
On the other hand, the federal job guarantee will reduce business costs by extending and maintaining the nation’s human and physical infrastructure and creating greater stability of demand for the products of America’s businesses. Both of these effects will benefit the private sector’s bottom line, providing at least a partial offset to the impact of the job guarantee on labor’s bargaining position.
The Right to Housing
Shelter is a basic need for survival, yet it is one many Americans cannot attain. The current federal minimum wage, $7.25, places affordable housing out of reach for most such workers across the county. According to the National Low Income Housing Coalition, a household whose occupants earn the minimum wage would need more than one full-time-wage worker to afford a two-bedroom rental apartment at fair market rent.
This is not only a problem for low-income Americans. At least 90 American cities have a median rent, excluding utilities, that comes to more than 30 percent of median gross household income. In short, these are rent-burdened cities. Across the country, half of all renters are now spending more than 30 percent of their income on housing. A recent Housing and Urban Development report found that there are 7.7 million American households that are extremely rent burdened, paying more than half their incomes for rent, and that are either not receiving government assistance and/or live in severely inadequate conditions.
With over 17 million vacant housing units, perhaps we also can design innovative policy measures to provide housing for the roughly 565,000 homeless Americans. The U.S. doesn’t need to reinvent the wheel to address this concern. Other countries, such as Singapore, have had relatively successful national housing policies, resulting in 90 percent home ownership rates.
The Right to Health Care
The Affordable Care Act provided millions with health insurance, driving down the uninsured rate to 9.2 percent, the lowest rate achieved in U.S. history. But the ACA was a grand compromise between the Democrats and corporate interests. While the ACA expanded coverage, improved access to contraceptives, ended some harmful practices by insurance companies, and drove down inflation in the health-care sector, it left far too many without coverage or with inadequate coverage.
Most Americans want a still more inclusive and accessible system; according to a Gallup poll, a majority endorsed replacing the ACA “with a federally funded health care system that provides insurance for all Americans.” Other than Mexico, the United States is the only OECD country without universal coverage. A Medicare-for-All type program, like the one put forth by Senator Bernie Sanders, would certainly fit the bill. His American Health Security Act would provide every American with affordable and comprehensive health-care services through the establishment of a national American Health Security Program.
We can, and we should, discuss the details of how to best achieve universal health coverage, but true universal coverage, says Harvard’s Adam Gaffney must include, “universal coverage (i.e. none left uninsured or uncovered), the elimination of financial impediments to care (i.e. no copayments and deductibles), comprehensive coverage (including services currently uncovered or poorly covered in the U.S.), and no inferior “tiers” of access for particular economic or demographic groups.”
The Right to Quality Education
Universal access to a high-quality public education, from Pre-K through the completion of a college degree, needs to be a right, not a privilege. While the right to an education is enshrined in many state constitutions, access to education remains separate and unequal at every stage of the system, denying many children and young adults the human right to develop their intellectual capacity.
While universal pre-K childcare has been a demand for decades, it has yet to become the law of the land. Many forget that such a program was within our grasp not too long ago. In 1971 Congress passed the bipartisan Comprehensive Child Development Act, which would have established nationally funded comprehensive child-care centers that would educate, feed, and care for the young, only to see it vetoed by President Richard Nixon. And so, instead of federally subsidized universal daycare, which would provide working families with necessary financial relief and enable women to enter the workforce, we get our current system—a system that is fraught, expensive, and “mediocre” at best. Today, daycare exceeds the cost of a public college education in many states. Those in the nation’s capital suffer in particular under the financial burden of child care, paying an average of $22,631 a year, according to the Economic Policy Institute. Despite extensive research highlighting the social and personal gains from investing in early childhood programs, the government has continuously failed to act.
Unequal access to education continues once children enter the public school system, the result of school segregation and segregated education in desegregated schools. When compelled by courts to desegregate, schools have relied on other institutional responses to maintain unequal access to quality education, such as racialized tracking. It’s time to eliminate such tracking and provide gifted and talented education for all students. Project Bright Idea, a pilot program devised by North Carolina educators and experts at the University of North Carolina Chapel Hill and Duke University found that treating students as gifted and talented yields “impressive academic results.” Further, case studies across the nation find that achievement amongst “low” achieving students improves while the performance of “high” achieving students remains constant when all students have access to a high-level curriculum. Such a move would be a major step towards ensuring that access to a quality education is no longer severely unequal.
Come time for college, kids still don’t get a break. Higher education policy places roadblocks in the path of far too many. The average $71,086 price tag for higher education at a four-year public institution is already well beyond the reach of most middle-class families. The right cost, at the point of delivery, for students at public colleges and universities should be $0. Students are demanding education as a right, not a privilege reserved only for those born into selective families that can afford it. Americans agree. Over 60 percent of Americans in a 2016 poll conducted by Princeton Survey Research Associated supported free college at public colleges and universities. It also happened to be one of the most popular proposals to emerge during the 2016 Democratic presidential primaries.
Providing universal tuition-free higher education could benefit historically educationally disenfranchised groups the most. The average college debt for African American bachelor degree holders is $37,000, compared with a $28,051 average for white graduates. The total burden of student debt has grown to an outrageous level—$1.48 trillion and counting—fueled largely by a pernicious profit motive in educational finance. We estimate that, amongst those currently enrolled, tuition-free public higher education could add a million additional black and Latino graduates, return public education to its former status as a public good, and extend it to those who have largely been excluded in the past. While education is no silver bullet to ending inequality, it should nevertheless operate as a right, instead of a debt-riddled privilege.
The Right to Sound Banking and Financial Services
Wall Street profit incentives are often not aligned with Main Street economic development, and nor are the more conservative Federal Reserve’s financial policies, such as the Fed’s staunch opposition to full employment. We must offer an alternative to the predatory nature of the current system of finance. The financial system has continued to redline opportunity in this country, particularly for financially vulnerable groups who have been deprived from asset-development by the banks’ policies of housing discrimination, limited or high cost basic banking services, last resort exploitive lending practices (such as payday lending), and the pushing of subprime loans even on creditworthy Latino and black borrowers.
Recent estimates indicate that 20 to 40 percent of the U.S. population relies on some form of non-traditional financial services, such as payday lending, which disproportionately preys on vulnerable and low-income Americans. Moreover, 53.6 percent of black households and 46.4 percent of Latino households are unbanked or underbanked, which is likely related to the high costs of banking for low-income individuals and the scarcity of banks operating in black and Latino neighborhoods.
A recent US Postal Service report found that the average underserved household spends almost 10 percent of its income on alternative financial services and interest. Converting one’s paycheck into cash should not bear a penalty, particularly for those with limited resources.
There are currently 53 million “credit invisible” households in the United States—households that do not frequently participate in forms of financial services that the major private credit bureaus incorporate in credit scores. This “credit invisibility” results in the further marginalization of this group, limiting access to credit and employment, and increasing costs associated with financial services. According to the think tank Demos, while most low-and middle-income white households with credit card debt report good or excellent credit, the opposite is true for African Americans. Further, evidence from the Federal Reserve indicates that less than one quarter of blacks reported prime scores, compared with roughly 65 percent of whites. As a result, blacks are more likely to receive sub-prime mortgages and pay more for accessing other financial products such as car loans. This need not be the case.
A public option for banking and basic financial services could provide all Americans with the right to a minimum, non-exploitative standard of banking and financial services. Like the job guarantee, public banking would generate a floor in the financial sector—if private banks don’t provide services at least as good as those provided by the public option, we expect consumers to close their accounts at private banks and choose the public banks.
Public banks are not a new idea. In 1910, Republican President William Howard Taft introduced the U.S. Postal Savings System to fight against the predatory-lending practices of the finance industry at the time, providing Americans an alternative that they could trust. This system functioned till 1966, when the banking lobby helped convince lawmakers to end the public option for banking and financial services. One state, North Dakota, still operates its own public bank. The state uses tax revenues to fund the bank, providing high-quality loans to farmers, students, and local businesses. Other countries, including Japan and Germany, currently have more extensive public banking options, and Germany’s municipal banks are a chief source of funding for that nation’s thriving small-and-medium-sized manufacturers.
One approach for public banking is to revive the postal banking option. The US Postal Service already provides alternative financial services via money orders (to the tune of $21 billion in 2014). In a recent white paper, the office of the USPS Inspector General noted that “while banks are closing branches all over the country, mostly in low-income areas in both rural communities and inner cities, the physical postal network is ubiquitous.” A postal bank in the U.S., including workers from the FJG program, can bring banking services to the unbanked while providing an important revenue stream for the USPS.
To provide Americans with access to reasonable financial services, another reform would be to federalize the credit score industry. Credit reports and scores have a direct and growing impact on Americans’ economic security and opportunity. Credit scores, which in theory represent the “credit worthiness” of consumers, are used to govern access for a range of basic economic needs—ranging from a car loan, to a lease on an apartment, to a job. These scores function in part as a gatekeeper to credit, which is central in today’s economy to build wealth and fully participate in the economic system. However, the credit scoring system has long been opaque and deeply flawed. Something as influential as a credit score in determining life outcomes should not be left in the hands of the for-profit, unaccountable private sector.
The Right to a Safe and Clean Environment
The environment is perhaps our greatest inherited collective resource. Yet like income and wealth, this resource—our planet and its environment—are not shared equally. The link between environmental quality and economic inequality is clear. This was elucidated in a memo by Lawrence Summers, then the chief economist of the World Bank, which stated “the economic logic of dumping a load of toxic waste in the lowest wage country is impeccable and we should face up to that.” The same logic has been applied to the lowest income counties in the United States. We do not accept this logic.
Our environmental policy should protect Americans against this logic, as well as assaults on the environment such as those waged by the Trump administration. As the Federal Water and Pollution Control Act makes clear, water quality should “protect the public health.” Clean water and clean air should not be something Americans need to purchase—rather they should be rights, provided to all.
In 1994, President Bill Clinton signed Executive Order 12898, which ordered federal agencies to identify and rectify “disproportionately high and adverse human health or environmental effects of its programs, policies, and activities on minority populations and low-income populations.” Despite this landmark victory, the racial and income-based pollution patterns and health disparities associated with exposure to environmental hazards remain prevalent. Researchers at the Political Economy Research Institute released a report identifying the Toxic 100—the top corporate air and water polluters across the country. The verdict? The “logic” of dumping on the poor and vulnerable racial/ethnic groups persists.
The ongoing Flint water crisis is only one tragic example. In Flint, decisions made by local and state authorities demonstrated that money and power matter more than public safety and human lives. A right to a clean environment for current and future generations is needed. That requires a rapid transition away from fossil fuels in the face of climate change—the greatest threat we have faced collectively as a species. The #KeepItInTheGround campaign is just beginning. A clean and safe environment should not be commodified, something we put up for sale to the highest bidder or the one with the most connections. Instead, we need to enshrine a mechanism that provides a clean and safe environment as a basic human right.
The Right to Seed Capital to Build a Lifetime of Asset Economic Security
The reports keep stacking up—income inequality has been growing rapidly since the late 1970s. The degree to which income is unequally distributed is shocking—yet income is less unequally distributed than wealth. Wealth is a paramount indicator of social well-being. Wealth—what you own minus what you owe—is critical to the economic security of Americans. With almost half of all Americans unable to afford an emergency expense amounting to $400, the average household is not resilient to economic shocks.
Recent research by Emmanuel Saez and Gabriel Zucman at Berkeley found that the top one percent of Americans held 42 percent of all wealth in 2012, with the top 0.1 percent holding 22 percent. Disparities are especially pronounced between races. The legacy of chattel slavery, where black people were literally a form of wealth for whites, and the discrimination encouraged and perpetuated through public policies, have left black families with minimal wealth. A report by the Center for Global Policy Solutions, entitled “Beyond Broke: Why Closing the Racial Wealth Gap Is a Priority for National Economic Security,” concludes that “[f]or every dollar in wealth held by whites, African Americans and Latinos held only 5 and 6 cents respectively.” In our in-depth study of The Color of Wealth in the Nation’s Capital, we find that white families have 81 times more wealth than black families in Washington, D.C. A new collaborative study from the Samuel DuBois Cook Center on Social Equity and Insight: the Center for Community and Economic Development finds that single older black women with a college degree hold a mere $11,000 in wealth to deal with their retirement, in comparison with similarly educated older white women, who have a median wealth of $394,400.
Conventional explanations of wealth disparities, relying on rhetoric around the dysfunctional behavior of blacks and their lack of education or financial literacy, simply do not hold up. Given the importance of wealth in determining life outcomes, public intervention is needed to address unjustly created distributions. One such solution, “baby bonds” would seed every American at birth with an initial endowment to be held in trust until adulthood. The program would be universal, through which every newborn would receive an account, starting at around $500 for those born into the most affluent families and progressively rising to $50,000 for children born into families with minimal wealth. The accounts would be accessible when the recipient reaches adulthood and used for some asset enhancing endeavor—a down payment for a home, say, or capital to start a new business. Estimates show that the cost of the program would amount to about 2 percent of federal spending. If the average account is established at around $20,000, the cost to the government would not exceed $90 billion a year inclusive of administration costs. While that may give some sticker shock, keep in mind the relative size of other asset development programs cost much more. Capping the mortgage interest deduction would be much more than sufficient to cover the cost of the new program.
Looking Forward
Many may question in this time of “resistance,” if this is the right time to fight for an expansion of economics rights, but no one wins anything of consequence by simply playing defense. Maintaining the highly unequal and unjust status quo is neither sufficient nor sustainable. We need to take aggressive measures to achieve economic justice.
A bold alternative is in order. Implementing an Economic Bill of Rights for the 21st century would restore economic, social and psychological balance—and dignity—to the millions of Americans who have been left behind in our highly unequal economy. It also will address the long-standing unjust and discriminatory barriers that keep members of stigmatized communities from prospering. We can no longer accept the redlining of opportunity in America.
