Let’s pass the DISCLOSE Act

Yesterday, Senators Sheldon Whitehouse, Charles E. Schumer, Michael Bennet, Richard Blumenthal and Elizabeth Warren of Massachusetts re-introduced the DISCLOSE Act, a comprehensive disclosure legislation that came within one vote of overcoming a party line filibuster and adopting comprehensive disclosure legislation. This time, Congress should pass the DISCLOSE Act and require disclosure of contributions to organizations engaged in political spending.

When the Supreme Court struck down corporate and union spending limits in Citizen’s United, Justice Anthony Kennedy wrote for the court that, “disclosure permits citizens and shareholders to react to the speech of corporate entities in a proper way.” Later, when court struck down aggregate limits in McCutcheon v. FEC, Chief Justice John Roberts noted that, “With modern technology, disclosure now offers a particularly effective means of arming the voting public with information.” On at least two occasions then, the Court has chosen to remove limits on political spending on the implicit premise that this spending would be disclosed.

Sadly, Citizen’s United did not lead to more disclosure but instead to a wave of dark money. A recent study by the Center for Responsive Politics finds that “the percentage of spending coming from groups that do not disclose their donors has risen from 1 percent to 47 percent since the 2006 midterm elections.” The rise of dark money has been lopsided because unions are held to a far different standard than corporations are when it comes to political spending.

First, unions must publicly disclose all of their spending and also itemize payments over $5,000 with the date, name and address of the recipient, and purpose of the payment. Union members, the general public and journalists have easy access to union political spending with an online, searchable database. Union members can therefore decide whether the union leadership is spending money in line with their preferences and vote out the leadership if they are not. Further, some union members who dislike the way the union is disbursing funds can receive a refund of a portion of their dues. In some instances, public sector unions must seek the consent of members before they can make political contributions.

In addition, unions are far smaller than corporations and rarely use 501(c)4s to influence political campaigns. As Robert Maguire of the Center for Responsive Politics tells us, “even if unions funneled every dime  liberal 501(c)4s spent over the four years from Citizen’s United to present, that spending would still be nearly four times less than what their conservative counterparts spent in 2012 alone.” He notes that, American Encore, a Koch-backed conservative foundation, spent more money on the 2012 election than all of the union spending and liberal 501(c)4 spending from 2010 to 2014 combined.

When unions give to 501(c)4s, they must disclose their donation, when a corporation does, no such disclosure is required. Therefore, corporations now funnel hundreds of millions through “social welfare groups,” which have exploded in the past few years.

Center for Responsive Politics, OpenSecrets.org

Shareholders or employees who disagree with the way a corporation is spending money have no right to redress. While a growing number of corporations (about 100) have chosen to voluntarily disclose their donations, they frequently do so after elections cycles and often choose not to disclose more potentially controversial donations. Even Aetna, which has received praise for its disclosure policies, gave $7 million to two 501(c)(4) groups in 2012 but didn’t disclose their contributions even though they had an agreement with their shareholders. This isn’t the case everywhere: in Britain corporations must receive shareholder consent for their political budgets.

Corporate spending and union spending aren’t just different in terms of how they are regulated, they also represent the interests of different groups. Princeton political scientist Martin Gilens has used extensive polling data to compare the preferences of Americans across the income spectrum with organizations that influence the political process. He notes in his book Affluence and Influence, “based on unions’ strong tendency to share the preferences of the less well-off and the large number of policy areas they are engaged in . . ., unions would appear to be among the most promising interest group bases for strengthening the policy influence of America’s poor and middle class.” Corporate donors and business lobby groups, on the other hand, tend to pursue policies that are not in line with the preferences of most Americans. This bolsters the case for making disclosure for all groups mandatory.

Author’s Calculations based on Affluence and Influence, Table 5.7

In fact, polls show that 9 in 10 Americans believe there is too much corporate money in politics and majorities across the political spectrum support more disclosure. A bipartisan group of law professors have petitioned the SEC to “develop rules to require public companies to disclose to shareholders the use of corporate resources for political activities.” A petition urging the SEC to require corporate disclosure has more than 500,000 citizen signatures as well as the support of more than 70 members of congress and Vanguard Founder and CEO John Bogle.

However, the SEC has removed developing such rules from its agenda. Disclosure is a simple proposal that has been endorsed by the Supreme Court, the American people, law professors and politicians from both sides of the aisle. Recent evidence suggests that disclosure would increase policymaker’s responsiveness to their consituents. In the absence of SEC action, the DISCLOSE Act is the best way forward. While it’s only the first step in taking back our democracy, it should be an easy one.

Originally appeared on Policyshop.

Why Can’t We Stop Gun Violence?

Since the Sandy Hook tragedy of 2012, there have been 17,042 gun deaths and . The Onion captured the frustration many Americans have about the gun violence problem: “ ‘No Way To Prevent This,’ Says Only Nation Where This Regularly Happens.” It’s certainly true that gun violence is unique to America, the chart below created with data from a recent paper by Sripal Bangalore and Franz H. Messerli, who find that higher levels of gun ownership correlate with more gun deaths (the study finds no correlation with the level of mental illness).

GunsKillPeople

 

The data show that the U.S. is the clear outlier with regard to gun violence (with 10.2 gun deaths per 100,000) while Japan, which has almost no firearm ownership, has almost no deaths as well (.06 deaths per 100,000 people). Japan’s success is due to having possibly the most strict gun-control regime of any country. In an article on Japan’s gun control regime, David Kopel notes that, “The only type of firearm which a Japanese citizen may even contemplate acquiring is a shotgun.” But even shotguns require an extensive licensing procedure which involves a written test as well as a test of mental health. Applicants and their relatives must undergo a background check and all guns must be kept in a locker. Handguns are banned. In many parts of America, a prospective gun owner can simply go to a gun show and obtain a gun, no questions asked.

Unlike in the U.S., mass shootings frequently spur policy changes in other countries. Australia, for example, passed strong gun control laws after a deadly massacre in 1996 and now has  a far lower gun violence rate than the U.S. (1.04 deaths per 100,000). However, a Japanese or Australian-style gun control regime is impossible in the United States. The Supreme Court struck down a ban on semi-automatic weapons and handguns in District of Columbia v. Heller, meaning that the only weapons that could be subject to a Japan-style ban are assault rifles. This decision was extended to the states in McDonald v. Chicago. Sadly then, the U.S. will ever get to down to a level of gun ownership as Japan or Australia.

But simply because the U.S. won’t get down to the gun ownership levels of Japan doesn’t mean we should do nothing. Within the U.S., states have dramatically divergent gun ownership rates. The Daily Beast finds that Kentucky had 58,196 background checks per 100,000 residents in 2012, while New Jersey had only 938. Hawaii, New York and Rhode Island had 1,208, 1,652 and 2,106 respectively. A 2013 study in The American Journal of Public Health performed an analysis similar to the Bangalore/Messerli study and finds the same results across the United States. Some states have very high levels of gun ownership (and therefore gun deaths) while others have low rates of gun ownership. Studies find that states with stricter gun control laws also have lower levels of gun violence. Other studies show that fewer guns lead to fewer gun suicides. Commonsense regulations like expanding background checks and removing the gun-show loophole have empirical backing as well as the support of most Americans. The question, then, is not “how” to prevent gun deaths, but rather, why we’re not, and the answer is clear: the National Rifle Association (NRA).

The NRA is high on its own political success. As David Frum notes, “No crime or atrocity, not even the massacre of children at Sandy Hook Elementary School, has checked the strong trend of U.S. public policy to make ever more lethal weapons ever more easily available to ever more people, including people with histories of domestic violence.” Frum understates the NRA’s extremism. The organization has  has even gone as far as fighting smart guns, which use new technologies to ensure that children can not unintentionally fire the gun (one requires the user to wear an accompanying wristwatch to fire it). Given that one study finds that smart guns reduce gun deaths significantly, such technologies are a no-brainer. The NRA also opposes laws requiring gun owners to safely store weapons, which have a track record of success.

The problem is that the NRA gains these political successes by lobbying against the interests of most Americans. Political scientist Martin Gilens writes in Affluence and Influence, “By far the strongest association between interest group alignments and policy outcomes concerns gun control.” He compares the stated policy preferences of Americans to those of interest groups, unions and corporations. He finds that interest groups tend to align with Americans on economic and social welfare policy, but strongly diverge on gun policy and environmental policy (on the chart below, a positive number indicates that the organization is pursuing policies that are aligned with Americans’ preferences, while a negative number indicates that they are lobbying against Americans’ preferences).

IGAlignment1NRA

 

Gilens finds, disturbingly, that interest groups are incredibly successful on the issue of gun control, but also that interest groups pursue policies that are radically divergent from public preferences. Gilens breaks down the data so we can see individual organizations.

IGAlignment2NRA

 

The chart shows that while some organizations, like the AARP lobby for policies with broad support among Americans, the National Rifle Association (NRA) does not (and this holds across the income spectrum). How does the NRA exert such a powerful influence on Washington? Certainly part of the answer is money. Data from the Center for Responsive Politics show that organizations in favor of gun control are vastly outspent by those opposed to it.

PoliticalDonationsNRA

Americans will always likely have more guns than other developed countries. The Supreme Court has decided strongly in favor of the NRA’s interpretation of the Second Amendment (in District of Columbia vs. Heller). But most Americans, including myself, aren’t trying to “take away your guns.” We’re trying to keep guns out of the hands of killers and children. Sadly, the NRA has the power to stop these common sense regulations. The Supreme Court has overstepped its bounds, but there is still room to act. We know what works. The people want it. The question is whether politicians have the gumption to tackle organized interests.

Something resembling this piece was published on Policymic.

How to Fight Oligarchy: Lessons From The States

Patrick Flavin is an assistant professor in the Department of Political Science at Baylor University. He is also doing pioneering work in the area of policy representation at the state level. You can find a discussion of his work here. I talked with him about his studies and what they tell us about fixing our democracy.

Sean McElwee: What exactly did you do? You have a rank of states by political equality of representation, what does that mean?

Patrick Flavin: All the papers use a pretty similar method. It basically measures how strongly the relationship is between the higher your income is and the likelihood that your ideology will be well-represented by policy. So think of two people and we had a number line from a one to a ten and the state generally passed policy measures that are a six and someone who is at the number line at the six would be well represented, someone with a one would not be well represented. So the table ranks how much income correlates with that. In Mississippi there is a strong relationship between your income and your representation, in North Dakota that relationship is not strong.

S: Does the inequality of a state affect the inequality of representation?

P: Usually states with higher levels of economic inequality also tend to be the most politically unequal. States with a big divide in rich and poor in income also tend to have a bigger divide in political representation. It’s not a one-to-one relationship or a perfect correlation, but it’s a general pattern. For example, Mississippi has a fair amount of really poor people with more liberal preferences, but Mississippi tends to pass very conservative legislation.

S: You had an interesting paper on what constitutes responsiveness. For some people  it’s ideological preferences and for some people it’s how much money is being brought back to the state.

P: The study of political inequality bounces between two measures. The first is opinions or ideology, which we discussed before. The second is interests. We would assume, I would argue rightly, that those at the bottom end of the spectrum would prefer more spending on public assistance and greater public spending. Surveys support that idea. I find that states that have stricter campaign finance laws pass more egalitarian policies on public assistance. That’s another way of measuring representation. There is not an agreed upon way of doing this. Martin Gilens looks at individual policies. We all tend to be finding the same thing, which is that there is unequal representation between the rich and poor.

S: But you’re the only one who has done this on the state level, which gives us a chance to see what works. What works?

P: One relationship is disclosure laws. There are three ways to regulating campaign finance. The first is ensuring that donors have to disclose who they are donating to. The second is limiting how much donors can give. The third is moving to a public financing system. The only type of policy I found with a strong relationship with my measure was disclosure requirements. I think that’s important because disclosure is something that both parties can agree on. There tends to be more agreement on the question. I also find that states the more strictly regulate lobbying and lobbyist interactions and what type of gifts they can give – those states are more egalitarian in terms of whose opinions get represented. That’s a good thing to learn for the states and possibly bring to the federal level. This policy is especially good in the wake of Citizen’s United, because in the wake of Citizen’s United individual and organizational limits allow individuals to spend independently.

S: Now what policies don’t have a strong correlation? You found, for instance, that more participation for low-income voters doesn’t have a strong effect.

P: Right. That’s depressing but it’s also consistent with what others have found. Places where the poor turn out they don’t seem to have more representation, which is a very troubling finding. The poor don’t get a whole bunch of a boost from voting. There is also research showing that minorities get less of a representational boost from turnouts than whites [Flavin refers here to the research of John Griffin and Brian Newman.]

[Interviewer’s Note: Flavin also points out that other studies find that turnout affects representation. One study specifically examined the low-income turnout, and found policy responsiveness increased with a higher low-income turnout. See this summary.]

S: Could gerrymandering and housing segregation explain the racial gap?

P: That’s probably part of the explanation. You have districts with Democratic candidates winning with 90% of the vote. It can definitely help explain racial inequality, but it can’t help with income inequality.

S: You also have a study that finds the more regulations a state has the more money that is distributed to the poor?

P: Yes. There are six policies I looked at: disclosure, limits on individuals, limits on organizations, whether there are public funds for governors, public funds for legislatures and clean elections. I gave each state a score for each year examined [1962 - 2006]. Then I compared it to what percentage of a state’s budget goes toward public welfare in general and then to cash assistance in particular.

S: To put it baldly, then, if we don’t get money out of politics, it won’t matter as much if poor people vote?

P: If poor people voted at the same rates as rich people, I’d expect they’d be better represented but at an institutional, practical recommendations level, passing laws that limit campaign finance are doable, so I focus on the laws side of things. There is evidence that these laws work.

S: Do you have any thoughts on the DISCLOSE Act?

P: I find that the stringency of disclosure requirements is statistically related to the equality of political representation across the states. Out of possible campaign finance fixes disclosure requirements seem to have the most bipartisan support, though this support is certainly not universal. It is probably the most practical/realistic area to push for reform.

How ordinary Americans can influence policy – no super PAC required

More and more studies are showing that the wealthy and corporations exert disproportionate influence over the U.S. political system. This viewpoint has been well documented by scholars Larry BartelsMartin Gilens and Kay Lehman Schlozman, among others.

Recently, Benjamin Page and Gilens disturbed many Americans with their finding that “average citizens’ preferences have little or no independent impact on policy.” Their data suggest that the wealthy have 15 times the influence of the middle class.

As remarkable as this conclusion is, many of the reporters discussing the study failed to read it carefully and missed other important findings. For example, Page and Gilens found that the preferences of elites actually correlate fairly well to the preferences of the average citizen (with a coefficient of 0.78, with 1.0 indicating exact alignment and –1.0 reflecting inverse correlation), whereas business groups have preferences that are far more divergent (–0.10). Public interest groups, such as unions and the American Association of Retired Persons, correlate slightly better with the interests of the average voter (0.12). However, pro-business groups, whose interests  largely conflict with the average voter’s, have about nine times the influence as typical voters.

In an e-mail, Page noted that the U.S. might get some “democracy by coincidence” — meaning that the preferences of the affluent for the most part align with those of the middle class — but such luck rarely occurs with the preferences of business groups. He also said that while his work with Gilens focuses on the top 10 percent of income earners, the top 1 percent and the top 0.1 percent may have even more influence and more divergent preferences as well. In a paper with Jason Seawright and Larry Bartels, Gilens showed that the top 1 percent have far different preferences and are far more likely to be politically active. This means that reformers must curb the influence of the superwealthy and corporate lobbying (see chart: a higher number indicates strong correlation with the preferences of the middle class and strong influence on policy, a negative number indicates divergence with the preferences of the middle class and weak influence on policy).

Floodgates of money

As disconcerting as these findings are, the problem has been made worse by recent Supreme Court decisions — namely, Citizens United and McCutcheon — that opened the floodgates of money flowing from the superrich to politicians and super PACs (See chart.) If the wealthy and business groups had disproportionate influence from 1981 to 2002, when these studies were conducted, imagine their power now that the system is inundated with money. For instance, in the 2012 election cycle, casino magnate Sheldon Adelson gave more money to influence elections than the total individual contributions of the residents of 12 states.

AlJazeeraChart2

What, then, is to be done?

To fix these oligopolistic trends, we must turn to the states for ideas. Patrick Flavin, an assistant professor of political science at Baylor University, may have some answers on this score. He has been using methods similar (although not entirely comparable) to those used by Gilens, Bartels and Page to test which states are most responsive to the interests of citizens. “One nice thing about federalism is that the 50 states serve as laboratories of democracy,” he said. “So we can examine different laws and institutional arrangements in the states to see what might promote more egalitarian patterns of political representation.” What he finds should give reformers hope: There are policies to strengthen the voice of middle class voters.

Flavin has used his metric of political representation to see what state-level policies correlate strongly with high levels of equality of political representation. Below is a table with the raw ratings. A higher number means that a state is more responsive to citizens across the income scale, while a low score means that only the ideological views of the wealthier citizens is represented in policy.

chart
Source: “Lobbying Regulations and Political Equality in the American States,” Patrick Flavin

The table shows that voters are best represented in Montana, Minnesota and Oregon and poorly represented in Georgia, Alabama and Mississippi. In a working paper available online, Flavin shows that states with stringent lobbying regulations better weigh the interests of citizens across the income spectrum. This shouldn’t be too surprising; lobbying provides benefits for wealthy corporations and not necessarily for taxpayers. Business lobbyists are known not for considering the social, moral or environmental consequences of the policies they pushing for but for promoting the the narrow interests of the groups they represent. For example, most Americans support stronger gun regulations, but the National Rifle Association has ensured that gun regulations across the country remain lax.

No common sense

The big question is what happens when we get money out of politics. Corporations and special interest groups don’t generally donate only to one party: Their goal is not usually to elect ideologically similar candidates but to win the sympathies of legislators to their pet issues. The hope is that once the money influence is removed, policies will align more closely with the preferences of voters. There is also the possibility that cleaner elections will lead to more voter participation by decreasing voter cynicism.

Another of Flavin’s studies measures how policies to get money out of politics affects voter interests. He uses data on state spending priorities from 1962 to 2008. He also rates the states for each year on the basis of six factors: disclosure, limits on individuals, limits on organizations, provision of public funds for governors, provision of public funds for legislatures and clean elections. He finds that states with laws to keep money out of politics dedicate more money to redistributive programs.

Finally, states have experimented with various policies to increase voter turnout, thereby reducing the turnout gap between the rich and poor. Elizabeth Rigby and Melanie J. Springer examined what reforms affected voting inequality at the state level. They find that in states with high registration inequality, the motor voter law (a law that requires states to allow voters to register when applying for or renewing a driver’s license) had a modest effect on decreasing voting inequality and that same-day registration had a strong impact. Sadly, many efforts have been focused on getting out the vote; the far more important reform is boosting registration among lower-income voters. These findings are important because a recent study using 30 years of state-level data by William Franko, Nathan J. Kelly and Christopher Witko found “that where the poor exercise their voice more in the voting booth relative to higher income groups, inequality is lower.” Franko found that states with wider turnout gaps between the rich and poor are less likely to pass minimum-wage increases, have weaker anti-predatory-lending polices and have less generous   health insurance programs for children in low-income families. Policies to increase low-income voter registration could help increase their voice in the political process and lead to policies that benefit them.

These important findings suggest two things. First, there are common-sense ways to get money out of politics and take back our democracy. Second, reformers should work to implement more state-level reforms. In a federal system such as ours, states play an important role in shaping the distribution of income. We need to implement corporate lobbying reform, donor disclosure, public financing of elections and same-day registration. The influence of money in our political system isn’t inescapable, and we should look to the states to find effective measures to curb the power of money. However, as Fredrick Douglass noted, “Power cedes nothing without demand.” Simply knowing what works isn’t enough. We need to put these policies into action.

Originally Published on Al Jazeera

The American People Don’t Support the NRA’s Agenda

Commenting on the recent spate of mass shootings, President Obama said, “If public opinion does not demand change in Congress, it will not change.” He added, “Most members of Congress—I have to say to some degree this is bipartisan—are terrified of the NRA.” Obama is partially wrong to claim that the public needs to “demand change in Congress,” given the large literature on Congress’s poor responsiveness to the opinions of poor and middle-class voters. He is right to note the power of the National Rifle Association.

Political scientist Martin Gilens writes in Affluence and Influence, “By far the strongest association between interest group alignments and policy outcomes concerns gun control.” He investigated positions of interest groups and compared them to the public. He compared the “Power 25” group of lobbyists to the preferences of Americans at different points of the income spectrum. He finds, rather worryingly that on all issues, net interest group alignment, “is uncorrelated with the public’s policy preferences at any income level.” However, he finds that on some issues, the correlations are stronger. In the chart below, positive numbers indicate aligned interests, while negative numbers indicate divergent interests.

On economic issues, interest groups side with the rich on cutting taxes and reducing regulation, while they align with the poor and middle class on increasing spending. However, on environmental issues and gun control, interest groups are strongly divergent. Interest groups strongly disapproved of the Kyoto Protocol, which had strong support among Americans. Americans of all income levels support strong gun regulation, but interest groups strongly oppose such regulations. We can see below the strong difference between Americans of all income levels and the NRA.

How does the NRA wield such a strong influence on policymakers? After all, in the year following the horrifying Sandy Hook shooting states were far more likely to pass laws loosening gun regulations than tightening them. During that period, there were 74 school shootings. Gilens notes that “pro-gun control groups spent less than one-fifth the amount on lobbying that their anti-gun control opponents spent.” Data from the Center for Responsive Politics show the stark difference in spending between the anti-gun control lobby and those in favor of gun control.

There is also the strong possibility that politicians perceive those who are in favor of less gun control are more likely to vote on that issue alone. Further, Gilens notes that the only time politicians seem to vote against the gun control lobby is when the preferences of the affluent were strongly against the gun lobby.

 

All of this is incredibly disturbing, not only for the fate of democracy, but for the possibility of stopping gun violence, which plagues our country. The solution is to increase the voice of the middle class and poor and curb the power of special interests. Studies at the state level offer us solutions. For instance, Patrick Flavin finds that states with stronger lobbying regulations have lower political inequality. He writes that these states, “tend to weigh citizens’ opinions more equally in the policymaking process.” One of the issues he examines is gun control. Other studies suggest that boosting voter-turnout reduces voting inequality. Lower voting inequality is tied to higher minimum wage laws, stronger anti-predatory lending laws and more money dedicated to SCHIP. It’s possible that this could also mean more stringent gun regulation, since there is strong support across income groups.

Curbing the influence of lobbyists, money and organized interest groups, while strengthening the voice of the poor and middle class is the solution to gun violence. The people already support gun regulation, the problem is making their voices heard in a deck stacked against them. 

Originally posted on Policyshop.

Comparing the Policy Preferences of Unions and Corporations

The recent Martin Gilens and Benjamin Page paper finding that ordinary citizens have, “little or no independent influence on policy at all.” While the paper was covered extensively in the popular press, few bothered to even read the paper which notes, “ the preferences of average citizens are positively and fairly highly correlated, across issues, with the preferences of economic elites.” Gilens’s data look at only those in the top 10% making about $146,000 a year. It’s likely that the superwealthy in the donor class have far different interests, which is suggested by other research by Page, Larry Bartels and Jason Seawright. It is in the top 1% and above where there is a motive for rent-seeking andevidence of it.

The more important finding from the Gilens/Page paper is the influence of interest groups. The authors note that: “Interest group alignments are almost totally unrelated to the preferences of average citizens.” The chart below shows the correlation of different groups with those of the middle class and the group’s influence over policy. We can see that economic elites have more influence on policymaking, but also a stronger correlation with the middle class. Far more disturbing are business interests, which have large amounts of influence, but whose policy preferences differ markedly from the middle class (although there are still caveats).

It’s important to note that the “mass based interest groups” include groups like the National Rifle Association and American Israel Public Affairs Committee which do not share the interests of average citizens. At the same time, one corporate lobbying organization, the American Hospital Association, is actually slightly correlated with the interests of average Americans. To parse out which groups are aligned with the preferences of Americans and which are positively malign, I used data from Gilens’s book Affluence and Influence. I stuck to groups which had at least one statistically significant correlation (either positive or negative) with one group of voters (10th percentile, 50th percentile and 90th percentile). This comparison yields some interesting results. First, we can see that most unions actually take positions that strongly correlate with the preferences of all Americans, although the correlation is stronger for the lower and middle class.

Second, we can see that corporate lobbying groups do not, with one exception.

Corporations also push policies that do not share the support most Americans.

Other lobbying groups differ. The wealthy tend to be more socially liberal than the poor and middle class, which explains the divergence of religious organizations. The NRA enjoys little overlap with the public, while AARP is generally a force working in favor of the preferences of most Americans.

To illustrate these differences, I’ve put the organizations on a scatter plot, divided into four quadrants. The y-axis shows where an organization aligns with the the top 90th percentile. The x-axis shows an organization’s correlation with the bottom 10th percentile. An organization in the upper right quadrant shares the preferences of the wealthy and the poor. An organization in the lower left does is working against the interests of Americans. Here we see that unions are all in the top right quadrant. No corporations are in the right half of the chart, indicating that none share the preferences of the poor.

Finally, I show how well the various groups correlate with the middle class on another chart below. We see the same result.

 

This makes a preliminary case for focusing on corporate lobbying in order to make policymaking match the preferences of Americans. There are some caveats. It’s difficult to tell how well preferences match interests. Gilens notes in an essay for Boston Review thatJohnson’s Great Society was actually a low in terms of voter preference:

the majority of Americans were opposed to many of the other domestic programs of the Johnson years. The Great Society and the War on Poverty were not responses to an upwelling of public concern for the disadvantaged or a desire to expand the role of government in addressing social needs…

In contrast, the Iraq War represents a high:

At least at first, the Afghanistan and Iraq wars and Bush anti-terrorism policies had widespread public backing. The administration also enjoyed support from Americans at all income levels for the Medicare drug benefit, No Child Left Behind (a long-standing Democratic agenda item on which Bush partnered with Senator Ted Kennedy), and the faith-based social services initiative. New federal regulations on funding stem cell research matched public sentiments. The income tax cuts and estate tax repeal adopted in 2001 and 2003 were supported by majorities of Americans at all income levels even though they clearly provided the greatest benefits to those at the top.

Further, Gilens’s data are dated—the most recent are from 2002, before Citizens United,but after along with the rise of inequality. I’ve suggested that this means we should focus on corporate interests, but there is still a strong possibility that the 1% have very different interests than the middle class and 90th percentile (data from the Cooperative Congressional Election Study indicate that the 1% has interests more similar to the 90th percentile than average voters). Adam Bonica argues that the wealthy and corporations tend to donate in a bipartisan or moderate fashion. This does not suggest they share the interests of Americans, but rather that they are attempting to buy influence. Corporations aim to change policy – the best way to do that is to sprinkle donations across party lines. Far more important are their aims, which the data suggest may not be broadly in line with those of average Americans.

We should aim to reduce the influence of money as much as possible. However the data suggest Nietzsche may have been onto something when he said, “In individuals, insanity is rare; but in groups, parties, nations and epochs, it is the rule.” While most Americans have broadly similar preferences, most corporate interest groups are fighting for an agenda that benefits only them.

Originally posted on Policyshop

Ten Questions for Gracia Hillman

Gracia Hillman, Demos’ newest fellow, is contributing to the organization’s efforts to expand the freedom to vote for all of America’s citizens. Hillman’s areas of expertise include voter engagement, voting rights, election administration, as well as the interests and rights of women, racial minorities and people with disabilities. 

From 2003 to 2010, Hillman was a commissioner of the Election Assistance Commission, serving as its chair in 2005. Her distinguished professional experience also includes having served as Senior Coordinator for International Women’s Issues at the U.S. Department of State, Executive Director of the US League of Women Voters, and Executive Director of the National Coalition on Black Voter Participation.

What inspires you to work tirelessly on voting rights?

My grandparents were immigrants to the United States in the early 1900s and there’s a large Cape Verdean community in New England, particularly in the New Bedford, Massachusetts area, because of the whaling trade. It became apparent in the early seventies while the United States was going through its major course correction on civil rights, integration and equal opportunity that Cape Verdean Americans were not being elected to office. At that time you had to go either to City Hall or to the fire station or the public library so I organized a small group of people to bring voter registration activities to public housing projects. That was my first foray into elections, and I began to realize the impediments that stopped people from fully participating in elections and also the possibilities.

What drew you to Demos?

I became familiar with Demos when I served on the U.S. Election Assistance Commission and I greatly appreciated its commitment to fairness and access to the franchise. I also have tremendous respect for Miles Rapoport who I met when he was Secretary of State of Connecticut. [Rapoport is the former president of Demos, who left in March 2014]

What work will you be pursuing as a Demos Senior Fellow?

I will be looking at election administration—the things that advocates and individuals in communities need to stay on top of potential changes to voter ID requirements or other changes officials may be contemplating. I will also be forging working relationships with people who are the chief election official for their jurisdiction, to ensure that officials will explore with the community what the impact of any potential change might be and look for new ideas that are cost effective that can work to make sure that everybody has equal access to voting.

What contemporary connection do you see between women’s rights and voting?

Elections open up a whole dialogue about getting a community engaged and particularly for low-income women. Low-income women really get the brunt of all the changes to public policy procedure and they’re left to fend for themselves. When women have access to resources and are engaged in the changes it makes the transition a lot easier. Any time the community is going to go through any change with election procedures with voting rights issues it affects families.

Tell us your thoughts about the confluence between economic and political power.

Certainly economic power affects political participation to the extent that elected officials need money to get their job and to hold onto their job. Legislators have to spend an inordinate amount of time raising the money as the cost of running for even a state legislative seat is just getting obscene. Politicians dance to a tune and individuals and groups come to the table with money more often than not for that very purpose. The little guy gets left out. Even while we resolve the situation of minimizing the influence of the big bucks we also must stop the partisan political shenanigans that prevent voting process from being fully open.

You’ve worked on the local, state, and federal levels. What’d you learn from those experiences?

One of the things that irked me throughout the 80s were nationally organized efforts to do grassroots activities. When I worked at Operation Big Vote we had a coalition model and all communities had to work on their efforts through a coalition. The coalition was convened and organized by local groups. Our end goal was not only to increase the number of African-Americans who were registered and voting but also have a model left behind so the community could continue to use it throughout time for any election.

You’ve also worked at the international level. How does your work on elections in Asia, Africa and Europe inform your understanding of U.S. democracy?

One big lesson is that sometimes simple is better. Countries that knew they had a high level of illiteracy would have to use a symbol or a candidate’s picture so that people could instantly recognize who it was they were voting for. The United States used to be hailed as a great example for voter registration and voter education activities, but now  we’ve made it so darn complicated. Other countries are more willing to use technology so that people can vote from phones or other mobile devices and the goal is to encourage people to vote, rather than restrict voting because you have to be in a particular place on a particular date during particular hours.

You worked on the Dukakis campaign for President. Dukakis is a big hero of mine. Tell me about that experience. 

At that time I had been asked to serve as Executive Director for the Congressional Black Caucus foundation and I said, “well it better be interim, because when Dukakis becomes the Democratic nominee I’m going to go to the campaign full time.” They laughed because they didn’t think he had a chance. Lo and behold it was just a really well-thought out and structured campaign. There were some blips and I think the unraveling of it was whenBernard Shaw asked the governor the question about if his wife had been raped and murdered. That put the campaign in a tail-spin and Republicans used the Willie Horton issue, the death penalty and work release programs.

You brought up Willie Horton. That raises the question of the criminal justice system and voting.

We have a criminal justice system that operates on the principle that if you’re convicted and you serve your time, that you come back and are in a rehabilitative process so you will be a productive citizen. We say that, but we don’t behave that way. For a few years I served on the board of an organization here in D.C. that serviced women who had been incarcerated and returning to their communities in D.C. Part of re-integrating into the community includes voting, so to permanently deny someone the right to vote makes little sense.

Drawing from your work at all levels, what measures do you think could be really beneficially going forward in the next decade?

We should establish uniform procedures across the fifty states, so that if you are eligible to vote in any of those jurisdictions and you move, it’s easier to get that registration transferred to the jurisdiction where you will vote. Even some states right now can’t communicate within the state agencies because the types of computer systems that are used by the individual agencies don’t communicate with each other. We have to work towards one form of voter identification that can be used and easily tracked throughout the country.

Originally published on Demos Policyshop.

Why we should abolish the GDP

Co-Written with Lew Daly.

Imagine this: your state is thinking about building a new coal plant. Gross domestic product measures how much money that project would produce. But it can’t account for the children who get asthma or the people who die from that air pollution. And that’s a problem.

What was once a highly technical debate about the failures of conventional economic metrics is fast becoming a world movement to unseat GDP and replace it with something better.

In America, many states are finding new, more holistic measures of progress. Already, Maryland, Oregon and Vermont have begun using the genuine progress indicator (GPI).

GPI takes into account 26 social, economic and environmental indicators. These include financial factors such as inequality and the cost of underemployment. But GPI also considers the cost of pollution, climate change and non-renewable energy resources. And it explores the possible social impacts, such as the cost of commuting and crime.

States that calculate GPI often find that while they perform well economically, environmental and social indicators lag. The GDP/GPI comparison below reflects a large and growing “well-being gap” in our development since the 1970s: We are growing in our national output and consumption, but the growth is not improving our well-being as a society.

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The GPI well-being gap also tracks closely with life satisfaction, which has stalled in the United States since 1973. Data from the General Social Survey and the World Bank show that while GDP per capita has increased dramatically, happiness has flattened out.

The percentage of people who are “very happy” has remained stalled at around 30 percent (“pretty happy” moved up two percentage points) for three and a half decades, even while GDP per capita (in 2011 dollars) doubled.

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And at the same time GDP has grown, progress on child poverty has stalled. In fact, the child poverty rate is eight points higher today than it was in 1969.

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While alternative measures sound ephemeral, they are not. When commenting on Bhutan’s Gross National Happiness policy, Cylvia Hayes, the first lady of Oregon says: “What Bhutan is doing is not trivial at all. They are running policy and infrastructure decisions through a more comprehensive set of metrics that gives a much fuller account of what the effects of those decisions will be.”

Oregon’s governor, John Kitzhaber (D), wants to tie GPI to a 10-year budget plan that encourages longer-range policy development for a more sustainable state economy.

And Oregon isn’t the only state looking for new ways to measure growth. In Maryland, GPI is influencing the development of new goals such as reducing infant mortality, cutting greenhouse gas emissions 25 percent by 2020 and planting more crops that improve soil fertility. Researchers in Utah and Colorado are also developing GPI estimates in collaboration with the other states.

Some countries are also making the shift. In France in 2009, then-President Nicolas Sarkozy asked Joseph E. Stiglitz, Amartya Sen and Jean-Paul Fitoussi to investigate the limits of GDP. As a result of these efforts, INSEE, the French statistics agency, has moved to use happiness as an economic indicator and released numerous reports on its inequalityquality of life and sustainability. One significant departure between GDP and other measures is the environmental impacts of growth, which are staggering. GDP growth has coincided with a massive and costly increase in carbon dioxide concentrations.

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As a group of social scientists argued in the journal Nature, “if a business used GDP-style accounting, it would aim to maximize gross revenue — even at the expense of profitability, efficiency, sustainability or flexibility.”

Originally published on The Washington Post.

You can blame America’s inequality and shrinking middle class for rising student debt

Co-Written with Mark Huelsman.

There is a tendency among elite opinion makers to believe that debt accrued while gaining a college degree is “good debt” that isn’t problematic because, as the thought goes, those with college degrees tend to make enough money to recoup their debt over a lifetime. Student debt is supposedly an equalizer—a way for students to gain access to credit in order to get a degree that will give them an equal chance to enter the middle class and achieve the American Dream. Sadly, like many pundit platitudes, this assertion is grounded in fantasy, not fact.

In fact, this is only true for some students—those who were fairly wealthy in the first place. College is certainly worth the cost, but that at present it is saddling poor and middle-class students with student debt is actually preventing them from participating in the wealth-building processes that previous generations have enjoyed.

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The debate over student debt usually focuses on those right out of school, but that masks that a substantial portion of those with student debt struggle mightily to pay off their loans in a timely manner, delaying (sometimes in perpetuity) their entry into the middle class. Research by the US Federal Reserve Bank of New York finds that many borrowers still haven’t paid off their student loans by their 40s and 50s.

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For students just out of school, upward of 15% of their federal student loans are in default within three years of students leaving school, and delinquency rates for student loans have continued to rise during and after the recession, even as delinquencies in every other form of loan—including mortgages, home equity loans, credit cards, and auto loans—have declined.

The inability to pay off debt is a really big deal, because these students are more likely to take any job that comes their way to pay off their loans than invest in themselves. Research from Demos finds that if “current borrowing patterns continue, student debt levels will reach $2 trillion sometime around 2022. Another report concludes that, “an average student debt burden for a dual-headed household with bachelors leads to a lifetime wealth loss of nearly $208,000.” Given that wealth inequality has returned to Gilded Era heights, this finding should be disturbing.

The problem is that, rather than being seen as a social investment, college education is increasingly seen as a commodity—something that is accessible for the wealthy, but out of reach for the poor, and increasingly, the middle class. Sure enough, student debt is highly correlated to income level with the wealthiest having the lowest amount of debt as a portion of their income (see table).

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Poor and middle class students are much more likely to take on student loans—in fact, nearly 9 in 10 graduates who receive Pell Grants also needed to borrow to finance their degree, compared to 53% of graduates who did not receive Pell Grants. These students will spend more time paying off their debt and less time saving for retirement or other needs, creating a vicious cycle of deepening wealth inequality.

There is a more tenuous, but equally important way in which rising inequality has increased student debt among the poor and middle class – through the political system. Recently, Martin Gilens and Benjamin Page sent the internet alight with their assertion that “economic elites and organized groups representing business interests have substantial independent impacts on U.S. government policy, while average citizens and mass-based interest groups have little or no independent influence.” This finding is corroborated by Larry BartelsDorian WarrenJacob HackerPaul Pierson and Kay Lehman Schlozman who have all recorded similar findings.

Although this elite and corporate control of the political system is bad a priori, it has particular importance in the case of education. In their study of the political attitudes of the wealthiest 1%, Larry Bartels, Benjamin Page and Jason Seawright find that the wealthiest 1% have different policy priorities than average voters. For instance, while 78% of the general public agree with the statement, “The federal government should make sure that everyone who wants to go to college can do so,” only 28% of the wealthy agree. Elites are also far less likely to agree that, “The federal government should spend whatever is necessary to ensure that all children have really good public schools they can go to,” by a margin of 35% to 87%. They also believe that cutting deficits is a more important priority than funding education, and believe that education is a lower spending priority than the middle class.

This helps explain why states have slashed spending for education while also cutting taxes—those with the most influence over policy have little to gain from public education, but much to gain from cutting taxes. It also explains why there is very little national attention paid to community colleges, which educate 4 in 10 college students, and who are disproportionately impacted by state budget cuts.  Research by Greg Duncan and Richard Murnane shows that wealthy spend far more supplementing their children’s incomes than the poor, which means that state level cuts have a devastating impact on the poor (see chart).

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Robert Hiltonsmith and Tamara Draut find that in the aftermath of the Great Recession, 49 states (all but North Dakota) cut spending on higher education and that state spending on higher education hit an all-time low in the wake of the recession (see chart). This, essentially, results in higher tuition. Draut and Hiltonsmith find that, “Nationally, average tuition at 4-year public universities increased by 20% in the four years since 2008 after rising 14% in the four years prior.” Tuition continues to grow as a share of the median income, which means all families but the very rich have to take out large debts to pay for their education. This, in turn, means that recent graduates are paying off loans, rather than building wealth.

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College is an important pathway to the middle class and one of the most effective ways to fight inequality. As it becomes increasingly difficult for students to gain an education, it closes gateways to upward mobility. The effect is particularly potent for blacks. A recent study by Bhashkar Mazumder finds that, “blacks have experienced substantially less upward intergenerational mobility and substantially more downward intergenerational mobility than whites.” He finds that this gap shrinks among those with 16 years of schooling.

One simple way to move away from the debt-for-diploma system is for the government to shift from a policy of loans to a policy of grants. There is no reason why college education should primarily be funded by expensive, high interest loans. In the past, Pell Grants helped the poor and middle class attend college, but Pell Grants make up an increasingly low percentage of the cost for college (see chart).

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At a bare minimum the government could allow students to refinance their debts at a lower level; most other countries have policies that allow students to pay off debts as a portion of their income and eventually allow the debts to be forgiven. In Britain, students don’t begin paying off their loans until they find stable employment, and then they pay in proportion to their earnings. Australia similarly ties the cost of paying off the loan to the income of the graduate, and loans themselves come with no interest attached. In Denmark, education is considered a right by the people and an investment by the government, and is therefore free. Some students are even offered a stipend by the government to defray costs. Norway and Sweden have  similar systems of higher education. The US has attempted to implement loan repayment schemes that allow students to pay in accordance with their income, but the default repayment plan on federal student loans is still an arbitrary 10-year time period—a time when borrowers tend to make less, and when saving for retirement could benefit them the most. But enrollment in these plans have been slow, likely due to the fact that our system is needlessly complex and opaque (to wit, there are upwards of 9 different repayment plans one can choose on student loans).

Education, and especially college education is a pathway to the middle class, and most Americans think it is more important than ever. But as society becomes more unequal, access to debt-free education becomes harder and harder.

Originally published on Quartz. 

America’s new wealthy have so little to offer society

Co-written with Wallace Turbeville.

In F. Scott Fitzgerald’s The Great Gatsby, East Egg represents inherited wealth and privilege, while West Egg represents wealth earned through innovation and hard work, a distinction at the core of the American ideal. We have always embraced a dynamic capitalism, marked not by stasis but rather “creative destruction,” lionizing trust-busters as heroes of competition. Joseph Schumpeter, who coined the phrase, feared that eventually capitalism would lead to corporatism and destroy the entrepreneur, the lifeblood of the capitalist system. One disturbing implication of Thomas Piketty’s new book, Capital, is that the American economy is slipping into a form of “rentier” capitalism, in which passive income from wealth, increasingly in the form of inherited fortunes, is supplanting dynamism, hard work and innovation. The term rentier came into use in the mid-19th century to describe people who lived off income from property rather than creating something of value. And now the rentiers have found a way to protect their gains—buying influence in the political system.

The rise of rentier capitalism

Richard Hofstadter observed about American capitalism, “Once great men created fortunes; today a great system creates fortunate men.” This was what Fitzgerald saw in the 1920s: dead, inherited wealth next to dynamic new money. He saw the former as aristocratic, with only the facade of knowledge and virtue, while the latter was entirely uninterested in wisdom and seduced by wealth. Oscar Wilde observed the same in Victorian England, where the illusion of virtue (being named Earnest) was far more important than its practice. Today, much the same dynamic exists between the inherited rentier wealth of the Kochs and Waltons and the new money of the Zuckerbergs and Brins. There was a day when aristocrats were at least cultured. Today, instead, we have a wealthy class with the culture of new money and innovativeness of old money (i.e., rather little of either). This new rentier class, with little to offer society, subsists largely on legalized grift or, in economic terms, rent.

Rents comes in two forms, both referring to income received as a result of status rather than earned by hard work or as compensation for a product, idea or service that benefits society broadly. The first form is inherited wealth and the second is monopolistic market power. The first is easy to see. The second has changed from vertical business trusts to Jamie Dimon as the reincarnation of J. Pierrepont Morgan armed with supercomputers, phalanxes of physicists for quantitative analysis and legions of lobbyists. In our post-liberal economy, these two types of rentiers interact in a feedback loop that has changed the meaning of American inspired (and imposed) western capitalism.

Thomas Piketty paints a dystopian picture of the consequences of this accumulation of wealth in his new book. Piketty describes an underlying property of capitalist economies—if return on capital assets exceeds growth of the economy, wealth will flow into investment in assets, land, companies and financial assets and away from entrepreneurial innovation. Innovation requires distribution of income to the workers who produce products and services, empowering them to consume such goods and services in a virtuous circle measured by consumption driven growth. In contrast, the pool of passive capital asset investment will grow as earnings accumulate instead of being used for consumption. For Piketty, this is the usual configuration of a capitalist economy, rather than the idyllic days of 1945-1979 during which equality increased and the financial well-being and security of the “typical American family” marched relentlessly forward.

Today, America’s top 1% makes its income primarily from capital, not labor.

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Piketty writes, “In terms of total amounts involved, inheritance has thus nearly regained the importance it had for nineteenth century cohorts.”

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He notes, however, that this truth has yet to reach popular culture, where “recent American TV series feature heroes and heroines laden with degrees and high-level skills.”

Piketty concludes that we may soon reach a point in which social rent-seeking àl la marrying wealthy will be a far more effective path to prosperity than entrepreneurship. This is how capitalism dies—not with a revolution—but rather vitiated by rentiers, increasingly myopic and addicted like a junkie to the high of wealth accumulation.

The rise of rentier finance

These conditions are closely related to the massive growth of an overtly rent-seeking financial sector.  Rather than investing in the “real economy,” financiers make money through increasingly obfuscated and complex financial “innovations.” With the deregulation of finance in the Clinton era, finance became increasingly rent-seeking, building towers of leverage rather than companies. During the period of growing disparity of incomes and wealth described by Piketty, this differential between financial sector wages has increased by a staggering amount. Thomas Philippon and Ariell Reshef, find that, “that rents accounted for 30% to 50% of the wage differential between the financial sector and the rest of the private sector.”

 

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Investment in the rent-supercharged financial sector itself has been a primary destination for accumulated wealth and it has greatly increased returns relative to growth. This capital investment fuels the growth of the rent-seeking business of the financial sector, which causes wealth to accumulate and need to be invested, and so on in a loop. The two trends reinforce each other.

The politics of rent

The development of rentier capitalism was not inevitable. The most nakedly self-interested class in modern history owes a substantial debt to a slavish political system. As Paul Krugman notes of Bush era policies, “True, the top tax bracket on earned income fell from 39.6 to 35 percent. But the top rate on dividends fell from 39.6 percent (because they were taxed as ordinary income) to 15 percent — and the estate tax was completely eliminated.”

The Koch brothers, who bankroll a large portion of the conservative dis-information machine are great examples. They claim to love free markets but in truth nothing terrifies them more. The freedom that they seek is the freedom to exploit the market power that their inherited wealth affords them. They use the political sphere to entrench the wealth inherited from their father. Piketty notes that the American tradition is one of high progressive taxation, especially on bequests, to prevent an American analog to European-style aristocracy. Even the patron saint of libertarianism, Robert Nozick, argued that an estate tax was fair, and suggested that, “taxes will subtract from the possessions people can bequeath the value of what they themselves have received through bequests.” Two generations of rentiers are rather enough.

As we have seen, the financial sector perpetuates and is fueled by the new rentier class. In her book, All The Presidents’ Bankers, Nomi Prins traces the history of banker influence in the highest corridors of power, when “the titans of banking” replaces “the barons of industry as the beacons of economic supremacy in the United States.”

Economic inequality perpetuates itself through political inequality, which breeds cronyism. Supreme Court decisions like McCutcheon and Citizen’s United enhance the power of the super wealthy to use the political system to extract rents. Larry BartelsMartin GilensDorian WarrenJacob HackerPaul Pierson, and Kay Lehman Schlozman have found that the rise in economic inequality has coincidedwith a rise in political inequality. The wealthy are using the political system to bolster their wealth, and while both parties are certainly complicit, in few eras has the political system been so nakedly captured by big money.

The implications

The implications are stark. First, liberals must note the important distinction between wealth earned through creativity and labor and wealth accumulated to capital, and focus their attention on the latter.

A growing portion of today’s moneyed elite is neither virtuous nor meritorious, it is parasitic. Second, government must create an economy that rewards work, not property. The Lockean ideal quickly becomes farce when one family owns more wealth than the poorest 40 million Americans.

Taxing inheritance and empowering the middle and lower income segments of society will slow the drift toward an economy dominated by a growing rentier class. Moreover, a moderate increase in inflation could greatly benefit the vast majority of Americans. Higher inflation, even higher than the official target, would adversely affect the asset-holding super rich whose asset value would erode with inflation, but would benefit the rest of the public by encouraging immediate consumption and decreasing the burden of existing debt.

But there is a more fundamental way to address the problem. The modern financial sector constitutes a powerful extra-governmental system of redistribution in favor of the wealthiest Americans. A large portion of the financial sector is in the business of extracting value from the flows of money within the economy with little or no benefit to the intermediation of the allocation of investment capital to socially beneficial uses.

The financial reforms that were adopted in response to the 2008 financial crash were overwhelmingly focused on reducing the potential for a repeat of the catastrophic run on the financial system that triggered the crisis. While this was an admirable endeavor,   a second phase of reform of the financial sector limiting its role in the accumulation of wealth at the top and the stagnation and decline of the well-being and security of the rest of society is essential to a return to a sustainable economy. The myriad practices through which the financial sector extracts value from the system without enhancing the process of allocating capital to purposes that serve the public must be eliminated to reverse the drift toward a rentier economy. These practices can be identified, starting with high-speed trading, predatory derivatives transactions, and tax incentives for hedge funds. Policy makers simply need to develop the backbone to deal with them.

Originally published on Quartz.