Until economic and social rules work for all Americans, they’re not working. Inspired by the legacy of Franklin and Eleanor, the Roosevelt Institute reimagines the rules to create a nation where everyone enjoys a fair share of our collective prosperity. We are a 21st century think tank bringing together multiple generations of thinkers and leaders to help drive key economic and social debates and have local and national impact. TABLE OF CONTENTS EXECUTIVE SUMMARY 7 INTRODUCTION 11 THE CURRENT RULES 23 More market power, less competition 24 The growth of the financial sector 28 The ‘shareholder revolution,’ the rise of CEO pay, and the squeezing of workers 33 Lower taxes for the wealthy 36 The end of full-employment monetary policy 40 THE STIFLING OF WORKER VOICE 43 The sinking floor of labor standards 46 Racial discrimination 49 REWRITING THE RULES 57 Make Markets Competitive 58 Fix the financial sector 62 Incentivize long-term business growth 68 Rebalance the tax and transfer system 70 Make full employment the goal 73 Empower workers 77 Expand access to labor markets and opportunities for advancement 80 Expand economic security and opportunity 84 APPENDIX: OVERVIEW OF RECENT INEQUALITY TRENDS 93 ENDNOTES 100 This paper is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License. ACKNOWLEDGEMENTS This report was authored by » Axel Aubrun, Topos Partnership » Dean Baker, Center for Economic Policy Joseph E. Stiglitz, and Research Chief Economist & Senior Fellow, » Mark Barenberg, Columbia University Roosevelt Institute School of Law » Craig Becker, AFL-CIO with coauthors » Suzanne Berger, MIT (in alphabetical order) » Jared Bernstein, Center on Budget and Policy Priorities » Nell Abernathy, Roosevelt Institute » Josh Bivens, Economic Policy Institute » Adam Hersh, Roosevelt Institute » Kate Black, American Women » Susan Holmberg, Roosevelt Institute » Raphael Bostic, University of Southern » Mike Konczal, Roosevelt Institute California Price School » Heather Boushey, Washington Center for and research assistant Equitable Growth » Beth Ann Bovino, Standard & Poor’s » » Eric Harris Bernstein, Roosevelt Institute Julia Bowling, Brennan Center for Justice » Ellen Bravo, Family Values @ Work and with contributions from Consortium » David Card, University of California (in alphabetical order) Berkeley » Frank Clemente, Americans for Tax » Carola Binder, University of California Fairness Berkeley » Michael Cragg, The Brattle Group » Andrea Flynn, Roosevelt Institute » Sheldon Danziger, Russell Sage » Violetta Kuzmova, Columbia University Foundation » Tim Price, Roosevelt Institute » Mike Darner, Congressional Progressive » Mark Stelzner, University of Caucus Massachusetts Amherst » Xavier de Souza Briggs, Ford Foundation » Anastasia Wilson, University of » Brad DeLong, University of California Massachusetts Amherst Berkeley » David desJardins, Consultant and Investor Joseph Stiglitz and the Roosevelt Institute » Geert Dhondt, John Jay College of Criminal Justice would like to acknowledge the following people » Lisa Donner, Americans for Financial (in alphabetical order) for their input and/or Reform » Steven Fazzari, Washington University in participation in convenings that helped to inform St. Louis » Amanda Fischer, Office of Representative this work. This is not a list of endorsers, and Maxine Waters mistakes are the authors’ alone. » Sarah Fleisch Fink, National Partnership for Women and Families » Organizations are listed for affiliation Nancy Folbre, University of Massachusetts purposes only. Amherst REWRITING THE RULES OF THE AMERICAN ECONOMY: AN AGENDA FOR SHARED PROSPERITY 4 ACKNOWLEDGEMENTS » Daniel Geldon, Consultant » Christina Romer, University of California » Richard Gilbert, University of California Berkeley Berkeley » Emmaneul Saez, University of California » Michelle Holder, John Jay College of Berkeley Criminal Justice » Aimee Santos-Lyons, Western States » Olivier Giovannoni, Bard College Center » Stanley Greenberg, Greenberg Quinlan » Steve Savner, Center for Community Rosner Research Change » Robert Greenstein, Center on Budget and » John Schmitt, Center for Economic and Policy Priorities Policy Research » Martin Guzman, Columbia University » Dan Schwerin, Office of Hillary Rodham » Jody Heymann, University of California Clinton Los Angeles » Adrianne Shropshire, Black Civic » Bart Hobijn, Federal Reserve Bank of San Engagement Fund Francisco » Zach Silk, Silk Strategic » Matt Hollamby, Wyss Foundation » Damon Silvers, AFL-CIO » Chye-Ching Huang, Center on Budget and » William Spriggs, AFL-CIO Policy Priorities » Graham Steele, U.S. Senate Banking » Taylor Jo Isenberg, Roosevelt Institute Committee » Arun Ivatury, SEIU » Lynn Stout, Cornell University Law School » Elizabeth Jacobs, Washington Center for » Dorian Warren, Roosevelt Institute Equitable Growth » Felicia Wong, Roosevelt Institute » Simon Johnson, MIT Sloan School » David Woolner, Roosevelt Institute » Ianna Kachoris, MacArthur Foundation » Julie Kashen, Make it Work Campaign Special thanks to Roosevelt staff, Initiative » Stephanie Kelton, U.S. Senate Budget for Policy Dialogue staff, and consultants Committee for their support and contributions: Hannah » Richard Kirsch, Roosevelt Institute Assadi, Aman Banerji, Johanna Bonewitz, » Anna Lefer Kuhn, Arca Foundation » Mark Levinson, SEIU Lydia Bowers, Brenna Conway, Samantha » Tara Magner, MacArthur Foundation Diaz, Renée Fidz, Joelle Gamble, Kathryn » Brad Miller, Roosevelt Institute Greenberg, Laurie Ignacio, Jiaming Ju, » Larry Mishel, Economic Policy Institute Eamon Kircher-Allen, Gabriel Matthews, Joe » Markos Zúniga Moulitsas, DailyKos McManus, Camellia Phillips, Marybeth Seitz- » Marcus Mrowka, Roosevelt Institute Brown, Liz Sisson, Alan Smith, Kevin Stump, » Jessica Gordon Nembhard, John Jay Alexandra Tempus, and Patrick Watson. College of Criminal Justice » Dave Palmer, Roosevelt Institute » Manuel Pastor, University of Southern California This report was made possible » Aaron Pickrell, Remington Road Group, on with generous support from the behalf of NYC Mayor Bill de Blasio » Kalen Pruss, Office of Martin O’Malley Ford Foundation, the MacArthur » Robert Reich, University of California Foundation, and Bernard L. Berkeley Schwartz. » Rashad Robinson, Color of Change REWRITING THE RULES OF THE AMERICAN ECONOMY: AN AGENDA FOR SHARED PROSPERITY 5 EXECUTIVE SUMMARY REWRITING THE RULES OF THE AMERICAN ECONOMY: AN AGENDA FOR SHARED PROSPERITY 6 EXECUTIVE SUMMARY Inequality is not inevitable: it is a choice we make with the rules we create to structure our economy. Over the last 35 years, America’s policy choices have been grounded in false assumptions, and the result is a weakened economy in which most Americans struggle to achieve or maintain a middle-class lifestyle while a small percentage enjoy an increasingly large share of the nation’s wealth. Though these lived experiences and personal challenges are important, they are only the tip of the iceberg that is the crisis of slow income growth and rising inequality. To fully understand the scope of the problem, we must also examine the array of laws and policies that lie beneath the surface—the rules that determine the balance of power between public and private, employers and workers, innovation and Dominant economic frameworks over shared growth, and all the other interests the past 35 years—like “trickle-down” that make up the modern economy. economics, and the idea that markets work perfectly on their own—paved the Given the scale and interconnected nature way for an onslaught of policies that of the issues we face, a tentative, piecemeal decimated America’s middle class. This response will not suffice. Instead, this paper presents an evidence-backed report lays out both a new framework for alternative framework: understanding the current structure of our economy and a comprehensive policy agenda u that rewrites the rules to promote stronger Markets are shaped by laws, growth and broadly shared prosperity. regulations, and institutions. Rules matter. The United States bills itself as the land u The rules determine how fast the of opportunity, a place where anyone can economy grows, and who shares in achieve success and a better life through the benefits of that prosperity. hard work and determination. But in fact, u the U.S. today lags behind most other Concentrated wealth can hurt developed nations in measures of inequality economic performance. Under the and economic mobility. For decades, wages right rules, shared prosperity and have stagnated for the majority of workers strong economic performance while economic gains have disproportionately reinforce each other. There is no gone to the top 1 percent. Good jobs that trade-off. provide access to the middle class are u increasingly scarce, while essentials like A tentative, piecemeal policy education, housing, and health care are response to help the neediest will growing ever more expensive. Deeply rooted not suffice. We must rewrite the structural discrimination continues to hold rules of the economy with a focus on down women and people of color, and more restoring a balance of power between than one-fifth of all American children now live in poverty, meaning that these trends the competing interests that make up are on track to become even worse in the the modern economy. future. To solve these problems, we must better understand the causes of today’s REWRITING THE RULES OF THE AMERICAN ECONOMY: AN AGENDA FOR SHARED PROSPERITY 7 EXECUTIVE SUMMARY inequality,