More Is Better. And Smarter.

The Case for Deficit-Financed Investment

When asked last week about his proposed corporate tax hike—pitched alongside the American Jobs Plan last month—President Biden told reporters, “I’m willing to compromise but I’m not willing to not pay for what we’re talking about. I’m not willing to deficit spend.”

That’s the wrong approach, as Roosevelt Fellow J.W. Mason told CNN. “When they put down that marker, ‘we’re gonna pay for this 100 percent,’ and then they find that it’s hard to get those taxes through . . . you end up with a smaller program than the country needs and that’s the danger.”

The right approach? Deficit-financed investment, Roosevelt’s Emily DiVito argues on the blog. 

“The US federal government has the means and the ability to . . . make bigger investments with deficit spending, circumventing the need for pay-fors to raise revenue or reduce spending elsewhere,” she writes.

Three reasons we should do so now:

1. We need to. After decades of underinvestment in our infrastructure and people, and insufficient action against the climate crisis, the combined $4 trillion of the American Jobs Plan and American Families Plan won’t be enough.
2. The extra money can help us recover faster, more fully, and more equitably.
3. The investment would pay for itself, in the form of increased economic productivity and potential—and with today’s low interest rates likely to last a while, there’s little risk. 

Read on.

Examining the Racial Wealth Gap

On Wednesday, Roosevelt Fellows Mehrsa Baradaran and Darrick Hamilton testified at the US Congress Joint Economic Committee hearing, “Examining the Racial Wealth Gap in the United States.” 

“An essential first step in dealing with the wealth gap is to acknowledge that public policy created the wealth gap and must be used to address it,” Baradaran said. “Full justice demands a recognition of the historic breach of the social contract between America’s constitutional democracy and Black Americans. And contract breach requires a remedy.”

“[A]cknowledgment alone will be empty if not accompanied by some form of material redress: Reparations provides a retrospective, direct, and parsimonious approach to address the Black-white racial wealth gap,” said Hamilton. “Moreover, it is a racially just policy because it requires the US to take public responsibility and atone for its long history of racial injustice.”

Read and watch Baradaran’s and Hamilton’s full testimonies. 

Regulating Stock Buybacks

From 2010 to 2019, publicly traded companies spent a total of $6.3 trillion on stock buybacks—that is, repurchases of their own shares on the open market.

But, Roosevelt Fellow Lenore Palladino and William Lazonick explain in a new working paper, stock buybacks manipulate stock prices and enrich corporate executives at the expense of workers and taxpayers—and innovation. 

“Before the pandemic hit, the corporate governance ideology of shareholder primacy contributed to the country’s widening income and wealth inequality by disproportionately directing corporate funds to white, wealthy households who own 85 percent of corporate stock, while workers experienced four decades of wage stagnation,” they write.

As Palladino told Vox’s Emily Stewart, “The fact that the stock market is booming is because of the financialization of our goods- and services-producing companies, not because the real economy is doing so well.”

What We’re Reading

Americans Are More Pro-Union—and Anti-Big Business—Than at Any Time in Decades [by Roosevelt’s Emily DiVito and Aaron Sojourner] – The Guardian 

Americans Have Learned to Talk About Racial Inequality. But They’ve Done Little to Solve It –TIME

The Best Books about Environmental Justice, According to Experts [feat. Roosevelt’s Rhiana Gunn-Wright] – New York Magazine