Wealth, Debt and Inequality: Everyone’s Economy Goes to Congress

On Tuesday, April 10th as much of Washington was watching the kickoff of Zuck’s congressional apology tour, Demos was on Capitol Hill with key allies, reminding our representatives that economic opportunity remains a core issue for their constituents, and detailing how current federal policy falls well short of the robust agenda we need to lift up working families of all races—the kind of agenda featured in Demos’ 2018 policy book, Everyone’s Economy.

Demos’ VP of Policy & Research Tammy Draut kicked off the conversation by noting that the working class no longer matches the “white guy in a hardhat” stereotype. As she explains in her book Sleeping Giant (out in paperback next week), the new working class is more female and racially diverse than ever, and increasingly toils in the poorly paid “serving and caring” sectors of our economy. This is the reason we require a multi-racial populist agenda to meet their needs.

From there, the conversation focused on the role of debt and taxation in driving our disturbing racial wealth gap, and a set of clear steps lawmakers can take to reverse the trend.

Demos Economist Algernon Austin explained how student loan and vehicle debt is driving the persistent gap, and how investing in public transit is a key solution. Mark Huelsman, Demos Senior Policy Analyst, picked up on the student debt theme, describing the recent shift to a debt-for-diploma system (which wasn’t the case when today’s members of Congress were in college), and how this disproportionately harms students of color. He pointed to new polling showing support for “debt-free college,” and Tammy pointed to new legislation sponsored by Sen. Brian Schatz as a solution.

Chye-Ching Huang of the Center for Budget and Policy Priorities then took the audience on a whirlwind tour of how taxation could operate to reduce inequality by providing resources to invest in public goods and incentivizing work for low-income families. Instead, as Chye-Ching pointed out, taxation often exacerbates that inequality by providing disproportionate benefits to wealthy, white populations—at times doing this on top of discriminatory policy that locks people of color out of opportunity, such as the mortgage interest deduction.

Finally, Eileen Appelbaum, Co-Director of the Center for Economic and Policy Research, talked about the many ways in which private equity firms rig the system against workers—gaining 20 percent potential profit against less than 1 percent of the risk for purchasing a company, saddling the companies they buy with huge debt loads, and charging them “monitoring fees” while they retain ownership—all of which is a recipe for bankruptcy (like Toys “R” Us), in which workers are laid off but private equity managers can still walk away with millions. Solutions include severance requirements for workers and forcing private equity firms to act as “joint employers” so workers can receive fair treatment during bankruptcy.

This conversation—attended by nearly 60 Hill staff across 2 sessions—took place in the wake of the 50th anniversary of Martin Luther King, Jr.’s assassination, and serves as yet another reminder that we’re a long way from what Dr. King was fighting for when he was killed: true economic opportunity and fairness for African Americans and others who must push forward against the headwinds of systemic racism.

The 25 policies featured in Everyone’s Economy won’t fix racism or completely level the playing field. But it’s a tangible agenda that policymakers in Congress can take up right now to address the problems highlighted above and take us forward toward an America where everyone truly has an equal chance to prosper.