The heart of the Accountable Capitalism Act is a requirement that companies with more than $1 billion in revenue obtain a corporate charter at the federal level, rather than basing themselves in the most loosely regulated state they can find. (Sorry, Delaware.)
This new charter is meant to address an epidemic of bad corporate behavior, especially the tendency of top executives to value profits over wider well-being. It would obligate executives to consider the interests of all corporate stakeholders — including employees, customers and communities — not just shareholders. It would require that at least 40 percent of company board members be elected by employees, an idea known as co-determination. The bill also contains provisions curbing stock buybacks, which tend to benefit only shareholders, and unilateral political expenditures.
.. it’s a distinct break from the neoliberal capitalism of the recent Democratic Party.
In the 1980s, Milton Friedman enshrined the idea of shareholder value maximization, which told businesses that their sole purpose was to maximize profit for their owners. Rather than pushing back against this obviously selfish, wealth-favoring theory, Democrats got on board. Sure, this framing might need a tweak here, a bit of regulation there, or the carrot of a tax break or two. But super-efficient big businesses would keep the broader economy chugging along for everyone — self-interest would mean we’d all win.
.. some 80 percent of stock market value is owned by 10 percent of the population, little of that benefit trickles down to the rest.
.. All that said, the Accountable Capitalism Act still relies on a fundamental belief that capitalism is good, even as a new generation of Democrats wants to upend that system altogether. On the left, winner-take-all competition — which Warren professes to “love,” by the way — is more and more seen as the root of our country’s ills, not something to preserve. A new wave of socialist candidates are loudly making that case.
.. But Warren isn’t out to get capitalism. She’s out to save it. The senator clearly believes that markets can create wealth.
Last week, one of President Trump’s top economic advisers, Larry Kudlow, argued the U.S. economy is “crushing it,” posting boom-like numbers in key areas, all thanks to the leadership of the president.
Evaluating such claims usually begins with assessing whether the president should get credit for an economy he inherited in year eight of a solid expansion. But the fact that Trump is claiming credit for trends that were largely ongoing before he took office is one of the few ways in which he is not much different from former presidents.
.. Who is actually getting ahead in the Trump economy?
.. . In contrast, corporate profits and equity markets truly are crushing it, both on a pre- and especially, given the large business tax cuts, a post-tax basis.
.. There is also no evidence of an investment boom, suggesting the recent, above-trend growth in GDP is Keynes, not Laffer — meaning the deficit spending is providing a temporary boost but will not have lasting, positive impacts for long-term economic growth.
.. Starting with wages, since Trump took office, the real hourly wage for the 82 percent of the workforce that is blue collar in factories and non-managers in services is up half-a-percent, an extra 11 cents per hour.
.. the growth of mid-level pay has picked up a bit, as we’d expect with such low unemployment. But inflation, largely driven by higher energy costs, has also sped up, canceling out any real gains.
.. If energy prices come down and unemployment continues to fall, real wage growth for mid-wage workers will improve. But the magnitude of their gains will likely be nothing close to the administration’s claim that the tax cut would add at least $4,000 to annual earnings within a few years of the legislation.
.. In President Barack Obama’s second term, real annual wage growth for mid-wage workers was about 1 percent, so call that the baseline.
.. Sticking with the tax cut, its proponents main claim was the big corporate cuts would generate more business investment, which would lead to faster productivity growth, which would position us for higher paying jobs. So far, every link in that chain is broken.
.. Business investment is growing, as we’d expect in an economy operating close to full capacity. But its growth rate is not faster now than at various points earlier in the expansion.
.. There has been a modest uptick in investment in structures (such as plants, offices, wells, mine shafts, warehouses) in the first half of 2018, but, as economist Dean Baker has shown, the growth in such investment was due to higher energy prices generating increased investment in mining for oil and natural gas.
.. While mining investment has increased by 36.7 percent over the last year, it rose by 47.3 percent from the second quarter of 2009 to the second quarter of 2010, when the Obama administration was still enforcing environmental laws. In both cases, the key factor was rising world oil prices.
.. It takes time to plan investments, so it is too soon to conclude the tax cuts have not made a difference. But none of the surveys of companies’ investment plans show any plans to ratchet up capital spending
.. What is clear is firms are using their tax windfalls to boost share prices through buybacks, which, along with strong corporate profits, are fueling a historical bull market for stocks.
.. instead of borrowing $2 trillion to finance the regressive tax cut, Congress could have put more money in the pockets of working Americans and made investments for our economic future.
.. First, we should have expanded the Earned Income Tax Credit to compensate for decades of stagnant wage growth. The Brown-Khanna plan, calling for a $1.4 trillion EITC expansion, would have provided working families making up to $75,000 with up to $8,000 more in take home pay.
.. the best way to raise pay for ordinary Americans is to do so directly as opposed to pretending it will come through the largesse of executives and shareholders.
.. Second, we should have put billions to expand the National Science Foundation’s Advanced Technological Education program, linking employers to technical schools to develop credentials that respond to the needs of our cutting-edge industries.
.. Third, we should have provided hiring incentives for anchor companies to create jobs in places left behind such as Paintsville, Ky., or Flint, Mich. If a company is willing to hire in places where people do not have enough access to high-wage jobs, then they should get support for doing so.
.. Fourth, we should have invested in bringing high speed Internet to every corner of America. Providing fiber broadband to every corner of the United States is the modern equivalent of rural electrification.
.. Larry Kudlow’s right: The Trump administration is crushing it for its donor base, which is in turn handsomely rewarding them.
.. But it has done nothing for the forgotten Americans and nothing to make sure America is a winner in the 21st century. We do not need more sugar highs for those already doing well. We need to give lasting pay raises to those struggling to pay the bills and then focus on the forward-looking investments that will finally reconnect GDP growth to broadly shared prosperity.
Mr. Moynihan, 58 years old, got the top role after CEO Kenneth Lewis unexpectedly announced his retirement in fall 2009. During that period, Bank of America faced major financial problems following acquisitions of Countrywide Financial Corp. and Merrill Lynch & Co. To stay afloat, the bank had to take $45 billion from the government.
.. After Donald Trump’s surprise 2016 election, bank stocks broadly jumped. Bank of America shares surged 74% between then and the end of 2017.
.. For the full year of 2017, the bank posted a $21.1 billion profit, excluding an adjustment from the tax cut, roughly matching the bank’s all-time profit record from 2006.
.. The bank issued millions of new shares during the crisis, however, so its per-share earnings remain far below where they were precrisis. Likewise its shares, unlike those of competitors such as JPMorgan Chase & Co. and Wells Fargo & Co., remain below precrisis levels.
.. “Bank of America has done a sensational job under Brian Moynihan,” Mr. Buffett said
the fact that a worker’s wealth and well-being is much more dependent upon her employer than the employer is on a given worker tilts things in the employer’s favor.
.. Two trends demonstrate the decline of labor and the ascent of business. Since 1979, after-tax corporate profits as a share of gross domestic product have grown by 22.8 percent, while the share of nonfarm business sector income going to labor has dropped by 10.3 percent.
The decline in worker bargaining power in the United States is the cumulative effect of numerous small and large changes over recent decades reaching into almost every area of law and policy. This combines with a decline in the enforcement of existing laws that could protect workers’ bargaining power — laws protecting unions, laws against wage theft, nondiscrimination laws, and more.
.. Among these changes is the requirement that employees sign what are known as “noncompete” and “no-raid” agreements, both of which restrict workers’ ability to extract pay hikes by threatening to take similar jobs at competing companies.
.. “less than half of workers who have non-competes also report possessing trade secrets.”
When entry-level workers at fast food restaurants are asked to sign two-year non-competes, it becomes less plausible that trade secrets are always the primary motivation for such agreements.
.. The treasury report estimated that 30 million American workers have signed noncompete agreements.
.. 94 percent of the net employment growth in the U.S. economy from 2005 to 2015 appears to have occurred in alternative work arrangements.
The growing emphasis on “shareholder value” has provided additional justification for all of these anti-worker developments.
.. “the shareholder value movement starting in the late 1980s and now institutionalized through industry analysts” was crucially important in the devaluation of employees:
.. Accounting in business is mainly about costs. Finance people hate fixed costs because of the challenges they raise to share price valuation when there is uncertainty, and the biggest fixed costs are labor. Simply moving the same labor costs from employees to outside staffing companies moves it from one part of the accounting ledger to another and makes analysts happier.
This mentality, in turn, encourages “the use of temps and contractors” to fill high-wage jobs because “that way the employer doesn’t have to raise wages for all their employees.”
.. Companies could outsource work to areas with cheaper labor and less of a union presence. This both weakened the union and ramped up competitive pressure on the companies that were unionized. The result was fewer unions.
.. In 2017, 6.5 percent of the private sector work force was unionized, down from 35 percent in 1955.
.. The contemporary weakness of organized labor and the threatened status of employees has roots in the breakdown in the 1970s of the postwar capital-labor accord — what A.H. Raskin, the legendary labor reporter for The Times, called a “live-and-let-live relationship” that held sway for 30 years.
.. First, they would alter antitrust enforcement to require consideration of the likely effect of mergers on concentration in the labor market, in order to prevent “too high a risk of wage suppression.”
.. Second, Krueger and Posner would support legislation making noncompete agreements “uniformly unenforceable and banned if they govern a worker who earns less than the median wage in her state.”
.. ban no-poaching arrangements altogether:
We propose a per se rule against no-poaching agreements regardless of whether they are used outside or within franchises. In other words, no-poaching agreements would be considered illegal regardless of the circumstances of their use.
.. In the 2016 election, Trump profited from the conviction of rural and working-class voters that they were on a downward trajectory. If anything, Trump appears to be gambling that letting those voters’ lives continue to languish will work to his advantage in 2020.
.. His administration has turned the executive branch, the federal courts and the regulatory agencies into the sworn enemy of workers, organized and unorganized. Trump is indisputably indifferent to the plight of anyone in the bottom half of the income distribution:
- look at his appointments,
- look at his record in office,
- look back at his business career and
- look at the man himself.