Not This Time: Watch out for Wall Street
Back during the Great Recession, we bailed out Wall Street. This time, we need to make sure the bailout is for the rest of us.
By Ericka Taylor, Inequality.org
We have entered uncertain times. The novel coronavirus has upended life around the globe, and none of us knows exactly how long the outbreak or its ramifications will last. But daily reminders of how much we can’t control shouldn’t stop us from seizing upon those things we can.
We may not know if the United States has yet been successful in flattening the curve, but we do know that social distancing is our best strategy for limiting the spread of the disease. We don’t know when those with the privilege to telework will return to the office, but we know that it’s essential to look out for the economic and physical well-being of those who can’t work remotely and those who can’t work at all. We can’t know how deeply we’ll sink into the coming recession, but we can commit to avoiding the mistakes we made during the last one.
During the Great Recession, we bailed out Wall Street. This time, the bailout should be for the rest of us. The overwhelming majority of people want an economy that works for everyone, not just the super-rich. We want to be able to cover our basic needs, from housing to food to education, without being forced to take on unsustainable debt. We want a safety net to protect us when hard times strike and the security of knowing that getting sick will neither bankrupt us nor force us to put others at risk because we don’t have paid sick days.
All of this is achievable. We’ve already seen local legislators and Congress begin putting temporary supports in place to mediate the harm of the coronavirus and the recession.
Here’s just a small sampling of what else needs to happen if we are to counter business—and bailouts—as usual.
Last Time: The Bailout Centered on Greed
In 2009, the U.S. government allowed banks to write down roughly a trillion dollars in losses. This is after the finance industry engaged in such increasingly risky behavior that, over the prior 30 years, its debt had grown from $3 trillion to $36 trillion. Federal prosecutors did not even criminally charge any major bank CEOs, declining to make personal the consequences of their greed. By 2010, top Wall Street executives and traders were back to normal, collectively receiving $25 billion in bonuses, but the jobless rate on Main Street was still near 10%. Losses in home value and retirement savings hit nearly $10 trillion during the Great Recession, devastating thousands of families.BAILOUTS ARE COMINGLet’s make sure they work for airline workers
This Time: The Bailout Must Center on Need
The nature of the coronavirus requires that we protect public health at all costs. That means making sure that everyone can access healthcare and stay home sick without losing their wages. We must support people who lose their jobs or are furloughed without pay due to the pandemic. We also need to support small- and medium-sized businesses in their efforts to care for their employees and their livelihood.
For the short-term, that means:
- Paid sick and family leave;
- Interest-free loan forbearance for all who need it;
- A moratorium on evictions and foreclosures;
- A moratorium on negative credit reporting;
- Halting all debt collection;
- Flexible repayment options post-forbearance;
- Stopping wage garnishment and the freezing of bank accounts;
- Increasing predatory lending protections; and
- Spurring the economy by canceling student debt.
Last Time: We Didn’t Put in Measures to Close the Growing Wealth Divide
It’s important to note that the economy could have been facing a looming recession even if the coronavirus had never emerged. While Wall Street continues to hand out bonuses that dwarf the average worker’s salary, the rest of us have continued to struggle. The gig economy has exploded and wages for lower- and middle-income workers have stagnated, while costs have increased for everything from housing to goods and services to childcare.
Families across the country are taking on increasing debt, while the super-rich either hoard or gamble with their increasingly large share of the collective pie. The wealth divide is even more acute for some. The recession worsened the century-long economic divide between Black and white households: By 2031, Black wealth is expected to be nearly $100,000 lower than it would have been without the Great Recession.
This Time: We Can Narrow the Wealth Divide by Taxing Extreme CEO Pay Gaps
It is indefensible for companies to pay the frontline workers who produce their goods and services the tiniest fractions of what their CEOs earn. The gap between CEO pay and the typical worker has continued to skyrocket, with the vast majority of S&P 500 firms paying their CEOs more than 100 times what they pay typical workers, and 1 in 10 of those workers was paid below the poverty level for a family of four. We should tax CEO pay ratios that are over 100 times higher than typical workers to help pay for pressing social needs that will benefit the many and not just the corporate elite. If a tax penalty like the one proposed here had been in place in 2018, the federal government could have brought in up to $17.2 billion in revenue annually.
Last Time: We Didn’t Regulate Stock Buybacks
Stock buybacks are schemes in which a company buys its own stock. That might sound innocent enough, but buying up shares reduces the total number of stock shares, making the remaining shares become more valuable. Company executives, who get paid in stock, then become even wealthier thanks to this artificial inflation of the stock price. But the company has in no way become more efficient, innovative, or profitable.
This Time: End Stock Buybacks
Even billionaire Mark Cuban agrees that companies that receive a bailout during this crisis should not be allowed to buy stocks back in the future because they’d be “using taxpayer money to buy back stock.” To put a finer point on the consequences of this behavior: The largest U.S. airlines spent 96% of their available cash earnings buying their own shares. American Airlines even had negative free cash flow from 2010-2019 and still spent $12.5 billion enriching its executives by buying its own stocks. Now airlines are among the first in line for a bailout.
Any federal support airlines receive should mandate that they provide necessary worker coronavirus health protections, ensure all workers receive full pay and benefits during the crisis, require a pay-ratio limit, and must, as our friends at the Institute for Policy Studies suggest, be tied to “other proposed pro-worker conditions, such as setting a $15 per hour wage minimum, requiring worker representation on boards, and banning anti-union activity.”
This list is far from comprehensive, and much more will need to be done. The banks that were “too big to fail” are uniformly larger now, and the modest constraints imposed by the Dodd-Frank Act have either been weakened or have yet to be finalized even a decade later. Additionally, recovery from the coming recession will be impossible if we fail to help states and municipalities finance their response to the health crisis. Requiring banks to hold on to their capital instead of gambling with it will also be essential to sustaining the economy.
In the coming weeks and months, we’ll be expanding on the proposals above and developing additional ones. We’ll also be working with our allies, and hopefully, you, to ensure that we emerge from the other side of this recession into the world we envision. We can have fair wages and quality healthcare and a safety net that isn’t filled with gaping holes. All we have to do is fight for it.
Originally posted at TakeOnWallStreet.com
On March 20, one hundred Democrats sent a joint letter to House Speaker Pelosi listing a number of corporate accountability conditions for emergency relief, beginning with strong demands for protections against worker layoffs, wage cuts, and labor rights violations. The Democrats also demand restrictions on executive pay that would have real bite.
These include a cap on senior executive pay of no more than 50 times the pay of the firm’s median worker. Linking CEO pay to a multiple of worker pay would prevent taxpayer subsidies from pumping up executive pay and, at the same time, create an incentive to narrow internal pay divides by lifting up the bottom of the wage scale.
We urge that any legislation include appropriate guardrails for those corporations accepting taxpayer funding, including:
- Workers must come first. Corporations must use federal assistance to maintain their payrolls without demanding concessions on wages or benefits. Workers must be protected in the case of bankruptcy and no funds should be used for anti-union campaigns or to undermine collective bargaining efforts.
- Tax dollars must not be used to reward wealthy shareholders and executives. No stock buybacks, dividends, or executive bonuses until federal funds are repaid in full.
- Cap on senior executive pay. No corporate executives should make more than 50 times the pay of their median worker.
- Workers must have a seat at the table. Corporate recipients of public assistance must reserve at least one seat on their board for a representative elected by workers.
- Companies must be held accountable. An oversight authority must be established to ensure corporate compliance with these conditions. The oversight board must include worker representatives. CEOs should personally certify compliance and violations of the terms should trigger criminal penalties and claw-backs of public assistance.
- Taxpayers must have a stake in the company. Taxpayers should receive equity in return for assistance to ensure that once companies return to fiscal health, the public can benefit from its investment.
As I explain in this CNN oped, there should be bipartisan potential for a restriction based on the CEO-worker pay gap. A Stanford survey, for instance, found a majority of ordinary Republicans favor a cap on CEO pay relative to worker pay at all companies.
Organized by Rep. Peter DeFazio (D-OR), Chairman of the House Committee on Transportation, and Rep. Lloyd Doggett (D-TX), Chairman of the House Ways and Means Health Subcommittee, the Democrats’ letter includes two other conditions that affect executive pay: a ban on stock buybacks, which inflate equity-based exec compensation, and a moratorium on executive bonuses until federal funds are repaid. The letter also calls for bailout firms to include worker representatives on their boards, a policy that has helped restrain executive excess in many European countries.
Congressional Progressive Caucus Co-Chairs Pramila Jayapal (D-WA) and Mark Pocan (D-WI) also included a 50-1 pay ratio cap at bailed-out companies in an extensive list of crisis response demands they sent to Pelosi.
These bold Democratic proposals stand in stark contrast to the Senate Republican plan’s pathetically weak restrictions on executive compensation at airlines and other distressed companies that receive emergency financial assistance. Despite their vows to restrict CEO pay, the Republican plan merely bans pay raises for two years for executives who earned more than $425,000 in 2019. In other words, if a CEO made $10 million in 2019, he or she could earn $10 million in 2020 and 2021. If an executive made $424,999 in 2019, he or she would face no pay limits whatsoever.
Saying you’re going to limit CEO pay at bailed-out corporations and then merely proposing to freeze that pay at pre-virus levels is like chasing burglars out of your house and then calling them an Uber for their getaway.
The Republican plan would do nothing to prevent massive CEO windfalls through their equity-based pay during a taxpayer-funded economic recovery. Say a CEO got a stock grant worth $9 million in 2019. To match that value in 2020, when share prices are very low, the firm would have to award many more shares, which could easily balloon in value in a recovery. Many Wall Street firms pulled this maneuver after the 2008 crash.
Proposals to merely ban executive bonuses for bailed-out firms, even if extended for a few years after they repay the public funds, could also be easily circumvented by shifting pay into other forms of compensation, including stock-based pay.
The Republicans’ proposal regarding golden parachutes is also laughable. These payouts for departing executives would merely be limited to twice the value of their 2019 compensation. In 2018 (the most recent year for which data are available), the CEOs of the five largest U.S. airlines made an average of $10 million. So taxpayers could be required to cover the bill for golden parachutes of $20 million or more.
Saying you’re going to limit CEO pay at bailed-out corporations and then merely proposing to freeze that pay at pre-virus levels — the trick President Trump and other Republicans are trying to pull off — is like is like chasing burglars out of your house and then calling them an Uber for their getaway.
Taxpayer bailouts should not help corporate CEOs escape the crisis without a scratch while so many others are suffering.
Sarah Anderson directs the Global Economy Project at the Institute for Policy Studies and co-edits Inequality.org. Follow her at @SarahDAnderson1 Executive Pay
100 House Democrats Call for Cap on CEO-Worker Pay Gaps at Bailed-Out Firms MARCH 21, 2020 / by Sarah Anderson. Meanwhile, Republicans have proposed pathetically weak executive pay restrictions for companies relying on taxpayer support.CONTINUE READING
How to Make the Airline Bailout Work for Workers, Not Just CEOs MARCH 17, 2020 / by Sarah Anderson. The government should provide direct wage subsidies to airline workers while restricting CEO pay to no more than 50 times median wages.CONTINUE READING
Iowa’s ‘First in the Nation’ Presidential Candidate Contest is Also One of the Most Inequitable JANUARY 30, 2020 / by Sarah Anderson
- Development of a COVID-19 Vaccine: We call on the CDC for the development of a vaccine, with international cooperation and free distribution, and that there is no profiteering by pharamaceutical companies through these efforts. County and city officials must also work to ensure that testing is widely available and free of cost.
- Guaranteed Protections for All Workers: At least 30 paid days of sick leave and family and medical leave for all workers, not just a fraction as the bipartisan bill that just passed Congress allows for. There should be no exclusions based on employer size, employee status, or length of employment. No one should go to work when they’re sick or when a loved on is. Protective equipment and safety measures for healthcare and emergency workers. Emergency unemployment benefits and wage coverage for all workers, including tipped workers, gig workers, domestic workers, undocumented workers, and independent contractors. We support currently proposed legislation to establish an emergency Earned Income Tax Credit (EITC) in response to the COVID-19 pandemic.
- Protections for People/Workers Without Wages: Not every person living in the US is able to work, whether due to disability, age, discriminatory practices, or because their labor is unpaid, as with parents who care for children at home, or criminalized, as is the case with sex workers. Many also deal with wage stagnation or make a living outside wage labor. Every person residing in the US, regardless of status, should receive $3,000 a month from the government to bolster the social safety net and help enforce a better standard of living during this crisis.
- Medicare for All: We need healthcare free at the point of service, with no copays, deductibles, or premiums. Our country requires comprehensive and universal coverage, regardless of citizenship or immigration status. Congress must take action to pass an emergency Medicare for All bill that accomplishes this. We also demand a repeal to the Hyde Amendment and protection for abortion as basic healthcare and not an elective procedure.
- Right to Safe Housing: This means a moratorium on evictions, taxes, and foreclosures. We are calling for a rent freeze, an end to houseless camps sweeps, and immediate provision of emergency housing for all who are unhoused.
- Keep Communities Safe: Police, jails, and ICE/CBP hurt our communities every day, but they are especially dangerous during a viral pandemic. Many of these institutions will become hot beds for the virus and provide obstacles to ensuring those inside benefit from community care. We demand a moratorium on detention and deportations, a release of incarcerated people, closure of detention camps, and the abolition of cash bail. Services supporting those experiencing sexual and domestic violence, intensified during times of confinement, must be prioritized. Local, state, and federal funds and personnel should be redirected to providing emergency services.
- Bail Out People and the Planet: Put people back to work in the aftermath of the pandemic with a Green New Deal. Nationalize fossil fuel companies; phase out fossil fuel use within 10 years; and ensure a just transition for affected workers with a job, home, pension, and 5 year salary guarantee. This would also suspend utility shut offs and bills for 12 months; expand power marketing administrations to create unionized jobs building publicly owned renewable energy.
- Debt Forgiveness: If the Fed can pump $1.5 trillion into Wall Street, we can forgive student loan debts, and suspend payments for mortgages and other household debts for those who lose their jobs.
- Lifting of All US sanctions Against Sovereign Countries. Sanctions have killed hundreds of thousands of civilians, depriving regular people of much-needed medical supplies and building materials. The COVID-19 pandemic only intensifies these shortages, particularly in hard-hit countries like Iran.
- Right to Information: We deserve to know what’s going on in our country in order to have full transparency and accountability of those in power. To do this, we must ensure that everyone has free internet/Wifi and a means with which to access.
- Safe and Fair elections: States who have not yet had primaries should reallocate resources to ensure that voters can vote by mail and thus do not have to risk spreading the virus by crowding into voter booths. Election workers should also be equipped with personal protection while they ensure we can continue the primaries as safely as possible.
As we make these demands, we must also prioritize organizing around:
- Community Cooperation: Now more than ever, mutual aid is key to ensuring members of our community stay resilient as we endure this crisis together. We must form or find local efforts to be sure our neighbors are taken care of.
- Bernie Sanders: We know that when it comes to elected officials, we are not choosing a hero or a friend, but rather a political opponent. Bernie Sanders has continuously fought for many of the working class demands we have listed, and thus, we will continue our work to ensure his message is heard by the many and maintain he is the best candidate to beat Trump in November.
We know the work that must happen to deal with COVID-19 must be collective work and that our impact and chance at survival is contingent on working with as many people as possible. This crisis represents a moral obligation to mitigate this crisis as best as possible and empower those around us to take action now.
The COVID-19 pandemic has revealed truths about how our capitalist society runs. It has laid bare the injustice, the inequality, and the indifference to human suffering that are endemic to capitalism. In response, voices around the country, including some in Congress, are arguing for national paid sick leave, expansion of Medicaid, a moratorium on evictions, the forgiveness of student debt, and free healthcare.
We need all of these things–but we’ve needed them for a long time. It should not take a disaster that threatens the well-being of people across the world for our leaders to muster up the political will to provide workers with basic human rights.
If there were ever a time for bold leadership not bound by the old ways of doing things, this is it. So, right now, we have a choice. We can let Trump and the Democratic Party establishment have their way, pushing private corporations as the “saviors,” letting them turn a crisis into a profit-making opportunity while millions die. Or, we can come together in solidarity — to push back against the rich and powerful who use racism and xenophobia to divide us — and demand that the crisis be dealt with in the only humane way — with universal programs that guarantee basic needs as human rights, and pave the way to a more just society. We know these ideas may be revolutionary to the status quo. They are radical because they get to the root of the problem. They produce results for the working class.
Now is the time for solidarity and political demands because this crisis is political.