By Karen Petrou
On July 18, the Economic Policy Subcommittee of the U.S. Senate Banking Committee turned its attention from the panel’s usual agenda to an unusual hearing on the challenges posed by U.S. economic inequality and what Congress might actually do about them. For the first time, we saw a shared belief by senators on both sides of the aisle and diverse witnesses that, over the past two decades, Americans have become mired in the income and wealth into which they are born. This isn’t exactly a news flash – see our prior blog posts on how unequal America has become and our most recent one on the dearth of public resources with which to counter fierce economic downdrafts. However, it isn’t just that senators finally discovered inequality – it’s that the outline of a bipartisan response took shape. Thus, for all the difficulty in Congress doing anything about even something as critical as economic inequality, the session was a break-out moment.
The Unifying Force
Perhaps the most startling fact about this hearing is that it was convened by Sen. Tom Cotton (R-AR), a strong conservative one might not think of as keen to consider economic equality. Notably, he took the same position on aggregate GDP and like-kind economic measurements as Paul Krugman, Joseph Stiglitz, and other very progressive democrats: prosperity data miss most Americans. As Sen. Cotton said:
To exaggerate just a little, they [economists] often seem to believe that so long as the economy grows at 3 percent and Americans can afford more cheap plastic stuff from China, that America must be doing great. But is that really true? When I talk to Arkansans, I hear a different story. Most of them don’t dream of extravagant wealth, much less abstract ideas like “economic growth” and “consumer surplus.” …[T]hey dream of a career that pays an honest wage so they can live in a decent neighborhood. They dream of getting married and starting a family. And ultimately, they dream of passing on this standard of living to their children – plus a little bit more. That’s the American dream I hear, according to the Arkansans that I know. … Is our nation helping Americans achieve this American Dream, or are we failing them? I have to say, I think in some important ways our nation is failing our fellow citizens.
Ranking Democrat Cortez Masto (D-NV) rarely agrees with Sen. Cotton, but she strongly echoed his view that most Americans have been left behind in the recent “recovery”:
We want our children to grow up and become financially self-reliant. We want the children of renters to be able to own their own homes if they wish. We want children whose parents struggled to put food on the table to be able to afford a full pantry and even a few meals out every month. We want children who survived homelessness to grow up with an income adequate to not just pay the rent but save for their children’s college education and their own retirement. We want workers retiring from one career to be able to open a small store and have it thrive. Yet, those dreams – the American Dream – are unattainable for too many…. It is wrong that the zip code where a child is born and grows up affects their future income and financial success more than that child’s education, aptitude or work ethic.
The Dividing Line
Where differences arise is what she and Sen. Cotton want to do about economic immobility. For the Arkansas Republican, the solution lies in less regulation and a far tougher stand against China. For the Nevada Democrat, it’s unaffordable banking services, predatory lending, high student-debt levels, non-compete clauses, “union-busting,” and franchising practices (the latter of which she plans soon to address in legislation).
These differences are sharp and might seem insuperable barriers to constructive action on economic immobility and the inequality that empowers it. However, the first step to effective political action is to agree that otherwise divergent politicians share a common problem. Until now, most conservative Republicans blamed immobility and inequality on family indolence – “welfare queens,” veterans too willing to rely on disability income, etc. But Sen. Cotton knows his constituents too well and their inequality has become too embedded for him to espouse these cures; instead, he’s looking for action.
Conversely, Democrats have long blamed struggling families’ plight on inadequate social spending – more welfare, “Medicare for all,” and so forth. Sen. Cortez Masto aims at other targets, most notably post-crisis financial policy. This isn’t uncontroversial, but it’s at least a more pragmatic place to start the inequality discussion than other Democratic initiatives focused on long-term economic justice, not getting money now into people’s pockets.
An Equality DMZ
To craft near-term, substantive equality solutions, one needs to step away from the ongoing battle over “reducing regulatory burden” versus “weakening big bank rules.” One potential DMZ is to be found in the “Equality Bank“ construct. This isn’t anything like a Postal Bank or the public banks that progressives propose and conservatives detest. Instead, the Equality-Bank idea subsumes new charters fully viable under current law which could reduce regulatory burden – fine for the GOP – but tie this tightly to an enforceable, specific, and meaningful mission to serve low-and-moderate income households – a goal on which both Republicans and Democrats agree.
The devil is really in the details, but Equality Banks are the kind of action that responds to bipartisan inequality concerns without encountering partisan third rails. It is also among the handful of proposals that unite the largest banking organizations with the smallest, preventing the internecine warfare that dooms so much in this sector.