In order to create jobs and expand the economy, panelists at the Center for American Progress argued Wednesday for reforms to the American model of capitalism—a path also needed, they said, to counteract executives earning billions and potential elimination of the middle class.
The Center for American Progress is a liberal Washington think tank founded by John Podesta, the head of President Obama’s transition team and White House chief of staff under former President Bill Clinton.
The panelists Rep. Keith Ellison, D-Minn., Thomas Conway, International Vice President of United Steelworkers and Brit Wittman, Director of Cisco Leadership Education, Cisco Systems, Inc. centered their discussion on a proposal entitled “Inclusive Capitalism for the American Workforce” by Richard Freeman, Herbert Ascherman Chair in Economics, Harvard University, and Joseph Blasi and Douglas Kruse, both professors at Rutgers’ School of Management and Labor Relations.
The proposal advocates “incentive compensation systems for corporations to allow for tax deductions of earnings based on company performance. By giving tax breaks only to incentive systems that include all workers, the US can give many more American a share of future economic growth and thus re-establish a link between economic performance and the earning of regular workers.”
“The weakening of the American middle class is a legitimate fear–that our kids’ futures won’t be as bright as ours was,” Ellison said. “If you give rich people more and more money, it doesn’t come down, it stays up there.”
Furman criticized his fellow academics for overemphasizing executive compensation as a measure of corporate health.
“Business school professors, accounting professors and economists–the only thing academics have found within the current system is that the guys at the top clean up,” Freeman said “But that does not mean that the company is running well.”
The plan includes cash profit sharing, in which worker pay is linked to overall company performance; gain sharing, in which pay is linked to work group or department performance and employee stock ownership or company stock options.
Wittman, who oversees executive development at the computer networking giant, said rewarding specific kinds of behavior can be difficult in practice.
“I try to create incentive programs to encourage the right behavior,” Wittman said. “The risk that you don’t drive the behavior you’d want and the risk that you’ll drive it too much.”
Ellison, a third term congressman who serves on the House Financial Services Committee, says the Freeman proposals face political opposition. “If you get out there and talk about income equality—there will be people out there that will call you socialist and outspend you,” Ellison said. “We have to reach out for coalition partners. We have to find people.”
With 83 members, Ellison is the Co-Chair of the largest Democratic party caucus in the House, the Progressive Caucus.
“What do they (executives) do with the money?—they buy politicians and they promote think-tanks. They will create policy that will exacerbate the problem even more,” Ellison said.
“We are fighting against legislation that is hurting the middle class. We are promoting a set of bills and provisions that are bolstering the middle class.”
Conway, whose union includes over one million former and retired members, said change will take time.
“You’re going to have to make some time to fight the fight,” Conway said. “It’s going to take a tipping point in this country and we’re getting there “