Jonathan Rothwell for the Brookings Institution: One way that the top 1 percent cements their position is by occupying the financial sector and accessing above-market returns on their investments.
The large and growing prominence of the financial sector in terms of excess pay has a great deal to do with hedge funds, which barely existed before the 1980s but are now integrated into mainstream investment banks such as Goldman Sachs and hold more than a trillion dollars in assets from pension funds, university endowments and other institutional and private investors.
A hedge fund is a loose term referring to an investment portfolio that is less regulated than other funds, because only very rich individuals or approved institutions can participate in it. This regulatory distinction allows hedge funds to take more risk, borrowing levels of money that greatly exceed their assets — and avoid many onerous reporting requirements. These regulatory advantages have allowed hedge funds to consistently outperform stocks and other assets by roughly 2 percentage points each year.
The accredited investor rule has mostly been ignored by scholars of inequality. But legal scholars Houman Shadab, Usha Rodrigues and Cary Martin Shelby are an exception. They have each written persuasively about how the rules contribute to inequality by giving the richest investors privileged access to the best investment strategies. …
The law also has inflated the compensation of hedge fund workers — roughly $500,000 on average — by restricting competition. Mutual funds, which charge tiny fees by comparison, are barred from using hedge fund strategies because they don’t have rich investors. If the law were changed to allow mutual funds to offer hedge fund portfolios, hundreds of billions of dollars would be transferred annually from super-rich hedge fund managers and investment bankers to ordinary investors, and even low-income workers with retirement plans.
Let’s extinguish youth smoking
Shauna Rust for the Roosevelt Institute: Since the 1964 Surgeon General’s report revealed the health hazards of smoking, awareness of the deadly toll of tobacco use has become widespread.
Yet more than 480,000 Americans still die each year due to illnesses caused by tobacco use. A groundbreaking study by the Institute of Medicine found that raising the smoking age to 21 could prevent hundreds of thousands of premature deaths. Given that tobacco use remains the leading cause of preventable death in the U.S., we need to raise the national tobacco age to 21 to save lives and reduce healthcare costs.
The main impetus for raising the tobacco age is the fact that most adult smokers, 95 percent, begin smoking before the age of 21. Research has found that almost nine out of 10 current smokers tried smoking before the age of 18, but that the age range of 18–21 is a critical transition period when young people are most likely to become daily smokers. …
Raising the tobacco age to 21 also would help prevent youth from obtaining tobacco products from peers or older students. As the Campaign for Tobacco-Free Kids points out, most youth are obtaining their cigarettes and tobacco products from social sources rather than direct retailer purchases. In fact, 82 percent of adolescent smokers obtain their cigarettes from others, mostly friends or peers. By raising the national tobacco age to 21, many of these social sources could be cut off, since high school-aged youth are less likely to go to school with, work with, or be friends with people over the age of 21. Similarly, when U.S. states raised the drinking age from 18 to 21 in the 1980s, youth alcohol use, binge drinking and alcohol-related car crashes decreased, according to the National Highway Traffic Safety Administration.
Radical measures to reduce equality
William Darity interviewed by the Russell Sage Foundation: I’ve been an advocate of two programs that I describe as “universal but race-conscious.” That is, they would be applied universally, but would have disproportionately greater benefit for the groups that have been historically deprived.
The first is a federal job guarantee, which is an anti-poverty measure intended to address the problems associated with low wages or uncertain wages. By guaranteeing all adults access to the opportunity to work at non-poverty wages, this program would ensure a “living wage” for all. Existing proposals to raise the minimum wage or to mandate a living wage cannot accomplish that aim because you only can receive the minimum or living wage if you have a job. The job guarantee not only would protect individuals from unemployment, but also would provide an assurance of a job for everyone at non-poverty wages. It also would include a benefits package containing the same health insurance plan that civil servants receive now. Such a program dramatically would reduce economic insecurity for low-income families and individuals.
The second measure is what we call the “baby bonds” proposal, which is an anti-inequality measure designed to address the wealth gap. This program would create public trust funds for all newborn infants that they could access when they reach 18. It’s simply universalizing the model that wealthy families already use — giving kids a trust that they can access at a certain age. The amount of the trust would be graduated based on the wealth position of the parents. And again, this would be a universal program, meaning that every child, regardless of how wealthy their parents are, would receive something, but kids whose parents have less wealth would have greater amounts in their trusts.
Compiled by Joseph Lawler from reports published by the various think tanks.
