The nation’s woefully inadequate response to the pandemic is jeopardizing millions of retirement futures.
The United States, President Donald Trump is now proclaiming, stands at “war.” We are facing, in the novel coronavirus, “an invisible enemy” that could claim the lives of more Americans than every shooting war America has ever fought.
But that sort of terrible toll, public health people have been working so hard to remind us, doesn’t have to be inevitable, not if we all sacrifice for the common good.
In 1942, in the months right after Pearl Harbor, President Franklin Roosevelt faced the same basic challenge as we do today. To overcome the fascist forces aligned globally against us, FDR understood, the American people were going to have to sacrifice as never before.
That sacrifice, FDR also understood, would have to be shared. The war’s burden, he believed, had to be “equitably distributed” to ensure that “a few do not gain from the sacrifices of the many.”
“The great masses of our people,” FDR adviser Randolph Paul would add, will sacrifice gladly “if they know that no group is being favored, that rich and poor alike are giving up the comforts of peacetime in order that we may more effectively prosecute the war.”
Our rich today and the corporations they run don’t seem, sadly, to be exactly rushing to give up any of their contemporary comforts. They’re rushing instead to line up for bailouts. Airline executives are asking for over $50 billion in grants, deferred taxes, and loan guarantees. The cruise, hospitality, and gaming industries are clamoring for corona cash, too.
President Trump has been more than sympathetic.
“We’re going to back the airlines 100 percent,” he’s opined in one typical comment. “It’s not their fault.”
That doesn’t happen to be quite true. The airlines are reeling right now in no small part, notes Institute for Policy Studies analyst Sarah Anderson, because they’ve spent the past decade squandering their “free cash flow” — the money left over after operating expenses and capital expenditures — on share buybacks. A whopping 96 percent of the dollars the biggest U.S. airlines could have spent on strengthening their operations for the long haul has gone instead to buying back their own shares of stock, a move that serves only to pump up the rewards that go to top airline execs and shareholders.
U.S. corporations outside the airline industry, meanwhile, have been playing the same make-the-rich-richer games. Overall, S&P 500 companies have spent 50 percent of their available “cash flow” dollars on buybacks.
Corporate America’s top execs would like to see all their lucrative games continue. They’re seeking no-strings-attached federal bailout aid that helps them restore their comfortable pre-corona status quo. But progressive lawmakers on Capitol Hill, backed by the labor movement, are pushing back. They want bailout aid earmarked only for vulnerable workers, not the occupants of executive suites.
Franklin Roosevelt would most definitely approve this pushback thrust. FDR spent a good chunk of World War II fighting to keep top corporate executives from making a killing off the conflict.
In June 1942, for instance, Roosevelt’s war procurement agencies sent 100,000 war contractors a pamphlet that warned against excessive executive compensation. Salary packages over $25,000, the federal contracting pamphlet indicated, could be “open to question and subject to limitation.”
The limitation would come that October when a presidential proclamation created a new federal Office of Economic Stabilization and directed that new agency to limit corporate executive pay after taxes to $25,000 per year, about $400,000 in today’s dollars.
Supreme Court justice James Byrnes stepped down from the nation’s highest tribunal to run this new office, and he quickly issued regulations that established a maximum fine of $1,000 — and up to a year in jail — for any executive violating the $25,000-cap rule. He also denied corporations tax deductions on the entire salary paid out to cap rule violators, not just “the amount in excess of $25,000.”
Unfortunately, in the new Congress that convened the following January, progressive lawmakers no longer had a working majority, mainly because many conservative-leaning election officials had effectively disenfranchised FDR-leaning soldiers serving abroad. Less than 1 percent of the nation’s five million active-duty service personnel voted in the 1942 election.
Conservatives in the resulting new Congress attached language killing the $25,000 corporate pay cap to a badly needed raise-the-debt-ceiling bill, and FDR didn’t have the votes to sustain a veto. So FDR didn’t win his corporate executive pay-cap battle, but he did win the broader war for shared sacrifice — thanks to his aggressive action on the tax front. America’s rich would be paying, by 1944, about four times more of their income in taxes than the rich paid at any point during World War I.
In 1939, the year the war in Europe began, the first dollar of taxpayer income over $200,000 faced a 66 percent federal income tax rate. In 1944 and 1945, that first dollar over $200,000 faced a 94 percent tax rate. That top rate would hover around 90 percent for the next two decades, years that would see the emergence in the United States of the first mass middle class in world history.
Shared sacrifice had become shared prosperity.
Can we today follow in FDR’s bold footsteps? Some lawmakers on Capitol Hill are certainly trying to march in his direction. The Congressional Progressive Caucus Center, for instance, has released an innovative menu of policy proposals for making sure that bailout dollars help the many and not the few.
Among the proposals: requiring CEOs of bailed-out businesses to cap executive compensation at 50 times the pay of their most typical workers, the upper limit of the CEO-worker pay gap in the decades right after World War II. In 2018, by contrast, 50 U.S. corporations paid their top executives over 1,000 times their typical worker pay.
Linking executive pay at bailed-out companies to worker compensation would give top execs a powerful incentive to raise their worker pay. Limiting CEO compensation during the corona crisis would also help us transition toward a more equal economy for our post-corona world.
“If major corporations can be effectively run by CEOs getting one tenth the going rate, it would set a valuable precedent,” as economist Dean Baker observes.
Our world would look quite different, he adds, “if we had the same ratios of CEO to worker pay as fifty years ago.”
If we win the war the right way, in other words, we can go on to win the peace.
Sam Pizzigati co-edits Inequality.org. His recent books include The Case for a Maximum Wage and The Rich Don’t Always Win: The Forgotten Triumph over Plutocracy that Created the American Middle Class, 1900-1970. Follow him at @Too_Much_Online.