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Hearing Inequality

By Bartlett Naylor

At a U.S. Senate Budget Committee hearing on income and wealth inequality on March 17, Sen. Chris Van Hollen (D-Md.) pointed to a startling statistic:  last year the average annual household income in the city of Baltimore was roughly $53,000. If Jeff Bezos of Amazon were to move there, that figure would rise to more than $170,000. Baltimore is home to 593,490 individuals living in 239,116 households. That’s one person making triple the average of an  entire city.  Bezos reportedly made about $64 billion in 2020 (a good year for Amazon, certainly). Sen. Van Hollen might understate the inequality: Bezos’ $64 billion would add $107,000 to individual income average, but $267,000 to the average income per household.

Such is the economic inequality rampant in the United States.

Under the gavel of Chair Bernie Sanders (I-Vt.), the committee heard from witnesses spanning the political spectrum, including Robert Reich, former Secretary of Labor under President Clinton and now a professor at the University of California Berkley; Sarah Anderson of the Institute for Policy Studies; Jennifer Bates, an Amazon worker; and Scott Winthrop of the right-leaning American Enterprise Institute.

The testimony these witnesses delivered was compelling. Anderson pointed to a Federal Reserve finding that roughly 40 percent of Americans lacked the funds in a bank account to meet a $400 emergency.  Bates, who is attempting to form a union in Alabama, reported that work at her warehouse is “grueling.”

In conjunction with the hearing, Sen. Sanders introduced a measure that would lessen income inequality, the Tax Excessive CEO Pay Act.  The bill would incrementally raise the corporate tax rate corresponding to the ratio of pay between the CEO and median paid worker at a firm. If firms paid median workers $60,000 and the CEO $3 million, there would be no penalty. As the ratio increases, the corporate tax rate increases, topping out when the CEO is paid more than 500 times the median when the corporate tax rate would be an additional 5 percent. Currently, the average CEO makes more than 300 times that of the average worker. In practice, the bill would incentivize companies to divert less profit to corporate executives and pay line workers more reasonably. Public Citizen enthusiastically supports this measure, along with more than 30 other national organizations, such as the AFL-CIO. Sanders’ bill already enjoys the support of Sens. Van Hollen, Elizabeth Warren (D-Mass.), Edward Markey (D-Mass) and 20 House members, led by Reps. Barbara Lee (D-Calif.) and Rashida Tlaib (D-Mich.)

But almost as troubling as Sen. Van Hollen’s observation about Bezos’ overwhelming income were the partisan defenses of the problem of out-of-control executive pay. In committee member Sen. Pat Toomey’s (R-Penn.) opinion, the problem is abating. Before the pandemic, wages were rising for workers. Spendable income, when taxes and various benefits were considered, softened some of the bar chart peaks of high wealth groups, and filled some of the valleys in the chart representing the poor. To this, Sen. Van Hollen and others raised undeniable inequities, such as the Baltimore comparison. Intoned Chair Sanders, “The American people understand that today we are moving toward an oligarchic form of society where the very rich are doing phenomenally well, and working families are struggling in a way that we have not seen since the Great Depression.”

What’s more, Toomey and his Republican colleagues aren’t listening to their own constituents. Polls show that a majority of Americans, including Republicans, favor capping CEO pay.

Wage and income stagnation among American workers requires ambitious reforms in addition to the Sanders Tax Excessive CEO Pay Act. Sen. Ben Ray Lujan (D-NM) highlighted the decline in union membership, now at about 6.4 percent of the private sector workforce. During her testimony, Anderson reviewed a suite of pay reforms, all endorsed by Public Citizen in a  report on this topic.

President Biden and Congress are now poised to consider another ambitious economic recovery act that can pass through what’s known as reconciliation. Reconciliation applies to tax and spending measures and requires only a simple majority of the Senate in order to pass.  Sanders’ bill can ideally be part of this next reconciliation package. Sen. Toomey and his fellow Republicans may choose to continue to focus on the part of the metaphorical income equity issue as a glass “half full” when it really just contains some water–moisture really–while ignoring the vast empty part.

But what’s important is for Congress to recognize who truly creates value and should be justly compensated. As Amazon worker Bates, certainly familiar with moving packages, testified: “We, the workers, made the billions for Amazon — I often say, we are the billionaires — we just don’t get to spend it.”