Today, 40 organizations led by the Economic Policy Institute, We Build Progress, the AFL-CIO Tech Institute, and Workshop delivered the letter below urging Congress to center workers in federal AI legislation. 

Dear Member of Congress: 

Employers’ increasing use of AI systems has the potential to affect the lives and livelihoods of workers across the country. Without appropriate guardrails, employers’ integration of these technologies may jeopardize workers’ rights, put workers at risk of discrimination, violate privacy rights, and dramatically impact the economic stability of working families.

These risks posed by technological change are not new. For years, employers have used algorithmic or automated systems and similar technologies in ways that harm workers. Now, the pervasive and growing integration of AI into the workplace is amplifying these risks. These impacts on workers are further exacerbated by persistent power imbalances in the labor market that favor employers. 

It is urgent that Congress take action. It has been nearly two years since the Bipartisan Senate AI Working Group released its roadmap for AI policy, but the Senate has yet to consider comprehensive legislation. AI adoption is moving forward at breakneck speed, and America’s workers cannot afford to wait. 

We applaud members of Congress who have introduced worker-focused legislation addressing issues like civil rights, surveillance in the workplace, and improvements to labor market data. Efforts at broader federal reform must also center the impacts of AI on workers. Under these circumstances, we urge the newly formed House Democratic Commission on AI and the Innovation Economy to center the recommendations of members with expertise in workers’ need for strong labor protections and AI’s impact on the economy. 

The urgency of this moment is further compounded by the Trump administration’s decision to prioritize corporate capture over the public good. In December, after Congress again declined to preempt critical state efforts to regulate AI, President Trump issued an Executive Order that purports to block states from protecting their own residents—a move that blatantly infringes on states’ rights while offering no federal alternative. The administration has doubled down with a national AI legislative framework that would severely curtail states’ ability to regulate AI. Rather than respecting states’ authority to protect their own residents, the administration is doing the bidding of tech oligarchs. 

The AI industry, venture capitalists, and lobbyists spent hundreds of millions of dollars last year pressuring Congress to pass legislation that would prevent state lawmaking. These attempts have failed multiple times because a significant number of members across both parties recognize the dangers posed by AI, while industry actors continue to push for deregulation. 

This is not what the public wants. Recent polling shows a bipartisan consensus in support of AI safety measures: 88% of Democrats and 79% of Republicans favor maintaining existing rules for AI security. Many people want more guardrails on AI: Majorities of both parties are in favor of new regulations to protect society, including 63% of Democrats and 59% of Republicans. 

Federal action is necessary, but it must also leave states room to innovate. Not all states are taking action, so Congress must provide a baseline of protection for people across the country, with a core focus on workers’ rights and livelihoods. 

But federal legislation should be a floor, not a ceiling. Locking the U.S. into a static, insufficient federal framework would guarantee that protections will swiftly become obsolete. It’s important that policymakers do not build a framework that is so narrow or rigid that it fails to keep up with constantly changing AI risks and shifting economic conditions, leaving workers vulnerable to new risks from new tools and practices.

A strong federal framework can create a reinforced system of guardrails to help working people navigate the growing use of AI. Congress has a responsibility to act now—the well-being of our workers and communities depends on it.

Sincerely,

AFL-CIO 

AFL-CIO Tech Institute 

AFT 

American Federation of State, County and Municipal Employees

Americans for Responsible Innovation 

California Initiative for Technology and Democracy

California School Employees Association 

Care in Action

Center for Democracy & Technology 

Center for Oil & Gas Organizing

The Century Foundation 

Communications Workers of America (CWA) 

Consumer Federation of America 

Data & Society 

Economic Policy Institute 

Encode AI 

Future of Life Institute

Interfaith Center on Corporate Responsibility

Jobs With Justice 

The Leadership Conference on Civil and Human Rights 

Legal Aid Justice Center 

Louisiana Progress 

National Action Network 

National Association of Voice Actors 

National Black Worker Center 

National Domestic Workers Alliance 

National Employment Law Project 

National Employment Lawyers Association 

National Institute for Workers’ Rights 

National Partnership for Women & Families 

National Women’s Law Center 

Open MIC (Open Media and Information Companies Initiative) 

Oxfam America

Public Citizen 

Service Employees International Union (SEIU) 

TechTonic Justice 

United Church of Christ Media Justice Ministry

United Food and Commercial Workers International Union 

We Build Progress 

Working Partnerships USA 

Workshop 

Writers Guild of America West

The most acute and immediate damage stemming from this bill would be felt by the millions of American families losing key safety net protections like Medicaid and Supplemental Nutrition Assistance Program (SNAP) benefits. The Medicaid cuts constitute a sad step backward in the nation’s commitment to providing access to health care for all. Proponents of the House bill often claim that these Medicaid cuts can be achieved simply by imposing work reporting requirements on healthy, working-age adults. But healthy, working-age adults are by definition not heavy consumers of health spending, so achieving the budgeted Medicaid cuts will obviously harm others as well.

Medicaid provides health insurance coverage for low-income Americans, but this includes paying out-of-pocket health costs for low-income retired Medicare recipients and providing nursing home and in-home care services for elderly Americans. Medicaid also covers 41% of all births in the United States, including over 50% of all births in Louisiana, Mississippi, New Mexico, and Oklahoma. Work reporting requirements will obviously yield no savings from these Medicaid functions.

Besides providing affordable health care to families, Medicaid is also crucial to state budgets and hospital systems throughout the country—particularly in rural areas. In 2023, the federal government sent $615 billion to state governments to cover Medicaid spending; this federal contribution accounted for over 75% of total state Medicaid spending in more than 19 states. Rural hospitals in states that accepted the Medicaid expansion that was part of the Affordable Care Act were 62% less likely to close than rural hospitals in non-expansion states.

In addition to Medicaid, the House bill also significantly cuts SNAP. These steep cuts to the social safety net are being undertaken to defray the staggering cost of the tax cuts included in the House bill, including the hidden cost of preserving the large corporate income tax cut passed in the 2017 tax law. But even these sharp spending cuts will pay for far less than half of the tax cuts (not even including the cost of maintaining the corporate income tax cuts of the 2017 law).

U.S. structural deficits are already too high, with real debt service payments approaching their historic highs in the past year. The House bill layers $3.8 trillion in additional tax cuts ($5.3 trillion if all provisions are made permanent) on top of these existing fiscal gaps—and these tax cuts are overwhelmingly tilted toward the highest-income households. Even with the safety net cuts, the House bill leads to public debt rising by over $3 trillion in coming years (and over $5 trillion over the next decade if provisions are made permanent rather than phasing out). The higher debt and deficits will put noticeable upward pressure on both inflation and interest rates in coming years.

The combination of cuts to key safety net programs like Medicaid and SNAP and tax cuts disproportionately benefiting higher-income households means that the House budget constitutes an extremely large upward redistribution of income. Given how much this bill adds to the U.S. debt, it is shocking that it still imposes absolute losses on the bottom 40% of U.S households (if some of the fiscal cost is absorbed in future bills with extremely high and broad tariffs, the share of households seeing absolute losses will increase rapidly).

The United States has a number of pressing economic challenges to address, many of which require a greater level of state capacity to navigate—capacity that will be eroded by large tax cuts. The House bill addresses none of the nation’s key economic challenges usefully and exacerbates many of them. The Senate should refuse to pass this bill and start over from scratch on the budget.

Daron Acemoglu
MIT Economics

Peter Diamond
MIT Economics

Oliver Hart
Harvard University

Simon Johnson
MIT Sloan School of Management

Paul Krugman
Graduate Center, City University of New York

Joseph Stiglitz
Columbia University

Re: Renomination of Gwynne Wilcox to serve as Member of the National Labor Relations Board

Dear Chairman Sanders, Ranking Member Cassidy, and Members of the Committee:

The undersigned organizations write to express our support for President Biden’s historic decision to renominate Gwynne Wilcox to serve as a Member of the National Labor Relations Board (NLRB).

Ms. Wilcox already made history with her previous Senate confirmation in July 2021 as the first Black woman to ever serve as an NLRB Member. Prior to her current service at the NLRB, she already possessed an outstanding track record as a respected labor law expert and coalition builder. We celebrate her renomination and urge you to confirm her to this important position.

The Members of the NLRB are critical to the implementation and enforcement of federal labor law and policy, and to upholding workers’ fundamental right to join together to improve their working conditions. Without a functioning Board, workers lose their fundamental right to join together to improve their working conditions. When workers come together to organize unions and engage in collective action and collective bargaining, they earn better wages, are more likely to have health insurance, and they pave the way for other workers to receive fair treatment on the job in the future. A well-functioning NLRB is critical to safeguarding this right.

Data from the Bureau of Labor Statistics and the National Labor Relations Board have shown increases in 2022 and 2023 in union election activity, unfair labor practice filings, and cases before the Board. This elevates the urgency of swiftly reconfirming Ms. Wilcox to another term on the Board without a lapse between the expiration of her current term and the new one, to ensure that the NLRB is efficiently able to continue hearing cases with more than the three Member minimum required for a quorum.

During her tenure so far at the NLRB, Ms. Wilcox has played a crucial role in improving efficiency and effectiveness in processing cases. She has also championed measures at the Board to improve language access and public outreach by the agency. As the Committee already knows, prior to her first nomination, Ms. Wilcox spent her career as a champion for worker rights, women’s rights, and civil rights under the law. As a partner at the law firm Levy Ratner, P.C. in New York, Ms. Wilcox has represented unions and individual employees for over 20 years. Ms. Wilcox also previously served as counsel for unions representing health care workers, fast food workers, and more, in addition to experience as a field attorney in Region 2 of the NLRB. Ms. Wilcox’s leadership skills have made her an effective and respected Board Member.

Ms. Wilcox is widely respected by her peers and is a frequent presenter on labor and employment law topics before the American Bar Association, the National Bar Association, state bar associations, and the National Academy of Arbitrators. In November 2021, she was presented with the Honorable Bernice B. Donald Diversity, Equity, and Inclusion in the Legal Profession Award by the ABA’s Labor and Employment Law Section.

For all of these reasons, we urge you to swiftly reconfirm Ms. Wilcox to serve at the NLRB. Thank you in advance for doing all you can to make Ms. Wilcox’s confirmation a top priority.

Sincerely,

AFL-CIO
Communications Workers of America (CWA)
Economic Policy Institute
Equality California
International Association of Machinists and Aerospace Workers
Jobs to Move America
Jobs With Justice
Maine Equal Justice
National Employment Law Project
National Employment Lawyers’ Association
National Immigration Law Center
National Institute for Workers’ Rights
National Organization for Women
National Women’s Law Center
Oregonizers
Oxfam America
Patriotic Millionaires
ROC United
Service Employees International Union (SEIU)
The Leadership Conference on Civil and Human Rights
United Food and Commercial Workers International Union
Workplace Justice Project at  Loyola Law Clinic

We, the undersigned organizations, represent a coalition of workers’ rights advocates, labor experts, and civil rights groups from across the country. Our collective work and research have helped to illuminate glaring inequities in our economy, including the fact that a disproportionate share of people working in underpaid, insecure, and unsafe jobs are people of color. 

For years, we have also been raising the alarm about the erosion of workers’ power relative to employers, and how that harms us all. But we are in a moment now where we can act decisively to shift that power and move toward an economy—and workplaces—that work for us all.

Workers in the fast-food industry in particular face low wages and systemic violations of workplace laws, and too often, they lack the power to change their workplaces for the better. 

AB 257 (Holden, Carillo, Low, Rivas), the FAST Recovery Act, is an important step toward improving many of the issues facing California’s fast-food workforce, and crucially, invites the workers who are experts on their workplaces into the process of designing solutions. We respectfully urge California’s Assembly and Senate members to vote AYE on this legislation in January 2022. 

This proposed legislation is important for workers across the country and for shaping the future of our national economy. The state of California has a long history of leading the way on workers’ rights and worker protections, including becoming the first state to pass a $15 minimum wage in 2016—a breakthrough that paved the way for states across the country to take similar action.

Nationally, policymakers and analysts continue to look to California as a laboratory for progressive and innovative legislative solutions. As we look ahead to the 2022 legislative session, California legislators must take action to support the state’s 557,000 fast-food workers, nearly 80% of whom are Latino, AAPI, Black, and immigrants. 

California fast-food workers have been organizing for eight years with the Fight for $15 and a Union to demand higher wages, safer workplaces, and a strong voice on the job. 

In the past year alone, workers have led more than 300 strikes and protests across the state, sounding the alarm on an industry in crisis. Workers are standing up against egregious workplace violations like wage theft, sexual harassment, racial discrimination, retaliation for organizing, and health and safety hazards. 

Fast-food workers’ power to address these problems, however, is too often limited by the franchise model, in which billion-dollar fast-food companies like McDonald’s retain control of franchisee operations while abdicating responsibility for their front-line workers. This “fissured” industry leaves workers to deal with poor working conditions and leaves small operators with little authority and few resources to address workers’ issues. 

AB 257 provides an innovative path toward increasing power and protections for both workers and franchisees in California. Two core elements of the bill work toward “defissuring” the fast-food sector in the state by: 

Giving workers and franchisees a seat at the table. The bill creates a statewide Fast-Food Sector Council that brings together front-line fast-food workers, state regulatory agencies, and representatives of both franchisees and their parent corporations. The Fast-Food Sector Council would have the power to raise wages and strengthen health, safety, and working conditions, including training standards and fair scheduling rules.

Holding large fast-food corporations accountable. Corporate fast-food giants like McDonald’s will be required to ensure all their restaurants and franchisees have the resources they need to operate safely and in compliance with the law.

The Fast-Food Sector Council would improve working conditions for half a million California cooks and cashiers, help responsible businesses compete on a fair and level playing field, and ensure that the wealthy corporations do their part.

The exciting opportunity of the Sector Council is that it will bring together workers and employers who really understand the sector to strengthen the regulatory process and make workplaces better for everyone. The structure of the Sector Council will follow a well-established template in California for administrative bodies setting statewide standards. 

In addition to addressing issues that fast-food workers have been raising for years, AB 257 also enacts core recommendations of California’s Future of Work Commission—which was led by members from technology, labor, business, education, venture capital, and other sectors—to “empower workers” and “harness the full capabilities and collaboration of all stakeholders” to improve job quality, reduce income inequality, and decrease economic disparities across race and gender.

This legislation already has the support of more than 50 state and national racial, economic, and climate justice groups, faith-based organizations, worker advocates, and labor unions. 

California can continue to be a model for economic prosperity rooted in economic justice, but only if legislators take bold steps to empower and protect working Californians like those in the fast-food industry.

We urge an AYE vote on AB 257. 

Sincerely,

Economic Policy Institute
National Employment Law Project

Additional Signatories:

Asset Building Strategies
California Immigrant Policy Center
Center for American Progress
Center for Law and Social Policy (CLASP)
Center for Worker Justice of Eastern Iowa
Center on Policy Initiatives
Civic Ventures
Clergy and Laity United for Economic Justice
Coalition of Labor Union Women, AFL-CIO
Coalition on Human Needs
Connecticut Voices for Children
Florida Policy Institute
Indiana Community Action Poverty Institute
Indivisible Northern Nevada
Jean-Michel Cousteau’s Ocean Futures Society
Justice at Work
Justice for Migrant Women
Legal Aid at Work
Long Beach Alliance for Clean Energy
National Black Worker Center
National Domestic Workers Alliance
National Employment Lawyers Association
National Partnership for Women and Families
National Women’s Law Center
National Workrights Institute
New Jersey Policy Perspective
One Fair Wage
Oxfam America
Pittsburgh Black Worker Center
ROC United
Silicon Valley Rising Action
Social Security Works California
The Purple Campaign
Voices for Progress
Women Employed
Workers’ Rights Institute
Working Partnerships USA
Workplace Fairness

Minority Leader Kevin McCarthy
H-204, The Capitol
Washington, DC 20515

Majority Leader Chuck Schumer
S-221, The Capitol
Washington, DC 20510

Minority Leader Mitch McConnell
S-230, The Capitol
Washington, DC 20510

Dear Speaker Pelosi, Leader Schumer, Leader McConnell, and Leader McCarthy:

In the midst of our ongoing health and economic crises that have left millions unable to pay their bills, policymakers need to take bold action to bolster our economy, reduce hardship, and forge a path to an equitable recovery. President Biden’s $1.9 trillion American Rescue Plan—with its critical public health investments to beat COVID-19, its aid to help struggling families, and its assistance to states, localities, tribes, and territories—is an appropriate scale of new spending under current conditions.

Our nation continues to be battered by a vicious virus and the economic fallout from the pandemic. In December, some 27 million workers had lost their jobs or seen their hours and pay cut. The rise in long-term unemployment shows clearly that our economy remains very troubled. Black and Latinx people are disproportionately feeling the impact, with unemployment rates in December of 9.9% and 9.3%, respectively—well above the white unemployment rate of 6%, which is itself too high. In its January 26 monetary policy statement, the Federal Reserve noted the continued weakness in the economy saying, “The recovery in economic activity and employment has moderated in recent months with weakness concentrated in the sectors most adversely affected by the pandemic.”

Household hardship remains significantly above pre-pandemic levels. Almost 24 million adults reported that their household sometimes or often didn’t get enough to eat, the most recent Census data show, and more than 15 million renters reported that they were behind on rent. Hardship rates are particularly high among families with children, particularly Black and Latinx households with children, raising serious concerns about the long-term consequences for children’s health and academic outcomes.

Congress must act fast and pass further legislation that reflects the scale of the crisis. The Emergency Coronavirus Relief Act, enacted in December, was a needed stopgap measure, but it didn’t do nearly enough to address the depth and breadth of today’s hardship. It will end far too soon, and it lacks key components of relief.

Repairing the economy and labor market will require that we get the virus under control, and that we also provide a significant amount of investment and support. With the economy down 10 million jobs and millions of people working part time because there isn’t enough business for them to work full time, the time for bold action is now. The economy will not fully recover until the virus is no longer a public health threat, which is why we must be aggressive in our public health response while we also support those who are struggling and boost the economy.

Prompt action is critical because crucial unemployment aid will end in March. That not only will hurt those workers, but it also will significantly hurt a struggling economy by reducing consumer spending. Congress needs to act so that people don’t once again lose their benefits for an unnecessary period, given the challenges that states face in administering benefits after a lapse in benefits and subsequent renewal.

Moreover, to address the challenge of benefit lapses, policymakers should ensure that relief measures stay in place at least into the fall, and then should be extended beyond that based on the underlying economic conditions.

With sufficient federal spending to sustain demand in the economy and address the public health crisis, the economy could mount a robust recovery in 2021 once the virus is under control. But if the federal government withdraws support too soon, we could face years of weak growth and high unemployment, as borne out in the Great Recession and its aftermath. Avoiding that outcome should be our top economic priority.

The risk from providing too little in relief and economic recovery far outweighs the risk of providing too much. We urge you to act quickly to pass a robust pandemic relief package to control the virus, address hardship, and boost the economy.

Sincerely,

Rebecca Dixon, Executive Director,
National Employment Law Center

Thea Lee, President,
Economic Policy Institute

Greg Leiserson, Chief Economist,
Washington Center for Equitable Growth

Sharon Parrott, President,
Center on Budget and Policy Priorities

John Podesta, Founder and Chair of the Board,
Center for American Progress

Felicia Wong, President and CEO,
Roosevelt Institute

Dear Speaker Pelosi:

We, the undersigned, urge you to enact substantial improvements to the short-time compensation program, or work share, as part of the next COVID-19 relief package. While the CARES Act did strengthen work-sharing programs in the states with existing work-sharing laws, recent developments demand even stronger policies.

In just the last five weeks, an unprecedented 26 million people filed for unemployment benefits. One path to potentially limit the number of unemployed over the coming months is to encourage employers to reduce hours rather than laying workers off. A robust, enhanced federal work-sharing program could do just that.

In the states that have made use of the existing short-time compensation program—as well as in a number of countries that have similar policies—work-sharing has prevented layoffs and contributed to a faster recovery in previous downturns. Work-sharing allows employers to reduce hours for all workers instead of laying them off. The employees are then compensated for the reduction in hours with a portion of their unemployment insurance benefits to make up for the difference in lost wages. This keeps people working and businesses open while allowing businesses to quickly ramp up as the economy recovers. As suggested by Congressman Mark Pocan, to adequately address the reduction in GDP and potential job loss, the federal work-sharing program should be improved by:

• allowing employers participating in the work-sharing program to reduce hours worked by employees to 20 percent of their normal working hours
• having the federal government temporarily cover 100 percent of work-sharing program costs in all states,
• allowing all businesses to participate in work-sharing, regardless of firm size (to participate in state work-sharing programs, some states currently require a minimum number of employees, in effect barring some small businesses)

A stronger federal work-sharing program could slow the rise in unemployment. These improvements would allow thousands of additional businesses to participate in work-sharing, reducing layoffs and overall costs to unemployment insurance benefits. Strengthening work-sharing along with other payroll subsidies could bring about a quicker and broader economic recovery. It is important that Congress act decisively and enact these measures without delay.

Sincerely,

Randy Albelda, Professor of Economics, University of Massachusetts Boston

Larry Allen, Professor of Economics, Lamar University

Eileen Appelbaum, Co-Director, Center for Economic and Policy Research

Peter Arno, Senior Fellow and Director of Health Policy Research, Political Economy Research Institute, UMASS, Amherst

Michael Ash, Professor of Economics & Public Policy, University of Massachusetts Amherst

M.V. Lee Badgett, Professor of Economics, University of Massachusetts Amherst

Ron Baiman, Associate Professor of Economics, Benedictine University

Dean Baker, Senior Economist and Co-Founder, Center for Economic and Policy Research

Erdogan Bakir, Associate Professor of Economics, Bucknell University

Radhika Balakrishnan, Professor, Rutgers University

Eric Beinhocker, Executive Director, Institute for New Economic Thinking, University of Oxford

Lourdes Beneria, Professor Emerita, Cornell University

Cyrus Bina, Distinguished Research Professor of Economics, University of Minnesota (Morris Campus)

Josh Bivens, Research Director, Economic Policy Institute

Sandra E. Black, Professor of Economics and International Affairs, Columbia University

Robert A. Blecker, Professor of Economics, American University

Howard Botwinick, Associate Professor of Economics Emeritus, SUNY Cortland

Scott Carter, Professor of Economics, The University of Tulsa

Kimberly Christensen, Economics Professor, Sarah Lawrence College

Nathaniel Cline, Associate Professor, University of Redlands

George De Martino, Professor of Economics, University of Denver

Arindrajit Dube, Professor of Economics, University of Massachusetts, Amherst

Richard Du Boff, Wexler Professor Emeritus of Economics, Bryn Mawr College

Amitava Krishna Dutt, Professor of Economics and Political Science, University of Notre Dame

Nina Eichacker, Professor, University of Rhode Island

Gerald Epstein, Professor of Economics, University of Massachusetts Amherst

Anders Fremstad, Assistant Professor of Economics, Colorado State University

John Gallup, Associate Professor, Portland State University

Lonnie Golden, Professor of Economics and Labor-Employment Relations, Penn State University, Abington

Don Goldstein, Emeritus, Professor of Economics, Allegheny College

Neva Goodwin, Co-Director, Global Development and Environment Institute, Tufts University

Joshua Greenstein, Assistant Professor of Economics, Hobart and William Smith Colleges

Robert Guttmann, Augustus B. Weller Professor of Economics, Hofstra University

Greg Hannsgen, Independent Economist, Greg Hannsgen’s Economics Blog

Denise Hare, Professor of Economics, Reed College

John Harvey, Professor of Economics, Texas Christian University

Baban Hasnat, Professor of International Business and Economics, SUNY Brockport

P. Sai-wing Ho, Professor of Economics, University of Denver

Susan Houseman, Vice President and Director of Research, Upjohn Institute for Employment Research

Eric Hoyt, Ph.D. in Economics, UMass-Amherst

Dorene Isenberg, Professor, Dept. of Economics, University of Redlands

Haider A. Khan, Distinguished University Professor, University of Denver

Mary C. King, Professor of Economics Emerita, Portland State University

Anthony Laramie, Chair and Professor of Economics, Merrimack College

William Van Lear, Professor of Economics, Belmont Abbey College

Thea Lee, President, Economic Policy Institute

Charles Levenstein, Professor Emeritus of Work Environment, University of Massachusetts Lowell

Margaret Levenstein, Research Professor, University of Michigan

Arthur MacEwan, Professor Emeritus of Economics, University of Massachusetts Boston

Allan, MacNeill, Professor, Webster University

Zagros Madjd-Sadjadi, Former Chief Economist, City and County of San Francisco and Professor of Economics, Winston-Salem State University

Arindam Mandal, Associate Professor of Economics, Siena College

Thomas Masterson, Director of Applied Micromodeling, Levy Economics Institute of Bard College

Peter Hans Matthews, Professor of Economics, Middlebury College

Terrence McDonough, Emeritus Professor, National University of Ireland Galway

Martin Melkonian, Adjunct Associate Professor, Hofstra University

John Miller, Professor of Economics, Wheaton College, Norton, MA

Lawrence Mishel, Distinguished Fellow, Economic Policy Institute

Tracy Mott, Professor Emeritus of Economics, University of Denver

Michele Naples, Dr., The College of New Jersey

Katherine Moos, Assistant Professor of Economics, University of Massachusetts Amherst

Catherine P. Mulder, Assoc. Professor, John Jay College-CUNY

Julie A. Nelson, Professor of Economics Emeritus, University of Massachusetts Boston

Reynold F. Nesiba, Professor of Economics, Augustana University

Eric Nilsson, Professor of Economics, California State University, San Bernardino

Lenore Palladino, Assistant Professor of Economics and Public Policy, University of Massachusetts Amherst

Mark Paul, Assistant Professor of Economics, New College of Florida

Eva Paus, Professor of Economics on the Ford Foundation, Mount Holyoke College

Luke Petach, Assistant Professor of Economics, Belmont University

Karen Pfeifer, Professor Emerita of Economics, Smith College

Lynda Pickbourn, Associate Professor of Economics and Lecturer in Economics, Hampshire College and University of Massachusetts, Amherst

Bruce Pietrykowski, Professor of Economics, University of Michigan-Dearborn

Robert Pollin, Distinguished University Professor of Economics and Co-Director, Political Economy Research Institute, University of Massachusetts Amherst

Dr. Pratistha Joshi, Lecturer, Boston University

Mark Price, Assistant Director of Research, Labor Economist, Pennsylvania State Education Association

Smita Ramnarain, Dr., University of Rhode Island

Robert B. Reich, Chancellor’s Professor of Public Policy, University of California, Berkeley

Michael D. Robinson, Professor of Economics, Mount Holyoke College

Leopoldo Rodriguez, Associate Professor, Portland State University

David F. Ruccio, Professor of Economics Emeritus, University of Notre Dame

Jeffrey Sachs, University Professor, Columbia University

Emmanuel Saez, Professor of Economics and Director of the Center for Equitable Growth, University of California, Berkeley

John Schmitt, Vice President, Economic Policy Institute

Elliott Sclar, Emeritus Professor, Columbia University

Laurence Seidman, Professor of Economics, University of Delaware

Stephanie Seguino, Professor of Economics, University of Vermont

Zoe Sherman, Associate Professor of Economics, Merrimack College

Heidi Shierholz, Senior Economist and Director of Policy, Economic Policy Institute

Nicholas Shunda, Associate Professor of Economics, University of Redlands

William Spriggs, Professor of Economics, Howard University

Howard Stein, Professor, DAAS and Epidemiology, University of Michigan

Chris Tilly, Professor of Urban Planning and Sociology, UCLA

E. Ahmet Tonak, Visiting Professor, UMass Amherst, Economics Department

Mayo Toruño, Professor Emeritus, California State University San Bernardino

Mariano Torras, Ph.D., Professor of Economics, Adelphi University

Andres Torres, Professor (retired), Lehman College, CUNY

Eric Tymoigne, Associate Professor of Economics, Lewis & Clark College

David F. Weiman, Professor of Economics, Barnard College, Columbia University

Mark Weisbrot, Co-Director and Co-Founder, Center for Economic and Policy Research

Jeannette Wicks-Lim, Associate Research Professor, Political Economy Research Institute, University of Massachusetts

John Willoughby, Professor, Economics, American University

Brenda Wyss, Associate Professor of Economics, Wheaton College, MA

Tanadej Vechsuruck, Assistant Professor, University of Rhode Island

Yavuz Yasar, Associate Professor, University of Denver

Gabriel Zucman, Associate Professor of Economics, University of California, Berkeley

Dear Speaker Pelosi:

In just five weeks, 26 million Americans filed for unemployment benefits as a result of the novel coronavirus outbreak. The CBO recently forecast an 11.4 percent average unemployment rate for 2020 and a 10.1 percent average unemployment rate for 2021. The policy choices we make now will impact how many people lose their jobs or remain jobless in the coming months. And without a viable vaccine in the immediate future, the federal government can enact programs that encourage people to stay home by allowing them to continue to receive a paycheck while providing assistance to keep businesses intact so that they are ready to open when social distancing protocols are eased. For this reason, we, the undersigned, urge Congress to pass the Paycheck Guarantee Act.

The Paycheck Guarantee Act, proposed by Congresswoman Pramila Jayapal, would provide grants to businesses to cover up to 100 percent of payroll for employee wage replacement up to $100,000 for three months. The grants would be retroactive to the beginning of the pandemic to allow businesses to rehire employees who had been laid off. Importantly, workers would keep their employer-provided benefits, including health care. States and cities as well as independent contractors and gig workers would be eligible for the grants. The grants would also cover business expenses like rent and utilities to ensure that they can re-open when conditions improve. The grants would be delivered through existing payroll infrastructure to get the funds out of the door and to employers and working people quickly and efficiently. The grants would continue every three months until the Bureau of Economic Analysis’ nominal personal consumption expenditures (PCE) estimates register two consecutive months that are at least 95% as high as the three-month average level between December 2019 and February 2020. In addition to Representative Jayapal’s proposal, Senators Sanders, Warner, Jones, and Blumenthal proposed similar legislation last week.

The CARES Act did provide needed relief, but as a policy response, it does not meet the scale of the COVID-19 crisis. The interim package passed on April 23 provides additional funding for the PPP small business loan program, but this too fails to adequately address the fallout from the pandemic. The Paycheck Guarantee Act does much more to prevent mass layoffs, keep businesses intact and facilitate a faster recovery. Congress should move swiftly to pass the Paycheck Guarantee Act.

Sincerely,

Randy Albelda, Professor of Economics, University of Massachusetts Boston

Larry Allen, Professor of Economics, Lamar University

Eileen Appelbaum, Co-Director, Center for Economic and Policy Research

Peter Arno, Senior Fellow and Director of Health Policy Research, Political Economy Research Institute, UMASS, Amherst

Michael Ash, Professor of Economics & Public Policy, University of Massachusetts Amherst

M.V. Lee Badgett, Professor of Economics, University of Massachusetts Amherst

Ron Baiman, Associate Professor of Economics, Benedictine University

Dean Baker, Senior Economist and Co-Founder, Center for Economic and Policy Research

Erdogan Bakir, Associate Professor of Economics, Bucknell University

Radhika Balakrishnan, Professor, Rutgers University

Eric Beinhocker, Executive Director, Institute for New Economic Thinking, University of Oxford

Lourdes Beneria, Professor Emerita, Cornell University

Cyrus Bina, Distinguished Research Professor of Economics, University of Minnesota (Morris Campus)

Josh Bivens, Research Director, Economic Policy Institute

Sandra E. Black, Professor of Economics and International Affairs, Columbia University

Robert A. Blecker, Professor of Economics, American University

Howard Botwinick, Associate Professor of Economics Emeritus, SUNY Cortland

Scott Carter, Professor of Economics, The University of Tulsa

Kimberly Christensen , Economics Professor, Sarah Lawrence College

Nathaniel Cline, Associate Professor, University of Redlands

George De Martino, Professor of Economics, University of Denver

Arindrajit Dube, Professor of Economics, University of Massachusetts,Amherst

Richard Du Boff, Wexler Professor Emeritus of Economics, Bryn Mawr College

Amitava Krishna Dutt, Professor of Economics and Political Science, University of Notre Dame

Nina Eichacker, Professor, University of Rhode Island

Gerald Epstein, Professor of Economics, University of Massachusetts Amherst

Anders Fremstad, Assistant Professor of Economics, Colorado State University

John Gallup, Associate Professor, Portland State University

Don Goldstein, Emeritus, Professor of Economics, Allegheny College

Neva Goodwin, Co-Director, Global Development and Environment Institute, Tufts University

Joshua Greenstein, Assistant Professor of Economics, Hobart and William Smith Colleges

Robert Guttmann, Augustus B Weller Professor of Economics, Hofstra University

Greg Hannsgen, Independent Economist, Greg Hannsgen’s Economics Blog

Denise Hare, Professor of Economics, Reed College

John Harvey, Professor of Economics, Texas Christian University

Baban Hasnat, Professor of International Business and Economics, SUNY Brockport

P. Sai-wing Ho, Professor of Economics, University of Denver

Eric Hoyt, Ph.D. in Economics, UMass-Amherst

Dorene Isenberg, Professor, Dept. of Economics, University of Redlands

Haider A. Khan, Distinguished University Professor, University of Denver

Mary C. King, Professor of Economics Emerita, Portland State University

Anthony Laramie, Chair and Professor of Economics, Merrimack College

William Van Lear, Professor of Economics, Belmont Abbey College

Thea Lee, President, Economic Policy Institute

Charles Levenstein, Professor Emeritus of Work Environment, University of Massachusetts Lowell

Margaret Levenstein, Research Professor, University of Michigan

Arthur MacEwan, Professor Emeritus of Economics, University of Massachusetts Boston

Allan, MacNeill, Professor, Webster University

Zagros Madjd-Sadjadi, Former Chief Economist, City and County of San Francisco and Professor of Economics, Winston-Salem State University

Arindam Mandal, Associate Professor of Economics, Siena College

Thomas Masterson, Director of Applied Micromodeling, Levy Economics Institute of Bard College

Peter Hans Matthews, Professor of Economics, Middlebury College

Terrence McDonough, Emeritus Professor, National University of Ireland Galway

Martin Melkonian, Adjunct Associate Professor, Hofstra University

John Miller, Professor of Economics, Wheaton College, Norton, MA

Lawrence Mishel, Distinguished Fellow, Economic Policy Institute

Juan Antonio Montecino, Assistant Professor of Economics, American University

Tracy Mott, Professor Emeritus of Economics, University of Denver

Michele Naples, Dr, The College of New Jersey

Katherine Moos, Assistant Professor of Economics, University of Massachusetts Amherst

Catherine P. Mulder, Assoc. Professor, John Jay College-CUNY

Julie A. Nelson, Professor of Economics Emeritus, University of Massachusetts Boston

Reynold F. Nesiba, Professor of Economics, Augustana University

Eric Nilsson, Professor of Economics, California State University, San Bernardino

Lenore Palladino, Assistant Professor of Economics and Public Policy, University of Massachusetts Amherst

Mark Paul, Assistant Professor of Economics, New College of Florida

Eva Paus, Professor of Economics on the Ford Foundation, Mount Holyoke College

Luke Petach, Assistant Professor of Economics, Belmont University

Karen Pfeifer, Professor Emerita of Economics, Smith College

Lynda Pickbourn, Associate Professor of Economics and Lecturer in Economics , Hampshire College and University of Massachusetts, Amherst

Bruce Pietrykowski, Professor of Economics, University of Michigan-Dearborn

Robert Pollin, Distinguished University Professor of Economics and Co-Director, Political Economy Research Institute, University of Massachusetts Amherst

Dr. Pratistha Joshi, Lecturer, Boston University

Lee Price, Associate Fellow, Institute for Policy Studies

Mark Price, Assistant Director of Research, Labor Economist, Pennsylvania State Education Association

Dr. Smita Ramnarain, University of Rhode Island

Robert B. Reich, Chancellor’s Professor of Public Policy, University of California, Berkeley

Michael D. Robinson, Professor of Economics, Mount Holyoke College
Leopoldo Rodriguez, Associate Professor, Portland State University

David F. Ruccio, Professor of Economics Emeritus, University of Notre Dame

Jeffrey Sachs, University Professor, Columbia University

Emmanuel Saez, Professor of Economics and Director of the Center for Equitable Growth, University of California, Berkeley

John Schmitt, Vice President, Economic Policy Institute

Elliott Sclar, Emeritus Professor, Columbia University

Laurence Seidman, Professor of Economics, University of Delaware

Stephanie Seguino, Professor of Economics, University of Vermont

Zoe Sherman, Associate Professor of Economics, Merrimack College

Heidi Shierholz, Senior Economist and Director of Policy, Economic Policy Institute

Nicholas Shunda, Associate Professor of Economics, University of Redlands

William Spriggs, Professor of Economics, Howard University

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Chris Tilly, Professor of Urban Planning and Sociology, UCLA

E. Ahmet Tonak, Visiting Professor, UMass Amherst, Economics Department

Mayo Toruño, Professor Emeritus , California State University San Bernardino

Mariano Torras, Ph.D., Professor of Economics, Adelphi University

Andres Torres, Professor (retired), Lehman College, CUNY
Eric Tymoigne, Associate Professor of Economics, Lewis & Clark College

David F. Weiman, Professor of Economics, Barnard College, Columbia University

Mark Weisbrot, Co-Director and Co-Founder, Center for Economic and Policy Research

Jeannette Wicks-Lim, Associate Research Professor, Political Economy Research Institute, University of Massachusetts

John Willoughby, Professor, Economics, American University

Brenda Wyss, Associate Professor of Economics, Wheaton College, MA

Tanadej Vechsuruck, Assistant Professor , University of Rhode Island

Yavuz Yasar, Associate Professor, University of Denver

Gabriel Zucman, Associate Professor of Economics, University of California, Berkeley

The Honorable Mitch McConnell, Senate Majority Leader
The Honorable Charles Schumer, Senate Democratic Leader
The Honorable Mike Enzi, Chair, Committee on the Budget
The Honorable Bernie Sanders, Ranking Member, Committee on the Budget

The Honorable Richard Shelby, Chair, Committee on Appropriations
The Honorable Patrick Leahy, Vice Chair, Committee on Appropriations

The Honorable Charles Grassley, Chair, Finance Committee
The Honorable Ron Wyden, Ranking Member, Finance Committee
United States Senate
Washington, D.C. 20510

The Honorable Nancy Pelosi, Speaker of the House of Representatives
The Honorable Kevin McCarthy, House Republican Leader
The Honorable John Yarmuth, Chair, Committee on the Budget
The Honorable Steve Womack, Ranking Member, Committee on the Budget

The Honorable Nita Lowey, Chair, Committee on Appropriations
The Honorable Kay Granger, Ranking Member, Committee on Appropriations
The Honorable Richard Neal, Chair, Committee on Ways and Means
The Honorable Kevin Brady, Ranking Member, Committee on Ways and Means
United States House of Representatives
Washington, D.C. 20515

Dear Members of Congress:

We, the undersigned organizations and state and local elected officials, urge you to include $500 billion in funding for state, local, territorial, and tribal governments in the next federal coronavirus relief bill. While the first three bills included vital resources, the amount of aid allocated to date falls far short of what is needed to hold state, local, territorial, and tribal budgets harmless against the enormity of the crisis.

As economic activity has collapsed, it has triggered a dramatic downturn in state, local, territorial, and tribal revenues even apart from new spending demands imposed by the coronavirus. Unlike the federal government, most state governments are required by statute or constitution to balance their budgets. As revenues decline because of lower incomes and reduced spending, state and local governments face serious fiscal constraints, often leading to budget cuts that further depress demand in the economy.

Already, states and localities are announcing austerity measures and severe budget shortfalls exactly when public spending is most critical—for both protecting workers and priming the economy for a rapid bounceback when the shutdown ends. Ohio Governor Mike DeWine has proposed an across-the-board 20% budget cut; New York State Comptroller Thomas DiNapoli estimated tax revenue would be between $4 billion and $7 billion below projections for fiscal year 2020; the projected revenue decline for Arkansas is more than double the size of the state’s reserves; and California is projected to spend down its sizeable cash reserves in mere months, despite previously being on track to build the largest cash reserve in its history—of more than $20 billion. Local governments are announcing severe revenue shortfalls, too. This week, Arlington County, Virginia, announced a shortfall of $56 million for FY 2021, and cities such as Seattle and New Orleans are each projecting shortfalls of at least $100 million this year.

When the economy is ready to restart, these budget shortfalls will lead to large drags on the recovery if Congress does not act quickly. During the Great Recession, such budget gaps and the resulting cuts severely hampered the economic recovery. Congress should authorize at least $500 billion by the end of 2021 to avoid this economic drag.

In addition to providing $500 billion for state, local, territorial, and tribal aid, we urge you to:

Adopt a transformative approach by following the payroll guarantee model nations like the United Kingdom, Denmark, and the Netherlands have implemented, with the national government paying up to 90% of all payroll costs for employers affected by the public health shutdowns. These plans create an economic “deep freeze,” in which large swaths of the economy shut down, but workers and businesses are held as near harmless as possible.

Make additional investments in unemployment insurance (UI) by including triggers that allow both the additional $600 per week through the Federal Pandemic Unemployment Compensation (FPUC) program and expanded eligibility to phase out slowly and only as economic conditions warrant. The Goldman Sachs macroeconomic forecasting team estimates that the national unemployment rate will average 14.7% in June, July, and August of 2020, and that unemployment in the first 3 months of 2021—after the expanded criteria for unemployment benefits expire—will average 8.0%, or well over double the unemployment average in the first three months of 2020.

In addition, the Pandemic Unemployment Assistance (PUA) eligibility expansions still leave some workers falling through the cracks. This should be fixed by expanding eligibility to immigrant workers left out of UI and to new labor market entrants unable to find work. Finally, new money is needed to help states quickly build up their UI system administrative capacity to ensure the effective delivery of UI benefits.

Disburse another direct cash payment: Even with expanded PUA, some households facing economic distress due to the coronavirus shock may fall through the cracks, and recovery may be delayed if households feel insecure about their financial situation. The $1,200 cash payment included in the CARES Act is insufficient to carry all households through the relief period unscathed and to ensure a robust recovery once the all-clear sounds. Further, the cash payment provision is too restrictive about which households are eligible to receive the payment. Another direct cash payment should be provided, and it should be available to all income-eligible households regardless of tax filing or immigration status.

Provide full funding for testing, treatment, and frontline worker personal protective equipment (PPE): While substantial money for medical investments has been allocated in previous relief and recovery bills, an open-ended commitment by the federal government to fully fund any testing and treatment of coronavirus expenses should be made. A similar commitment should be made to purchase and disburse PPE to frontline workers (including but not limited to health care workers).

Include strong worker protections: This crisis has revealed the lack of power far too many U.S. workers experience in the workplace. Many workers are being required to work without protective equipment. They have no effective right to refuse dangerous assignments and are not even being granted hazard pay, despite working in difficult and dangerous conditions. Policymakers must include enhanced protections for all workers performing essential work during this crisis.

Sincerely,

100 Black Men of America, Inc.

ACCESS

ACLU of Kentucky

Action NC

Adelante Alabama Worker Center

AFL-CIO

Alabama Arise

American Family Voices

American Federation of State, County and Municipal Employees (AFSCME)

American Federation of Teachers

American Friends Service Committee

Americans for Democratic Action

Americans for Democratic Action, Southeastern Pennsylvania Chapter

Arizona Center for Economic Progress

Arkansas Advocates for Children and Families

Arkansas Community Organizations

Asian Pacific American Network of Oregon

Atlanta Jobs with Justice

Battle Born Progress

Ben Chipman, State Senator, Maine

Better Pennsylvania

Big Brothers Big Sisters of Metro Atlanta

Big Sky 55+

Billy Mitchell, State Representative, Georgia

Black Women Rising

Campaign for America’s Future

Causa Oregon

Center for Disability Rights

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Center for New York City Affairs

Center for Popular Democracy

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Central Arizonans for a Sustainable Economy (CASE)

Chinese-American Planning Council

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Coalition on Human Needs

Colorado Center on Law and Policy

Colorado Consumer Health Initiative

Colorado Fiscal Institute

Colorado Organization for Latina Opportunity and Reproductive Rights

Connecticut Citizen Action Group

Connecticut Voices for Children

Connecticut Women’s Education and Legal Fund (CWEALF)

Consumers for Affordable Health Care

Daniele Monroe-Moreno, Assemblywoman, Nevada

DC Fiscal Policy Institute

Demos

Dr. George E. Young, State Senator, Oklahoma

Economic Opportunity Institute

Economic Policy Institute

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Empire State Indivisible

Eric Luedtke, House Majority Leader, Maryland

Fair Share Connecticut

Faith in Indiana

Faith in Public Life

Federation of Protestant Welfare Agencies (FPWA)

Feminist Women’s Health Center

Fiscal Policy institute

Florida Institute on Research and Education

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Frank Hornstein, State Representative, Minnesota

Georgia Budget and Policy Institute

Georgia Coalition for the People’s Agenda

Georgia Legislative Black Caucus

Georgia NAACP

Georgia Stand-Up

Georgians for a Healthy Future

Good Jobs First

Granite State Organizing Project

HANA Center

Hawaii Appleseed Center for Law & Economic Justice

Health Access California

Health Care for America Now

Henry Beck, State Treasurer, Maine

Hillman Frazier, State Senator, Mississippi

Homeless and Housing Coalition of Kentucky

Hoosier Action

Howard Watts III, Assembly Member, Nevada

Human Impact Partners

In the Public Interest

Indiana Institute for Working Families

Institute for Women’s Policy Research

Institute on Taxation and Economic Policy

International Congress on Faith & Justice

Iowa Citizen Action Network

Iowa Policy Project

Jackie Traynere, County Board Member, Will County, Illinois

Jobs to Move America

Joe Fitzgibbon, State Representative, Washington

Joel Briscoe, State Representative, Utah

Kaye Kory, Delegate, Virginia

Kentucky Center for Economic Policy

Kentucky Council of Churches

Kentucky Mental Health Coalition

Kentucky Voices for Health

Keystone Research Center

Kids Forward

Labor Resource Center, UMass Boston

Legal Aid at Work

Legal Aid Justice Center

Lisa A. Cutter, State Representative, Colorado

Local Progress

Los Angeles Alliance for a New Economy

Louisiana Budget Project

Main Street Alliance

Maine AFL-CIO

Maine Center for Economic Policy

Maine Equal Justice

Maine People’s Alliance

Maine Small Business Coalition

Mainers for Working Families

Maria Robinson, State Representative, Massachusetts

Marjorie A. Porter, State Representative, New Hampshire

Mark V. Balfantz, At-Large School Board Member, Portland, Maine

Maryland Center on Economic Policy

Maryland Citizens’ Health Initiative

Massachusetts Budget and Policy Center

Mia Gregerson, State Representative, Washington

Miami Freedom Project

Michael Brennan, State Representative, Maine

Michigan League for Public Policy

Missouri Budget Project

Missouri Jobs with Justice

Montana Budget & Policy Center

Morningside Heights Resistance

NAACP

National Association or Minority Contractors Atlanta Chapter

National Black Worker Center Project

National Center for Transgender Equality

National Employment Law Project

National Immigration Law Center

National Korean American Service & Education Consortium (NAKASEC)

National Korean American Service & Education Consortium (NAKASEC) Virginia

New Jersey Policy Perspective

New Mexico Center on Law and Poverty

New Mexico Voices for Children

New Virginia Majority

Nicole Collier, State Representative, Texas

Nonprofit Professional Employees Union

North Carolina Justice Center

Northwest Health Law Advocates

Ohio Organizing Collaborative

Oklahoma Policy Institute

One Voice, Inc.

Opportunity Arizona

Oregon Center for Public Policy

Our Future West Virginia

Our Revolution

Oxfam America

Partnership for Southern Equity

Patriotic Millionaires

Paul Krizek, Delegate, Virginia

Pennsylvania Budget and Policy Center

Pennsylvania Health Access Network

People’s Action

Pious Ali, At-Large City Council Member, Portland, Maine

Policy Matters Ohio

PolicyLink

Power Coalition for Equity & Justice

Prevention Institute

Progressive Democrats of Orange County, North Carolina

Progressive Leadership Alliance of Nevada

Prosperity Now

Public Assets Institute

Randolph Bracy, State Senator, Florida

Restaurant Opportunities Centers (ROC) United

Rosanna Gabaldon, State Representative, Arizona

SC Appleseed Legal Justice Center

Service Employees International Union

Service Employees International Union Connecticut State Council

Sharon Beasley-Teague, State Representative, Georgia

Shenna Bellows, State Senator, Maine

Southern Economic Advancement Project

SPLC Action Fund

State Innovation Exchange

Strong Economy For All Coalition

Tae Chong, City Councilor, Portland, Maine

TakeAction Minnesota

Tax March

Terry Garrison, State Representative, North Carolina

The Bell Policy Center

The Common Ground Project

The Commonwealth Institute for Fiscal Analysis

The Georgia Black Constructors Association

The King Center

The Partnership for Working Families

Thrive Kentucky Coalition

Tina Wildberger, State Representative, Hawaii

TransFormation Alliance

Troy Jackson, State Senate President, Maine

UHCAN Ohio

Virginia Organizing

Voices for Illinois Children

Voices for Utah Children

Voices for Utah Children

Washington State Budget & Policy Center

West Virginia AFL-CIO

West Virginia Center on Budget and Policy

West Virginia Citizen Action Group

West Virginia Education Association

West Virginia FREE

West Virginians for Affordable Health Care

Woori Center

Working Partnerships USA

Workplace Fairness

U.S. Senate Committee on Health, Education, Labor and Pensions
428 Senate Dirksen Office Building
Washington, DC 20510

Re: Nomination of Eugene Scalia

Dear Members of the Senate Committee on Health, Education, Labor and Pensions:

The EPI Policy Center strongly opposes the nomination of Eugene Scalia for U.S. Secretary of Labor, and we strongly urge you to vote against his confirmation. The mission of the Department of Labor is to enforce labor law and improve the wages and working conditions of everyday Americans. In contrast, Mr. Scalia has built a career representing corporations, financial institutions, and other business organizations while fighting against worker protections like health and safety regulations, retirement security, and collective bargaining rights.

This is not Mr. Scalia’s first nomination for a role in the Department of Labor. In 2001, President George W. Bush nominated him for Solicitor of Labor, an appointment that was swiftly blocked because of Mr. Scalia’s extreme views against worker health and safety protections. President Bush circumvented the Senate and installed Mr. Scalia as Solicitor through a recess appointment. Since leaving the Labor Department in 2003, Mr. Scalia has represented powerful corporations and financial institutions—such as HSBC, Boeing, and Walmart—in labor cases while working as a partner at the Washington, D.C.–based law firm Gibson, Dunn & Crutcher. Mr. Scalia’s reputation as the go-to lawyer for corporations looking to avoid worker protections is so infamous that the headline for a profile piece on Mr. Scalia in Bloomberg Businessweek read “Suing the Government? Call Scalia!”1

This nation’s workers deserve a Labor Secretary who will look out for their interests, establish and enforce strong health and safety standards, and safeguard their retirement security. As a corporate attorney, Mr. Scalia has fought against the Department of Labor and the interests of working people in his representation of major corporations ranging from Walmart to Wall Street banks. Mr. Scalia also led the legal challenge to the Department of Labor’s April 2016 fiduciary rule, which safeguarded workers’ retirement security by ensuring financial advisers are acting in the best interest of workers and do not have conflicts of interest. And he represented SeaWorld when it unsuccessfully tried to avoid responsibility and an Occupational Safety and Health Administration (OSHA) citation and fine for failing to protect Dawn Brancheau, a trainer at SeaWorld who was killed on the job by a killer whale. Simply put, Mr. Scalia is the wrong person for the job.

We are not alone in our concerns about Mr. Scalia. As of September 6, 2019, more than 93,000 people have signed a petition opposing Mr. Scalia’s confirmation,2 and that number is growing.

Signed,

Celine McNicholas
Director of Government Affairs and Labor Counsel
EPI Policy Center

Margaret Poydock
Policy Associate
EPI Policy Center

1. Robert Schmidt, “Suing the Government? Call Scalia!,” Bloomberg Businessweek, January 26, 2012.

2. Action Network, “Sign Now: Reject a Labor Secretary Who Sides with Big Business over Working People” (online petition), accessed September 4, 2019.

Dear Senator Warren,

I am writing to express support for the “Stop Wall Street Looting Act of 2019,” a comprehensive bill aimed at stemming abusive practices employed by some private equity firms to line their pockets at the expense of workers, institutional investors, creditors, and others with stakes in the companies they acquire—and too often destroy. The legislation will not hinder those private equity firms that prosper by delivering efficiency gains to underperforming companies in their portfolios. Instead, it will simply remove tax and other incentives that allow some firms to realize large gains by inflicting even larger losses on other stakeholders. This type of negative sum strategy is pursued too often in the private equity industry and requires a legislative and regulatory response.

Private equity’s rocky history. Investment firms engaging in leveraged buyouts first caught the public’s attention in the 1980s with the hostile takeovers of high-profile companies such as RJR Nabisco, whose acquisition and subsequent collapse became the subject of a bestselling book and HBO movie, Barbarians at the Gate.1 Bad publicity about failed deals put a damper on leveraged buyouts in the 1990s, but the same business model, now known as private equity, made a comeback in the early 2000s and rebounded after the Great Recession. According to the private equity industry lobby, investment has more than doubled over the past 10 years, with $3.4 trillion invested between 2013 and 2018 and 5.8 million Americans employed in private equity-backed businesses.2

Abetted by short memories, deregulation, and low interest rates, private equity firms have trained their sights on companies with assets that can be easily sold off if necessary, such as store chains with real estate holdings. This has left in their wake what economist Eileen Appelbaum has described as a “retail apocalypse”—in which profitable companies such as Toys “R” Us are saddled with debt and stripped of assets before filing for bankruptcy.3 While toy, apparel, grocery, and other chains acquired by private equity undoubtedly face competition from online and big box retailers, their ability to adapt to meet these challenges has been hamstrung by debt service and payments to private equity partners in the form of fees and special dividends.

Economist Steven J. Davis and co-authors have found that though portfolio companies tend to be strong performers before their acquisition by private equity firms, job losses at these companies increase significantly (relative to similar companies) after their acquisition, often after establishments are shuttered.4 In their most recent working paper, Davis et al. find that when private equity firms acquire public companies, employment falls by 13 percent relative to peers, although the effect depends on the type of buyout (companies that were already privately held fared better).5

What is the role of private equity? Proponents say private equity can play a constructive role in the economy by streamlining and, if necessary, breaking up underperforming companies—what economist Joseph Schumpeter famously called “creative destruction.”6 In this view, private equity addresses the problem of empire-building CEOs whose interests are not closely aligned with those of shareholders because their pay and prestige reflects the company’s size rather than its performance. Solutions to this agency problem involve giving investors more control or managers a greater stake in profit maximization. With private equity, the result is a highly leveraged and multilayered business model that blurs the line between owners and managers.

How does private equity function in the real world? While leverage and direct control by equity investors can impose discipline on bloated companies, much of what private equity firms do is simply destructive—absent the “creative” part. Private equity firms often engage in what economists call “rent-seeking,” or unproductive behavior designed to take advantage of loopholes in the tax code, banking and securities laws, and bankruptcy provisions, rather than creating value through efficiency gains.

Private equity firms have rigged the system so that they share in the upside risk but minimize losses from bad bets—a “heads we win, tails you lose” strategy enabled by a tax system that encourages equity investors to load companies up with debt. If a portfolio company thrives despite being saddled with debt, it can be resold at a profit. If not, private equity partners recoup some or all of their minimal investment by selling assets and siphoning off cash through fees and debt-funded dividends.7 Meanwhile, suppliers and other creditors are kept in the dark if the company slides toward insolvency. The biggest victims are often workers, who risk losing not only their jobs, but also back wages, pension benefits, and severance pay, in bankruptcy proceedings tilted in favor of creditors with more political clout. Consumers are also harmed as companies they like are driven out of business, market concentration increases, and they are left with worthless gift cards and unfulfilled orders.

Banks, bondholders, limited partners, and other investors may suffer immense losses while private equity’s general partners emerge unscathed from bad deals. Private equity firms were behind the largest commercial real estate default in U.S. history, the result of their vastly overpaying for the Stuyvesant Town and Peter Cooper Village apartment complexes in Manhattan. Underlying this bad gamble was a projection that income would triple in five years, based in part on a strategy of improperly converting rent-stabilized units. When the deal went sour, the private equity partners lost only a tiny equity stake in the deal, while other investors lost billions.8

While some of the risk is borne by wealthy investors who can afford to suffer losses, ordinary Americans are indirectly exposed, notably workers whose pension funds are among the largest investors in private equity funds. The scale and riskiness of private equity transactions has also increased our economy’s vulnerability to financial crisis, especially as leverage has increased while standards have declined.9

Private equity markets itself to pension funds and other limited partners with the promise of outsize returns. However, these claims are based on cherry-picked statistics, manipulated earnings, and ignored risk. While early investors and insiders in some of the best-performing funds may prosper, more objective research finds that most investors do not achieve higher risk-adjusted returns to compensate for illiquidity and lack of transparency, so even non-risk-averse institutional investors would fare better by investing in, say, small cap index funds.10

In addition to shifting risk, private equity general partners also shift the tax burden to others through tax-avoidance strategies. The best known of these is classifying their compensation as lightly-taxed “carried interest.”11 While the revenue losses are hard to estimate because they depend on assumptions about how this income might be taxed if the loophole were closed, estimates have ranged from $18 billion annually to 10 times that amount.12

A comprehensive solution is at hand. The Stop Wall Street Looting Act will not outlaw private equity partnerships, but rather will force them to do what they already claim to be doing—restructuring underperforming companies to make them more productive. It does this through a number of provisions aimed at removing the tax and other incentives that encourage private equity firms to gamble with other people’s money, loot and destroy productive resources, and enrich themselves at the expense of other stakeholders.

To this end, the bill:

• holds those who have ultimate decision-making authority responsible for damages and debts, including employee back pay and benefits;
• limits or prohibits the looting of assets through fees and capital distributions;
• reduces the incentive for risk-taking by prohibiting interest on excessive debt obligations from being tax-deductible;
• limits enhancement of executive compensation, and prioritizes unpaid wages, severance pay, contributions to employee benefit plans, and damages from violations of labor and employment laws, during bankruptcy proceedings;
• directs bankruptcy courts to give substantial weight to the effect on employees in directing the sale of company properties;
• puts consumers with unredeemed gift cards or undelivered services just behind employees in bankruptcy proceedings, along with people who purchased, leased, or rented property from the company;
• closes the carried interest loophole that gives preferential tax treatment to private equity partners’ income;
• protects outside investors by requiring detailed disclosure of fees and returns, as well as the performance of past funds, including the outcomes for target firms;
• clarifies that fund managers have a fiduciary duty to pension plans whose assets they manage;
• prohibits giving favorable treatment to certain limited partners;
• requires managers of collateralized debt obligations to retain a share of the risk according to the credit risk retention requirements in the Dodd-Frank Act; and
• provides effective enforcement mechanisms to ensure compliance with these provisions.

Conclusion. A telling aspect of the private equity business model is that risks and rewards are not evenly distributed among investors. While private equity managers invest little of their own money, they capture a disproportionate share of gains through layers of fees and other opaque arrangements. Meanwhile, other insiders make private side deals, leaving less connected investors, such as pension funds, with the dregs. If the private equity business model were truly about using expertise to identify undervalued companies and manage them better, we would expect the partners to invest more of their own money. Instead, outside investors, such as pension funds, are brought in to bear more of the risk and reap less of the profit.

Rather than promoting efficient market outcomes, private equity often thrives on identifying, creating, and perpetuating tax and regulatory loopholes that distort economic incentives, perverting our political system in the process. If the Vikings had had public relations teams, they would have claimed to be making better use of the resources of the fishing villages they pillaged. Private equity often leaves a similar trail of destruction—looting productive resources rather than salvaging unproductive ones. This bill addresses serious problems with the private equity business model, without getting in the way of firms that actually do produce allocative or operational efficiencies that strengthen the U.S. economy.

Sincerely,

Thea Lee
President
Economic Policy Institute

Notes

1. Brian Burrough and John Helyar, Barbarians at the Gate: The Fall of RJR Nabisco (New York: HarperCollins, 2008).

2. American Investment Council, “2018 Top States and Districts,” April 29, 2019.

3. Eileen Appelbaum, “Recession or Not, There Will Be Pain; Coping with Corporate Bonds,” Working Economics Blog (Economic Policy Institute), May 30, 2019.

4. Research summarized by Eileen Appelbaum and Rosemary Batt in chapter 7 of their authoritative 2014 book, Private Equity at Work: When Wall Street Manages Main Street (New York: Russell Sage Foundation).

5. Steven J. Davis, John Haltiwanger, Kyle Handley, Ben Lipsius, Josh Lerner, and Javier Miranda, “The Social Impact of Private Equity over the Economic Cycle,” working paper presented at the American Economics Association Annual Meeting, January 6, 2019, downloadable at https://www.aeaweb.org/conference/2019/preliminary/paper/5nsZRYTz.

6. David Haarmeyer, “Private Equity Capitalism’s Misunderstood Entrepreneurs and Catalysts for Value Creation,” The Independent Review, Fall 2008.

7. Nabila Ahmed and Sridhar Natarajan, “Private Equity Wins Even When It Loses, Thanks to Debt Markets,” Bloomberg, March 20, 2017.

8. Eileen Appelbaum and Rosemary Batt, Private Equity at Work: When Wall Street Manages Main Street (New York: Russell Sage Foundation, 2014), pp. 44–45; Gabriel Sherman, “Clash of the Utopias,” New York Magazine, February 1, 2009; Charles V. Bagli, “Worry at Stuyvesant Town as Foreclosure Draws Near,” New York Times, February 15, 2010.

9. Trista Kelley, “Former Fed Chair Janet Yellen Just Joined the Chorus of Warnings About $1.6 Trillion ‘Leveraged Loan’ Market,” Business Insider, October 25, 2018; Kristen Haunss, “UPDATE 1-Leveraged Loan Credit Risk Warrants Attention, Regulators Testify,” Reuters, May 15, 2019.

10. For an overview of the research, See chapter 6 in Eileen Appelbaum and Rosemary Batt, Private Equity at Work: When Wall Street Manages Main Street (New York: Russell Sage Foundation, 2014). More recent research in this vein includes Brian Boyer, Taylor D. Nadauld, Keith P. Vorkink, and Michael S. Weisbach, “Private Equity Indices Based on Secondary Market Transactions,” NBER Working Paper no. 25207, November 2018; Gregory W. Brown, Oleg R. Gredil, and Steven N. Kaplan, “Do Private Equity Funds Manipulate Reported Returns?” Journal of Financial Economics 132, no. 2 (May 2019); Morten Sorensen, Neng Wang, and Jinqiang Yang “Valuing Private Equity,” Review of Financial Studies 27, no. 7 (2014); Berl A. Sensoy, Yingdi Wang, and Michael S. Weisbach. 2014. “Limited Partner Performance and the Maturing of the Private EquityIindustry,” Journal of Financial Economics 112, no. 3.

11. Young Ran Kim, “Carried Interest and Beyond: The Nature of Private Equity Investment and Its International Tax Implications,” Virginia Tax Review 37, no. 3 (2018).

12. Victor Fleischer, “How a Carried Interest Tax Could Raise $180 Billion,” New York Times, June 5, 2015.