Section 3: DemocracyBack to table of contents
An essential value in a reimagined American economy is participatory constitutional democracy. For the Commission, democracy means more than just a system of government in which people elect their leaders. It means that people are empowered as citizens to influence the direction of their country and community. In an economy that uplifts democratic principles, citizens should have a voice in the halls of government where policies that shape the trajectory of the economy are decided. Democracy as an economic value also means people feel they have voice and influence in their workplaces.
When people feel that their economy and government are not structured to their benefit, but instead are built for a small subset of the population, they lose faith in the systems and institutions they should trust to meet their needs. This sentiment was reflected in the comments of many listening session participants who believe greed is the main force driving our economy today. They see greed in the way big corporations seem to prioritize profits over people. They also see greed in elected political leaders maintaining the status quo rather than advocating for changes that would benefit working people. These behaviors cause disillusionment and make people feel that their needs and voices matter little compared to the interests of a powerful few.
The Commission recognizes that the path to implementing many of its recommendations—both in this and in previous sections—lies in changing the shape, structure, or design of the nation’s democratic institutions. Identifying the precise changes that need to be made to these institutions, however, is beyond the remit of our project. Instead, it is the focus of a previous Academy commission whose final report, Our Common Purpose: Reinventing American Democracy for the 21st Century, offers recommendations to empower voters, build more representative institutions, and heal the nation’s fractious civic culture.111
The following proposals seek to rebuild trust in institutions by making them fairer and by addressing deficits in the nation’s civic and economic culture. Some of these recommendations take on the problem of concentrated economic and political power directly. They call for making markets more competitive and making tax policy fairer to working people. Others are aimed at enhancing the voices and experiences of people not normally heard in the halls of government, including Native Americans and members of the working class. Another set of proposals seeks to restore our trust in and connection with each other by finding sustainable ways to fund local media outlets and community civic institutions.
- 111American Academy of Arts and Sciences, Our Common Purpose.
Create a Training and Financing Program to Help Working-Class Americans Run for Political Office
Money has become almost equivalent to political voice in the United States. At the local, state, and federal levels, it has become difficult for candidates without significant campaign funds or personal wealth to run or get elected. Those with the largest war chests tend to win.112 In 2010, the Supreme Court’s Citizens United v. Federal Elections Commission decision enabled unlimited campaign expenditures by corporations, labor unions, and other associations, and has been construed to allow certain types of political action committees to raise unlimited and undisclosed donations, often from wealthy individuals.113 So-called dark money is often spent on campaign advertisements, creating an influential and unaccountable force in modern elections.114 In other words, money gives wealthy individuals and well-financed organizations more voice than other voters. This situation hampers the adoption of policies that reflect the concerns and needs of people from a wide range of economic backgrounds.
The current legal environment offers little prospect of regulating political spending by individuals or corporations (though these problems could be addressed through a constitutional amendment, as is recommended in Our Common Purpose).115 Our Commission recommends several complementary strategies for increasing the voice of a wider range of Americans in the political process at the federal, state, and local levels.
First, we recommend the creation of a training and financing program to help working-class Americans run for political office at all levels of government.
“I think we need to find a way to make running for office something you don’t have to sacrifice to do. . . . Why do we depend on wealthy people and why do they have all the power and persuasion? We’ve got to find a way that more [regular] people can run for office.”
— Chris, Newspaper Editor, Montana
Almost every state and local elected official in the United States has a professional or white-collar background. In the early 2000s, just 2 percent of Congress and 9 percent of all of the nation’s city council members were from a working-class occupation, compared to 54 percent of the public. As of 2022, only 6 percent of Congress—twenty-two members of the House and no members of the Senate—do not have at least a bachelor’s degree. Compare this to the early 1960s, when nearly one-quarter of each chamber did not have a bachelor’s degree.116 A 2019 analysis found that only twelve members of either House of Congress had ever held blue-collar or service jobs.117 The election of officials with diverse economic backgrounds has direct consequences for the public policies legislatures pursue. Members of Congress from white-collar or professional occupations are more likely to support policies that benefit businesses, wealthy constituents, and the financial sector, while state legislatures composed of a higher percentage of members from working-class backgrounds are more likely to fund social welfare programs.118
The scarcity of working-class elected officials is not due to their lack of appeal to constituents or lack of skill. Americans are not against electing working-class candidates. People with a college degree are not more effective legislators than those with less formal education. And working-class Americans feel fully qualified to run for political office.119
Financial issues help explain the shortage of candidates from working-class backgrounds. The lack of financial resources to mount a campaign, the perils of incurring financial risk during an election, and unpreparedness for campaign activities like fundraising represent the main barriers to running for office. Working-class Americans without wealthy benefactors simply do not have the time or backing to spend months campaigning while not drawing a salary.120
Some of the commonly proposed policy reforms are insufficient to address this issue. Raising salaries for office holders will not help candidates take the time off work to campaign. This problem also cannot be solved entirely by public financing reforms like democracy voucher programs.121
Instead, we need new solutions specifically to address the challenges facing working people interested in running for office. The Commission recommends the creation of a nonprofit organization or political action committee devoted to offering financial support and free training programs for working-class people running for office. We recommend that this organization operate with a clear definition of working class, and that all potential candidates it works with commit to core democratic principles. The organization should be decidedly nonpartisan, willing to work with eligible candidates from either major political party, as well as those not affiliated with either party. Such training organizations already exist—for candidates committed to free enterprise/limited government ideology and prochoice Democratic women, for example—but not specifically for working-class candidates.122
The Commission also recommends additional ways of creating more opportunities for a wider range of Americans to run for political office, to make elected positions more representative, and to increase public trust in the political process:123
- Foundations, unions, and interest groups should offer seed money programs or political scholarships to help working-class individuals pay their personal expenses (including childcare, groceries, health care, rent/mortgages, and student loan payments) while running for office.124
- Alternatively, organizations in some places may be able to offer fellowships that provide a salary to working-class candidates to communicate about their experience running for office and their suggestions for policy changes that would make it easier for other working-class candidates to do so.
- The federal government should pass legislation that would allow candidates to use campaign money for clearly defined and limited personal expenses, such as childcare and housing (with sufficient restrictions to prevent fraud and misuse).125
- The Federal Elections Commission (FEC) should increase awareness and acceptance of its 2002 ruling that candidates for Congress may use their campaign funds to pay themselves reasonable and limited salaries.126
- States and localities should allow campaign funds to be used for childcare.127
- All levels of government should pass laws encouraging or requiring businesses to allow people to return to their jobs after running for office.
- To provide support during the months before a person officially declares candidacy, the FEC should extend the period of time during which candidates can earn a salary from their campaigns.128
- 112OpenSecrets, “Did Money Win?” (accessed July 18, 2023).
- 113Citizens United v. Federal Election Commission, 558 U.S. 310 (2010).
- 114Samuel C. Rhodes, Michael M. Franz, Erika Franklin Fowler, and Travis N. Ridout, “The Role of Dark Money Disclosure on Candidate Evaluations and Viability,” Election Law Journal: Rules, Politics, and Policy 18 (2) (2019): 175–190.
- 115American Academy of Arts and Sciences, Our Common Purpose, 29.
- 116Nicholas Carnes, White-Collar Government: The Hidden Role of Class in Economic Policy Making (Chicago: The University of Chicago Press, 2013).
- 117Sahil Chinoy and Jessia Ma, “Paths to Power: How Every Member Got to Congress,” The New York Times, January 27, 2019.
- 118Nicholas Carnes and Noam Lupu, “The Economic Backgrounds of Politicians,” Annual Review of Political Science 26 (1) (2023): 253–270; Carnes, White-Collar Government; Michael W. Kraus and Bennett Callaghan, “Noblesse Oblige? Social Status and Economic Inequality Maintenance among Politicians,” PLOS ONE 9 (1) (2014); and John D. Griffin and Claudia Anewalt-Remsburg, “Legislator Wealth and the Effort to Repeal the Estate Tax,” American Politics Research 41 (4) (2013): 599–622.
- 119Carnes, White-Collar Government; Nicholas Carnes, Cash Ceiling: Why Only the Rich Run for Office—and What We Can Do about It (Princeton, N.J.: Princeton University Press, 2020); Nicholas Carnes and Noam Lupu, “Do Voters Dislike Working-Class Candidates? Voter Biases and the Descriptive Underrepresentation of the Working Class,” American Political Science Review 110 (4) (2016): 832–844; Nicholas Carnes and Noam Lupu, “What Good Is a College Degree? Education and Leader Quality Reconsidered,” The Journal of Politics 78 (1) (2016): 35–49; and Jennifer L. Lawless and Richard L. Fox, “Running for Office Is Still for Men—Some Data on the ‘Ambition Gap,’” The Brookings Institution, February 8, 2022.
- 120Nicholas Carnes, “Why Are So Few U.S. Politicians from the Working Class?” The Guardian, October 4, 2018.
- 121Nicholas Carnes and Eric R. Hansen. “Does Paying Politicians More Promote Economic Diversity in Legislatures?” American Political Science Review 110 (4) (2016): 699–716; and John Sides, “What Would Actually Put More Working-Class People in Office?” The Washington Post, December 7, 2021.
- 122EA Morris Fellowship for Emerging Leaders, “About the Fellowship” (accessed July 18, 2023).
- 123Ashley Sorensen, “Representation Matters: Women and Working-Class Diversity in Congress,” The Gender Policy Report, October 19, 2021.
- 124Richard Pérez-Peña, “Union Effort Is Grooming Candidates in New Jersey,” The New York Times, October 29, 2010.
- 125H.R. 1623 Help America Run Act, 116th Congress (2019–2020), 52 U.S.C. 30114; and Nicholas Carnes, “Here’s How to Help People Who Have Kids and Aren’t Rich Run for Congress,” The Washington Post, March 8, 2019.
- 126Katharine Q. Seelye, “Candidates Allowed to Have Salaries from Campaigns,” The New York Times, November 26, 2002.
- 127“Board to Reconsider Campaign Funds Being Used for Child Care,” AP News, February 12, 2019.
- 128Jesse Mermell, “Remove Financial Barriers to Running for Office,” Data For Progress, December 22, 2020.
Deconcentrate Economic Power
The framers of the American democratic system, and of most other democratic political systems worldwide, made the separation of powers an essential design principle. This came from their awareness of the dangers inherent in overcentralized political power. In the early Republic, overcentralized economic power was not an evident danger, but when it became one after the Civil War, the country created laws and policies to limit the dangers posed by trusts and monopolies. These dangers were understood at the time as being mainly for businesses. The unfair practices of the biggest players, such as suppressing competition and innovation and overly concentrating economic power, forced smaller competitors into bankruptcy. The leading champion of the antitrust cause was Louis Brandeis, the future Supreme Court justice, who devoted much of his pre-judicial career to crusading against what he called “the curse of bigness.”
As antitrust law and policy have developed over recent decades, the general suspicion of economic concentration lessened, and a different legal and policy standard came to the fore: consumer welfare. Protecting consumers is an important goal of antitrust. However, when consumer protection became the exclusive goal, antitrust law failed to stop companies that offer low-cost or free services to consumers from engaging in economic practices that stifle competition, reduce consumer choice, discourage innovation, and drive down employees’ wages and benefits. In a system of underregulated political spending, concentrated economic power often converts itself into disproportionate political power. Economic concentration feeds inequities in the distribution of opportunity, individually and by region, class, ethnicity, and gender. It weakens trust in the system and in the idea of the nation as a community. Dispersing economic power should be revived as a goal of economic policy.
Examples of the harmful effects of excessive concentration abound. In four states in 2019, a single health insurance provider controlled more than 90 percent of the market. This borderline monopoly restricts consumer choice and negatively affects prices.129 More broadly, economists have found that as the standard measure of economic concentration rises, it depresses wages.130 Increased concentration is also associated with lower levels of entrepreneurial activity and of labor mobility. Companies that serve as marketplaces for other companies’ products impose onerous terms on their suppliers, who have no real choice but to accept them. Companies that offer a range of services can use a service that they dominate to steer customers to their other services, making it difficult for competitors to enter these markets. Companies that make their money from network effects buy up potential competitors so that they can be protected from meaningful economic challenges. Often, dominant tech companies offer highly compensated employment to the executives of acquired companies, and then assign them no work, thereby wasting talent and suppressing innovation. Companies that use gig workers instead of employees keep the advantages of employment—access to labor—while stripping away the rights for workers that usually accompany employment, like security, good benefits, and the right to negotiate collectively. These companies are behaving rationally in trying to take maximum advantage of the rules governing their behavior. For the situation to change, the rules have to change.
As ways to deconcentrate economic power, we offer these recommendations:
- The risks of concentrated economic power are most apparent when a single dominant seller of goods or a single dominant buyer of services has de facto control of a market, and abuses that control. Such companies should either be broken up or regulated in the manner of a public utility so they do not use their market power to impose special burdens on consumers or producers. It is especially important that companies owning dominant networks or platforms are not allowed to discriminate in pricing or availability among the companies using their services to reach consumers.
- The nation’s major antitrust laws are well over one hundred years old. Most antitrust policy is made case by case through lawsuits and regulatory actions like government approval of mergers. As government agencies and judges review these cases, they should be especially wary of creating markets with monopoly or oligopoly structures. They should consider not only consumer welfare and overall economic efficiency, but also the effects of power-concentrating business activity on pay and working conditions, on the ability of competitors to enter markets, and on preserving a variety of economic options for all the players in an industry: workers, firms, and buyers.
- Economic actors who operate under the effective control of a single major company—gig workers, franchisees, vendors whose access to markets is substantially in the hands of a single company—should have enhanced legal rights. These would include the right to bargain collectively, the right to have full information about the conditions of their relationship with the major company, and the right to offer their work or their products freely to other companies.
- 129José R. Guardado and Carol K. Kane, Competition in Health Insurance: A Comprehensive Study of U.S. Markets (Chicago: American Medical Association, 2017); and Jeffrey Davis, “The Flip Side of the Coin: A Look at the Increase in Health Insurer Consolidation,” American College of Emergency Physicians, February 10, 2022.
- 130Steve Maas, “Employer Concentration and Stagnant Wages,” The NBER Digest 5 (2018).
Revise the Tax Code to Incentivize Work and End Tax Policies That Benefit the Wealthy
To find out who and what a society values, one need only look at its tax code. Which items are heavily taxed? Which activities are rewarded with credits or exemptions? Who pays the largest share of their income to keep the government going?
The American tax system does not reflect the values the Commission believes should be central to the political economy. We believe the tax code should, wherever possible, reward work. People who work full time should be able to support their families, and tax credits could help people who are struggling to do so. Also, those at the lower end of the income spectrum should not be asked to pay more into the system than they already do.131
Many of the biggest existing tax credits benefit the wealthy. Some of these credits are the result of people with resources lobbying persistently and expensively on behalf of their own economic interests. Others are based on the outdated perception that America is suffering from a shortage of investment capital that needs to be corrected through tax incentives. Credits that make the tax code unnecessarily regressive should be eliminated.
“[We should fix] our tax system . . . so that everyone pays their fair share and we’re not really creating just tax breaks for the wealthy. And we can actually see that money get reinvested into our communities that need it. And really figure out how to live together instead of cheat one another out of the money that needs to be paid back.”
— Katie, Faith Leader, Arizona
The Commission’s call to end tax breaks for the rich is not just a matter of fiscal prudence. Making the tax code more progressive will help foster trust in the political and economic system as a whole. The perception that the rich do not pay their fair share nurtures discontent with a system that appears to be tilted by and for the wealthy few. Reducing unnecessary benefits to wealthy households and increasing fairness toward lower- and middle-income families can create a tax code that provides the funding the government needs while embodying the values that should sit at the heart of the economy.
The Commission recommends the following revisions to the tax code:
- Reward work by expanding the Earned Income Tax Credit (EITC)
The Earned Income Tax Credit is a tax credit for low- to moderate-income households with employment income. Credit amounts vary based on income, household size, disability status, and other factors. The Commission supports making the EITC more generous, particularly for lower-income adults without dependent children. We also support broadening the range of people eligible to receive it. Some ways to expand EITC eligibility include:
- Enacting a state-level EITC in the eighteen states that do not now have one.
- Increasing the income eligibility range.
- Expanding state EITCs to include those left out of the federal credit, particularly childless adults.
- Lowering the minimum eligibility age for the childless EITC to nineteen and increasing the maximum eligibility age for the childless EITC (currently only those aged between twenty-five and sixty-five are eligible).
In addition to expanding the EITC, another way to reward work through the tax code would be to lower the payroll tax rate for low- and middle-income workers.
- End tax credits that benefit the wealthy
The Commission has identified a number of tax credits that disproportionately benefit those who need it least, all of which should be substantially reformed or eliminated.
- The carried interest deduction: Carried interest is a type of income earned by partners of hedge funds or private investment funds. Typically, it amounts to a proportional share of the fund’s profits. For tax purposes, this income is treated as a capital gain and, as a result, is taxed at a lower rate than the tax on earned income. In a 2021 survey of private-equity professionals, carried interest accounted for an average of 84 percent of the total compensation for managing partners. Taxes on this income should be subject to the standard income tax rate.132
- The mortgage interest deduction: This tax credit allows homeowners to reduce their taxable income by the amount of interest paid on their mortgage, up to $750,000. By definition, the only taxpayers who can take advantage of this deduction are those who own a home, and the program particularly benefits those with more expensive homes. In 2018, 17 percent of the benefit from the mortgage interest deduction went to the wealthiest 1 percent of households, and 80 percent went to the top 20 percent. Only 4 percent helped households in the middle-income quintile.133 The credit should be made more progressive—particularly to aid first-time homeowners—or should be eliminated.
- The tax exclusion for employer-provided health care: Under the current tax code, employer-provided health insurance benefits are not considered taxable income. This exemption disproportionately benefits those in higher tax brackets, who would normally pay a higher rate on this form of income. The Congressional Budget Office estimates that this tax credit amounted to $316 billion in 2022.134 Again, the credit should be eliminated or reformed significantly (for more on reducing health care subsidies for high-income Americans, see Recommendation 3: Reform Childcare and Health Care to Lower Costs and Facilitate Benefit Portability).
The Commission also recommends that the federal government reconsider other tax policies so upper-income households pay their fair share. These could include increasing consumption/sales taxes on luxury goods, increased taxes on capital gains so work is not taxed at a higher rate than income from investments, and closing estate-tax loopholes that enable the wealthiest Americans to escape inheritance taxes via trusts and other tax avoidance strategies.
- 131Michael R. Strain, “How to Cut Taxes and Help the Poor at the Same Time,” The Washington Post, October 6, 2021.
- 132Tax Policy Center, “What Is Carried Interest, and How Is It Taxed?” Tax Policy Center Briefing Book (accessed July 18, 2023); Greg Iacurci, “Carried Interest Provision Is Cut from Inflation Reduction Act. How This Tax Break Works, and How It Benefits High-Income Taxpayers,” CNBC, August 8, 2022; and Jonathan Goldstein and John Rubinetti, 2021 North American Private Equity Investment Professional Compensation Survey (Chicago: Heidrick & Struggles, 2021).
- 133William G. Gale, “Chipping Away at the Mortgage Deduction,” The Wall Street Journal, April 9, 2019.
- 134Congressional Budget Office, Federal Subsidies for Health Insurance Coverage for People under 65: 2022 to 2032 (Washington, D.C.: Congressional Budget Office, 2022); and Tax Policy Center, “How Does the Tax Exclusion for Employer-Sponsored Health Insurance Work?” Tax Policy Center Briefing Book (accessed July 21, 2023).
Support Tribal Governmental Infrastructure to Advance Native American Self-Determination
For most of the twentieth century, American Indians on reservations were among the poorest identifiable people in the United States. To this day, some tribes struggle with overcrowded housing, grossly inadequate or nonexistent water and sewer systems, outdated health facilities, inadequate roads and commercial buildings, weak food supply systems, a deficit of banking services, and a lack of broadband connectivity.135 For many of the nation’s 574 federally recognized Indian tribes, these conditions have also generated social stresses that pose severe threats to tribal culture and tradition.
Over the last several decades, progress has finally been made in reversing the deficits that have for so long burdened Indian Country. The impetus has been the adoption of federal policies of tribal self-determination through self-governance.136 These policies gathered steam in the late 1980s and have allowed tribes to take the reins to determine their own futures. The result has been remarkable economic growth. While pockets of poverty persist, over the last thirty years, the average incomes of Native citizens on reservations across the United States have been growing more than three times faster than the incomes of the average American.137 Similar trends are evident in other determinants of well-being, including housing, health, and education. The strengthening of tribal economies has had spillover effects into nontribal jurisdictions, turning many tribes into the financial and social service engines of their entire regions.
“[The] first step toward economic well-being is creating self-determination within the communities. . . . The root of self-determination is trying to make sure that tribes feel empowered to bring their traditional practices to the forefront of what they do.”
— Liberty, Indigenous Nonprofit Coordinator, Minnesota
The Commission affirms the importance of tribal autonomy to self-govern. We also recognize that autonomy alone is not enough to foster economic security, mobility, and opportunity among Native Americans. We recommend escalating federal and nonprofit investment in tribes’ governmental infrastructure, the web of institutions through which tribes can meet the needs of their citizens and nurture healthy economies. Many tribes are in the nascent stages of their rebuilding. Some are assembling tribal court systems from the ground up. Others are creating new health, housing, education, business regulation, and environmental protection departments. Still others are rewriting the one-size-fits-all tribal constitutions imposed by the federal government in the 1930s. Overall, it is expensive to replace paternalistic structures with policies and institutions of tribes’ own design. The federal government should support this process financially. The philanthropic sector should also join in this effort. Native Americans represent roughly 2 percent of the U.S. population, but a recent report by Native Americans in Philanthropy found that Native groups received just 0.4 percent of all grants from the nation’s largest one thousand foundations.138 These foundations should increase their investment in Native peoples generally, and tribal governmental infrastructure in particular.
Governmental infrastructure is a crucial arena of investment because it offers the best path for addressing the economic challenges facing residents of tribal nations. Research consistently finds that judicial systems and administrative agencies materially increase tribes’ ability to create jobs and provide public services effectively.139 Without robust governmental systems, tribes will not be able to self-govern successfully, or be able to address their social problems or their deficient physical infrastructure.
Bolstering tribal governmental capacity will also strengthen educational opportunities, which are themselves vital for self-governance. The nation-building process requires citizens who are educated in such fields as business, public administration, law, finance, and accounting. Educational outcomes for Native citizens are improving thanks to a growing set of tribally controlled public, private, and charter schools, as well as a system of thirty-five fully accredited, tribally established and controlled colleges and universities.140 In addition, tribes are devoting more resources to lifelong and mid-career education opportunities for Native professionals. An increase in support for self-governance will foster additional tribal control over and innovation in schooling. It will also make self-governance easier, more cost efficient, and more effective over the long run.
Tribal self-determination through self-governance means that the typical American Indian nation today is providing—or at least trying to provide—the full array of laws, regulations, infrastructure, and public services expected of nontribal state and local governments in the United States. The empowerment of tribes is certainly an overdue break from the long history of control of tribes by outside governments. But current policy leaves tribes at a disadvantage. They are compelled to fill many of the functions provided off-reservation by state and local governments, and they receive roughly equivalent degrees of support from the federal government. However, unlike state and local governments, tribal governments do not have full powers of taxation. In addition to suggesting additional financial support for emerging tribal governments, the Commission recommends remedying this inequitable treatment.
Specifically, tribal nations’ powers of local taxation should be accorded primacy within each tribe’s boundaries of jurisdiction. State governments generally cannot tax activities occurring within neighboring states. So, too, the widespread practice of state and local governments taxing property, commerce, business and personal incomes, and natural resources within tribes’ jurisdictions should be ended.141
Doing so will not only do away with seemingly endless rounds of intergovernmental litigation and jurisdictional ambiguity. It will also enable tribal governments to meet fully the responsibilities they are willingly accepting under federal policies of self-determination through self-governance.
- 135U.S. Commission on Civil Rights, Broken Promises: Continuing Federal Funding Shortfall for Native Americans (Washington, D.C.: U.S. Commission on Civil Rights, 2018).
- 136Joseph P. Kalt, “American Indian Self-Determination through Self-Governance: The Only Policy That Has Ever Worked,” Statement to the Commission on Native Children, December 15, 2022.
- 137Randall K.Q. Akee, Eric C. Henson, Miriam Jorgensen, and Joseph P. Kalt, “The Need for a Significant Allocation of COVID‐19 Response Funds to American Indian Nations,” May 18, 2020.
- 138Aavi Bond, Sarina Dayal, Mantin Diomande, et al., Investing in Native Communities: Philanthropic Funding for Native American Communities and Causes (New York: Candid and Native Americans in Philanthropy, 2019).
- 139Kalt, “American Indian Self-Determination Through Self-Governance.”
- 140American Indian Higher Education Consortium, “Tribal Colleges and Universities” (accessed July 22, 2020).
- 141Kelly S. Croman and Jonathan B. Taylor, “Why Beggar Thy Indian Neighbor? The Case for Tribal Primacy in Taxation in Indian Country,” Joint Occasional Papers on Native Affairs (Tucson: The Native Nations Institute and The Harvard Project on American Indian Economic Development, 2016).
Facilitate the Creation of Robust Local and Community Media
The Commission recommends adopting mechanisms to improve the economic landscape for local and community-focused media and media companies. This recommendation grows from two observations.
First, accurate, trusted, diverse sources of information are necessary parts of an infrastructure that allows economies to grow and communities to thrive. Healthy societies rely on trust. Trust is maintained in part through a media ecosystem that provides accurate information and that equips people to participate fully and fairly in economic opportunities. Trusted media sources are indispensable in offsetting the misinformation and disinformation that have damaged American public life at all levels, and that might only become worse with advances in artificial intelligence.
The spread of “hard” infrastructure, from canals and highways to electric-power networks and public water supplies, has been one foundation of nationwide economic growth. “Soft” infrastructure, from schools and universities to libraries and public-health programs, has distinguished the societies with the most sustained and inclusive growth. In a democratic society, success in any of these realms depends on an information infrastructure. One 2018 study found a causal relationship between the closure of a local newspaper and an increase in government deficits and municipal borrowing costs, largely due to the lack of journalistic oversight.142 Major public decisions about the direction of the economy, as well as life-changing individual choices about career and family, rest on information a healthy media system can provide.
The role of local media extends beyond its conventional responsibility as a local government watchdog. It also acts as a crucial pillar of community cohesion. High school sports coverage, obituaries, wedding announcements, new economic development plans, and public events all help build connections between neighbors. When local news disappears, it is often replaced by national news, which is much more politically polarizing. Local news is a vital agent for creating a healthier democracy and for building engaged and trusting communities.143
Second, even though most American news operations are run as for-profit businesses, modern market conditions for the press have made it harder for private organizations to provide this essential public good. These pressures affect legacy news organizations, but they are even more important for the barriers they create to innovative new institutions. They have been especially intense for local and community-based news organizations, which have been eliminating reportorial staff, consolidating, and closing at a rapid pace. As news organizations have become more concentrated, homogenized, and monopolistic, they have increased the barriers for left-behind communities to have a full and useful picture of their lives. According to one Pew Research poll, 41 percent of rural Americans said the local media mostly covered their community, in contrast with 62 percent of urbanites.144
The nation has countless institutions that operate on the recognition that the private market will not adequately meet every public need. Public transit systems are not expected to turn a profit, nor are libraries or museums. Especially in the case of nonprofit news organizations, foundations can make investments and donations that corporations would not. National policy has also recognized the value of public support for activities that are privately run. The federal government does not directly grow corn, wheat, or soybeans, but its policies support the private farm operators who do.
Today’s local and community media require philanthropic support, like that provided to libraries or museums. They also deserve the kind of public investments that have made so many industries such sources of economic growth—from semiconductors to the biomedical and aerospace industries. The Commission recognizes that public support has historically had its greatest impact in fostering innovative start-ups, rather than simply protecting incumbent organizations. That principle should guide its support for media as well. Such reform is in keeping with the long-standing American practice that has adjusted tax and regulatory policy to support media organizations, such as the first major law governing postal rates, enacted in 1792, which offered special preferential rates for newspapers and periodicals.
As it reimagines the economy, the Commission is interested in reimagining the business structure of the media industry. Internet-era private market pressures on media organizations have made it difficult—if not impossible—for many local outlets to continue operating. The Commission recommends reforming the tax code so media organizations—particularly local and community-focused organizations—are treated less like other for-profit companies and more like public utilities tasked with providing an essential service. Media organizations are a business, but not just a business.145
Print and broadcast media companies have had up-and-down waves of profitability over the years, driven by technological changes and market shifts. During the late twentieth century, many local and national media organizations were highly profitable. In retrospect, that looks like an exceptional period. The world’s media organizations may now be returning to a new normal, in which information necessary for democracy does not have a robust marketplace.
Not-for-profit news organizations are on the rise—many of them allied with universities, public broadcasting services, local or community foundations, or other sources of support—and the Commission recommends that governments also help foster these types of media organizations. The Institute for Nonprofit News reports that its network doubled in size between 2018 and 2022, and now includes more than 400 independent news organizations that distribute content through over 7,100 media outlets.146
The Commission is not advocating for the establishment of an entirely not-for-profit or public media environment. We believe, though, that help is needed for media organizations of all kinds to fill their crucial democratic function. We are not alone in this view. In September 2023, the MacArthur Foundation, with support from the Knight Foundation, the Ford Foundation, and the Carnegie Corporation of New York, pledged $500 million to help fund local for-profit and not-for-profit newsrooms.147
Preserving Local and Community Media in Colorado
Nonprofit trusts represent a compelling pathway for preserving the autonomy and financial sustainability of local news outlets. One such trust, the Colorado News Conservancy, offers a powerful example of how trusts can help sustain vital news organizations in uncertain economic times.
Over the last two decades, local and community media organizations in Colorado grappled with the same financial uncertainty that plagued such organizations nationwide. The years between 2004 and 2019 were marked by a significant contraction in the state’s local media market, with almost one-fifth of weekly newspapers closing.148 The instability and closures were driven by shifts in consumer behavior and by the purchase of local media companies by hedge funds and private equity firms. These closures occurred particularly in rural and suburban areas and had noticeable repercussions on community well-being. When the Denver-based Rocky Mountain News closed due to financial hardship in 2009, the city experienced an almost 30 percent plunge in civic engagement. Researchers found that this decline was not experienced in cities that did not lose a major paper, suggesting a correlation between the loss of local news and a decline in active community participation.149
The Colorado News Conservancy (CNC) was formed in 2021 to prevent further erosion of the state’s local media. The CNC is a joint venture by the National Trust for Local News and the Denver-based news outlet The Colorado Sun—a news organization launched in 2018 by former employees of The Denver Post who quit in response to layoffs mandated by the Post’s hedge-fund ownership. In addition to the Sun, the CNC is made up of twenty-four local newspapers, which were purchased by the CNC with the aim of providing a sustainable, community-centric alternative to the national consolidation of local news.
The trust model relies on philanthropic support. CNC has a total of thirteen partner organizations, including the Knight Foundation, the Gates Family Foundation, and the Google News Initiative, which provide financial support, consulting, and technical assistance. The contributions of these partner organizations ensure the media organizations under the auspices of the CNC can operate without fear of closure.
The trust model of local journalism embodied by the Colorado News Conservancy provides a strategy to counter the trends of national consolidation and decline in local news. Similar trusts will soon be formed in northern Texas and Maine.150 The Commission endorses philanthropic support for these and other trusts, as well as continued experiments with the trust model. Such creative reimagining of local media will be vital to help preserve the news organizations that are necessary for the health of local communities and the health of American democracy.
Notwithstanding this influx of financial support, the Commission recommends a combination of the following:
- Provide news organizations with a tax credit for hiring local journalists. The main challenge for media organizations today is collecting and reporting the news with adequate reporting staff. Distributing the news is no longer onerous. The supply of potential new reporters is strong, but budget constraints mean newsrooms’ ability to hire is low. We need to make it easier and less expensive to collect and report the news.151
- Establish a national trust for local news to allow communities to keep control of their newspapers, rather than their being bought by larger media companies. A trust is a nonprofit entity that could purchase multiple newspapers and media organizations to ensure they remained under local or community control. The idea is similar to a land trust, where specific land is protected from development to maintain its natural or cultural value. A trust would be established through a collaboration between philanthropic and community-based entities that would help fund news organizations. In the Denver area, local nonprofits created the Colorado News Conservancy, which consists of twenty-four newspapers. Report for America’s Steven Waldman estimates that between $1 billion and $2 billion in philanthropic support, if properly targeted, would wipe out the country’s news deserts and create a strong system of reporting.152 Trusts are a feasible and effective way to channel philanthropic support.
- Expand the Corporation for Public Broadcasting (CPB) to include all public media. The CPB is a nonprofit entity created by Congress to support public broadcasting, and is the largest source of funding for public radio and television. The mandate of the CPB could be expanded to include support for local, nonprofit, and public-service-oriented outlets.153
- Help hedge funds and private equity firms unwind their ownership in media companies and restore ownership of companies to local communities. These entities invested heavily in media companies when profits were high. Because of lower profits and higher interest rates, many are now looking to get out of the media business. This trend should be encouraged, and we can do so by offering one-time capital gains tax credits for investors when media companies are sold to nonprofits.
- Provide refundable tax credits to small businesses for the advertisements or sponsorships they purchase with local news organizations.
- 142Pengjie Gao, Chang Lee, and Dermot Murphy, “Financing Dies in Darkness? The Impact of Newspaper Closures on Public Finance,” Journal of Financial Economics 135 (2) (2020): 445–467.
- 143Steven Waldman, “How High School Sports Coverage Can Save Democracy,” Editor and Publisher, June 5, 2023; and Daniel J. Moskowitz, “Local News, Information, and the Nationalization of U.S. Elections,” American Political Science Review 115 (1) (2020): 114–129.
- 144Elizabeth Grieco, “For Many Rural Residents in U.S., Local News Media Mostly Don’t Cover the Area Where They Live,” Pew Research Center, April 12, 2019.
- 145Steven Waldman, “There’s Already a Solution to the Crisis of Local News. Just Ask This Founding Father,” Politico Magazine, April 2, 2023.
- 146Institute for Nonprofit News, “Nonprofit News Outlets Are Growing Revenue and Audiences While Expanding across Local Markets,” July 27, 2022.
- 147MacArthur Foundation, “Press Forward Will Award More Than $500 Million to Revitalize Local News,” press release, September 7, 2023.
- 148Melissa Milios Davis, “Why a New Chapter for 24 Community Newspapers Matters for Colorado—and the Nation,” Colorado Media Project, May 3, 2021.
- 149Lee Shaker, “Dead Newspapers and Citizens’ Civic Engagement,” Political Communication 31 (1) (2014): 131–148.
- 150National Trust for Local News, 2022 Annual Report (Lexington, Mass.: National Trust for Local News, 2023); and Katie Robertson, “Nonprofit Buys 22 Newspapers in Maine,” The New York Times, July 11, 2023.
- 151Steven Waldman, “The Journalist Population,” Report for America, June 28, 2021.
- 152Steven Waldman, “For Local Newsrooms, Philanthropy Isn’t Charity—It’s Revenue,” Inside Philanthropy, March 23, 2021.
- 153Steven Waldman, The Information Needs of Communities: The Changing Media Landscape in the Broadband Age (Washington, D.C.: Federal Communications Commission, 2011).
Promote Economic Connectedness
In the United States today, many Americans feel they do not have anything in common with one another. Divisions in the nation have become so extreme that the one thing Americans do seem to share is the belief that they do not share anything.154 These divisions are especially evident along lines of political ideology, but they are also prevalent along lines of race, ethnicity, age, and other characteristics. Across the nation, feelings of us-versus-them prevail, generating disunity, political resentment, and a fractured sense of the common good.
One line of partition in American society is of particular importance to the Commission: socioeconomic status. This division is the result of Americans across the economic spectrum not having genuine opportunities to live, play, and work together. The Commission calls for the creation of bridges within and between communities to foster connections across lines of economic difference. We believe that inter- and intracommunity connectedness can help heal the divisions keeping Americans apart and can bring the nation closer to the fundamental conviction that we are all in this together.
Much of the nation’s class-segmentation problem is caused by policy choices that structure the nation’s neighborhoods and schools. The prevalence of single-family zoning and the lack of affordable housing have isolated wealthy homeowners into exclusive and homogenous neighborhoods (see Recommendation 2: Adopt Inclusionary Zoning Policies to Increase the Housing Supply). Because the assignment of students to public schools is generally based on where they live, neighborhood homogeneity is reflected in classrooms. The nation’s public schools are more segregated today than they were in the 1970s, both racially and economically.155 Students from these homogenous schools often attend colleges and universities with the same kinds of classmates they had in high school. Students from low- and middle-income backgrounds attend selective higher-education institutions at lower rates than students from wealthy families, even when they have the same test scores. For the college graduating class of 2013 (the last year for which data are available), thirty-eight colleges had more students from the top 1 percent of household income than from the bottom 60 percent.156
The lack of opportunity for cross-class interaction is also due to individual choices. In addition to educational decisions, affluent Americans have withdrawn from other public spaces—such as sports leagues, community pools, or recreational clubs—where cross-class relationships might be formed. The net effect is that children from well-resourced families have become far less likely to share the same spaces or form genuine connections with their peers who are not as advantaged.157
Scholars and policymakers have long recognized the importance of social capital, the strength of relationships and networks. Social capital provides numerous benefits, from better educational outcomes and reductions in personal prejudices to stronger civic ties, better job prospects, and improvements in mental and physical health.158
A 2022 study by economist Raj Chetty and his colleagues at Opportunity Insights pinpoints the role social capital plays in driving economic mobility. They find that economic connectedness, defined as cross-class friendships, is the biggest predictor of long-term upward mobility for Americans of all ages and income levels. Cross-class friendships have positive and significant outcomes for all involved. They expand the horizons of individuals who come from affluence, exposing them to those who come from less fortunate situations. These relationships also have been shown to result in tangible impacts on low-income individuals, helping to shape their “career aspirations and norms [and provide] valuable information about schools and colleges [as well as] connections to internship and job opportunities.” Opportunities to form these relationships are hard to come by in communities marked by class stratification. On average, only 2 percent of low-income individuals’ friends come from the top tiers of the income spectrum.159
Given the importance of cross-class relationships for economic mobility and for social cohesion, the Commission recommends the adoption of policies, practices, and programs to bring people together across lines of socioeconomic difference. These should address divisions both within and between communities.
To bridge intracommunity socioeconomic boundaries, the Commission suggests a revitalization of spaces where people from different backgrounds can interact with one another and develop relationships. These include public parks, local libraries, community recreation centers, and sports clubs.
Public libraries in particular show promise as connective spaces. Libraries today do far more than loan books. They offer programming for individuals of all backgrounds, including book clubs and computer and yoga classes. These are avenues for community members from different neighborhoods and backgrounds to come together on equal footing and to get to know one another.
Libraries also provide services, such as job application assistance for the unemployed and benefits assistance for the unhoused. Library-based services can also include small-business counseling and help for low-income individuals to access banking services (see Recommendation 4: Expand Access to Low-Cost Banking for Low-Income Americans). These services can be run not only by library staff but also by community volunteers, many of whom can share the skills and guidance needed to navigate today’s economy. These programs can also broaden professional networks for lower-income participants. In King County, Washington, for example, volunteer small business counseling has been an effective way to foster cross-class mentoring relationships.160
To promote these kinds of economic connectedness efforts within communities, we recommend the creation of Economic Mobility Incentive Funds. These funds would come from some combination of federal, state, local, and private philanthropic sources such as the Trust for Civic Infrastructure, as proposed in Our Common Purpose.161 Libraries, community centers, recreation clubs, sports leagues, or any other civic institutions could apply for funding, with grant criteria explicitly tied to programs that promote cross-class interaction and economic mobility. Congress has already started the process of expanding funding for institutions like libraries. The American Rescue Plan of 2021 allocated $200 million in grants to be distributed through the Institute of Museum and Library Services. This grant money is predicated on certain objectives, which could be expanded to cover connectedness goals. The private sector can also play a role in the effort of bridging divides by purposefully finding ways for employees in various types of jobs to come together and collaborate across socioeconomic lines.
A different set of strategies is required to create socioeconomic connections across communities. National service programs are widely recognized as an avenue to bridge partisan and social divisions. California recently expanded opportunities that enable college students to earn money for tuition, particularly by tutoring, mentoring, staffing food banks, building green spaces, and meeting other vital community needs. Such programs help bring young Americans together, fulfilling young people’s desire to interact with new people and experience new places while serving the nation.
Another promising strategy to build connectedness is an intercommunity exchange program. Many Americans of high school age feel they are growing up in a bubble in which they only interact with people of a similar racial, class, and political background. A new, innovative organization, the American Exchange Project (AEP), has found that offering small groups of high school seniors free travel to different parts of the country for one or two weeks strengthens their personal, civic, and social development. The short commitment helps the appeal of the program, especially for students who are in the workforce. Giving young Americans the opportunity to travel to communities different from their own expands their horizons and allows them to form diverse relationships and networks that stay with them long after the end of the trip. Coupled with local-level efforts to increase economic connectedness, a widely available, no-cost exchange program like AEP would enable the building of social capital for Americans in their communities and beyond.162
- 154“Danielle Allen: Our Common Purpose,” YouTube, uploaded February 26, 2021.
- 155Ulrich Boser and Perpetual Baffour, Isolated and Segregated: A New Look at the Income Divide in Our Nation’s Schooling System (Washington, D.C.: Center for American Progress, 2017); Heather L. Schwartz, “Housing Policy Is School Policy: Economically Integrative Housing Promotes Academic Success in Montgomery County, Maryland” (New York: The Century Foundation, 2010); and Valerie Strauss, “Why School Integration Works,” The Washington Post, May 31, 2019.
- 156Gregor Aisch, Larry Buchanan, Amanda Cox, and Kevin Quealy, “Some Colleges Have More Students from the Top 1 Percent than the Bottom 60. Find Yours,” The New York Times, January 18, 2017.
- 157Jon Solomon, “Survey: Low-Income Kids Are 6 Times More Likely to Quit Sports Due to Costs,” Project Play, January 14, 2020.
- 158Robert D. Putnam, “Bowling Alone: America’s Declining Social Capital,” Journal of Democracy 6 (1) (1995): 65–78; Isabel V. Sawhill, “Social Capital: Why We Need It and How We Can Create More of It,” Economic Studies at Brookings, July 2020; Thomas F. Pettigrew, “Advancing Intergroup Contact Theory: Comments on the Issue’s Articles,” Journal of Social Issues 77 (1) (2021): 258–273; Elizabeth Levy Paluck, Seth A. Green, and Donald P. Green, “The Contact Hypothesis Re-evaluated,” SoxArXiv, May 24, 2017; and Stefania Paolini, Jake Harwood, Miles Hewstone, and David L. Neumann, “Seeking and Avoiding Intergroup Contact: Future Frontiers of Research on Building Social Integration,” Social and Personality Psychology Compass 12 (12) (2018): e12422.
- 159Raj Chetty, Matthew O. Jackson, Theresa Kuchler, et al., Social Capital and Economic Mobility (Cambridge, Mass.: Opportunity Insights, 2022), 3; Erik Brynjolfsson, Karthik Rajkumar, and Guillaume Saint-Jacques, “The Real Strength of Weak Ties,” Stanford News, September 15, 2022; and Raj Chetty, Matthew O. Jackson, Theresa Kuchler, et al., “Social Capital II: Determinants of Economic Connectedness,” Nature 608 (7921) (2022).
- 160Eric Klinenberg, “To Restore Civil Society, Start with the Library,” The New York Times, September 8, 2018; Deborah Fallows, “Libraries Lead the Way—Again,” Our Towns, November 4, 2021; King County Library System, 2021 Annual Report—A Purpose-Driven Year: Commitment, Community and Connection (Seattle: King County Library System, 2021); and Eric Klinenberg, Palaces for the People: How Social Infrastructure Can Help Fight Inequality, Polarization, and the Decline of Civic Life (New York: Broadway Books, 2019).
- 161See “Strategy 6: Inspire a Culture of Commitment to American Constitutional Democracy and One Another,” in American Academy of Arts and Sciences, Our Common Purpose, 57.
- 162Esther Larson, “American Exchange Project: No Passport Required,” Philanthropy Roundtable, February 11, 2022; and The American Exchange Project (accessed July 20, 2023).