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April 2013

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Who is Pro Business?

Speaker of the House John Boehner and his party's followers claim that if the Senate and the nation-at-large supported their policies, businesses would flourish and unemployed Americans would be headed back to work.

But over the past few weeks, those same policies have been strongly rebuked by a highly-respected lifelong Republican and by a businessman celebrated for his profitable entrepreneurship.

Meet Sheila Bair, who served for five years as chairwoman of the Federal Deposit Insurance Corporation, and Craig Jelinek, the CEO of Costco Wholesaler, one of the country's top warehouse retailers, boasting a bigger market share than Sam's Club.

Bair describes herself as "a capitalist and a lifelong Republican." In an op-ed published in the New York Times, she slams Republican leaders for supporting policies that "[skew] income toward the upper, upper class." That "hurts our economy," she says "because the rich tend to sit on their money — unlike lower-and middle-income people, who spend a large share of their paychecks, and hence stimulate economic activity."

But Bair doesn't just take shots at her fellow party members. She proposes solutions to rebuild the U.S. economy that make common sense. She dares to talk about taxes. But she doesn't just mindlessly mimic the tea party's call to cut all taxes, leaving worthwhile programs starving.

"It's time to end the practice of taxing income made by wealthy investors in the stock market at a lower rate than income generated by work," Bair says. "Republicans should put fundamental tax reform on the table and make it our priority to end preferential treatment of investment income, which lets managers of hedge funds pay half the tax rate of managers of shoe stores."

Wouldn't it be better, Bair asks, for the Federal Reserve, instead of putting more "cheap money" into banks and the financial sector, to finance construction projects to rebuild the nation's transportation and energy infrastructure? "From Lincoln's transcontinental railroad to Eisenhower's highway system, Republicans have understood that investing in critical infrastructure projects creates jobs and expands commerce," she says.

In 2009, Sheila Bair was named by Forbes Magazine as the second most powerful woman in the world after Chancellor Angela Merkel of Germany.

If words are powerful, we would all benefit if Sheila Bair, now a senior advisor at the Pew Charitable Trusts, recovers some of her former influence. Prosperity and growth for America's working families will only happen if Democrats and Republicans both heed her common-sense solutions.

We can expect that some of the folks Bair is criticizing will say that she hasn't had experience running a business. If so, what would they say in response to Craig Jelinek, who shares her concerns about growing wealth inequality in America?

Jelinek has turned upside down the conventional wisdom on Wall Street and among so-called conservatives in Washington that in order to survive in today's global marketplace, businesses must drive down wages as low as they can go.

By their reasoning, Costco should have gone belly up years ago because the company actually pays its workers more than the industry average. A typical Costco employee makes approximately $45,000 a year; at Sam's Club, it's just $17,486.

Sam's Club is owned and operated by Wal-Mart Stores Inc., the Arkansas-based company infamous for pioneering the low-wage, minimal benefit workplace model, paying poverty-level wages as a way to offer lower prices and boost shareholders' earnings.

Costco has taken a different approach. Costco's workers have access to quality health care and decent retirement benefits, and the company has resisted pressure to outsource work to other countries, choosing to locate its call-center operations in house — right in the U.S.A.

A decade ago, Costco stock traded for $32 a share. Today's it is $100. And just days after Jelinek announced his support for raising the minimum wage, his company reported a profit of $537 million — up from $394 million last year.

At one point in our history, Jelinek's and Bair's approach to economics was not all that unique. It was Henry Ford who first realized that paying his employees a decent wage meant more of them could afford to buy his cars, boosting business and allowing him to hire even more workers.

For much of the second half of the 20th century, the idea that a living wage was good for business and America was a key component of the social compact that led to the greatest period of economic growth and prosperity in our history.

But beginning with Ronald Reagan's busting of the air traffic controllers strike in 1981, corporate America and segments of the political class decided to tear up the compact, setting the stage for massive income inequality and a declining middle class that haunts us today.

Big CEOs and corporate traders — who are raking in more profit now than they did before the 2008 recession — may not be worried, but for the vast majority of working Americans who are finding it harder and harder just to make it, the Wal-Mart model is unsustainable.

Costco shows that businesses can make it in America by investing in good jobs that provide a road to the middle class and uplift workers and the broader community. Genuine economic recovery requires that more corporations follow in Jelinek's footsteps and more policy makers listen carefully to Bair's warnings.

Edwin D. Hill

Edwin D. Hill
International President

Salvatore J. Chilia

Salvatore J. Chilia
International Secretary-Treasurer