March 04, 2021

Toomey: This is no time to abandon capitalism

Washington, D.C. – U.S. Senate Banking Committee Ranking Member Pat Toomey (R-Pa.) today pushed back on the false narrative that capitalism is failing too many people and the only cure is to reduce economic freedom and expand the power of government. In his opening statement during today’s Senate Banking Committee hearing on ‘Wall Street vs. Workers’, Sen. Toomey argued no other economic system has lifted more people out of poverty, created more opportunity, and produced a higher standard of living.

Ranking Member Toomey’s opening remarks, as prepared for delivery:

“Thank you, Mr. Chairman.

“The title of today’s hearing is Wall Street vs. Workers: How the Financial System Hurts Workers and Widens the Racial Wealth Gap. This title expresses a worldview held by many on the Left and some on the Right that capitalism is failing far too many people.

“In this worldview, capitalism has left behind the middle class and working class, lowered our standard of living, caused inequality, and contributed to the collapse of communities and families.

“The proposed prescription to cure these ills is almost inevitably to expand the power and role of government and reduce the economic freedom of Americans.

“Let me offer a different perspective. It’s this: capitalism produces the best conditions for the largest number of people.

“The empirical case is very simple. Capitalism clears a path for the industrious to become wealthy, for the poor to become middle class and for the middle class to build a prosperous, secure life for themselves and their children.

“No economic system has lifted more people out of poverty, created more opportunity, and produced a higher standard of living than ours. 

“This is no time to abandon it.

“There absolutely are very serious problems and challenges that we have throughout our society. We do have communities that have been left behind. We have persistent racial disparities in areas such as educational achievement. We have social pathologies that are very serious in their scale. But do we really think capitalism is the primary cause of these problems and challenges?

“At a more fundamental level, the critics are wrong about capitalism failing too many people. Globally, capitalism ranks with the wheel and written language as greatest of human achievements.

“It took nearly 2,000 years — from the time of Julius Caesar to that of George Washington — for the western world’s living standard to double. These two leaders rode into battle on the same form transportation. But with the advent of democratic capitalism we started doubling the standard of living every 20 years.

“In America, for all the problems we have, life is better today than it has ever been for the vast majority of people. It’s misleading to focus exclusively on wage gains of workers. What matters is living standard.

“There's no question that the standard of living of middle-class and working-class Americans has improved over recent decades. Life expectancy has increased and the quality of health is better. The average American lives in a larger, more comfortable home. Cars are safer and more comfortable. And unlimited information, entertainment, services, and resources are all in the palm of our hand.

“By any reasonable measure, there is a higher standard of living. A Cato Institute study found that the amount of time an unskilled worker has to work in order to purchase a basket of everyday items declined by 72% from 1979 to 2019.

“And life is continuing to get better. We still have economic mobility.

“In 2016, the Urban Institute looked at five income groups and measured their change as a percentage of the U.S. population since 1979. It looked at the poor, the rich, and the lower, middle and upper-middle classes. It found that membership in the poorest category shrunk by 4.5%, while membership in the upper-middle class and rich categories was up nearly 19%.

“Pre-COVID wage growth had been occurring across the board. Wage growth was especially strong for minorities and workers without a high school degree. In 2019, the overall poverty rate reached an all-time low.

“The most recent empirical experiment in expanding economic freedom occurred during the Trump Administration when we reformed the tax code and rolled back excessive regulations.

“Before COVID hit, the result was an economic boom. We saw the lowest unemployment in 50 years, seven million more jobs, seven million fewer people on food stamps, 1 million more job openings than people looking for jobs, and workers in the bottom 10% – from 2016 to 2019 – received on average a $3,500 raise in real dollars.

“This economic expansion particularly benefitted racial minorities. In 2019, black and Hispanic unemployment rates hit all-time lows. The gap in the unemployment rate between whites and both blacks and Hispanics reached all-time lows. Median household incomes reached record highs across all major demographics, including black and Hispanic households. Black and Hispanic labor force participation rates reached 10-year highs.

“I thought rising employment and wage gains being most pronounced for minority groups would be considered a good thing.

“Let’s pause to consider how our financial system contributes to the improved standard of living and economic growth that Americans enjoy.

“The financial system enables businesses and consumers to access credit and capital. The flow of credit and capital to businesses supports job creation, technological advancements, and the provision of goods and services that benefit consumers. Likewise, the flow of credit and capital to consumers enables them to purchase goods and services to benefit themselves and their families.

“Let’s consider the example of an ordinary blue-collar worker or middle income family that wants to purchase a car or buy a house. In the U.S., these consumers can access relatively large amounts of capital from perfect strangers, almost instantly, in order to purchase these valuable goods — even if their credit history is far from perfect. It’s the financial system that makes that possible.

“And let’s not forget that during the COVID pandemic, Congress has relied on the financial system to deliver billions of dollars of PPP loans to hundreds of thousands of small businesses so they can keep their workers employed.

“Let me close with this.

“As we work to address the economic, social, and cultural problems we face as a nation we need to promote economic growth and freedom, not stifle them.

“Economic growth does not solve all problems, but it does make all problems easier to solve.

“We can do more to ensure that everyone has the education and opportunity to thrive and obtain economic mobility.

“That’s what we should be focused on – not policies that undermine capitalism and are likely to leave us all poorer and probably no more equal.”