This post from Jack Metzgar is the ninth contribution to the Washington Monthly/The Democratic Strategist roundtable discussion of Stan Greenberg’s new article on government reform and the white working class from WaMo’s June/July/August issue.
Metzgar is a professor of humanities at Roosevelt University, and a participant in the Chicago Working-Class Studies consortium.
Stan Greenberg is right to focus on “white working-class and downscale voters” as key to a dominant Democratic majority and to advocate a bold progressive economic narrative as a way to attract a larger portion of these voters. But his sketch of such a program is too narrowly focused on the most popular reforms and fails to match the scale of the crisis facing American workers.
The programs Greenberg put “at the heart of” the “middle-class economic narrative” he tested with voters—“assistance with making college and child care affordable and ensuring equal pay for working women,” “tax credits for low-wage workers and the middle class and a promise to protect Medicare and Social Security”—are all both worthwhile and politically attractive. But they are “little helper” programs that promise some relief from economic stagnation and decline, but no fundamental change in direction in economic prospects. The economic narrative they suggest—a version of President Obama’s aim to “help people struggling to get into the middle class”—is thin. Neither “creating jobs” nor “raising wages” make it into the heart of Greenberg’s test program, probably because he thinks that job growth is now “robust.”
Neither job growth nor the economy is anything like robust. The long, painfully slow recovery we are still slogging through comes on the back of decades of erosion and decline in working-class wages, living standards and working conditions. A fundamental change in economic direction is needed. That’s what those big “wrong track” numbers should be telling Democrats. Rather than the current rate of job growth of about 200,000 net new jobs a month, we need at least double that and for a sustained period of time. Any credible program that promises that kind of job creation will get the attention of a wide array of voters, including the white working class. Combine that with a dedicated effort to raise wages, especially but not only at the low end, and Dems can make large inroads into changing their “white working-class problem.” Anything short of that, I fear, and they will also have difficulty turning out their base voters, large patches of whom are all out of whatever audacity of hope they once had.
Fortunately, a much bolder, more thoroughgoing economic vision and program has been articulated by of all people Larry Summers, who arguably speaks for the Wall Street wing of the Democratic Party. Summers’ “long-run secular stagnation” thesis argues that the economy has no chance of becoming genuinely healthy without major boosts from government investment to create jobs and increase wages. In a recent report from a commission organized by the Center for American Progress, Summers advocates a large increase in the federal minimum wage, a large increase in infrastructure spending, and a more fair tax system that produces a large amount of new revenue. The key economic concept here is that our outsized inequality of income has so severely weakened worker spending power as to undermine demand and long-term economic growth. The key word for Democratic politicians, however, is “large.”
The value of Summers’ analysis is that anything that increases wages and creates well-paying jobs increases consumer demand, which is what our slow-growing economy needs above all. Likewise, anything that improves the economy’s public infrastructure and human capital improves productivity and U.S. economic competitiveness in the long run. This is a growth narrative that can demolish the Republicans’ empty tropes about “job killers” and “job creators.”
The 10-year infrastructure program that Summers advocates would create 1.1 million jobs a year, heavily tilted toward construction jobs that do not require bachelor’s degrees. That would cost the government about $100 billion a year in increased spending—four times the Obama infrastructure proposal recently rejected by Congressional Republicans. Summers also advocates a residential housing program that would make both rental and owned housing more affordable, while creating additional construction jobs and further stimulating the economy. Likewise, early childhood education and free community college would not only be good for children and young people and improve the economy’s human capital, it would create more jobs, aid in tightening labor markets, and thereby increase wages—all of which would further stimulate our stagnant economy by increasing worker spending power.
So let’s say that to do all these things would cost about $300 billion a year, creating some 2.4 million additional jobs a year—that is, tripling the current average of about 200,000 new jobs a month. How would we pay for such a large increase in government investment spending? It would actually be more stimulative and would create substantially more jobs if the government simply borrowed the money. But besides giving the GOP a “fiscal responsibility” whip to reinitiate the debt-and-deficit debate, borrowing the money would miss the opportunity to right some wrongs in the U.S. tax code.
Summers, like President Obama, attacks some of the most egregious corporate and individual giveaways, but even the ones that are not small are very complicated to explain— like eliminating the “step-up in basis” rule for inherited assets and reforming “earnings stripping” by corporations. These are great things to do “in committee” when you own both the executive and legislative branches. But they are a waste of the precious little explanatory time candidates have to talk taxes during an election campaign.
Where Dems can most clearly differentiate themselves from Republicans is in the economic rationale for using tax hikes on the highest-earning individuals in order to pay for a large government investment in creating jobs. But Dems need to be willing to substantively engage in “class warfare” and to “redistribute” large amounts of money, even if they might understandably want to avoid using those terms.
Both the individual and corporate tax codes are loaded with narrowly targeted and often relatively small special-interest giveaways, but more importantly, the basic structure of the code redistributes money from workers/consumers to investors. In my experience teaching working-class adults, most people do not know that and are incensed when they find out. Here are a few innocent questions I would love to see Democrats asking in 2016: Why do people who work for a living pay higher marginal tax rates than people who gain income from investing? Why do families pay sales tax on meals at McDonald’s, but investors don’t pay sales tax when they buy stocks and bonds? Why do state and local governments tax wealth when it is in the form of real estate, but nobody taxes wealth when it is in the form of financial assets like stocks and bonds?
There are semi-defensible answers to these questions, but they all involve a trickle-down presumption that investors are more important in driving the economy than workers and consumers—a presumption that once may have had a reasonable rationale, but that was long ago when workers had a much larger share of total income than they have now. Such a public discussion about what truly drives the economy and about the classism embedded in the way we tax ourselves would be good for the American soul. But in addition, correcting just the unearned income inequity would produce $160 billion in new revenue annually, and imposing a very small sales tax on the purchase of stocks and bonds would produce another $150 billion every year—more than enough to finance not only a 21st century infrastructure (and the millions of jobs it would take to build it), but early childhood education, free community college, and a lot of other highly popular programs Democrats are associated with. But equally, and possibly more, important is the broad economic principles Dems would have to articulate. Rather than “tax fairness” being one in a list of discrete programs, with “infrastructure investment” another discrete item, the two would be linked to a broader economic narrative of “inclusive prosperity” that would raise wages and living standards for almost everybody.
I can understand why Democratic strategists may be wise to focus on financing their popular spending programs by eliminating or reforming more narrow (and complicated) tax giveaways. They have to raise money for campaigns, after all, and for that they have to go where the money is—the investor class. But if Greenberg is right that “reform of government and the political process is the price of admission with [disenchanted] voters,” then it will be hard to avoid risking a large part of their Wall Street constituency if Dems are to gain a stronger presence among the white working class, let alone give working-class blacks and Latinos a reason to vote despite the obstacles Republicans are putting in their way. In any case, little helper programs won’t do it. Democrats need to think big about jobs and wages—and taxes too.