America’s Forgotten Formula for Economic Equality

A signature moment in the first Democratic presidential debate was when CNN moderator Anderson Cooper asked Bernie Sanders how he could hope to win the general election as an avowed “democratic socialist.” The Vermont senator had a ready answer. Being a democratic socialist, he said, is about “saying that it is immoral and wrong” that “57 percent of all new income is going to the top 1 percent” and that millions of working families lack paid family leave. America, he said, should “look to countries like Denmark, like Sweden and Norway, and learn from what they have accomplished for their working people.” He can win, he told Cooper, by bringing to the polls “huge turnouts” of hitherto alienated voters who agree with him.

Hillary Clinton also had a ready response. “What Senator Sanders says certainly makes sense in the terms of the inequality that we have,” she agreed. But, she continued,

we are not Denmark. I love Denmark. We are the United States of America. And it’s our job to rein in the excesses of capitalism so that it doesn’t run amok and doesn’t cause the kind of inequities we’re seeing in our economic system. But we would be making a grave mistake to turn our backs on what built the greatest middle class in the history of the world.

What is that special American something that built “the greatest middle class in the history of the world” but that makes us different from Scandinavian Europe? Clinton didn’t really say, and Cooper didn’t press her.

The closest she came was stating that America affords the opportunity and freedom to start small businesses. But Sanders also professed support for entrepreneurialism. Indeed, on a range of issues, her policy prescriptions aren’t that different than his. She’s at least as big an advocate of paid family leave as he is. He’d probably demand higher taxes on the rich and a bigger expansion of the federal government. She’d probably settle for less-steep tax increases on the rich and a greater role for the private sector in the delivery of services. But both would tackle inequality by strengthening Washington’s hand.

Republicans, of course, would do the opposite. “Doesn’t it make more sense to shift power away from Washington,” Jeb Bush asked an Iowa crowd, and “back to communities and states so that we can grow at a rate where median income in Washington, Iowa, is growing and maybe median income in Washington, D.C., starts to shrink?”

Here’s the thing, though. Jeb’s right to focus on narrowing the income gap between Washington, Iowa, and Washington, D.C., even if devolving political power isn’t the answer. Bernie’s right that the American economy could use more Denmark-like services, like paid family leave, even though that’s not going to correct the economic imbalance between Washington, D.C., and Washington, Iowa. And Hillary’s right that there’s a uniquely American way of achieving a more equal economic order, even if she didn’t, at that moment, articulate it.

That “secret sauce” of American economic equality is the subject of Phillip Longman’s cover story in this issue. He begins by noting that for most of American history, but especially in the middle decades of the twentieth century, average incomes among different regions of the country were converging. Beginning around 1980, however, this convergence reversed. Today, incomes in a handful of coastal metro areas (New York, D.C., San Francisco, Seattle, Boston) have grown spectacularly, while the rest of America has fallen further and further behind.

What changed, Longman argues, is public policy. First under Jimmy Carter, then under Ronald Reagan, Washington politicians stripped away numerous statutes and regulations put in place by their predecessors over the previous century that were designed to preserve local control of businesses and to check the tendency of behemoth corporations in a few dominant cities to monopolize power over the rest of the country. These laws and rules, covering everything from transportation to retail, are now largely forgotten (ever heard of the Robinson-Patman Act?). But they comprised a system of managed market competition—enforced by federal political power but aimed at decentralizing economic power—that was American’s unique and successful alternative to socialism.

Other stories in this issue address aspects of this loss of local autonomy. John Heltman details how today’s journalism market in D.C. keeps Washington insiders, but not average citizens, abreast of news about the federal government. Anne-Marie Slaughter and Ben Scott argue that think tanks can only stay relevant by engaging local communities in policy formulation. And a piece by yours truly notes that many of America’s economically “hot” cities enjoy the peculiar advantage of being state capitals, and hence are awash in federal money.

It’s not too late for these ideas to find their way into the 2016 contest. Here’s hoping the candidates start debating Robinson-Patman as vigorously as Glass-Steagall.

Paul Glastris

Paul Glastris is the editor in chief of the Washington Monthly.