Guest Host: Indira Lakshmanan

The Economic Innovation Group's Distressed Communities Index report measures "community well-being" based on economic growth and development.

The Economic Innovation Group's Distressed Communities Index report measures "community well-being" based on economic growth and development.

Last month, the unemployment rate in the U.S. fell below five percent for the first time since 2008. Good news, right? Maybe not for everyone. Voters in this presidential election cycle have said loud and clear that for millions of Americans, the economy hasn’t recovered from the Great Recession. Recent data helps explain why positive economic indicators and forecasts haven’t translated into more prosperity for everyone. In 36 states, unemployment rates remain above pre-recession levels. And a new study says in the most distressed zip codes, employment has actually fallen in the last three years. Guest host Indira Lakshmanan and her panel of guests look at America’s patchwork recovery.

Guests

  • David Wessel director, Hutchins Center on Fiscal & Monetary Policy at the Brookings Institution; author of "Red Ink: Inside the High-Stakes Politics of the Federal Budget."
  • Janet Adamy news editor, Wall Street Journal
  • Steve Glickman executive director, the Economic Innovation Group

Transcript

  • 10:06:54

    MS. INDIRA LAKSHMANANThanks for joining us. I'm Indira Lakshmanan sitting in for Diane Rehm. She's out with the flu. If there's one thing presidential hopefuls Donald Trump and Bernie Sanders have in common, it's that they've tapped into voter anxiety over the economy and a sense among many Americans that even if statistics say the economy has recovered from the great recession, millions of Americans are struggling to stay afloat.

  • 10:07:17

    MS. INDIRA LAKSHMANANOn this Super Tuesday as voters go to the polls in 13 states and one territory, we'll discuss why the country has experienced a patchwork economic recovery and what that means for the presidential race. I'm joined here in the Washington studio by David Wessel of the Brookings Institution, a non-partisan Washington research institute, Janet Adamy of the Wall Street Journal and Steve Glickman of the Economic Innovation Group, a new research and advocacy group in Washington, backed by Silicon Valley entrepreneurs. Thank you all for being here.

  • 10:07:51

    MR. DAVID WESSELGood to see you.

  • 10:07:51

    MS. JANET ADAMYMy pleasure.

  • 10:07:51

    MR. STEVE GLICKMANThanks for having us.

  • 10:07:52

    LAKSHMANANAnd throughout the hour we also want to hear from you, our listeners. We'll be taking your calls and your questions on 1-800-433-8850. You can also send us an email to drshow@wamu.org. Or send us a message on Facebook or Twitter. So, David Wessel, I wanna start with you. If you were the doctor and the economy is the patient, how is its health and what is your prognosis?

  • 10:08:19

    WESSELWow, a yes/no question to start it off?

  • 10:08:21

    LAKSHMANANLet's just make it simple.

  • 10:08:23

    WESSELI would say that the U.S. economy suffered a major heart attack. The financial crisis and the worst recession in most of our lifetimes. It has recovered. It's out of intensive care. But it's not fully healthy. And what we're seeing is some of the chronic disease that emerged, that was present before the recession, showing itself. Slow growth and wages at the middle, widening inequality, lack of opportunity for people born at the bottom, very difficult time for people who have not education or who have skills that have been taken away by globalization and technology, and a political system that is so angry and paralyzed that isn't doing much to treat these systems.

  • 10:09:12

    LAKSHMANANAnd so the patient is off of life-support, but it's really not ready to walk out of the hospital quite yet.

  • 10:09:19

    WESSELNo. I wouldn't say that. I think the patient's out of the hospital. Look, it's really important to not overdo how bad things are. If you look at the median income of American households, it has finally, finally recovered to levels that we saw before the recession. It took a long time, but I think it's really striking.

  • 10:09:40

    WESSELThere's a company called Sentier Research, a bunch of former census guys who do a monthly tally of the median income. And they say, okay, great, in December 2015 we were back to where we were in 2007. But we're still below where we were in December 2000. So we have been through a period of 15 years where a lot of people at the middle of the middle, the median haven't done very well, and people below the median, the bottom half have done really, really poorly.

  • 10:10:09

    LAKSHMANANWell, part of this, of course, seems to be regional and some people are being left behind. That helps explain both Trump and Bernie Sanders. But this geographic question feels like a way to look at how people who are not winners in this increasingly high-tech and global economy, those people are getting left behind and becoming a political force. So, Steve Glickman, you just authored a big report looking at the recovery through the lens of geography, breaking it down all the way to zip code. What did you find?

  • 10:10:40

    GLICKMANThanks for having me on. So that report is called the Distressed Communities Index. It was authored by John Lettieri and Kenan Fikri from the Economic Innovation Group. And it - I think the big headline is that 50 million Americans are still living in distressed communities throughout the country. And their reality of what happened during the economic recovery is a lot different than the 80 million Americans we looked at in the most prosperous zip codes across the country.

  • 10:11:05

    GLICKMANThey basically haven't felt a recovery at all. In fact, their economic well-being is getting a lot worse. And we really evaluated the economy on a community level. We looked at just about every community across the country. And we found that these concentrations of distress are located largely in the areas like the South, the Southwest, and in those former industrial cities in the Rust Belt, places like Detroit and Cleveland, places like Milwaukee and Baltimore.

  • 10:11:33

    GLICKMANAnd so the way voters are viewing the economy is very much based on what they're seeing in their own backyards. And in big chunks of the country, they're not seeing a benefit from the economy at all. We see this highly correlated between cities that are really tapped into the knowledge economy, so your San Franciscos, your Washington, D.C.s, your Seattles are doing fantastic. But those cities that haven't transitioned from those old industrial economy to the new knowledge and information economy, they've not only not benefitted from the recovery, but they've been falling behind for a decade.

  • 10:12:04

    LAKSHMANANSo on an absolute basis, we have more people who are doing better now in these certain zip codes that are improving. You mentioned San Francisco, Washington, D.C., among them. But there is still a substantial chunk - what percentage of the country is actually doing worse? You described places like Flint and Baltimore and Detroit.

  • 10:12:25

    GLICKMANThat's right. So the good news is the top 20 percent of prosperous zip codes, about 80 million plus people, are greater than the bottom 20 percent of the most distressed, which is about 50 million people. But the real challenging thing is for those communities, if they're in this downward spiral that they have not yet successfully been able to get out of on their own. And what you see - and if you look at the population numbers, people are leaving those communities in a large number.

  • 10:12:50

    GLICKMANThey're going, they're flocking to these economies on the coast. But they're leaving behind more and more distressed areas where there's less and less opportunity. And while the country has gained and it continues to gain jobs, it's gaining businesses over all, these communities are losing jobs, they're losing businesses. And it's different than what the rest of the country is feeling. So it - yes, it's 50 million Americans who are in this worse case situation. But it's 50 million Americans that lack the opportunity to get out of it.

  • 10:13:19

    GLICKMANAnd a lot of recent studies are showing - and we're a big fan of Raj Chetty, who's now over at Stanford, who have shown the difference between being a - being poor in a place like San Francisco or a place like Detroit is enormous. For folks in places like San Francisco, you can get out of poverty. You have opportunity in your community, you have new jobs and new industries. For - in places like Detroit and Cleveland, there is no way to get out of poverty. And the American dream can't just be based on what zip code you happen to grow up in.

  • 10:13:45

    LAKSHMANANWell, if feels like this ties very much back to the election year and to what we're seeing today in Super Tuesday. Some of these very communities, which are so distressed, that Steve is referring to, are actually voting today. Janet Adamy, this, you know, this uneven economic recovery, it feels as if the data is giving credence both to Bernie Sanders's message, that the gap between the richest and the poorest communities has widened since the great recession ended, and also to Donald Trump's message that some areas just haven't benefitted from the recovery that the White House has touted.

  • 10:14:22

    ADAMYSure. I think you can see that in the rise of both of those two candidates. And it's particularly interesting on the Trump side. He is, of course, poised to do very well today in a number of contests. You've seen really weak levels of employment in places like Alabama and Tennessee. That's where Trump seems to be polling ahead. His message is really resonating with the white, lower-education level voters who are very uneasy about their economic prospects. These are people who lost manufacturing jobs.

  • 10:14:51

    ADAMYThe Wall Street Journal has done some polling and found that 62 percent of Trump supporters have no college degree, 55 percent of them think that free trade is bad for the U.S. So it's pretty clear that these voters are hearing his message about - talking about his concerns about China. And they feel like - they hear something that makes them think that they - that he could help their economic woes.

  • 10:15:15

    LAKSHMANANAnd when he says make America great again, and on - it's written on the gimme caps that you're - are emblazoned at all these rallies.

  • 10:15:23

    WESSELWe get to pay for those caps.

  • 10:15:24

    LAKSHMANANIt's true. You have - it's not free advertising. It's paid advertising. But then the message to them is that he's harkening back to sort of a pre-NAFTA, pre, you know, TPP, pre-free trade era? Is that the idea? One where they're gonna get manufacturing jobs that are gonna come back. The same jobs that Hillary Clinton says those jobs are never coming back.

  • 10:15:46

    ADAMYYeah, I think he's instilling some hope that in America, that was very good to them and maybe, you know, their parents, that he'd like to restore some aspects of it. But to your point, there's, you know, there are dim prospects for those coming back. I think one aspect that's part of this is that these many communities have tried to do job training, federally funded job training programs in parts of the upper Midwest.

  • 10:16:08

    ADAMYThe idea being that maybe you could even move some of these people who worked in manufacturing into industries like healthcare. Well, I think what people have found is that it's much harder to retrain workers than people thought. And in some of the growing industries, like the healthcare industry that was thought to have, you know, this bulk of high-paying jobs, you've had people go from unionized work, which paid very highly, had generous benefits, to becoming home healthcare aides who are making little more than minimum wage and even themselves are struggling to get health insurance.

  • 10:16:40

    LAKSHMANANYeah, all right. Well, David Wessel, the Labor Department just reported last week that the average annual jobless rates fell in 2015 from the prior year in 47 states, plus the District of Columbia, but at the same time, Labor Department figures show that 36 states still have average unemployment rates above their pre-recession levels. How does this break down? And explain to us how this is possible.

  • 10:17:04

    WESSELWell, we've always - we are a very big country with very diverse economies. And there are always some places that are up and some places are down. I think the bottom line is things in the job market have been getting better over the last year. Those Labor Department numbers were annual averages and they kind of sometimes can make things look better or worse than they have. But basically, the national unemployment rate in January was 4.9 percent.

  • 10:17:31

    WESSELThat's higher than the 4.4 percent low we saw before the recession. But I think the problem is that - those unemployment data don't really communicate what everybody's feeling. Wages aren't going up. A lot of people are not in the workforce. One in seven prime age men, between the ages of 25 and 54 isn't working, one in seven.

  • 10:17:52

    LAKSHMANANWow, one in seven. That is a figure. Keep that in your mind, as we go to our break now. We're just gonna take a short break. And when we come back, we'll be talking more about the uneven economic recovery. Stay with us.

  • 10:20:00

    LAKSHMANANWelcome back. I'm Indira Lakshmanan sitting in for Diane Rehm. This hour we're talking about the patchwork economic recovery in the United States, why some zip codes are doing much better than others. And how it can be that even though Labor Department data show that the economy has definitely recovered from the Great Recession, in many communities in the United States, 50 million people feel as if they are not benefiting from that.

  • 10:20:26

    LAKSHMANANJoining me here in the studio to talk about it, David Wessel, director of the Hutchins Center on Fiscal & Monetary Policy at the Brookings Institution. He's also the author of "Red Ink: Inside the high-Stakes Politics of the Federal Budget." Janet Adamy, news editor at The Wall Street Journal and a specialist in demographics. Steve Glickman, executive director at the Economic Innovation Group, a new nonprofit research and advocacy organization that supports greater private investment in struggling communities. The group is backed by technology entrepreneurs and has economists on its board from the left and the right.

  • 10:20:59

    LAKSHMANANSo, David, before we went to the break, you were talking about this seeming contradiction between falling unemployment rates and yet the fact that in 36 out of the 50 states, unemployment rates are still higher than they were before the recession. You were also mentioning that one in seven men between the prime working years of 25 and age 54 is not actually working.

  • 10:21:25

    WESSELRight. So I think you have to take a slight historical perspective here. To say that things are better is correct. The unemployment rate, at the worst of the recession in 2009, was 10 percent. And today it's below five. So things are definitely better. That doesn't mean they're good and it doesn't mean they're good for everybody. And I think, as the overall economy has recovered, we're identifying those places and pockets of people who are struggling. Some of them haven't recovered from the recession before the last one. And I think it's understandable why this is a good time to look at them.

  • 10:22:07

    WESSELBecause now that we've got the engine of the economy going again and the Fed is saying we can raise interest rates and things are a little better, we're building houses and stuff like that, we have to look at what was fundamentally wrong with the economy before this. And I think what Steve's report shows is that a lot -- rising tides don't lift all boats.

  • 10:22:27

    LAKSHMANANHmm.

  • 10:22:27

    WESSELAnd it's important now to focus on that. I think some of the anger we see in the campaign is people who feel they've been left behind. I don't think it explains everything. For instance, a lot of black people have been hurt. We have huge pockets of poverty among African Americans. In Chicago, for instance, half of the black men -- half of them between 20 and 24 are neither working or in school. We see black kids who grow up in poverty have a much harder time rising to the middle class than white kids. And those voters are not showing up in the Sanders or Trump column. So there's other things going on as people vote.

  • 10:23:05

    WESSELBut, clearly, the people who are left out, who feel that the elites don't understand their problems, are rebelling and they're rebelling at the polls. Some of them voting for Bernie Sanders and some for Donald Trump.

  • 10:23:17

    LAKSHMANANInteresting. So, in other words, the economic inequities and the unequal recovery that we're seeing is not translating directly into who the voters are, who feel frustrated and disenfranchised in -- insofar as you said, African Americans have been disproportionately hit, and yet they're not the ones feeling this frustration.

  • 10:23:35

    WESSELI think that economics have a lot to do with this but it's not the only thing. I think a lot of white, working class men who are showing up at Trump rallies are not only focused on their paycheck. They're angry at what they see on the Oscars the other night, all this talk about diversity. They're feeling threatened by the rise of women in the workplace, about more women going to college than men.

  • 10:23:58

    LAKSHMANANAbout Hillary Clinton (unintelligible).

  • 10:23:58

    WESSELAbout Hillary Clinton. When Donald Trump says, I want to make America great again, the again conveys a kind of idealized view of an earlier era, the 1950s, the 1960s, when men were muscular and they could get jobs and there wasn't all this talk about affirmative action.

  • 10:24:18

    LAKSHMANANDon't forget Rosie the Riveter.

  • 10:24:20

    WESSELRight.

  • 10:24:20

    LAKSHMANANThere were women who had jobs in the factories too. All right. Steve, let's fast-forward from the 1950s to the present, to the reality of, is America great or not? You talked about distressed communities compared to prospering ones. You've made the comparison between if you're unemployed in San Francisco versus in Detroit, how much harder it is in Detroit to get reemployed. What are the specific differences between those communities that make it so difficult to get out of poverty or a declining situation in one versus the other?

  • 10:24:50

    GLICKMANWell, I think it boils down to opportunity. Our study looked at seven factors. We looked at employment, we looked at income, we looked at housing, we looked at job growth, we looked at business growth and we looked at education. And we think those seven factors make up what it means to be in an economically robust or an economically struggling community. And in a city like San Francisco for those factors, you see very few people who haven't graduated from high school. You see very low rates of poverty. You see a lot of jobs, a lot of economic dynamism, new businesses and new industries.

  • 10:25:24

    GLICKMANAnd in a city like a Detroit or a Cleveland or a Milwaukee, you don't see any of that. In our most distressed communities, you see 25 percent -- and this is a 10 percent most distressed -- you see 25 percent poverty rates. You see 25 percent, 30 percent of the population hasn't even graduated from high school. And you see big declines in the number of jobs and the rate of businesses that are created. And if you're not doing that, if you're not creating new businesses, if you're not supporting the growth of entrepreneurship in your community, you're not creating the new jobs. Entrepreneurship is tied with most of the new job creation in the country.

  • 10:25:58

    GLICKMANOne of the sort of less talked about stats nationally is that we're at a 30-year decline in the rate of entrepreneurship and the rate of new business starts in this country. And as David pointed out, it's not just looking at the unemployment rate, you have to look at the labor participation rate. What's happening with adults in these communities? We find, in the most distressed areas, numbers of over 50 percent of the adults are not working. When you have all those factors aligned, you don't have anywhere to go for your step up that socioeconomic ladder.

  • 10:26:28

    GLICKMANAnd one of the biggest limitations in those communities is the ability to attract investment and capital. And when you can't attract investment and capital, you can't scale new businesses. And the local government loses its tax base and they can't fund infrastructure projects for their communities. So who's going to step in? That's why we're really focused on what it would take to drive new forms of private investment to those areas.

  • 10:26:51

    LAKSHMANANAll right. Well, you talk about long-term unemployment that then makes it hard for people to get back into the workforce at all. Janet, explain to us some of the specific reasons why people are so anxious about the economy, despite improving on paper employment rates. I mean, is part of it that fewer people are looking for work? Have they just given up?

  • 10:27:09

    ADAMYYeah, some of it. What you see in some of the upper-Midwestern cities, the industrial cities was -- places like Decatur, Ill., is a great example -- so the unemployment is actually, looks a little bit better there. But it's only better because people gave up looking for work or just left the area altogether. So I think it comes back to what David was saying about wage growth. I mean, wage growth continues to be very sluggish. And if people don't feel that in their pocketbooks, that is what makes them anxious.

  • 10:27:37

    ADAMYYou know, you mentioned -- you were hitting on something that I think is kind of an interesting disconnect between how people are voting in the primaries. You've seen, you know, this -- the support for Hillary Clinton among African Americans and Latinos who have higher rates of unemployment than whites do has been very strong. And the Sanders campaign, really its base of voters is young, white, educated men. I think some of those people -- the hope of the Sanders campaign was if, as they heard the message of, you know, trying to help the poor more, that the economy was tilted toward the one percent, that they would pull more of those people in.

  • 10:28:17

    ADAMYYou saw Bernie Sanders getting the endorsement of Ben Jealous, the former president of the NAACP, really reaching out and thinking that if I can just get my message to some of these people, I'll get some of them in under my tent. But the reality is, you know, the Clintons -- Hillary and Bill Clinton -- have such long relationships with the black community, she's done better with Latino voters, that it's really hard for Sanders to get -- to have that message resonate with those voters.

  • 10:28:43

    LAKSHMANANAll right. So wage growth isn't going up. Middle class families aren't getting ahead. They're just, at best, getting by. Long-term unemployment is still high, 2.1 million Americans haven't been able to get a job for more than a half a year, as I understand it, David. So this is all part of the picture.

  • 10:29:01

    WESSELRight. And there are also a lot of workers who are working part-time jobs who wish they had full-time. I'd like to pick up something that Steve mentioned, because I think it's really important. So what we are learning from economic research is that place really does matter. And it's not -- doesn't matter just to adults today, it matters what happens to the kids. Steve mentioned the work by Raj Chetty, who's this wonderful economist now at Stanford, who's had access to data from the Treasury, from the tax records, that people haven't had before.

  • 10:29:30

    WESSELAnd he's say -- he looks at, what are the odds that a poor kid is born in the bottom 20 percent of the population and makes it to the top 20 percent? Well, they're better than 12 percent -- the odds are better than 12 percent that you rise from the bottom to the top, if you happen to be lucky enough to be born and grow up in San Jose or San Francisco or Seattle or D.C. But if you grow up somewhere else -- Charlotte, Milwaukee, Atlanta, Dayton, Indianapolis -- your odds are almost nothing, less than 5 percent.

  • 10:29:58

    WESSELAnd so I think what we're learning is what happens in these communities really matters. If you grow up in a community where there are a lot of single-parent families, where a lot of the men are in jail, where the education system is lousy, where, as Steve says, there aren't any jobs, you are destined, we're learning, unfortunately, from the data, to not make it out of poverty. And so the challenge to us is, how do we do things in those communities that -- we're not going to make every place like Beverly Hills and Chevy Chase, D.C. -- but how do we make it so that we don't have so many inner-city zip codes where there's real despair that you see in these reports?

  • 10:30:34

    LAKSHMANANSo basically the story of American mobility, you're saying it's false in 2016. That if you are born into a poor community, you're very unlikely to get out of it.

  • 10:30:44

    WESSELThe myth of American mobility -- upward social mobility has always been stronger than the reality. And it's particularly bad in African-American communities and in people who grow up, regardless of race, in these distressed communities.

  • 10:30:59

    ADAMYYeah. And I'll just add to that. One of the big problems that we're seeing emerge today is that poorer students have much greater loads of student debt. So the student debt crisis that is really weighing on young people across the country is having a disproportionate impact. Those folks have -- they have debt that is burying them and it's harder for them to finish their degrees. So in some situations, you're having people who, you know, they're just getting their foot up on that ladder. They may be the first in their family to go to college. But the debt is so burdensome that they struggle to finish and then they have no degree and a bunch of loans.

  • 10:31:29

    LAKSHMANANWell, I think the story you're telling is not only that of young people who are investing in college and then unable to pay it back, unable to find the jobs, but people who have been laid off from some of their jobs. Just tapping into some of that, we have an email here from Robin in Dallas, who says, "when my husband and I were both laid off in 2010, it took all of our savings, 401 (k) s, and the sale of vehicles in order to keep our home. Our current jobs pay the bills but we will never recover what we lost." This ongoing problem seems to be lost on the economic experts, she says.

  • 10:32:01

    WESSELI don't think it -- I don't -- she's right. I don't think it's lost on the economic experts. I think we know that deep recessions, like the devastating one we had, have deep-scarring effects and they last for a long time. Some of the people are like this person who emailed, people who can't get back to where they were. But if you graduated from college in 2008 and 2009 and 2010, chances are it'll take you decades to get the kind of wages that your predecessor generations got.

  • 10:32:28

    LAKSHMANANEven to where their parents were, say, in 2010...

  • 10:32:30

    WESSELYes.

  • 10:32:31

    LAKSHMANAN...before they were laid off. I'm Indira Lakshmanan and you're listening to "The Diane Rehm Show." All right, let's go to the calls. We have Wanda from Murphy, Texas, on the line. Wanda, go ahead.

  • 10:32:42

    RONDAYes, it's actually Ronda, but that's okay.

  • 10:32:44

    LAKSHMANANOh, thank you, Ronda. I hope it's Murphy, Texas. I hope we got that right.

  • 10:32:49

    RONDAYes, it is definitely Murphy, Texas. But I just wanted to just mention a couple points about the reality of where we are. I think a lot of politicians as well as a lot of us as voters -- and today is Super Tuesday, so go vote -- is that we don't want to know the truth about where we are. I liked what the last person just said about the myth of the American dream. And I think a lot of politicians give false hope, let's say, about, you know, jobs coming back.

  • 10:33:15

    RONDAI grew up in Alabama and Georgia, where there were a lot of cotton mills and towel mills and so on and so forth. But when I go back now, those buildings are still standing but they're either empty or they've been turned into lofts. And many of the people who used to work at the mills cannot even afford to live in the lofts. They're very, very nice. Their parents and grandparents put a lot of blood, sweat and tears into those buildings. But they'll never be able to live there.

  • 10:33:40

    RONDAAnd I think that politicians, as well as we, as citizens, we need to be honest about the fact that the jobs are not coming back. We need to invest in our educational system from kindergarten on, so that we can all be a part of a global economy and stop giving this false hope. Because that's what makes people angry. All you've got to do is look at the background of some of the political candidates now and you see the angry people. And I don't want to be, you know, color, you know -- how do I say it? I don't want to be racist, but you look at the background and you see a lot of angry white people.

  • 10:34:14

    LAKSHMANANAll right. Well, thank you so much Ronda. It sounds like Ronda should be running for office. She has a campaign platform there. Don't give false hope. Mill jobs aren't coming back. We need to invest in education and be part of a new economy. Steve, it kind of sounds like the tune that you're singing over at your institute.

  • 10:34:31

    GLICKMANWell, I think Ronda is exactly right, in that, she's -- what she's expressing, and in a place like Alabama or Georgia are two of the, I think, worst hit states that have recovered the slowest from the recession -- there really are two countries in the U.S. that are experiencing the economy in two totally different ways. And I think what's really frustrating for voters is the sense that both parties are sticking with business as usual. They're relying on their same kind of lowest-common-denominator economic policies.

  • 10:35:01

    GLICKMANOn the left, you hear a lot about the minimum wage, as if that's going to be a game-changer for all these communities that face much more widespread issues than that. On the right, you often hear about tax cuts. Who is taking into account and talking to these voters and explaining that the economy now is different. There are parts of the -- we need to offer different types of solutions and we need them to be targeted to parts of the country that haven't recovered.

  • 10:35:24

    GLICKMANNot -- and what's really challenging about this is that these economies are all different. Local economies need different things. For some, manufacturing is the way to go. For some communities, they have to develop a stronger knowledge economy. For some, it's going to be skills. All of them can benefit from new forms of investment in industry.

  • 10:35:41

    LAKSHMANANAnd that is challenging to figure out what's right -- what solution for what place. But just very quickly, Steve, explain to us, the laypeople, what is a median zip code and why are they significant in your report?

  • 10:35:53

    GLICKMANSure. So a median zip code is sort of your average community across the country, the most likely one you're likely to see across America. And what's significant about them is the median zip code does worse than the country at large. And what that basically means is that the very wealthy, prosperous zip codes and communities across the country are carrying a lot of the recovery for the rest of the country. And in some ways, they're obscuring what the recovery looks like. So part of the reason why unemployment is so low, the GDP growth is so high, is because a handful of cities across the country are carrying the economic recovery for the rest of America.

  • 10:36:33

    GLICKMANAnd it makes it look like, for some of these less well-recovered cities, that they're also doing better as well. But it's not the case. When you dig down in the...

  • 10:36:41

    LAKSHMANANSo outliers are raising the average, basically.

  • 10:36:43

    GLICKMANThey are. When you look at it at a community level, you find that many, many more communities in concentrated parts of this country have been falling behind for a decade. The recession was just a blip and now they're getting worse.

  • 10:36:55

    LAKSHMANANHmm. All right. Well quickly, Janet, before we go to our break, we've heard Donald Trump talk about the unemployment numbers and the White House figures as being phony. What does he mean by that? Is there any truth to what he's saying?

  • 10:37:08

    ADAMYI mean, I think he's trying to get into some of the nuances of what we're talking about here, which is that the numbers don't necessarily reflect the picture that you see. I think, you know, one thing that we haven't talked about is the role of unionization in this. And I think you see a, you know, big decrease in unionized jobs, which is something that, you know, you don't hear Trump talking about it as much. But when you're getting into this issue of the manufacturing jobs, a big part of the reason that this lifestyle hasn't come back is unionization rates are just so low.

  • 10:37:39

    LAKSHMANANAll right. We're going to take a quick break. Stick with us. When we're back, we'll be taking more of your calls and your questions on the uneven economic recovery. Stay tuned.

  • 10:40:02

    LAKSHMANANWelcome back. I'm Indira Lakshmanan, sitting in for Diane Rehm. This hour we're talking about the uneven economic recovery in this country with David Wessel of the Brookings Institution, Janet Adamy of Wall Street Journal and Steve Glickman of the Economic Innovation Group. We're taking your calls on 1-800-433-8850 and your emails to drshow@wamu.org. Or you can always send us a message on Facebook or a tweet to @drshow.

  • 10:40:32

    LAKSHMANANSo Janet, before the break, we were talking a little bit about Donald Trump's speeches, in which he was saying that, you know, oh, the White House says that unemployment is only four to five percent, that's phony, the number could be 28, 29, 35, and then he throws it out, 42 percent. I don't know where he's getting these numbers, but, you know, tell us, how much are these numbers fungible?

  • 10:40:56

    ADAMYI think the numbers don't tell the whole story. I want to come back to what Ronda of Texas was saying, about that the candidates were promising things that they can't deliver, and the voters don't seem to realize that. I think on the -- that may be more true on the Republican side. On the Democratic side, you saw this huge surge of support for -- unexpected surge of support for Bernie Sanders early on, as he was talking about things like offering all Americans free college, Bernie Sanders himself went for college for free in New York City way back in the day, offering a Medicare-like health care system for all Americans.

  • 10:41:29

    ADAMYAnd what you heard was Hillary Clinton responding and saying, you know, that sounds great, but it's not realistic. I think to the extent that you are seeing Hillary Clinton really start to more clearly eclipse him as the candidate that's best poised to capture the Democratic nomination, I think to some extent, voters may be wondering about how feasible some of his promises are. I mean, in Super Tuesday today, we may see Bernie Sanders, you know, he's expected to capture Vermont. There are one or two other states, Massachusetts and Minnesota, where he's expected to be competitive.

  • 10:42:02

    ADAMYBut I think after today, you're going to see her emerge as, you know, the very clear -- the very clear person who's poised to capture the nomination, and voters will be signaling that some of these things that he promised may not be feasible.

  • 10:42:15

    LAKSHMANANWell Janet, you're touching on something that many of our listeners are writing and calling in about. Doug (PH) in Tacoma Park, Maryland, is saying "great show today on the disparity in the, quote, recovery of the economy, but I'm interested to hear what we do about it because this is not a new phenomenon." David?

  • 10:42:32

    WESSELRight. You know, I was struck by something that Ronda said that -- and she made a lot of good points, but she said...

  • 10:42:40

    LAKSHMANANThat's our caller from Texas.

  • 10:42:41

    WESSELRight. She said that she condemned candidates who offer false hope. And I think that's definitely true. False hope might be something, like Janet says, where a candidate says we're going to have free college education and free health care and free paid leave, and you're not going to have to pay more in taxes.

  • 10:42:54

    LAKSHMANANRight.

  • 10:42:56

    WESSELOr it might be just a simple, simple slogan from Donald Trump, who says I'm going to make America great again, trust me, I know how to do that, and there doesn't seem to be anything underneath it. But I think that -- I do hope that we can give people some reasonable hope. What are things that we could do that will prevent us from having this conversation 10 years from now? It's going to be hard. I don't think there is any single thing that will work.

  • 10:43:23

    WESSELWe know that if we have better pre-K that kids tend to do better. We know that we have not yet made progress on our K-through-12 schools. We know we have to figure out a way, as Janet suggested, that if you start college, a community college, you finish it, you finish a certificate or degree because dropouts are very expensive. We know we have to create a tax system that encourages business to invest both physically in America and in people here.

  • 10:43:50

    WESSELWe know we have to find a way to deal with this incredible pace of technological change, which has made some people really rich and other people watch their jobs evaporate over a short period of time. So I don't think there are any single good policies. I think President Obama has put out a lot of seeds that he doesn't get credit for. Some of them have been passed by Congress.

  • 10:44:14

    LAKSHMANANThe America Recovery Act is one thing that...

  • 10:44:16

    WESSELRight, but I'm thinking more about the long-term investments. Why aren't we spending more on infrastructure in America at a time of very low interest rates? Why are we managing our budget so that we spend more and more of our budget on benefits for, like, Medicare, Social Security, many of them for old people, and we're squeezing all that discretionary spending, as we call it in Washington, that's investment in the future?

  • 10:44:37

    WESSELSo I think there are things we can't do, but it's hard to give the American people that kind of tough-love message. It's going to be hard, it's not going to be quick, and some of you are going to pay higher taxes.

  • 10:44:47

    LAKSHMANANSo you're saying that President Obama is right to want to invest in infrastructure but is not being given the opportunity because of needing to pay for entitlements that should be, in fact, cut back?

  • 10:44:56

    WESSELOr -- yes or because Congress won't let him borrow the money or cut the spending he would cut.

  • 10:45:02

    LAKSHMANANThat's right. You wanted to jump in, Janet.

  • 10:45:03

    ADAMYYeah, and just as, you know, we're talking about this as, you know, what are the presidential candidates going to do to fix this, but I think the point that Steve said he makes is that this is all very local, very state-level. So I think to the extent people are concerned about this, they should be asking their governor what they're going to do as much as they're asking the presidential candidates what they're going to do.

  • 10:45:23

    LAKSHMANANAll right, good point. Let's take a call from Terry (PH) in Brewster Town, Tennessee. Terry, you're on the air.

  • 10:45:27

    TERRYThank you, Indira, for taking the call and for the program.

  • 10:45:31

    LAKSHMANANAbsolutely.

  • 10:45:32

    TERRYThis is very interesting.

  • 10:45:33

    LAKSHMANANThanks.

  • 10:45:34

    TERRYIf the Bush tax cuts had worked, we'd have full employment because the millionaires and billionaires would have created real jobs instead of committing fraud and pocketing the money or moving the jobs overseas. Warren Buffett, Bill Gates and the others could have challenged the other millionaires and billionaires to use half of their money right now to create jobs that would've helped their countrymen and the nonprofits would've profited from that because poor people donate more.

  • 10:46:10

    LAKSHMANANOkay, as a percentage you're right. All right, thank you very much, Terry. All right, so Terry is touching on something that some of our other listeners are also saying. Anthony in Indianapolis, Indiana, says "companies are sitting on $4 trillion because the Federal Reserve has propped up the stock market." And Michael in Silver Spring, Maryland, says "can you please talk about what the Republicans are actually offering to promote economic growth." So tying back in to the criticism of the Bush tax cuts, he's saying, just stating that there's a problem isn't a plan. Steve?

  • 10:46:42

    GLICKMANWell, I think the last caller made a really important point, which is that those who benefitted from the stock market have done tremendously well. There's a huge amount of capital now sitting with the investor class in this country that way out-paces the type of capital you have with the federal government or you have with state and local entities. And this is where I'm going to offer I think a little bit of optimism. Paul Ryan, when he took over as speaker, made a very clear point to make poverty top of his agenda.

  • 10:47:12

    GLICKMANOne of the first things he did was reach out to the Congressional Black Caucus and talk to them about what steps can be taken. And there's a long history of bipartisan agreement around developing geographically tied incentives for investors in the private sector to target their resources to distressed areas of the country. We need to rethink the way these zones work, and there's a lot of hope that they can make their way even through a divided Congress.

  • 10:47:36

    GLICKMANWe hear all the time from members that they're interested in theses sort of ideas, and you also see people as diverse as President Obama to Rand Paul offering ideas around establishing these types of zones as a way to channel investment from people who have benefitted tremendously from the recovery to these communities that need it most. We still need to get over the finish line with legislation that would really move the needle, but I think it's possible.

  • 10:48:02

    LAKSHMANANAll right, Janet, I want to turn back to politics for a moment. Bernie Sanders, of course, has gotten all the attention on the Democratic side for talking about income inequality, but Hillary Clinton is also talking about the economy. But I want to know, it feels like it's, you know, a difficult needle that she has to thread because on the one hand, is it politically savvy and accurate for her to talk about problems in the economy, or should she be talking about a recovery launched by President Obama, for whom she worked?

  • 10:48:30

    ADAMYIt's tricky. There's a really interesting Pew poll that came out a couple weeks ago that looked at what voters thought of both parties, and it found that, you know, among Democrats they felt like the government was doing too much to help the wealthy. Among Republicans they felt like the government was doing too much to help the poor. But interestingly enough, voters from both...

  • 10:48:53

    LAKSHMANANToo much to help both the wealthy and the poor?

  • 10:48:55

    ADAMYYeah, depending on which party you were in. But voters from both parties felt like the government was not doing enough to help the middle class. So I think she can -- she can thread the needle by pointing out that, you know, basically Obama pulled us out of the worst of the worst and still acknowledge that there's still a lot that needs to be done.

  • 10:49:15

    ADAMYI think, Indira, one of the big problems she has is that this is an issue where voters don't feel like they connect with her. They hear about the paid speeches that she made to Goldman Sachs. They hear about the fact that she hasn't driven a car since, you know, somewhere in the mid-1990s and the extreme wealth that...

  • 10:49:34

    LAKSHMANANAlthough isn't that kind of like George Bush, Sr., when he hadn't seen a grocery store, you know, scanner? If you are someone who's been vice president, or in her case first lady or whatever, why would you drive a car or see a grocery scanner?

  • 10:49:46

    ADAMYAbsolutely, absolutely, it comes with the territory. But I think as people hear these things, you know, the comment about coming out of the White House dead broke, people hear these things, and they look at her, and they say she's just not a person who I think can relate to how I feel. She's in such a different sphere. So it's less about what she says on policy, I think, to some extent, and more about, you know, do you look at her and trust that, you know, she can really empathize with me.

  • 10:50:10

    WESSELYeah, I wonder how often Donald Trump drives his own car. (laugh)

  • 10:50:14

    LAKSHMANANWell, that's true.

  • 10:50:16

    WESSELBut I think, I just want to respond to the caller who said, what are the Republicans offering, to be fair to them. So it's very hard to generalize across Republicans and particularly once you throw Trump into the mix. He has such a mélange of policies it's hard to generalize. But in general, the Republican candidates, certainly Ted Cruz and Marco Rubio, see a smaller role for government in the things we're talking about.

  • 10:50:37

    WESSELThey believe that if we had lower tax rates and less government regulation, then generally the private sector would be willing to invest more, and we'd grow faster. And that's quite a contrast to the Sanders and Clinton view and the Obama view, which is that the -- we need the power of the government, the muscle of the government, to help harness the forces of the market so we have less of the inequality that Steve's report has pointed out.

  • 10:51:01

    LAKSHMANANAll right, well quickly, David, it is Super Tuesday. Put on your political analyst hat and gaze into that crystal ball and tell us what are you watching for based on economic conditions in different regions of the country who are voting. What are you expecting?

  • 10:51:15

    WESSELI don't think what happens today is going to have a lot to do with economic conditions, except for this kind of disenfranchised thing. What I'm watching is how much -- can Ted Cruz beat Donald Trump in Texas and by a lot? Because if he doesn't, I think he's toast. And I'm also fascinated by some of the congressional primaries that aren't getting a lot of attention. The chairman of the Ways and Means Committee, Kevin Brady of Texas, and the chairman of the Senate Banking Committee, Dick Shelby of Alabama, each has a really tough primary today, and I'm interested to see what happens there.

  • 10:51:44

    LAKSHMANANI'm Indira Lakshmanan, and you're listening to the Diane Rehm Show. Steve, you wanted to jump in there.

  • 10:51:49

    GLICKMANYeah, I think it's a good transition to the populism where we're seeing in this election it's -- on both parties you see this happening with Bernie Sanders or Donald Trump. It's clearly a lot deeper on the Republican side. There's a much deeper conflict happening in the Republican Party, where this anger and anxiety has taken root and is expressing itself in the Donald Trump candidacy.

  • 10:52:10

    GLICKMANAnd I think there are a lot of Republicans across the country that are uncomfortable with the solutions he's offering. Even though he's tapping into a feeling that's real among people, it's there on a lesser side on the Democratic side. I think most of us would probably agree Hillary's going to do pretty well today, and Donald Trump's also going to do pretty well today, but the Bernie Sanders and even more so, the Elizabeth Warren popularity in the party is a real sign of things to come for Democrats, as well.

  • 10:52:37

    LAKSHMANANAll right, Janet, I think this question is for you from listener Tony (PH) from Tamarac, Florida. He says, "we keep hearing how well the economy is doing without seeing it in our daily lives. But could it be that the policies that have, quote, helped the economy have only served to concentrate wealth in the few upper echelons?" Tony says, "this is a bipartisan effort that has harmed us, and things like free trade and unregulated immigration are increasing economic indicators but serving only a narrow range of individuals."

  • 10:53:05

    ADAMYWell, Tony is certainly right that wealth has become more concentrated among a smaller tier of Americans. Who's responsible for it is a very open question and a long debate. Another piece of research that came out from Pew this year found that for the first time on record in over 40 years, the middle class, the share of the country that is middle class is no longer the majority share in the U.S. So the middle class is now eclipsed by...

  • 10:53:35

    LAKSHMANANThat's stunning. Is this the first time in -- how many years?

  • 10:53:37

    ADAMYIt's the first time since they began measuring since I believe it was 1971. And so you've seen -- what you've seen is you've seen a pretty significant concentration of wealth among the highest-earning Americans and also a growth of the poor population. So it's difficult to pinpoint exactly which party you would point to for those -- for that disparity, but I think, you know, he's absolutely right to feel like that concentration is happening.

  • 10:54:07

    LAKSHMANANAll right, well, a couple of our listeners are feeling that same way, too. Mary from Alexandria, Virginia, says that she's over 50 and lost her job in 2007, 2008. "It's all great and fine to talk about the need to equalize, but when there isn't enough to go around, the people with the power look after themselves," says Mary. And then we have a very interesting tweet from Francile (PH) in San Antonio, Texas, who says, "once again I want to ask your panel why we are so wedded to the average statistic when we're talking about the economy?"

  • 10:54:38

    LAKSHMANAN"Your panel discussed how useless averages are when the high-earning zip codes skew the statistics." And she wants us to know she's from zip code 78209, which is one of the highest-performing zip codes, which she says, Steve, gives a lie to stories about jobs and economic income statistics.

  • 10:54:57

    GLICKMANWell, I think two separate questions there. One, the extent to which policymakers are connected to the real economic malaise that's being experienced in big chunks of the country. I think you find from a lot of policymakers that they're kind of trapped in a bubble here, where they hear from folks in Washington where the economy is great, they hear from folks, a lot of time donors in New York and San Francisco and in L.A. whose problems are different than, you know, your average voter in some of these places in the South and in the industrial Midwest we talk about.

  • 10:55:26

    GLICKMANIt's really important for policymakers to get out to their communities and see what's happening in places that, you know, don't represent a lot of their donors or maybe most regular voters live. And of course on the overall analysis, we look at communities writ large. So some individuals are going to do great in those communities, and some individuals are going to do less great. But the key thing here again is opportunity. When you move from an individual level to a community level, even if you fall down that socioeconomic ladder, when there's more businesses and more jobs, you have more of a shot to be involved in something that's going to take you up that socioeconomic ladder, and that's what scares us the most.

  • 10:56:03

    LAKSHMANANAnd that's of course talking about much longer-term solutions, where you can't, you know, get from here to there, to a job, in six months or in a campaign cycle if you're talking about investing in pre-K education so that that four-year-old is able to get a job when they're 24. I mean, that's what makes it hard. All right, in the short time we have left, we're going to learn the unemployment numbers this Friday. Any predictions?

  • 10:56:27

    WESSELI know the caller doesn't like the averages, but the averages look pretty good. They don't tell the whole story, but it's better to have a good average than a bad average.

  • 10:56:36

    LAKSHMANANJanet?

  • 10:56:36

    ADAMYYeah, I would agree with David, and I think, too, one thing that's worth noting is that while Americans are voting on the economy, our latest polling shows that national security outweighs their economic concerns. So this is certainly having an effect on the election, but I think you're going to continue to see people vote on national security terms.

  • 10:56:55

    LAKSHMANANOver the economy? Whatever happened to, it's the economy, stupid?

  • 10:56:58

    ADAMYWell this -- our last poll on this was in December, which was after the San Bernardino attack. So I expect it's shifted a little bit. But there's still a lot of fear around those.

  • 10:57:04

    LAKSHMANANYeah, that was a couple months ago. Voters have forgotten about that by now. Yeah, well, we always seem to hear that economy ends up being a leading issue. It will be very interesting to see what the next Wall Street Journal poll says. We will be looking for it. That's Janet Adamy, news editor at the Wall Street Journal. Also joining us, Steve Glickman, executive director at the Economic Innovation Group, and David Wessel, director of the Hutchins Center on Fiscal & Monetary Policy at the Brookings Institution. Thanks to all three of you for joining me, and thanks to all the listeners for tuning in. I'm Indira Lakshmanan, and you're listening to the Diane Rehm Show.

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