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Research suggests that in the last few decades at least a third and as many as a half of all American families have, in economic terms, either stayed the same or lost ground. For these families the American dream remains just that, and now more than ever in recent memory, it’s an unrealistic aspiration. Join us to discuss how a stagnating quality of life for many Americans is taking its toll on our country and what we can do about it.
- David Leonhardt Op-ed columnist, The New York Times; former editor, The Upshot, a New York Times website covering politics and policy
- Douglas Holtz-Eakin President of the American Action Forum; chief economist and director (2003-2006), Congressional Budget Office
- Dante Chinni Director, American Communities Project, Michigan State University; he also writes for NBC News and The Wall Street Journal
MS. DIANE REHMThanks for joining us. I'm Diane Rehm. Many American families, indeed many entire communities in the U.S., have lost something precious, faith that hard work will lead to greater prosperity. According to new research, the typical household today has a net worth that's 14 percent below what it was in 1984 and this widespread stagnation is taking a heavy toll.
MS. DIANE REHMJoining me to talk about why so many families are struggling and how this crisis is reshaping our future, David Leonhardt of the New York Times, Douglas Holtz-Eakin of the American Action Forum and by phone from Monroe County, Ohio, Dante Chinni of the American Communities Project at Michigan State University.
MS. DIANE REHMI'm sure many of you will want to contribute this morning. You can do so by calling us at 800-433-8850. Send an email to firstname.lastname@example.org. Follow us on Facebook or send us a tweet. And welcome to all of you.
MR. DAVID LEONHARDTHello, Diane.
MR. DOUGLAS HOLTZ-EAKINThank you.
MR. DANTE CHINNIThank you.
REHMAnd David Leonhardt, you wrote your first column for the New York Times yesterday all about economic stagnation. You call it the central challenge of our times.
LEONHARDTI think it is. I think the only other one you could argue fits that bill is climate change. But the thing about economic stagnation is it makes every other problem, including climate change, harder to solve because of the lack of faith, as you just put it, that it causes people to have. And you know, I know it's almost a cliché. People say the middle class is disappearing. I think that's an exaggeration.
LEONHARDTBut I think what's not an exaggeration is that for a large portion of this country, maybe a third, maybe a half, the quality of life has really stagnated. I mean, it is remarkable that lower income whites don't live as long as they used to. They suffer much more from complications from obesity. They are much more likely to die from drug overdose. It is remarkable that incomes have been growing so slowly over the last 30 years that the net worth is down.
LEONHARDTIt is remarkable how many more kids are growing up in families with only one parent. It's remarkable how many more people spend time in jail at some point in their lives. And so even as life has gotten substantially better, I would argue, for the top half -- not just the one percent, but I would say the top half, it's really gotten -- it's stagnated for everyone else and that creates this anger.
REHMAnger, but what does that mean for how the country moves forward or does not?
LEONHARDTWhat I said in my column is I asked readers to think about the stories they tell about their own families. You know, you talk about the immigrant great grandparents who came over here. You talk about the first college graduate in your family. If you're African American, maybe you talk about your grandparents who couldn't vote because they were African American and then the fact that maybe your grandparents actually got to vote for an African American president.
LEONHARDTFlip all that and imagine that you couldn't tell those stories because the quality of your life had stagnated. And this is a problem that actually spans races. It applies to large groups of whites. It applies to large groups of African Americans. You would be so angry about hard work unrewarded. You'd be so anxious about what it would mean about your children that it would be very hard to have trust in society.
LEONHARDTAnd I think that explains a lot of the decline of trust we've seen in virtually every major institution, religious institutions, the media, banks, labor unions, the government, you name it. And I have to say that even though a lot of that anger is today expressing itself in truly odious ways, I really do understand where a lot of it is coming from.
REHMAnd Douglas Eakin, does the extent of this anger seem to be what's behind both the Trump and Bernie Sanders campaigns?
HOLTZ-EAKINI think there's a lot to that. I want to just say, David Leonhardt's a wise man. And I agree with everything he just said. One way to think about it is in the good old days, say, from the end of World War II to 2007, the economy grew fast enough that even with population growth, income per person doubled roughly every 35 years. So, you know, in one person's working career, you could imagine the standard of living doubling and that was the route to whatever your version of the American dream might be.
HOLTZ-EAKINWhether it's send someone to school or, you know, first home, whatever the stories your family would have. Now, the economy's growing a 2 percent and is projected to grow at 2 percent for as far as the eye can see and with population growth, the standard of living's going to double roughly ever 70, 75 years. So the American dream's disappearing over the horizon and so not only do we have this palpable sense of things were bad, we had a recession, a financial crisis, we don't have a lot of hope collectively in our economy future. And I think that's weighing on everyone.
REHMSo how does this economic picture we see today differ from what was, say, 40, 50 years ago?
HOLTZ-EAKINI think there's some really important differences. And one of the great mistakes is to somehow pretend we can just go back to 40, 50 years ago. We can't. At the end of World War II, we were astride the global economy as a virtual monopoly and many other countries literally in ruins. That's not going to come back. So looking forward, I think it's very important to recognize we have a challenge and to recognize that it comes in really two forms. The first is just growing more rapidly to get everybody bigger opportunities. And economics isn't complicated.
HOLTZ-EAKINYou have more stuff if you have more people to make stuff and they're more productive. So this is about people and productivity and the roots of productivity are investing in technologies and capital, but educating people effectively, making sure that all those school systems work. So those are challenges. We can talk at length about those. But one of the really interesting things that happened in the data is the geography of growth has just changed dramatically. It's no longer the case that a rising tide lifts all boats.
HOLTZ-EAKINWe have pockets of geography that aren't growing at all, especially in this recovery. And so the experience across America is very different and there are places filled with anger and filled with a lack of hope because not much is going on.
REHMAnd Dante Chinni, you're joining us from Monroe County, Ohio. Talk about why you're there, what you're seeing and how that may fit into this broader picture.
CHINNIWell, I'm here, actually, working on assignment with NBC News and it's -- but I'm here because I look at the data and this is where the data told me to go. And I started -- I came here earlier this summer for the same reason. Monroe County is in southeastern Ohio. It's on the West Virginia border. It has the highest unemployment rate in Ohio. The unemployment rate in August and the latest monthly numbers is 9 percent. And it's a place that really has just fallen on hard times, particularly over the last decade.
CHINNIThe aluminum plant, which had been shedding jobs really for 20, 30 years, finally just closed. That was a good source of income here. That's gone now. And what Douglas is saying is just absolutely true, and David as well. I mean, these are themes that I'm seeing all -- in places like this all around the country. Look, geographically speaking, when we got this last set of data about how incomes had risen and we were in the 2015 numbers, things were looking much better, the numbers from the census from the Labor Department.
CHINNIBut if you look closer at those numbers, there were a selection of counties around the country where there was negative income growth. Now, the sample is very small so they couldn't say for certain it was negative, but the one thing they could say for certain was that they hadn't grown. I think they probably were negative and all those places were rural. We're talking about lots of places all around the country. Look, this is not to say there aren't exceptions, that there aren't rural communities doing well, but they are -- those places truly are the exception.
CHINNIAnd what you're seeing in places like Monroe County here in Ohio is an older generation that kind of, you know, they got what they could out of the system and they're probably going to be okay. Their children don't have that. So you're literally -- what you're talking about doing for the next generation here is educating as much as you can, finding different jobs for them and for a lot of them, that's going to require leaving here. There's not a lot here.
REHMBut what I understand, Dante, and correct me if I'm wrong, isn't Monroe County -- aren't the voters there heavily supporting Donald Trump?
CHINNIYes. If that's the -- if we're really talking about the reason why I'm here one week before the election or one month before the election, that's why I'm here. This county had been reliably Democratic for about 50 years. It is now heavily Trump territory. In fact, I just talked to -- the Trump signs here are moving, even after the statements from Friday, they're moving faster than they've seen for any candidate in 20, 30 years.
REHMAnd what do they hope that a Trump presidency can do for them?
CHINNIJust change Washington. I mean, I think a lot of people here will acknowledge that Trump's not going to bring back the aluminum plant and he can't go back in time. I think they understand that. But they just want Washington violently shaken up. They want it -- I don't want -- burning it down, I don't know, but they want something that's going to cause an earthquake in Washington and they think that Trump is, at least, a way to do that.
CHINNIEven if they don't love everything he says, he's giving voice to their anger and he is, at least, promising to throw the system into -- not chaos, but into disarray, which wouldn't be bad in the minds of people here.
REHMIs that enough to address the issue of stagnation?
LEONHARDTNo. I mean, there is nothing in Donald Trump's agenda that would address the issue of stagnation. I mean, we'll talk about his tax plan later, but it would really do -- it would probably hurt. But I think that it is important to think about this primal scream that Dante is hearing because it stems from this anger. It's not about specific policies.
REHMDavid Leonhardt, he's an op-ed columnist for the New York Times. Douglas Holtz-Eakin is president of the American Action Forum. Dante Chinni is director of the American Communities Project at Michigan State University. He also writes for NBC News and The Wall Street Journal.
REHMAnd welcome back as we talk about the stagnation of the U.S. economy, how it is affecting not only individuals but communities, families, what that has done to the nation that has for so many years lived on hope, faith and understanding that their own situation can be improved. We have a first email from Palmer, who says the state of the U.S. economy is due to illegal immigration. For example this is why teens are hard put to get jobs. This will not be acknowledged on NPR owing to the corruption of the media in general, Doug.
HOLTZ-EAKINI'm going to leave media corruption to David, and I'm going to say it's not going to be acknowledged because it's not true in that the economic role of immigration is very poorly understood. Without immigration, the U.S. population would shrink. The people who are born here do not have enough babies for the population to grow. All future population growth in the U.S. will come from our choices on immigration. Without it, we're Japan, we're shrinking, become less important on the globe, and the economy gets smaller. So that's immigration in general.
HOLTZ-EAKINIllegal immigration, this is 11 million people in a country that's over 310 million. So the numbers just can't be right to somehow say they're the source of all our evils. They are just as productive as legal immigrants are, as domestic workers are. Estimates are that if, for example, Mr. Trump's promise to deport all illegal aliens in two years were to come through, it would cost about $300 billion.
REHMTo our economy.
HOLTZ-EAKINIt would cost the federal government writing a check for $300 billion. That would cover 85,000 cops, about 30,000 lawyers, 300,000 detention beds, 30,000 chartered buses, 17,000 chartered planes, and we'd have a recession that was just as bad as the most recent one. So they're not harming us, they're helping the U.S.
REHMDante, what about the folks in Monroe County? What are they saying about immigration?
CHINNII think they see it as part of the problem, but for them, remember, we're talking about a county I'm in right now, this is 97.4 percent white, non-Hispanic. This is about as white as the country gets. So for them, I mean, I'm sure immigration, they would say they want Trump to build the wall and whatnot, but for them it's really much more about jobs being sent overseas that used to be here. But I suppose they may argue that lower wages in some places maybe have attracted plants and jobs elsewhere in the United States, even where there are more illegal immigrants to do the work. But for them here, it's mostly about trade.
LEONHARDTI think it's worth thinking about just a very small version, portion of the logic here, right. Doug laid out a really strong case for the big picture. I'm going to go small. It is certainly true that some immigrants who are here illegally may take a job that a native person might get, right. It would be wrong to claim that that never happens, right. But it is -- it is wrong to claim that this is somehow harming us, and people who are here illegally tend not to speak English, they tend not to have a high school degree. They can't do jobs that many 16-year-olds enrolled in American high schools can do. They don't have the skills to do those jobs, and so they just can't be taking large numbers of jobs from Americans who do speak English and do have just much higher skill levels. They're doing different jobs.
REHMSo where does that idea come from?
LEONHARDTWell, I mean, I think it comes from the fact that when things are going badly, you want to try to figure out why they're going badly. And the people who are blaming illegal immigrants are often not wrong that things are going badly. They are wrong to blame illegal immigrants.
HOLTZ-EAKINFrom my time in politics, I learned that the things that I like, policy ideas, the way I think about the world, puppies, kittens and sunshine, is not politically very powerful. What's powerful is fear and anger. And so stoke people's fears, get them angry at somebody, illegal immigrants are an easy target, someone overseas taking jobs an easy target, that’s where you get political animation.
REHMDavid, you say that the Black Lives Matter movement is another manifestation of the general frustration out there that discrimination actually blocks progress.
HOLTZ-EAKINYes, and I say it is mostly a productive manifestation. I don't agree with all of the tactics of that movement. But I think on net it is quite productive. It is forcing America to confront the ways in which racism endures. And look, the black-white pay gap is as large as it was 40 years ago. There are certainly ways -- I mean, President Obama has made this point better than anyone. He said unless you were a black man living in this country in the 1950s and '60s, don’t tell me that nothing has improved with race, right.
HOLTZ-EAKINClearly the amount of racism and discrimination is less in many ways than it used to be. However, it's also clear that we have enormous problems here, whether it's the massive numbers of African-Americans that we have locked up, in many cases permanently damaging their career prospects and even their ability to vote, or whether it's these economic gaps.
REHMHere's an email from Boyd. Has the U.S. stagnated economically or just lost its way in pursuit of false goals like addiction to growth, the next quarterly earnings, et cetera? Doug.
HOLTZ-EAKINI don't think there's a lot of evidence that this short-termism is somehow the root of our problem. You know, I know it's a trendy topic, and as David said, with, you know, saying that there isn't ever a case when an illegal immigrant didn't take someone's job, you can't say there's never been a case when the pursuit of quarterly profits didn't turn out to be a misguided way for a company to run itself.
HOLTZ-EAKINBut for the economy as a whole, there are just some blocking and tackling and structural things that we're just not doing. We've got great documentation of failure in the education system now. You know, we've tested every kid of a decade. And so know where failure occurs, down to the student and teacher and the principal, and we haven't fixed it. We have far too many students who aren't graduated, particularly in these really bad school districts. When they graduate, they're not ready for college, and the single biggest predictor of someone who will not finish college or will end up with a lot of student debt is needing remedial education when they show up their freshman year.
HOLTZ-EAKINAnd that happens in public schools and in private schools, it happens with rich children and poor children. It's pervasive.
LEONHARDTThere were two questions there. One was about short-termism. Doug's right, there's just not a lot of evidence that corporate short-termism is causing our problems. I'm probably a little more agnostic. We need more evidence and research because I think it could be a problem. I'm just not sure. The second question was about this addiction to growth, and I guess I would really urge people, particularly on the left, not to denigrate economic growth.
LEONHARDTEconomic growth pays for scientific research that allows us to live longer and healthier lives. Economic growth pays for all kinds of wonderful things that make life meaningful. And we really want economic growth. If we don't continue to have economic growth, we won't be able to continue to live longer and live healthier, and we won't be able to help all these people who are today struggling with poverty.
LEONHARDTAnd so I guess I would argue really clearly our growth hasn't been the kind that I would like to see, it hasn't been equal enough, but the idea that we would be better off if we went to a zero-growth world, that would make every problem harder to solve, whether it's health, whether it's climate, you name it.
REHMDante, you might want to talk about the health of those folks to whom you've been talking.
CHINNIWell, I mean, if we're talking about physical health or economic health, it's, you know, I think on this question the idea that we need, that growth is somehow the problem is I think just kind of silly to me. I think that the problem we're having in a lot of these places is even the conversation we just had right here, especially when Douglas was talking about with education. The problem is that you just need a lot more than a high school education now, and the jobs that are available require more from people, and we just have to be honest about that, and that is going to require -- we're going to have to do something about the education system, we've going to have it reform it.
CHINNII know we're always talking about reforming it, but we've got to something more serious because look, it used to be that you could get through school maybe with Bs or Cs or Ds and then still go out and get a job here at the aluminum plant, or where I grew up at the auto factory. Those jobs are gone, and they're not just gone to China or to Mexico, they're gone to machines, and we just simply don't need as many people to do those jobs anymore. So what does that mean?
CHINNIThat means you've got to find a way to make yourself more valuable to the workforce, and that's a really -- it's hard.
CHINNII mean, we're talking about huge structural changes, and that's the -- the really interesting thing about what David wrote is, I agreed with everything he wrote in the piece yesterday, and I think something needs to be done. I think everybody thinks something needs to be done. What that's going to look like or how that's going to work, I don't know. It's such a complicated, and it's got so many deep roots.
REHMAll right, and let's open the phones. We have a caller in Indianapolis, Indiana. Colby, you're on the air.
COLBYHi guys. I was curious if you would like to comment on the need or at least the lack of strong unions among so-called unskilled labor. I'm thinking about the successes the UAW and the CIO had in the '20s, '30s and '40s and how they created these jobs that were undervalued and how that contributed to the growth of the middle class. And I'm curious as that pertains for the fight for $15 and the sort of I guess prospects people would have if there was a stronger labor movement right now.
REHMI gather you, yourself, used to be a union organizer, and now you're working at Starbucks?
COLBYThat's right, and I'm also a member of the National Writers Union right now.
REHMAll right, David?
LEONHARDTMy guess is Doug and I might disagree a little bit here, which is always good. I mean, I've changed my mind a little bit on this, and I've come to think, at first I wasn't sure how much of a role unions could play in a global economy, and it's true they have to change, right, because some jobs are going to be able to go overseas in a way that they couldn’t, and unions can't simply try to hold on to the past and say let's keep the same jobs because they can put companies out of business that way. That was part of the problem in Detroit.
LEONHARDTBut I do think that labor unions are really vital, and I do think the weakness of labor unions has contributed to some of the inequality trends. And I think that you see -- it's interesting, you do see, I think, more focus on this issue within the Democratic party. I mean Larry Summers, to take an example of an economist who I think many people on the left think of as not one of them, now talks increasingly about how important it is to strengthen organized labor.
LEONHARDTResearch does show that you take similar workers, one who's in a union, makes more and has benefits than one who is not.
HOLTZ-EAKINI think David's wrong. So there's just no way that you can put a union in place and take a worker who doesn't have the skills to the do the job, and Dante talked about how these jobs are just flat disappearing, and have the unions strong-arm the company into successfully employing large numbers of people. The company will go out of business.
HOLTZ-EAKINAnd so I think this is one of those shiny bottles that people look at, and they go if we just did that, it's all going to be fine. It's in the end going to come back to the worker and the skills that worker has and the opportunities that they can pursue, not the union they belong to. Even though David's right about that research, I think that's small and at the margin.
REHMDante, what do you say?
CHINNIWell again, I think geography is actually some of the story here. If you look at -- I think it's very hard to do with factory work or what we would think of as manufacturing work. I think it's harder to unions, and we're talking about unskilled labor now, I think look at a place like Las Vegas, where you can unionize service workers because there are just so many of them, right. I think you've got enough there where they can be a force, and they are a force, and they I think can help raise wages for service workers in the entire area.
CHINNIBut for me, service workers is a way -- is a place where a lot of this unionizing would have to happen, and I just, I don't -- I don't know feasible it is in a lot of places unless you've got just such a critical mass of them, and they're so important to the local economy that they could put together and kind of use their leverage to get something.
REHMAnd you're listening to the Diane Rehm Show. We have an email from Louis, who says your panel is too right-wing. The problem is not stagnation but the choices in a rigged economy and what it is that people feel when they use that phrase. What are they saying?
LEONHARDTIs that the full email?
REHMThat's the full email, your panel is too right-wing, problem's not stagnation but the choices in a rigged economy.
REHMNext time Doug and I have an argument about something, I'm going to remind him that I'm too right-wing.
LEONHARDTI can't wait.
LEONHARDTSo obviously I need to guess a little bit here, right, since the email doesn't go into detail, but I've talked to enough people who have had this view that it's not just a guess. I think that there is -- I think the rigged economy can mean multiple things, depending where it's coming from. This is obviously coming from the left. And I think what that tends to focus on is much more about the one percent, right, which is this idea that very rich people in this country are essentially stealing all the bounty of economic growth and keeping it from the rest of us.
LEONHARDTI actually agree with some portion of that critique, right. I think that we -- one of the big problems in our economy is that the very rich have not only had the biggest pre-tax income gains over the last generation, but they've had the biggest tax cuts, as well. I think that we should be defining rich more finely. I actually think this is -- I have some criticisms of Hillary Clinton's tax policy, but I think this is one of the best things about it. She sets higher rates once you get up to $5 million or so.
LEONHARDTAnd so yes, I think that is part of the issue. But I think it would be a grave mistake to pretend that is the whole issue. I mean, the fact that we have so many schools that are not educating kids who come from lower- and middle-income backgrounds, that's not just about the one percent, and that damages a lot of people. The fact that we have many more kids growing up without -- in households without two parents, that's not just about the one percent. That's really not good for the average kid.
LEONHARDTAnd so I think that this notion of a rigged economy and the one percent is part of the problem, but I just don't see any reason to believe that it's the entire problem.
HOLTZ-EAKINI want to emphasize the last part of that, which is we know the difference between poor and not poor in America is work and that if you want to have a successful work career, you have to go to school, finish, get a job, then if you want to get married and then have kids, do it in any other order, and it's a one-way ticket to poverty. And that's not about the one percent. That's about how people are educated and how they live their economic lives, and that's the opportunity they will or will not have.
HOLTZ-EAKINWhat bothers me, if I can just say one more thing.
HOLTZ-EAKINThe obsession with, in tax policy, the one percent and basically all regulatory policies is we're not letting a small group in an ironic fashion dictate how our country runs itself instead of thinking about the general welfare of the population. I don't think we should be running our tax code based on the one percent either for good or ill. But we've become obsessed with them, and all the tax policy discussions are now about the one percent. What about everyone else, and what's going to create opportunity and a lot of growth?
REHMAnd who is this small group that is creating that discussion focused on the one percent?
HOLTZ-EAKINI would say, you know, perhaps too broad-brushedly, but Democrats have given up on growth, and so they've simply decided that they're going to feed the middle class through large new entitlement programs, which is all Clinton is proposing, financed with taxes on the upper end, and that's all they have.
REHMAll right, and when we come back, we're going to talk a little bit about the Trump and Clinton tax policies, what they're offering, what they would do to the issue of stagnation or growth and take your calls, as well. Stay with us.
REHMAnd welcome back. One issue we touched on, but only briefly, is taxes. And I'm wondering Dante, from your perspective, how people in Monroe County are talking about taxes.
CHINNIIt's actually really interesting, the exchange that David and Douglas just had -- it's, the, taxes aren't a big part of what is driving this Trump movement. In fact, what's really interesting is this is a true populist movement in some ways, in that it is angry at the private sector. That's what's so interesting about it. This is the right wing. Well, I don't know if it's the right wing. It is a wing of the Republican Party that is angry and blue collar and it is angry at the private sector. And it's angry at Wall Street.
CHINNIAnd I don't know if it would define its anger as the one percent. That's true. That might be the wrong way to talk about it. But only maybe because one percent's not enough. I mean, they're angry at a lot of people. And taxes, I think, are in their mind, but only -- I think they would say that the rich -- this is again coming from Republicans. I think the people here would say the rich need to pay more. And that's really fascinating. And what's that -- you know, what's that about?
CHINNIThat's about the fact that I think, when you come to a place like this, they understand that the private sector isn't really helping them. And it's not. And let's be completely frank about this. In a lot of these places where people are struggling, it's not that the private sector is going to save them just because there's not a lot of reason. And this is nothing, because Monroe County is beautiful. But there's not a lot of reason, if you're a company, to invest in Monroe County. So, taxes, I think they see as less of the problem here.
CHINNIThe problem that they see is the system, quote unquote, is getting them down. And what's different about it is it's not just the system of Washington, it's the entire thing. They're angry at Wall Street and wealthy Americans as well.
REHMInteresting. Donald Trump's tax plan, put in very simplistic terms, would create large tax relief for the top one percent. Whereas Hillary Clinton would raise rates on the top one percent. Is either of these proposals going to make the issue of stagnation any better?
LEONHARDTNeither of these proposals is a magic bullet, by any means. I think Trump's would make it worse. I think Hillary's, while it would not solve anywhere near most of the problem, would be helpful. And I think it would be helpful because we do have a fair number of needs that require money. Right? And Hillary Clinton is talking about raising substantial amounts of additional revenue from high wealth and high income people.
REHMCorporations, investors. Trump would drastically reduce those taxes.
LEONHARDTTrump would reduce them further. I think the thing to keep in mind is the taxes on wealthy Americans have fallen enormously over the last several decades. Obama has raised them, but he hasn't done anywhere near reversed the decline. And Hillary, although she would not -- also, not reverse the decline, I think there's a real argument about whether we would want to reverse the whole decline would increase them further. And I do think that is important.
LEONHARDTBecause I think the evidence now suggests that's not going to do a lot of economic damage. And I think it can give us more resources to try to address some of our problems, whether it's roads, whether it's mass transit, whether it's educating more people. So no, Hillary Clinton's tax plan is not going to solve stagnation. But no one thing is going to solve stagnation and I would view it as one modest part of a package that makes sense.
REHMAnd how do you see it Doug?
MR. DOUGLAS-HOLTZ-EAKINAs I said, I think the Clinton campaign is reflective of a Democratic Party that's given up on growth. She's creating new entitlements, so, you know, pre-K, free college, child care, limits on out of pocket cost. Paid family leave. Entitlement after entitlement, which will be paid for, and to her credit, she's arguing the math adds up. By these taxes on higher income individuals and capital gains and high frequency trading. And just an array of things that make the tax code more complicated, but raise the money.
MR. DOUGLAS-HOLTZ-EAKINThe problem with this is that A, it doesn't address the problem that there are existing entitlements that we can't afford and that don't have well-funded. And she's creating all these new ones. And B, it won't create any growth. And then, when I say that, they'll always say, but infrastructure. And it's true, we need good infrastructure programs, but they're being oversold dramatically. Mr. Trump, to his credit, talks about growth. On the other hand, his policies are charitably a hot mess and just don't add up.
MR. DOUGLAS-HOLTZ-EAKINSome are anti-growth, he's protectionist. He's anti-immigration. Some are just implausible. His tax cuts are enormous for everyone and leave a gaping hole in the federal budget. So, you know, I'm quite dispirited by the quality of what I see as the economic policy on both sides of this election.
LEONHARDTI do think -- look, I think some of the policies Democrats are pushing are not going to help growth, right? I mean, whatever you may think of Social Security, bolstering Social Security does nothing for growth. But I think some of the things you just listed, right, pre-K, trying to get more poor kids to go to college. To me, those are plausibly pro-growth policies. In fact, I would argue that education is the single most pro-growth thing we could pursue. I don't that's the full solution, education, but it does seem to me as part of it.
DOUGLAS-HOLTZ-EAKINSo, I'm going to agree and disagree. It's just a timing issue. Better education's everything. I think I've even mentioned on this show there's a calculation done by Eric Hanushek out at Hoover that says if we raised US K-12 educational attainment up to Canadian levels, so this isn't something fancy like China. These are people almost like us. They're Canadians. And if we could get to their levels of attainment, real wages in the United States would be 20 percent higher. That's about a trillion dollars a year. Nothing beats a better educated work force.
DOUGLAS-HOLTZ-EAKINIt takes 18 years to get the first payoff, so if you're going to elect Hillary Clinton and say, let's grow faster with this pre-K program, be patient.
REHMAll right, let's go to Matt in Grand Rapids, Michigan, who has been patient. You're on the air.
DOUGLAS-HOLTZ-EAKINThank you, Matt.
MATTHey there, everybody. And Dante, go green. So, I've actually got a substantially more optimistic view of this whole situation.
MATTTo your point about education, that is likely to become, you know, the overall cost of education and the amount of time it takes to get somebody from the point where, you know, they're not particularly able to contribute to the US economy. You know, to where they are, is likely to reduce itself substantially over the coming years as online education matures into something that I would call more stable and productive form than it currently is in right now. We see that with things like (unintelligible) Academy.
MATTStuff like Arizona State University, building out very robust online programs and other things like that. But more broadly, to the point of technological dislocation, that a lot of folks are concerned about, I think it's important to note that at no point in the history of computation over the last, you know, 50 or 60 years, which, when we're talking about robots, that's what we're talking about. At no point has that, you know, has advancement in that realm ever decreased the output or totally dislocated, in the long run, the output of anybody at any given skill level.
LEONHARDTLook, I agree there are reasons for optimism and I agree that technology probably tops the list. I mean, I think it is true that it's possible that technology could lead to a more widespread and more efficient education system. I also think that driverless cars could actually be a really important change. And they could even be an important change for some of these communities we've been talking about, like the one that Dante's in right now. Driverless cars have the potential to make us turn into a much more mobile society, because humans aren't very effective drivers.
LEONHARDTPeople could get around more safely, they could get around faster. There are all kinds of technological things that should give us reason for optimism. I just think that the level of anger that you see today stems from something real and from real problems that at current, we're not on pace to solve.
REHMAnd from Twitter, can we talk about how we have a global economy and how much of our growth depends on that? Has the economy been this global before, Doug?
DOUGLAS-HOLTZ-EAKINWe had a very global economy very early in the 20th century, late 19th century. We're back to a very global economy. In between, we had, you know, the Great Depression, (unintelligible), everyone withdrew from globalization. We're seeing some movement in that direction again, something that I don't think would be wise. But having said all that, the US remains unique among the global economies in how much we are really domestically driven. Unlike most of the other countries that rely heavily on exports, the US is engaged in global trade.
DOUGLAS-HOLTZ-EAKINIt's successful in global trade, but it's not reliant on it in the very same way. And so when I look at the issues that will make things better, I go straight to the self-inflicted wounds in the domestic economy, where if we got better policies, we could get better growth and it would come from what we're doing at home.
REHMAll right. To Terry in Charlotte, North Carolina. You're on the air.
TERRYThank you, Diane. Good discussion this morning.
TERRYI've got two -- I've got two proposals that I put before you from, for the economy. And the quickest growth that I could think of would be to refinance the over one trillion dollars of student debt that is really shackling the youngest and most productive members of our society. I graduated from college 35 years ago with 590 dollars in debt and my wife had 1900. And I just think, and I remember my 20s as being something full of optimism, but the kids coming out today, with anything from 300 to 500 to, if you have a professional degree, a thousand to two thousand dollars a monthly payment. Is I think it's worth a point. No other recession recovery has had this kind of debt on some of the most productive and energetic people of our population.
REHMAll right. And your second point.
TERRYThe second point, Trump's international trade advisor, Dan DiMicco, is a former President of Nucor Steel and he led a chamber meeting here 10 years ago. A Chamber of Commerce meeting here in Charlotte, North Carolina. And they were talking about a bipartisan effort to actually have income support for the losers in free trade. While free trade, it's proven, does lift the economy, does expand the economy, does bring lower prices, there's also very, very defined losers who could lose everything.
TERRYAnd he just flat out said it 10 years ago. He said, you can't retrain 50-year-old factory workers and train them to income levels anything like what they received. And they were advocating at the time, and they were trying to build energy behind some sort of bipartisan solution where you provide actual income supports. When a factory leaves town, 900 jobs are eliminated and they're not coming back.
LEONHARDTIt's a very thoughtful call. I'll partially, quickly partially agree and disagree with both points. I agree student debt is a significant problem. I think it's worth looking at the numbers. They typical grad, the average graduate of a four year college has only 25,000 dollars in student debt. Inflation adjusted, that's almost exactly what I had when I graduated. So I know that it's not fun. It's unpleasant. But it's not hundreds of thousands of dollars. It's an amount that most college graduates can work off.
LEONHARDTThe thing is most people don't go to a University that costs 50,000 dollars. That's -- those are for the elites, and most of them either pay or can get financial aid. To me, the big student debt problem are actually the people who leave with 15,000 and no degree. Those are the people I think we want to focus on, because if you leave without a college degree, you are facing some really, often, not so great prospects. The second thing is I think the idea of supporting workers who have fallen on hard times is a really important -- is a really important one.
LEONHARDTI would be a little wary of trying to have the government sort through the reason they are struggling. Was it trade, was it not? It's often complicated. It seems to me that a kind of safety net that dealt with things more broadly than having to try to solve the mystery of why they were hurt is likely to be better.
REHMAnd you're listening to "The Diane Rehm Show." And to Houston, Texas, Hi Cindy, you're on the air.
CINDYYes, good morning. I would like to object to one of your panelists. His comment where he continually says that Hillary Clinton is not interested in growth and I would argue the point that her policies are growth related. If you give a tax cut to people that have no money, and if you tax the people that do have money, and you kind of take it out of their Swiss bank accounts and put it back into the economy, then eventually, it will create growth. When you provide child care and early childhood development for working mothers, you're going to get growth.
DOUGLAS-HOLTZ-EAKINSo, there are two kinds of growth. One kind of growth comes from sort of putting the workers who are not currently working back to work using the factories more fully. That usually relies on getting people to spend more. So, that's the argument for tax cuts to lower income individuals. We're passed that point. We're essentially back to full employment. We're not going to get much out of that in terms of aggregate economic growth. The long run growth comes from people and productivity.
DOUGLAS-HOLTZ-EAKINHow much can they make? And you have to find links to productivity in those policies, and there just aren't strong links. She may want growth, but what's on paper really isn't going to produce it.
REHMAll right, and finally, I want to turn to Dante with this email from John in Manchester, Missouri. He says, is there any way to repurpose those rural communities that have fallen behind, such as an influx of new industries or job retraining? Does anyone or any government entity have any plans to address this problem? And Dante, it seems to me that both you and James Fallows and his wife Deb, who flew all over the country, stopping in at various cities and towns across the country, have found that some have been able to repurpose themselves. What's your view?
CHINNIWell, the interesting this is if a rural community is able to repurpose itself, it has some resource that's there. And that resource actually may be an educational institution. It may be something that's related to tourism. You find, actually, that rural communities that are in places, that are lakes or, you know, that are tourist towns, do better. Right? I mean, there's a question of what that leads to in the long run. I don't know how that economy is really -- what happens to that economy. It's really relying on people coming to town and spending money.
CHINNIBut it's a hard road. And I do think that you need something upon which to build around, at least. And you go to a place like Monroe and it's difficult to imagine what that is. My, my thought about a lot of this is the private sector just can't save a place like this. It's going to have to be something else, just because there's not a lot of reason to invest if you’re a private sector company. But something, maybe, where the public sector could work to build institutions in the area that could help sustain the community again.
CHINNII'm thinking education, in particular. I'm talking like satellite university, the headquarters, something like that. But there's only so many of those that can go around. I hate to be -- you know, I hate to be the just the pessimist on all this stuff, and it's not pessimistic for all of them. But I do think that for a lot of them, I'm not sure what the path out is.
REHMAnd I'm afraid, on that note, we're going to have to end this discussion. I do think that we're all going to have to be very creative as we think about ways going forward. I want to thank you all for being with us. Dante Chinni, Director of the American Communities Project at Michigan State U. Douglas-Holtz-Eakin, President of the American Action Forum. David Leonhardt, who is now an op-ed columnist for the New York Times. He wrote his first column yesterday on which we have based this program. Thanks for listening. I'm Diane Rehm.
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