MS. DIANE REHMThanks for joining us. I'm Diane Rehm. President-elect Donald Trump drew broad support from voters who feel left out and forgotten in an increasingly global economy. Trump has promised to help them by raising barriers to trade and creating U.S. jobs. Joining me to talk about global economic trends and what Trump administration protectionist policies might mean for the U.S. economy, Dean Baker of The Center for Economic and Policy Research, Marcus Noland of the Peterson Institute of International Economics and Marc Levinson, former editor with The Economist, author of a new book "An Extraordinary Time: The End of the Post War Boom and the Return of the Ordinary Economy."

MS. DIANE REHMI hope you'll join our conversation. Call us on 800-433-8850. Send an email to drshow@wamu.org. Follow us on Facebook or Twitter. And welcome to all of you.

MR. DEAN BAKERThanks for having me on.

MR. MARCUS NOLANDGood morning.

REHMDean Baker, I'll start with you because there's lots of attention being paid today over Carrier's decision not to move at least some of their jobs out of Indiana. I think 1,000 versus what would've been 2,000. Tell us what the inducements were that were offered by the state.

BAKERWell, there's a couple things going on here. First off, we're not clear on what the inducements were. There were reports in the paper of 700,000, which, you know, $700 per job doesn't sound bad, whether that's the whole story from the state of Indiana, we don't really know. I should point out, that's not unusual. So it's been a practice of states for a long time to, in effect, pay companies to keep jobs there, bring jobs there. So that's not unusual. But again, we'd like to know what the actual amount was.

BAKERThis was, you know, leaked out. Who knows if that's right? The other issue was there were reports that President-elect Trump was making threats to United Carrier, the parent company, about military contracts. It's a major military contractor. And whether that's true or not, we don't know, but that does bring a big wild card into the picture, if, you know, the president is prepared to threaten contracts as a way of changing company's policies on where they locate their plants. That's a big wild card. And, you know, I don't know. Maybe he did, maybe he didn't.

BAKERMaybe we'll find out at some point.

REHMAnd the question also is about timing and when this deal might have been made and then finalized.

BAKERIt was great showmanship. I'll give him credit on that. So, you know, he made a big issue of this during the campaign. He was railing he was going to impose a 35 percent tariff. I had people asking. I go, I don't know how you put a tariff on a single company, you know. So he was making these claims. He's going to keep them from moving their jobs and, well, he kept some of them here, half of them, that's better than zero, good for those people, but what did he have to do to get that, you know? We don't know.

REHMThen, the question becomes, wouldn't it have been more useful to spend that kind of money on broader infrastructure, which would have benefitted the entire population of Indiana?

BAKERVery likely. You know, again, we don't know exactly what's at stake, but in general, you like to see policies put in place, not case by case incentives, you know, handouts. Those often -- this gets to be crony capitalism. So you know, this has been -- again, I don't want to single him out and say this is the first time it's been done. It's not. But it's not, in general, a good practice.

REHMMarc Noland, crony capitalism?

NOLANDWell, I think, like Dean said, we don't know what the details are, but what I can tell you from my own work this summer and this fall, is that major American firms were afraid of precisely what Dean alluded to, the notion that a President Trump would be intervening on, say, defense contracts or other types of government contracts and basically behaving in a way that sort of verged on lawlessness. One of the strange things in the campaign...

REHMExcuse me. Do you believe that the Carrier deal verges on lawlessness?

NOLANDI think that if you use extraordinary measures to break an existing contract or you use extraordinary measures to exclude bidders from a contract, that seems like lawlessness to me. I can tell you the firms are afraid of that. One of the strange things, as Dean alluded to, was during the campaign, he started out with a position that he would put a 35 percent tariff on Mexico. But partway through the campaign, he started talking about individual tariffs on individual firms and there would be one tariff for Apple and a different tariff for United Technologies and a third tariff for Nabisco.

NOLANDThis is historically unprecedented. And I'm not a lawyer, but my guess is it's probably unconstitutional. It violates the equal protection clause. So there is a sense among American corporations that this really was a departure from normal practice and something that they were quite concerned about.

REHMAny indication that Trump himself, pardon me, owned any part of Carrier?

NOLANDTo my knowledge, there is no indication that Trump owned any part of Carrier. I think, however, there are stories -- and, again, it's just stories in the press, that people around Trump do own companies in Mexico that export to the United States. So that idea of having a non uniform tariff, but a firm specific tariff raises this issue of crony capitalism.

REHMMarc Levinson, as the author of this brand new book "An Extraordinary Time," clearly economic anxiety was part of this whole election process. How do you see the health of the U.S. economy at this time?

MR. MARC LEVINSONWell, there's a difference, I suppose, between health and expectation. There is an expectation, which both recent presidential candidates fostered, that somehow they could make the U.S. economy boom. And you frequently see this in election times, that we can get five, six percent growth. Those were numbers that were used during the campaign. Well, most of the time, most economies grow fairly slowly, a couple of percent and that's a growth rate that leaves most people having jobs, living standards are rising, but not very rapidly.

MR. MARC LEVINSONPeople don't have that warm, fuzzy feeling that they have when there's a boom. So you've got an economy which is doing okay. It's not really growing fast enough to make people feel great. It's certainly not doing terribly by historical standards. I'd say it's actually doing fairly normal.

REHMHow much can a President Trump or if she had been elected, a President Clinton do to make that economy boom?

LEVINSONIn the short term, a president can do a lot, okay? It's easy to have a big tax cut or a big spending increase or lower interest rates a whole lot or something like that. And for a few months, that can make the economy boom. But in the longer run, the rate at which the economy grows really depends on the growth of productivity and that's something that the president has almost no control over.

REHMMarcus Noland.

NOLANDThe flipside is, is that you can't do a lot to increase the long-run secular growth rate of the economy, though you can create booms. And indeed, I'm a little concerned about the repercussions of a Trump boom in two or three years. But at the same time, you can also slow down the economy. If you undertake protectionist policies, you slow down, you shift resources into low productivity activities and you can slow down the economy.

NOLANDSo, for example, a country like Argentina had a per capita income three-quarters that of the United States in 1900, the same as Canada. They undertook a lot of bad populist policies and now look at Argentina today. So these questions about how much a president can do to raise the long term rate, we know bad leadership can do a lot to lower the rate.

REHMDean Baker.

BAKERI'd say a couple points. First off, I do think there is a more a president can do 'cause I think the short term is more linked to the long term. And we see that very clearly with what's happened in the last decade. So if you go back to before the crash and you look at the projections for potential GDP, this is from the congressional budget office, other authoritative projections, they're about 10 percent higher than where we are today, than the current projections of potential GDP.

BAKERAnd the story that I think most economists attach to that is because we had a very weak economy following the crash, we didn't see the investment we otherwise would've seen. We didn't see people improving their skills. People dropped out of the labor force. Some that may be permanent. We argue about that, but certainly some of it is. So as a result of that, we are suffering a long term loss as a result of short term policy failures.

BAKERThe other point is that we have to keep in mind, we've seen this enormous upwardly distribution over the last 35 years so we have two questions. One is how much does the economy grow? And I'll grant, there's a limit to what we can do on that. But we can do better, I think, then what we have been doing. But the other point is, is that's shared. So if we're growing 2, 2 1/2 percent, but it's all going to those at the top, then that's not a good story for those in the middle.

BAKEROn the other hand, if we're growing 2, 2 1/2 percent, and that's more or less evenly divided, well, I think most people are okay with that.

REHMIt's interesting this morning that there was an announcement, some big announcement about tax policy and the extent to which President-elect Trump is going to lower taxes on the middle class, but keep them at the same rate for the upper 1 percent. What's that going to do to the economy, Marcus?

NOLANDWell, there is a great deal of uncertainty about what will actually happen. President-elect Trump's tax plan evolved over the course of the campaign. It was kind of a moving target. So sometimes he said he was for certain measures and sometimes he said he was against them. But in the area of taxes, he's got to negotiate with Congress so they get a say in all this. Most of the projections now believe that there's going to be a substantial tax cut, a lot on corporate taxes, some on personal taxes and it's probably going to be a couple percent of GDP for the next several years.

REHMMarcus Noland of the Peterson Institute of International Economics. Short break, right back.

REHMAnd welcome back. There's no doubt in my mind that the folks in Indiana whose jobs have been saved are going to be very, very happy. The question I have in mind is how can that be repeated when you're dealing with a lot of job losses in U.S. manufacturing. Is it going to come back, Marcus?

NOLANDI doubt it. I think the consensus among economists is the job losses in manufacturing over the last 20, 25 years are predominately due to technological change and automation. International trade has played a role in that, particularly in some sectors like apparel. But the bulk of manufacturing jobs have disappeared because of automation. If you try to do things like putting big tariffs on China or Mexico in an attempt to bring those jobs back, you'll bring some of them back, but most of them will simply shift to other locations.

NOLANDOne firm told me that if there were a 35-percent tariff on Mexico, they would shut down their operations there. They would bring some of those jobs back to the United States, but the bulk of them would move to Singapore. And to make room for them in Singapore, they would move activities currently done in Singapore to Eastern Europe. It would just set up a daisy chain of shifting production around the world. The net gains for the U.S. economy would be minimal.

REHMDean Baker?

BAKERYeah, I'd put it a little differently. I do think trade has played a more important role. So if you look at manufacturing employment from 1970 to 2000, it was more or less constant at about 17 million. Now there's cyclical ups and down, up during the boom, down in the recession, but roughly 17 million over that period. We fall to about 12 million in 2010. Now a little bit of that was the recession, 2008-2009. Most of that was due to the explosion in the trade deficit, and furthermore we've mostly recovered from the recession. Those jobs haven't come back. So I'd say trade certainly accelerated that process enormously.

BAKERThe other point that I'd make is, you know, again I'd agree with Marcus on the tariff point, but there's another way, you know, and Trump has occasionally talked about this, you know we're trying to say what might Trump policy be, we don't know, but he has talked about currency issue. And ordinarily what you expect is that countries that have large trade deficits like the United States see downward pressure on their currency. Countries that have surpluses, say China, have upward pressure. We've seen that mitigated by the fact that China holds huge amounts of reserves.

BAKERNow they have sold some of them recently, but they still hold around $3 trillion in reserves and another $1.5 trillion in sovereign wealth funds, that keeps down the value of their currency against the dollar. Now if Trump were to place a priority on adjusting currency values, I don't see that as protectionist. This is what is supposed to be the market outcome. I think that would be a good thing. It's not going to bring back six million manufacturing jobs. It could bring back one million, and I think that would be a positive thing.

REHMHow positive a thing would that be for the five million or six million who've lost their job since 2000, Marc Levinson?

LEVINSONWell Diane, let me just offer a little guidance from history here. In my book, "An Extraordinary Time," I talk about how the very rapid growth in the world economy came to an end in 1973, and after that, growth was much slower, and governments were grasping at straws, really, to deal with this problem. They we relooking at ways to speed up their economies. Many governments around the world adopted policies that are generally known as structural adjustment.

LEVINSONOkay, they had the idea that we're going to pick out some key industries that are in trouble, steel, shipbuilding, textiles, we're going to have some policies here that are going to keep those jobs in place, and you had these sorts of arrangements in Europe, you had these sorts of arrangements in Japan, you had these sorts of arrangements in North America, and the net effect was actually to slow down economic growth.

LEVINSONThe reason is that companies that probably should have merged or gone out of business were kept in business. Companies in industries where there was already too much capacity continued to produce when there wasn't really any demand for their products. And so these kinds of policies that seem in the short run to be creating jobs actually are not always so terrific.

REHMSo the argument during the campaign, and certainly one that appealed to both Bernie Sanders supporters and Trump supporters, was global trade is taking away our jobs. How true was that, Marcus?

NOLANDI think it's fundamentally untrue. Trade affects the composition of employment, and so there have been job losses due to trade, as I mentioned, a sector like apparel that's undeniable. But there have also been jobs created due to trade.

REHMSuch as?

NOLANDWell some of them directly in manufacturing, such as advanced capital goods, which would be one of the sectors worst hit if we got into a trade war with China. Some of those are jobs that are involving essentially white-collar jobs in research and development, management, back-office functions such as accounting and finance and so on, to manage those global factories around the world.

NOLANDAt the end of the day, it's the kind -- trade will affect the composition of output. It's not going to affect the overall level of employment.

REHMDean Baker?

BAKERWell, I guess I'd make a couple points. I think trade certainly had a very, very large impact on levels of employment in the Midwest, you know, the states that, you know, went for Donald Trump, who everyone thought were going to go for Hillary Clinton, Ohio, Pennsylvania, Michigan, Wisconsin. That was a really big thing, and that was trade. They lose millions of manufacturing jobs. That's the manufacturing center of the U.S. Those people are right to think that they were losing jobs because of trade because I think that was absolutely true.

BAKERThe other point, Marcus was saying that it affects the composition but not the level. That's something economists generally say and might have been reasonably close to being true prior to the Great Recession. Since the Great Recession, you hear very mainstream economists, people like Olivia Blanchard, who was the chief economist at the IMF, Larry Summers, who had been treasury secretary, very well-respected economists, talk about secular stagnation, meaning we don't have enough demand in the economy.

BAKERThe point about that is that if we're losing demand because of trade, we can't assume we're just making it up elsewhere. There is no elsewhere. So when we're running a trade deficit, it peaked at six percent of GDP in 2005, 2006, that is not being made up. So I think we do have a problem where trade does cost jobs. It doesn't have to, but I'm just saying the pattern of trade we've seen in the last 15 years has cost the United States jobs.

REHMAll right, I want to take a call from Harrisburg, Pennsylvania, Tom, you're on the air.

TOMThank you, Diane. Where I'm calling from in Pennsylvania, okay, people here, the gentlemen on your show mentioned lawlessness, protectionism, good, good, we want more of that. That's how we feel we've been treated, and it's -- there's 1,000 people in Indianapolis right now whose holidays are a lot nicer, and they could care less about the minutia that the media is trying to spin and make this a negative. This is a positive.

REHMTom, what about the four or five million other people without jobs? Do you think that the 1,000 in Indiana is going to make them feel happier?

TOMDiane, that's the fault of the policy that we've just been talking about. That's the fault of the -- I'm the son of a laid-off steelworker, okay, and here's what I want to ask Marcus. Marcus, let's go to Mexico, let's go to Vietnam, and for everybody there who has something that does not say -- or that says made in the USA, I'll give you a dollar, okay. Now for every walking citizen there that has something that says something other than made in the USA, you give me a dollar. Would you take that deal?

REHMMarcus?

NOLANDIt depends on if we unpack the components and the capital goods used to make those products.

REHMWhat about steel, though? That is one of the big industries that has had to lay off a great many folks.

NOLANDWell so there's this basic tension running in this conversation that sort of I represent one tendency, and Dean represents another, but they're basically just arguing about the degrees. Steel clearly lost employment because of technological change, the introduction of mini-mills, the introduction of various types of new steel technology. That was a fundamental driver in the level of employment in the steel industry.

NOLANDNow having said that, steel is notorious for state support and over-capacity globally. And it is clearly a problem in countries that don't have robust supporters for steel if their competitors do. So the addition of gigantic new capacity in China has clearly put stress on the global steel sector. So in the specific case that the caller raised of steel, yeah, it's both. It is clearly technological change, but there's a characteristic of this industry, and this has been historically the case. There is simply over-capacity and a tendency towards cartelization as a result.

REHMAnd on another subject that has raise a lot of voices during the campaign, coal, coal workers totally out of work, and yet President-elect Trump has said he's going to bring back coal. How do you see that happening, Dean?

BAKERIt's not, and this is -- the coal industry, I mean, is one that -- you know, the discussion of this has just been kind of infuriating because, you know, most of the jobs that were lost in coal were lost in the '80s, and the main reason people lost jobs in coal was we replaced underground mining with strip mining. There was a huge improvement in productivity. You could get much more coal out of a mountaintop if you just tear off the mountaintop than sending workers underground.

REHMCertainly leaves the Earth looking pretty bloody.

BAKERNot a good environmental policy, but just this is what happened. So there's been this mythology that somehow coalminers have lost their jobs because, you know, President Obama and his war on coal, and there's basically no reality to it. Now there was somewhat of a loss of coalmining jobs in the last four years, but this has been because of fracking. We have very cheap natural gas, so a lot of power companies have switched from coal-fired generation to natural gas. Against, that's not environmental regulation, quite the opposite.

BAKERSo the reality is we have very few coalmining jobs left in the country, 50,000, and there's nothing that, you know, a President Trump could really do about that unless he's going to outlaw, you know, strip mining and fracking, and everything he says goes the other way.

REHMWhat do you think, Marcus?

NOLANDAnd relax the Clean Air Act.

BAKERAnd relax the Clean Air Act, yeah.

REHMAnd he has said regulation is one of the things at the top of this list. All right, let's take a call from Gary in Arlington, Virginia, you're on the air.

GARYHi Diane, love your show.

REHMThanks.

GARYAnd thanks for this topic. I think both panelists are missing some big, obvious facts out there. Germany and China have both maintained their manufacturing output, they have targeted on developing an educational system and a supply chain of companies in related fields. Germany through all this runs a trade surplus with us and China. They have preserved their manufacturing employment. They have a shorter work week than we do. They have longer vacation time than we do. Their health care costs are half of what our because they have regulated health care that doesn't allow for price gouging by pharmaceutical companies.

GARYEvery good job pays for health care. If we don't do something to control health care costs, which were going up just as fast before Obamacare as they've gone up during Obamacare, our manufacturing base cannot be competitive if we have a health care tax on top of manufacturing jobs.

REHMDean Baker?

BAKERWell I think you make a lot of good points there. I would certainly distinguish Germany from China because China, its biggest asset had been cheap labor. Labor's getting more expensive there, and they are moving very quickly up the ladder to a more educated workforce, and that's very impressive in my view.

BAKERBut nonetheless, it's in a different category from the U.S. and Germany. Germany, on the other hand, has maintained a very large manufacturing sector, and they've done it with very skilled workers, and, you know, one of the big issues, you say health care costs, this actually is a very important point. I should correct you, our health care costs have actually slowed sharply not all due to Obamacare clearly, but nonetheless health care cost growth has been much less rapid in the last eight years than earlier in the century.

BAKERBut a point about health care I think is very important. We talk about free trade protectionism. We have enormous protectionism in the health care sector. You mentioned drugs. Prescription drugs would be cheap if we didn't have patent protection, and we're talking about enormous differences. We spend $430 billion a year on drugs. If we snapped our fingers and got real patent protection, we'd spend 10 to 20 percent of that amount. That's just incredible differences. That's protectionism in a really big, bad way.

REHMAnd you're listening to the Diane Rehm Show. As we look at the big picture, Marc Levinson, some people have said that trade, international trade, is good for the large economy, but people within the smaller areas are really being hurt. So you have large economic growth to a certain extent, but people individually are failing.

LEVINSONI think there's something to that. It's been understood for a long time that trade is good for the economy in a lot of ways, and certainly in the period after World War II, the increase in trade was really a big reason the world economy boomed. You had five or six international trade agreements that lowered tariffs, so goods could be shipped around the world again. You had a common market in Europe. So there were a lot of efficiencies to be gained.

LEVINSONTrade tends to allow companies to get bigger and operate more efficiently, what economists call economies of scale come out of greater trade, and trade tends to force less efficient companies out of business and make that capital and that labor go do something else. So those were really important factors in economic growth.

LEVINSONBut I think it's very true that trade doesn't help everybody. You know, there's an old saw that I think all of us learned back when we were taking economics classes in college, that if you have freer trade, the winners can compensate the losers, and everybody ends up better off. And somehow we never quite end up at that point.

REHMInteresting, Marcus?

NOLANDSo in the United States economy over the last 50 years, the share of trade in the U.S. economy has roughly tripled. So people are much more exposed to trade now than they were a generation or two ago. And some colleagues of mine calculated that international trade delivers about a trillion dollars a year of benefits to the U.S. economy. Now it does disadvantage some people, and we have a program for that called Trade Adjustment Assistance. We spend less than $100 million on it.

NOLANDSo we're getting a trillion dollars in benefits, and we're spending less than $100 million on adjustment, and if you look at the program, and I mean no disrespect for the people at the Department of Labor who operate it, but the -- what you have is a system in which people at the Department of Labor are trying to go to individual plants and parse whether that plant closed because of technological change or because of international trade or because they just had lousy management.

NOLANDAnd if they decide it closed because of international trade, you get some support for retraining and adjustment. If it was technological change, or you just had a lousy management, you're out of luck. And I think most of us would agree that to support this growing role of international trade in the U.S. economy, which brings tremendous benefits, we need to have better programs for adjustment, retraining and so on. It shouldn't be contingent on if it's trade or not.

NOLANDLook, if you lose your job, or you have a catastrophic fall in income, we have ways of cushioning that. The real hard part that I don't think any of us have a great handle on is the aspect of retraining and redeployment of that labor.

REHMI have heard that word going all the way back to the Carter administration talking about retraining of workers, and I have yet to see it really, really happen. We've got to take a short break here. More of your comments, questions when we come back. Stay with us.

REHMWelcome back as we talk about the U.S. economy, how trade has affected job growth. We have an email from Aaron, who says if manufacturing jobs are returned to the U.S., and the workers are paid a living wage, from $15 to $20 minimum, how would this affect the price of products and therefore the economy? Would this drive the prices of the products out of reach for the working class, Dean Baker?

BAKERWell it would certainly make them more expensive, and again, you'd have to ask what other policies are you doing this in conjunction with because if we were just to raise wages, you know, actually most manufacturing wages are about $15 an hour, so in the case of manufacturing, that wouldn't be a raise, that would be a fall. So I'd have to look at the fuller picture here.

BAKERWe could, if the idea is, you know, talking about a higher minimum wage, we certainly could have a higher minimum wage, $15 an hour might be a high target for today. If were shooting 10 years out, that's probably a reasonable target. Again, you have to ask in conjunction with other policies. But I just wanted to jump quickly on a couple things Marcus said, Again agreeing completely about the inadequacy of the trade adjustment programs. We do have countries, Denmark I mentioned because my wife's Danish, but, you know, Denmark is a country way more exposed to international trade, and there aren't the same negative attitudes there, but they spend, you know, relative to the size of the economy probably about 100 times as much on retraining, readjusting their workforce.

BAKERSo in principle it can be done, but it's not going to be done on the cheap. The other point I want to make is that we have to recognize we really have very one-sided trade in the sense that we're happy to put our manufacturing workers in competition. Diane, did you know that you can't practice medicine in the United States unless you completed a U.S. residency program?

BAKERSo you have plenty of doctors who are very skilled, very competent in countries like Germany, Canada. They would be arrested if they practiced medicine in the U.S.

REHMWithout going through that residency program.

BAKERThe whole residency program. Same story with dentists. So you have all these people, and I could go on the other professions, those are the most protectionist, but you have all these people in the U.S. who think, oh, you know, I'm a doctor, an I'm successful because I have the right skills, well you might have the right skills and be very smart and everything, but the reason you're paid twice as much as doctors in Europe and Canada is because we have protectionism.

BAKERSo what I find sort of ironic in this story is people happy to rail against protectionism when the beneficiaries are manufacturing workers. When you talk about it with doctors, they go, oh, wait, wait, wait a second. We have to acknowledge there's protectionism there.

REHMDuring the campaign, Donald Trump said that NAFTA was the worst trade agreement he had ever seen, that it was the worst deal in history. What do you think of it, Marcus?

NOLANDI think that NAFTA was a great economic and political success for the United States. I'm originally from Texas, and I grew up bordering Mexico, and for the great bulk of the history of the United States and Mexico, we had really bad relations. And you had a reform process take off in Mexico in the 1980s, a process of political and economic reform. NAFTA was part of that. They came to us and wanted to get into the U.S.-Canada agreement.

NOLANDWe had an agreement. It has benefitted us economically, and while I don't think one can claim NAFTA, you know, was the source of the consolidation of democracy in Mexico, it clearly had a big positive effect on Mexico both economically, politically and socially. And I you build...

REHMBut...

NOLANDIf you put a 35-percent tariff on Mexico, and you send Mexico into recession, you're going to have more undocumented migrants in this country, not less. You're going to have more illicit activities in this country, not less.

REHMDid NAFTA put downward pressure on U.S. wages?

NOLANDNAFTA probably put downward pressure on U.S. wages, particularly in some sectors, in some areas, the apparel sector in L.A. for sure. It probably put downward pressure on wages in low-tech manufacturing in general. It also led to the expansion of activities in capital goods, in other parts of manufacturing, and as I said, basically these white-collar back-office jobs associated with managing global supply chains.

LEVINSONI'd just make a couple quick points in that first off, I don't see NAFTA as having been a great boon for Mexico. If you look at Mexico's per capita GDP growth in the post-NAFTA years, it actually was less than in the U.S. So you're supposed to see a convergence of developing countries speeding up their growth, catching up to the U.S. We went the other way over the last quarter-century.

LEVINSONThe other point is it probably did increase immigrant because one of the points of NAFTA was to open up Mexico's agricultural market. It displaced millions of agricultural workers in Mexico, and some of them ended up coming to the U.S. I mean, in many cases they were better off by that, but if that's a concern, that actually is probably true.

REHMHere's an email. For the last two terms we've heard about the trillions of cash that companies have been sitting on. What will happen to that cash now? Will Trump have an effect on that investment, and where might it go, Marcus?

NOLANDWell there's a great hope that we're going to bring all this cash back to the United States, and it will go into investment. I was amused that Dean cited my colleague Olivia Blanchard whose office is next to mine as a proponent of somebody who thought was draining jobs. I would be surprised if Olivia took that position. One of the things has -- that has depressed output employment in the United States is weak investment.

NOLANDOur corporations are sitting on tremendous amounts of cash. And I think there's a hope that whatever tax policy comes out of the negotiation between the Trump administration and the Republican control of Congress will unlock some of that. But I think it's too -- it's impossible to say at the moment if that'll happen and the magnitude of such an impact. But it would be great if the companies in the United States stopped buying back stock and started actually investing in productive plant equipment.

REHMWhat about that, Marc Levinson, the cash that so many corporations are sitting on?

LEVINSONTo Marcus Noland's point, a few years ago there was a temporary tax break given for companies to repatriate some of their foreign earnings, and what came out of that was in fact a lot of stock buybacks. Most of the money went to shareholders. It didn't go into investment. Can't say whether we'd have the same thing this time around, but that's what has occurred in the past.

REHMDean Baker?

BAKERYeah, I think it's unlikely much of it will go to investment. Just to quickly comment on Marcus' colleague Olivia Blanchard. I was saying that he believes in secular stagnation, meaning there's a shortage of demand in the economy, and I'm just assuming he believes in the same economics that just about all of us do, that if you have a trade deficit, that's a drain on short-term demand. So that -- I don't want to put words in his mouth, but that would seem to follow.

REHMAll right, let's go to Ethan in Salisbury, North Carolina. You're on the air.

ETHANHi, good morning, how are you?

REHMGood.

ETHANGood. I wanted to ask, if Donald Trump is trying to bring back manufacturing jobs that have effectively been replaced by technology, wouldn't it be better to place a premium on vocational work, such as welding, carpentry, electricianal work, that is job-specific, requires much higher training and better pay?

NOLANDI'd love to see, you know, a serious vocational education program. Again, we had brought up the topic of Germany earlier. This is where they really excel. They have apprenticeship programs. You have blue-collar workers with very serious skills. And I know Mr. Trump believes that global warming is a Chinese hoax, but, you know, for the rest of us, one of the things that would be a great thing to train people for is retrofitting buildings to be more energy efficient, installing solar panels.

NOLANDThis would be a great two-fer. We'd create good jobs, and we'd reduce greenhouse gas emissions.

LEVINSONI'd like to just temper the enthusiasm for Germany here. We saw, starting in the 1970s, a sharp rise in unemployment all across the Europe, and unemployment has stayed high across Europe for the last 40 years. The way that countries like Germany have dealt with the situation is they've basically created a two-tier employment system. So you've got people who work for the big companies, who have jobs that pay very well with a lot of benefits, these companies themselves do a lot of training, they have apprenticeships. These folks have it pretty good.

LEVINSONBut then you've got a lot of people who have temporary jobs. They don't work for the big companies. Their wages have stagnated. They're barely getting by not just in Germany but in France, in The Netherlands, in Spain.

REHMIsn't that what we've come to here in this country?

LEVINSONAnd so they've got very much the same situation as we do in a certain sense because they have not really been able to get back to what they would consider to be full employment, either.

REHMSo you have said in your book, "An Extraordinary Time," that both voters and policymakers have sort of a false recollection of what's possible given what happen post-World War II. What do you mean?

LEVINSONFor the quarter-century really between 1948 and 1973, the world was growing on all cylinders. In all of the wealthy economies and many developing economies, jobs were easy to find, incomes were rising very rapidly. When you had economic shifts, people could pick up and move and find new jobs without any difficulty. And that is really what people remember. The economy was growing four or five percent a year during that time period, and families felt secure, they had good jobs, stable jobs, and they could see that their living standards were rising from year to year. They could get a car, they could get a bigger house, they could have vacations.

REHMSo you're saying that's what they continue to expect?

LEVINSONPeople continue to expect those sorts of improvements in living standards, and let's face it, the kinds of improvements in living standards that are going to happen today are much slower. They're much more gradual. Yes, we're not talking about people falling into utter starvation, but we are talking about much, much slower improvement in wages, much, much slower improvement at living standards, fewer benefits.

LEVINSONAnd I think that’s the reality that we're dealing in. I think it's going to be very difficult for politicians in any country to reverse that situation. They can make some changes that affect how income is distributed, I think that's important, but making the economy grow much faster, I think that's a stretch.

REHMDean?

BAKERWell again, I think we could do a little bit more in terms of faster growth because I don't think we've been pushing the economy to its potential. Hopefully we will in the not-too-distant future. But in any case, we aren't today, we haven't over the last decade. But the other point I'd make, again just emphasizing the issue of distribution, if the median wage had kept pace with productivity growth over the last four decades, the typical worker would be 40 percent richer today.

BAKERAnd you looked at the minimum wage, I mean, we're having this fight, the Fight for $15, we wouldn't be talking about $15. If the minimum wage had kept pace with productivity growth and inflation since the late '60s, as it had for the prior three decades, it would be $19 an hour today. That's a very different world.

REHMSo Marcus, if you were advising Donald Trump, what would -- what two or three things would you tell him that you believe would truly improve the economy and do it rapidly?

NOLANDWell first of all, I don't think Mr. Trump is going to ask me, but...

REHMI understand, but that's okay.

BAKERHe's listening, though.

NOLANDAnd there's a difference between in the short run and in the long run.

REHMRight.

NOLANDIn the short run you can gin up the economy by just having fiscal stimulus and accommodating monetary policy.

REHMHow about infrastructure?

NOLANDBut in the long run -- in the long run, number one, we have to improve the education system in this country.

REHMRight.

NOLANDNot at the elite level but more broadly based, and we've mentioned things like vocational education. We've got to make better use of our community college systems and things like that. We are falling behind the world in education.

REHMOkay.

NOLANDSo education number one. We could do more on infrastructure. My concern is what we actually do on infrastructure is not what we need to do. We need to do a lot of maintenance. We need to do investment in things like straightening out the railroad track between here and Boston so the trains can run faster. I'm afraid what we're going to do is create new infrastructure, and frankly if you look at the electoral map, we're going to create new infrastructure in places that are lightly populated because the way that people voted this time around.

REHMAnd three?

NOLANDNumber three, I think that we should probably do something about - I would actually say gender. I think that we can do a better job of making use of the abundant female talent in this economy, and for a whole variety of reasons, we don't. But work that I've been involved in at my institute suggest that if you make better use of women, your companies will be more profitable.

REHMAnd you're listening to "The Diane Rehm Show." And three from you, Dean Baker?

BAKERWell let me start, I could very strongly agree with Marcus on that last point. And one of the keys here is good quality, affordable child care. This was to some extent an issue in the campaign. I don't know how many people ever actually voted on it, but you -- you know, Hillary Clinton had a well-developed plan, Donald Trump talked about it to some extent, partly because of his daughter raising it, but I think having affordable, quality child care is a really big thing. It's very important for the children, and it's important for the parents, disproportionately mothers who want to know that their kids are okay. So I think that's a really big deal.

BAKERI would say we could do a lot in infrastructure. I think I'd agree with most of what Marcus said, so I'm not going to count this as one of my three here. I'm going to raise two on health care. One is prescription drugs. I think we need to look to a different mechanism for financing prescription drug research. It's absurd we're spending $84,000 for a three-month treatment of Solvadi. It's available as a generic in India for $200. That's what it should cost here. I mean, that's absolutely nuts. So that's enormous amount of money at stake and people's lives.

BAKERAnd the third part, I'll just say the high-end protectionism. We should be going after the protectionism that leads to very high pay for doctors, lawyers, to some extent economists. I think we're less benefitted that way, but fine, let's remove the protection. We should have an international market in these high-end professions.

REHMAll right and finally to you, Marc Levinson.

LEVINSONI think that a key issue is raising productivity in our economy, and that's not something that happens quickly. I think a very important aspect of that is improving education, as has been said here. And that is a long-term process that takes years to pay off. That's really essential if we're going to have a workforce that's going to be able to deliver more wealth in the years ahead. I think one of the problems that we and many of the other wealthy economies have right at this point in time is that we spend a huge share of resources on older people, like you and me, and not enough on the people who are really going to create the wealth to make our economy grow tomorrow.

REHMSo what does Donald Trump do about Social Security and Medicare, Marcus?

NOLANDWhat does he do?

REHMYeah, what does he do?

NOLANDI think he probably does very little. I think there's no political consensus in this country for change, and they will have proposals for, you know, things sort of like privatization. I think it'll be very difficult to get that through the Congress.

REHMWhat do you think, Dean?

BAKERI'd say 50-50 because he just appointed a Health and Human Services secretary totally committed to privatizing Medicare. He's got Speaker of the House Paul Ryan totally committed to privatizing Medicare. He's going to get a lot of pressure from his party to go that way.

REHMHe's going to get a lot of pushback from the public on that.

BAKERAbsolutely, he ran on the opposite.

REHMHe -- you know, it's going to be fascinating to see as we go forward these various ideas and how the president-elect plays them out. Dean Baker, Marcus Noland, Marc Levinson, thank you all so much.

BAKERThanks for everything.

NOLANDThank you.

LEVINSONThank you.

REHMAnd thanks, everyone, for listening. I'm Diane Rehm.