Over the past few decades, economists have gathered a lot of empirical evidence supporting the underlying truth of middle-out economics: that a thriving middle class is the cause of economic growth. Our friends at the Roosevelt Institute have produced a new report which outlines the events that led to our new understanding of how the economy really works. Suzanne Kahn, Vice President of the Think Tank at the Roosevelt Institute, joins us to talk about what’s in the report and share how the progressive economic policies of the Biden Administration could mark a lasting shift away from neoliberal, trickle-down economics and toward a new era of middle-out economics.
Suzanne Kahn serves as the Vice President of the Think Tank at the Roosevelt Institute, where she oversees and manages projects to develop critical research and policy to rebalance power in our society and economy. Previously, Suzanne was Roosevelt’s director of education, jobs, and worker power and the Great Democracy Initiative. Her research and writing focus on building a network of robust public goods—for example public higher education—and labor organizations that together can empower workers to counter corporate power in the labor market and public sphere.
Suzanne Kahn @SuzMKahn
Roosevelt Institute @rooseveltinst
Think Tank at the Roosevelt Institute @RooseveltFwd
Sea Change: How a New Economics Went Mainstream
https://rooseveltinstitute.org/publications/sea-change
Website: https://pitchforkeconomics.com
Twitter: @PitchforkEcon
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Nick Hanauer:
The rising inequality and growing political instability that we see today are the direct result of decades of bad economic theory.
Biden:
It’s time to build our economy from the bottom up and from the middle out, not the top down.
Nick Hanauer:
Middle-out economics is the answer.
Biden:
Because Wall Street didn’t build this country, great middle-class built this country.
Nick Hanauer:
The more the middle class thrives, the better the economy is for everyone, even rich people like me.
Speaker 3:
This is Pitchfork Economics with Nick Hanauer, a podcast about how to build the economy from the middle out. Welcome to the show.
Nick Hanauer:
So Goldy, today we’re going to talk to Suzanne Kahn who serves as vice president at the Roosevelt Institute, an organization we work closely with and she’s here to talk about their new report, which is called Sea Change: How a New Economics Went Mainstream. I think you and I, we have a lot to say about the report itself. I think our analysis of the sea change would take a different form.
Goldy:
It would overlap.
Nick Hanauer:
It would overlap, but not quite the same.
Goldy:
We’d probably give ourselves a little more credit.
Nick Hanauer:
Some different kinds of things in a different order and so on and so forth. But here’s the thing that is 100% correct about the report is that there has been a sea change.
Goldy:
We’re in the middle of it right now.
Nick Hanauer:
We are we are in the middle of a profound sea change.
Goldy:
In fact Nick, you and I, we’ve actually been writing about this for an upcoming publication. We feel that we are in a middle out moment.
Nick Hanauer:
Yeah. But you know it was a billion little things happening simultaneously. A lot of people working on different things in different ways that came together to really create this phase change and how people saw economic cause and effect, how they saw what kind of policies made sense, what kind of things were possible, so on and so forth. Put aside who did what and how it all happened, no matter what, it’s an extraordinarily important and consequential moment and something to be celebrated and promoted.
Goldy:
It is incredibly consequential potentially what’s happening now. Of course, look. We don’t know how the 2024 election will turn out. It could turn out that Trump wins and everything the Biden Administration has done gets thrown out the window, along with all of our Democratic institutions and norms. That’s the end of life as we know it. It could be that Biden wins and Trumpsters have an armed rebellion and we get the same thing because Biden lost. Or it could be that we have four more years of Joe Biden in the White House, pushing Bidenomics, which we think is very middle out. It’s enough time to complete the paradigm shift, similar to the one that happened in the early ’80s when Ronald Reagan really ushered in the Reagan Revolution, the neoliberal revolution, the economic paradigm that we’ve been living under ever since.
This Biden Revolution, this middle-out revolution could be the guiding paradigm for the next few decades or more. A paradigm which we think is better capable of addressing our crisis of economic inequality, our crisis of faith in democracy, and of course the climate crisis which neoliberalism cannot … It is impossible for neoliberalism to address the climate crisis, because it will argue that you do whatever the market does is the most efficient and beneficial, and moral and just outcome. The market will never address this on its own because as long as there’s money to be made by burning oil and cutting down rainforests, then that is what the market will do because they have the right to do it. Property rights unencumbered by government and all that.
Nick Hanauer:
Anyway, it’ll be really interesting to talk to Suzanne about their report and to go through the elements of it. With that, let’s talk to Suzanne.
Suzanne Kahn:
I’m Suzanne Kahn. I’m the vice president of the Think Tank at the Roosevelt Institute. We are a think tank that focuses on changing the conversation in which policy is made. We work across issue areas from climate, to corporate power, to higher education. But a common theme in all of them is trying to move away from neoliberal policy paradigms and think about new economic policy paradigms that can help us build a more equitable economy. My own expertise is really on labor and social insurance systems. I’m a historian by training and now I get to work with our team across a really broad portfolio of issue areas. Most recently, I got to work on a report we did called Sea Change, about everything that has happened over the last 15 years to get us to the economic policymaking moment we are now in.
Goldy:
Well, thanks for joining us. Regular listeners know that that intersection between history and economics, that’s my sweet spot. That’s what I love to talk about, so it’s great to have you on the pod. Nick, you want to start off?
Nick Hanauer:
Sure. So you’ve got this new report out, why don’t you give us the top line?
Suzanne Kahn:
Sure. We called it Sea Change because it is really about what a huge change has occurred over the last 15 years or so in the shared common sense in which policy makers make economic policy. I know this is something you all have talked about on previous episodes, but again, what we really wanted to document and look at was how different the policymaking landscape is now than it was even honestly four years ago.
Nick Hanauer:
During the Obama Administration.
Suzanne Kahn:
Right. During the Obama Administration, during the Trump Administration, and we really wanted to trace out what had happened to get us to this moment. And how we got to a point where policies that were unimaginable eight years ago, four years ago, everything from how Biden responded to the COVID-19 recession with a massive investment and actually spending, and not austerity politics; to the climate policies in the IRA, to his willingness to try and cancel student debt are all, we think representative of a much larger shift away from thinking about policymaking as something that should happen with markets as the central frame. So that’s the top line number one.
Then I would say top line number two is we are in a scary moment. We don’t know what will replace the neoliberal assumptions of the past. We at Roosevelt certainly are proposing new frameworks that would move us in a more progressive direction, that center equity and concern for our climate. But where we’re going next is up for grabs and we thought that a first step to helping direct that was to document how far we’ve come, which can hopefully give us some momentum in that progressive direction.
Nick Hanauer:
What are the high points?
Goldy:
You could also start from the low points to the high points, where we were 15 years ago to where we are now because it is quite remarkable.
Suzanne Kahn:
I’ll say our internal joking title for this before we released it was Millennials: Now Old. We really felt like as we were writing, this was a story about the lessons a whole generation of people learned from living through the economic crisis of 2008, 2009 and the long 10 years after that. So we started a lot of the story with occupy Wall Street as a response to the neoliberal framework with which the economic crisis was met, and really tried to show how the groundwork was laid on a whole range of issues. I think it’s fair to say no one really expected during the presidential primary of 2020, that Biden would be the guy who made many of those ideas become at least partial realities. Ideas that had been coming up from movements and economists and think tanks really pushing against neoliberalism for the past 10 or so years. The world changed so fast that the Bidenomics agenda has really reflected many of those lessons that I think were started to be learned and thought through in the wake of that 2009 recession.
Goldy:
One of the advantages to having an 80-year-old president is that Joe Biden actually was elected to the Senate before neoliberalism took hold. He’s old enough to remember what it was like before neoliberalism and what type of policies we had back then.
Suzanne Kahn:
Yes, even older than the millennials who are now old.
Goldy:
Yes. So let’s talk about some of these policies and how they’re different. I’m also curious not just from the policy perspective, but how the economic thinking that underlies and informs these policies has changed?
Suzanne Kahn:
Absolutely. One of my favorite examples is actually student debt. I think you can really trace an interesting ark from again, occupy Wall Street all the way through to Biden ultimately trying to cancel student debt. We can put the Supreme Court aside for a second. One of the things that really comes up during the occupy moment is challenges to how much debt people are holding for a whole variety of reasons and really challenging that. The challenge to student debt gets really institutionalized, there are a bunch of organizations including the debt collective are formed out of the initial occupy moment. They really start to put together a challenge to the idea that higher education should be paid for in this way, which is to say by individuals using private financing, which was really the product of neoliberal policy ideas.
That’s said we’re all individuals who compete in a market. We all have our own personal human capital to invest in and investing in a higher education for ourselves will be a good investment that prepares us to be little market actors who are going out into a free market. We’re just all going to compete from an equal starting platform. I think over the course of the 2010s, you really see a growing challenge to this neoliberal idea about human capital, underlying growing movement for free college and debt cancellation. You see Bernie Sanders pick it up in the 2016 campaign. Then by the 2020 Democratic primary, all the candidates are fighting for who has the most progressive free college and debt cancellation plan.
One of the results of that, is that when the COVID-19 pandemic starts and they’re looking around for ways to get money back into people’s pockets and stimulate the economy, student debt payments get paused, which I don’t think would have happened without that eight years of work putting that idea forward. It creates a momentum of its own so that when Biden comes into office, people have not been paying student debt payments for months, that continues and ultimately we see him try and cancel student debt, and make major reforms to the way that payment systems work going forward as well.
Goldy:
Right. It’s interesting because when you look at an opposition to student debt forgiveness, it’s often presented as totally outside the norm that somehow we’re going to take this large group of people and say, “You don’t have to pay your debt.” That is un-American in some way, but really it’s the student debt itself that is the historical anomaly. Our entire public education system, both K12 and public colleges and universities, was founded on the notion that a well-educated, skilled workforce was a public good. Not private, personal owned human capital, but it’s a public good. It was advocated for by industry because they knew they needed a literate and numerate workforce in a modern economy. It’s the neoliberal era where we say, “No, no, no. That’s a private good. You should pay for it yourself.” That’s the historical anomaly. So again, in some ways it’s fascinating to see this start to shift back to what it had been for the previous 150 years.
Suzanne Kahn:
I completely agree. I think Roosevelt did a lot of work in the 2018, 2019 looking at all the different ways that that idea about human capital had been misunderstood. So we have a great paper about how actually employers are just demanding more and more credentials for the same jobs and similar pay. It’s not that you’re actually investing in yourselves in a way that is getting you growing returns on that investment. I think even more damningly, employers are demanding many more degrees for the same jobs from black applicants than from white applicants.
Goldy:
We see that there’s studies showing that as unemployment goes up, employers demand more credentials as the labor market tightens. It’s harder for them to find workers, they demand fewer credentials. It’s a market power issue.
Nick Hanauer:
Speaking of market power, why don’t we talk for a little bit Suzanne about promoting competition? Take us through that.
Suzanne Kahn:
I think another thing you see over the course of the 2010s is a growing sense that there are these very large companies like Amazon that are having more and more control over our lives, and are being allowed to grow and absorb their competitors. Because of the way we’ve come to understand competition policy and antitrust law and another big shift that you see the Biden Administration implementing is appointing Lina Khan, who was one of the leading critics of corporate concentration and is founder of the neo brandeisian school of antitrust, to run the FTC. So we see them really centering an idea around needing more competition and really taking on corporate concentration, which I think is a larger part of … It’s obviously its own pillar of Bidenomics. But I think across the board, one of the breaks with neoliberalism that is really significant, what we’re seeing is an understanding of power and really trying to understand how power is playing out. Whether it’s in labor markets or among companies or in shaping public policy, and competition policy is part of that.
Goldy:
Right. That is really a core feature of neoliberalism, is wishing away power. I think knowingly, because it’s an ideology created to benefit people who have lots of power. So you want to pretend it doesn’t exist.
Nick Hanauer:
It’s actually deeper than the weaponized ideological framework of neoliberalism. Power is wished away in neoclassical economics. The problem is deeper and worse because you can’t make the math work if power exists in these equilibrium systems. You have to assume power away.
Goldy:
How do you mathematize power?
Nick Hanauer:
Exactly. It’s very difficult. You’re desperate to believe that markets are perfectly efficient and people are perfectly selfish and rational, and the economy is preyed optimal. Power is very awkward. Ignoring power in economics would be like ignoring gravity in physics. You’re missing the big part. Obviously one of the most exciting things about the Biden Administration is their head-on approach to this problem. If we can get another four years, probably the most important legacy may be these executive orders that are trying to make markets truly competitive rather than the oligopolies that they mostly are, which is really exciting.
Goldy:
I’m curious Suzanne, we have a take on this. But whether you and your colleagues see a coherent narrative in Bidenomics and their self-proclaimed three pillars of empowering workers, making smart investments and promoting competition. Do you see a coherent economic narrative in that?
Suzanne Kahn:
I do. I’m sure we all have thoughts about how well that narrative is being presented. But I think especially for folks like you and me who have been thinking a lot about neoliberalism and its coherent narrative, the three pillars do all take on the idea that markets are the primary frame through which public policy … The government role is to let markets be markets basically. I think it all goes back to the power piece we were just talking about. I think they’re all trying to look at how do we shift? Who or what companies have power? And actually say there’s a role for the government to play in choosing who we want to have power and how we want them to have power around these different issues we need to solve.
Goldy:
In rebalancing that power imbalance, that is implicit in their pillar of empowering workers. It’s to use government to either provide or to enable this counter veiling power in a segment of the market, which even Adam Smith acknowledges leans in favor of the employer. That individual workers are naturally at a disadvantage in terms of their power relationship with their employer. This is very different from the neoliberal approach of just let the markets work it all out and we’ll end up with an efficient and fair outcome, because that’s how markets always were.
Nick Hanauer:
Yeah, and everyone has equal power in the system.
Goldy:
But let’s get to some of the specifics of this report in terms of what has led to these changes both in policy and in theory. Obviously we’ve got two big ones which bookend this, which is the financial collapse, the Great Recession and that long painful slow growth recovery. Then on the other end, the pandemic. But there’s a lot of things that happened in between. Nick and I were chatting before you joined us and one of the things we noticed was missing from the report, was a mention of the fight for 15 and the success of these minimum wage movements in cities and states around the country. I’m curious whether you feel the fight for a minimum wage changed the way people think about economics? Also, if you want to go through some of the other things that helped brought us to this moment.
Suzanne Kahn:
That’s a great point about the fight for 15. I think we really tried to pick a few examples within each pillar to chart. I do think it’d be interesting to think about where the fight for 15 would fit in there. I certainly think it’s part of the empower and educate workers track. I absolutely think the fight for 15 was a significant moment. I think a lot of the Biden Administration’s biggest successes around worker empowerment have really come back actually to the ARP and really in the decision to prioritize full employment over, in some ways, inflation. We don’t talk enough about how that has really allowed for the wave of strikes and empowerment of workers as a generational high. So I think that we were focused on that piece of the story and fight for 15 is probably more related to some of the unfinished business. There’s still a lot of work to do to reform our labor laws at the national level.
Goldy:
I think what we would tell you is that we always viewed it as a wedge issue. That the fight for 15 was both good policy, in that clearly the studies show it’s had a huge impact on people’s lives in terms of raising wages at the low and even pushing up a bit as people above minimum wage jobs rise in response. But it also I think has done a great job not just educating workers as to we can win something like this, but I think pundit journalists, economists, the fact that it called the lie on one of the core principles not just of neoliberalism, but of neoclassical economics. That when the price of something rises, people purchase less of it. That the labor market is somehow locked into the law of supply and demand, that if you raise the minimum wage, employers will hire fewer low wage workers. That has turned out not to be true again and again. Either there’s no correlation the studies show or in fact that recent study showing that the higher the minimum wage went, the larger the increase in employment locally. To us, we think this calls the lie on orthodox economics entirely. Because if they’re wrong about something as basic as that, what else are they wrong about?
Nick Hanauer:
It feels to us like a $15 minimum wage was the first big assault on neoliberalism, because the orthodox thinking was when you raise wages, it kills jobs. The degree to which that idea got embedded in policymaking explains probably a trillion or a trillion and a half dollars of the $2.5 trillion shift in income from the bottom 90% to the top 1%. All of these things I think together combine to shake the neoliberal and neoclassical way of understanding economic cause and effect, which makes things like canceling student debt, promoting competition, all that other stuff seem more logical and plausible. The title of your report I think is really spot on, which is Sea Change. It is a profound change in how policymakers see economic cause and effect. I think what’s really remarkable is we had eight years of a Democratic administration not very long ago that had the political power to do all the stuff that the Biden Administration has done, but just chose not to do it because the economists that were running that policy shop thought that all of those things would be a big government job killing attack on freedom.
Goldy:
Right Nick. Kudos by the way to Roosevelt, which played a big role in-
Nick Hanauer:
Making sure those guys didn’t get their jobs back.
Goldy:
That’s right. The old, was it personnel is policy?
Nick Hanauer:
Yeah.
Suzanne Kahn:
Mm-hmm (affirmative).
Goldy:
Roosevelt played a big role in helping to staff the recommending staff for the Biden Administration. It’s a much better personnel than we’ve had in the past.
Suzanne Kahn:
We’re very proud of that. You asked, what are the things that changed? I do think that the experience of the promise of the Obama Administration, I worked on that campaign. I remember the excitement of the election. I think there was a visceral experience of the grip neoliberalism actually had on all policy imagination that occurred over those eight years that are part of what laid the groundwork for this sea change. I would add to that an accelerating climate crisis as well.
Nick Hanauer:
And for the Trump Administration.
Suzanne Kahn:
Yes. In some ways, I think that’s a different historical experience than the …
Goldy:
Let’s be fair to Obama, it’s not his fault that he was so young. Look, do I generally think our president should be in their 80s? No.
Nick Hanauer:
No.
Goldy:
Again, I repeat this a lot. It’s not all bad, especially in this moment when you have somebody with the long life of experience to know that there are other ways of doing things than the way we’ve been doing it for the past 40 years. So a couple of final questions. The first is our benevolent dictator question. If you were in charge of everything, what would you do?
Suzanne Kahn:
We at Roosevelt, because I think so much of our work is about the paradigm level and trying to shift the conversation, we spend a lot of time thinking about what a different policy world would look like. I think we start to fail at our job when we reject all political constraints and I will tell you why. I can imagine the best of all possible worlds, but when we imagine ourselves against that, it becomes really hard to celebrate our wins. I do think part of the point of this paper was not to say everything is great and we did it all, but to say look how far we’ve come. It’s really important for building momentum, that we recognize that.
Nick Hanauer:
Yeah, absolutely. One final question, why do you do this work?
Suzanne Kahn:
I have worked for labor unions, I’ve worked on much more direct policy fights and I think sometimes it can feel a little silly to focus at this high a level and really be trying to think through the conversation in which policy is made. But on the other hand, I do think we are at this moment where people are questioning neoliberalism and the dominant policy frame in a way that has not happened in 30, 40 years. That’s an incredible moment of opportunity, but it’s also a moment where we don’t know what’s going to happen. We don’t know if the new frame is going to lead us towards more climate catastrophe or less, if it’s going to make the air safer to breathe or less safe to breathe, if it’s going to make people have more opportunity no matter where they come from or less. I really think at a moment when things are up for grabs, it’s so important that we are trying to ensure and putting forward a vision that can shape a whole range of public policies that move us in a more progressive direction.
Nick Hanauer:
Awesome. Well, thank you very much for being with us.
Suzanne Kahn:
Yeah. Thank you. This was fun.
Goldy:
Of course, Nick, listening to Suzanne, I was reminded of one of our great American economists Milton Friedman who was responsible for much of this. But also, was absolutely right on at least one point. I remember this quote very clearly. “Only a crisis, actual or perceived, produces real change. When that crisis occurs, the actions that are taken depend on the ideas that are lying around.”
Nick Hanauer:
Couldn’t have been more right.
Goldy:
That was Milton Friedman on the ascendancy of neoliberalism. That they pushed these ideas for several decades and when that crisis, the stagflation occurred in the 1970s and the [inaudible 00:30:24] seemed to be unable to come up with policies to address it, Friedman and his fellow neoliberal swooped in with their ideas that were lying around. The neoliberal era was the result.
Nick Hanauer:
Absolutely. Here we are in a new era and there’s a bunch of new ideas that are percolating in a really profound way. We’ll have I think a really big effect on the economy and ideally how people think about how the economy works.
Goldy:
One of the final things that Suzanne said was that we don’t know what’s going to happen. I agree in the sense that we don’t know whether this new paradigm will be given the opportunity to take hold, but I think there are a lot of things that we do know about if it does take hold, what that new paradigm will look like. Because there’s been a lot of advances in economics on just the science of it over the past few decades, that informs that middle-out Bidenomics paradigm. There’s a lot of empirical evidence that supports it. I think one of the things that you and I have played a role in over the past decade is there’s the narrative has advanced. We are a storytelling species and having a good story to tell is really important.
Nick Hanauer:
Absolutely.
Goldy:
We’re telling a better story and it’s catching on.
Nick Hanauer:
That’s right. The good news is Goldy, is that no matter what happens, the state of the art in economics has changed. The Heritage Foundation is never going to change, right? The Cato Institute is never going to change, but the better economic ideas that are emerging from the academy, the fact that there’s an empirical revolution going on in academic economics, we’re not just talking about some dumb theory. We’re actually checking what happens in the real world to figure out if the theory makes any sense or not. Those trends I think are not going to stop, they’re going to accelerate. I think there’s a broad awareness within the academic economics community that a lot of the stuff that they said was true, wasn’t. So I do think that obviously the world is at a very scary point, but I do think that long term, the paradigm will shift. The question is, are we doing to make a lot of progress soon or is that progress going to be slow and fitful? Are we going to have to take two steps backwards or 10 steps backwards to take one step forward? That remains the question.
Goldy:
I think one of the things that’s encouraging to me about this is as Suzanne said, they’re joke title was what? Millennials Get Old. It’s important to note that millennials who graduated into the job market in the mid aughts, into the depths of the Great Recession and that slow recovery, they really suffered from neoliberal policies and neoclassical economic theory. They were the victims of it. A lot of the losses that occurred to them will never be fully regained. These are people whose lifetime job earnings will never recover fully, whose net worth will never recover fully from that lost decade post Great Recession. That lost decade was a consequence of bad policy. Contrast that with what happened with the pandemic, which was a much bigger economic collapse than anything we saw during the Great Recession.
People have to remind themselves that the spike in unemployment during the pandemic is so huge, that we’re going to have to just skip over it in future graphs. The graphs won’t fit on the page. We’re talking magnitudes greater than anything we’ve ever seen in history ever. To have a disruption like that and to come out of it as well as … In fact in some cases, for many people better with higher incomes and more savings than they had the pandemic. Then to have that spike of … Well, I know you have to call it inflation. Higher prices. That spike of higher prices that we had and to be told, “Oh, no. We’re going to have to have some suffering to deal with this. We’re going to have to have seven and a half unemployment for two years. Go back to the bad times.” It turns out we didn’t.
Well, this shows you oh my god, government is not the problem. Government can be the solution. All that government spending actually paid off in terms of easing the transition into the pandemic and out of the pandemic, and into the historically strong labor market that we have today. So there you had a real life experiment. If you look at the millennials, they went through the neoliberal policies following the Great Recession to oh, no. We can’t spend too much. We have to have austerity. That’s the way to get out of this and 10 years of suffering. Then we have the non-neoliberal, almost Keynesian approach to the pandemic and oh my god. Did we come out of this so much quicker and better from an even steeper decline? There’s lessons to be learned from real life.
Nick Hanauer:
Yeah. Let’s hope we learn the lessons. The problem with humanity is we’re so bad at that.
Goldy:
Well, again, tell the story right. People need to know. People need to know. They need to stop focusing on one year of inflation, of higher prices, which was very volatile. Clearly a supply-side problem. Stop focusing on that and look at how your real wages are higher than they were before those prices went up, and how much better off you are coming out of the pandemic than you were coming out of the Great Recession. Man, Bidenomics starts to look pretty good.
Nick Hanauer:
Absolutely.
Goldy:
Again, if you want to read the full report Sea Change: How a New Economics Went Mainstream, there is a link in the show notes.
Speaker 3:
Pitchfork Economics is produced by Civic Ventures. If you like the show, make sure to subscribe, rate and review us wherever you get your podcasts. Find us on Twitter and Facebook at Civic Action and Nick Hanauer. Follow our writing on Medium at Civic Skunk Works and peak behind the podcast scenes on Instagram at Pitchfork Economics. As always from our team at Civic Ventures, thanks for listening. See you next week.