This special episode of Pitchfork Economics features a live conversation from the “Redefining the Center: How to Make Middle-Out Economics the New Mainstream” conference hosted by Democracy Journal in Washington, D.C. Heather Boushey, a member of the White House Council of Economic Advisors, joins Nick for a wide-ranging discussion moderated by Michael Tomasky, editor of Democracy Journal. Hanauer & Boushey explore the policy initiatives being pursued by the Biden administration that prioritize working families and promote economic growth from the middle out and discuss the crucial role of the middle out as a paradigm shift in how people think about economic cause and effect. This dynamic and thought-provoking discussion was a great start to an outstanding conference.
Heather Boushey is an economist and policy advisor who serves as a key member of President Biden’s White House Council of Economic Advisors and Chief Economist for the President’s Invest in America Cabinet. Prior to joining the Biden administration, she was the President and CEO of the Washington Center for Equitable Growth, a think tank focused on advancing evidence-based policies to reduce inequality. In her role in the White House, she plays a crucial role in shaping economic policy and advising the President on issues related to labor, income inequality, and economic opportunity.
Twitter: @hboushey46
Further reading: The Middle-Out Moment Is Here
Website: https://pitchforkeconomics.com
Twitter: @PitchforkEcon
Instagram: @pitchforkeconomics
Nick’s twitter: @NickHanauer
Nick Hanauer:
The rising inequality and growing political instability that we see today are the direct result of decades of bad economic theory.
Speaker 2:
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.
Speaker 2:
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.
David Goldstein:
If you can’t tell from the tone of my voice, Nick, obviously you know the Covid finally got me-
Nick Hanauer:
It did.
David Goldstein:
… and it got me unfortunately at a conference in DC, we were recently at, I did get to catch the opening day. You were on a panel. Give us a little heads up. What was it about, because we’re about to air some excerpts from it.
Nick Hanauer:
Yeah. So Goldy, we spent last week in DC. There was a conference hosted by the Journal of Democracy on middle out economics, and it was a who’s who of people from the administration and economic policymakers talking about what middle out economics is, where it came from, how to do more of it, and how to defeat trickle-down and neoliberalism. It was spectacular. I mean, it was a really incredibly interesting and lively couple of days. And that first panel was headlined by me and my old friend, Heather Boushey, who’s the chief economist for the Council of Economic Advisers.
The funny part about this is that Heather and I go way, way, way back. Heather was at the Center for American Progress when I did a lot of work with them. She was one of the most consequential economic policy and economic thinkers there. She went off to run something called the Center for Equitable Growth. She is a huge part of driving the Biden Administration’s middle out economic agenda. And the opening panel was us sort of reflecting on the history of middle out, those early conversations we had about it in 2010, 11, 12, and where it has come to today. It felt like an interesting conversation at the time. I guess our podcast listeners-
David Goldstein:
It wasn’t interesting as somebody in the audience, I can tell you it was a fascinating conversation and more important to our listeners. You hear us talk about middle out all the time. It’s really fascinating to hear about it from an administration official like Heather Boushey, who’s right there in the White House, talking to the president, knows how much they have internalized this. And I got to say, I know you were beaming throughout that first day, at least from the day that I observed before being confined to my hotel room.
Nick Hanauer:
Yeah. It was really cool.
David Goldstein:
It’s great to see how much progress has been made.
Nick Hanauer:
Absolutely. And my old friend, Michael Tomasky, who’s the editor and publisher of the Democracy Journal, moderated this discussion between us and yeah, it felt interesting and fun to me. Hopefully our listeners will agree.
David Goldstein:
Yeah, listen and enjoy.
Michael Tomasky:
You know Nick. I’ve spoken of Nick. I introduced Nick earlier, but let’s welcome again to the stage, Nick Hanauer. You should listen to Pitchfork Economics, Nick’s podcast. That you do with who?
Nick Hanauer:
David Goldstein.
Michael Tomasky:
David Goldstein.
Nick Hanauer:
Goldy was here somewhere.
Michael Tomasky:
He was somewhere over there.
Nick Hanauer:
Yay, Goldy.
Michael Tomasky:
By the way, I should have mentioned this in my introductory remarks, but all the proceedings here will be on the record. Some of you out there are going to be on panel, so you should know this, everything’s going to be on the record. And some things may be picked up if you’re lucky, and if you say it just the right way for Pitchfork Economics. So everyone should know that. I need not introduce the amazing Heather Boushey of the council.
So grateful that you joined us tonight.
Heather Boushey:
So happy to be here.
Michael Tomasky:
Yeah. And your enthusiasm for this project for all these weeks has been really appreciated. We’re going to have a little conversation here about two aspects, two manifestations, two faces of middle out economics. One, as an economic theory. Well, it’s more than a theory. It’s being put into practice and it’s working. So as an economic set of ideas, Heather’s going to talk mostly about that, because we love and appreciate and admire the Hatch Act in this room. Nick is going to talk about middle out economics as a political strategy to beat the hell out of the other side.
But I want to start on a more personal level, because you guys have known each other for 15 something years.
Nick Hanauer:
Long time.
Michael Tomasky:
You’re both from Seattle.
Nick Hanauer:
Yes.
Michael Tomasky:
There’s no truth-
Nick Hanauer:
Hey. Sorry.
Heather Boushey:
Emily? Where’s Emily? Yeah.
Michael Tomasky:
I don’t think there’s any truth to the rumor that they knew each other when they were six, like Mick Jagger and Keith Richards did and then reconnected many years later, but-
Nick Hanauer:
No.
Michael Tomasky:
No? Okay. But anyway, just talk Heather first, I guess just talk not only about how you met Nick, but also about your journey in this world and in this battle.
Heather Boushey:
Well, I don’t actually remember, I was trying to think about this, but I apologize. I don’t remember the moment that I met Nick, but I do remember early conversations. I was at the Center for American Progress, and we were doing work, trying to understand the role of the middle class in economic growth and stability. We were asking all these sort of analytic questions and research questions, and then this guy shows up and he starts talking about middle out and I’ll let him tell the story of the table. But there was this table, I mean, he does it so much better than I do. I think what really got me about the conversations that Nick and I had and the team had when I first met him was that he understood that our theory of what makes the economy grow, that story that we tell ourselves, a story that is in everybody’s heads is really powerful.
And it’s what people think the economy is supposed to deliver, good jobs in their community. And we need both the data and the analytics and all that to tell that story, but we also need to tell a story of growth. It’s not enough to have a story of redistribution or saying that we’re going to fix things and we don’t care whether or not the economy grows. But fundamentally what people want to hear and what the economy is for is for this thing called growth. Now, I think we can have deep conversations about critiquing the limits of growth, especially given climate change and all the other things. But in terms of what that means to people in terms of their economics, I think that’s really important. So let me just say a couple of things about the economics of that. So we have approached this, the president has approached this, and what I think is so exciting is to see the President of the United States talk about building an economy from the middle out and bottom up.
And I do not know, at some point I counted how many times he’d said it, because I get all the press things in my inbox and it was 74, and then I stopped counting. And that was like-
Nick Hanauer:
It’s been hundreds.
Heather Boushey:
It’s been hundreds. I know. He says it every day in every speech. And what he means by that is that we are investing in America all across these United States. We’re making sure that we make the investments to get our economy to full employment. We’re making investments to reduce equity. We’re making investments in infrastructure and we’re crowding in private capital. We’re investing in the things that matter. We’re always doing it with an eye to empowering workers and bringing workers and communities along. That’s the middle out part. There’s the growth and then it’s saying, hey, if we invest in all of us, if we bring everybody along, that growth is going to be stronger, more sustainable, and then never losing sight that markets work when markets are functional.
And that so much of what’s gone wrong in our economy over the past half century is that we stopped enforcing the laws on the books to make sure that markets were competitive. We stopped thinking about what competition meant in a variety of ways, and we’ve really prioritized that. But these investments in America, in order to deliver an economy that grows from the middle out, that’s what we’re living now. And so it’s a theory, and I wrote about the theoretical stuff at Equitable Growth and we did all of this kind of work, which we could talk about, but to see it in practice and what that means, and I’ll say one more thing and I hope we can keep coming back to this.
It really, when you talk about middle out, at least the way we’re thinking about it, is it’s always about making sure that what happens when we’re producing something of value is making sure that you’re centering workers and communities in that first instance. So it’s not just about redistributing the gains of growth, it’s about what some people have called pre-distribution, but let’s just call it what it is, which is production, right? Production and distribution in the first instance. And that is when you’re building an economy from the middle out, you’re really making sure that you’re thinking about what that growth means.
Michael Tomasky:
Nick, you want to tell that story and-
Nick Hanauer:
Yeah. It’s [inaudible 00:10:12] because Heather and I have been at this for a really unconscionably long time. It goes back-
Heather Boushey:
We haven’t aged a day.
Nick Hanauer:
No, we look exactly the same. 15 years, but it’s at least 15 years. And so I came to this work not as an academic economist, but as a business strategy person. My career has been starting tiny companies with the aim of destroying huge companies. And if you want to do that, there’s a very particular approach you have to take in order to be successful. And we are, with respect to political economy, very much in a market share war. There is an entrenched competitor. It’s incredibly well financed. And you can call that neoclassical economics, you can call it neoliberalism, you call it trickle-down economics. But there was a set of ideas that totally dominated policymaking over 50 years. And I knew enough about economics 15 years ago to know that all of it was a pack of lies that it wasn’t true, wasn’t an accurate representation of how the economy actually worked.
Because I’d started about 40 companies and I could just tell that it wasn’t true. But what I really knew is that if you wanted to beat it, you had to take a very particular approach. And that meant both tearing down what they said and believed. But equally creating an alternative that people could understand, because saying is so important to remember, saying their product sucks is not a strategy for winning. It’s a way to lose slower potentially. But you cannot win doing that. You have to be able to say their thing sucks and ours is great and here’s why. And so you had to frame the choice as a choice. This is table stakes in any competitive endeavor. And on our side, we had definitely not done that. Right? Definitely not done that because for 50 years they said growth and we said fairness. And if you look at the polling by a margin of almost two to one, people want growth more than fairness for fairly obvious reasons.
So the worst part of that is, is it not only did we lose those contests by two to one, we spent 50 years ratifying their theory of growth. Basically explaining to everyone who was listening that they knew about growth and we didn’t. And so the high order bit is you have to own growth. You cannot win unless you win growth. And as Heather said, there’s problems with growth that we could talk about a lot, but the thing about growth in the English language is it is code for, there’s something in it for all of us. Because progressive policies are targeted. Raising the minimum wage of $15 an hour is targeted. Most people are not going to benefit from that. So if all you’re talking about is how fair that is to people, then the only people who care or the people either those people are people who desperately care about those people, and that’s only about 35 or 40%.
But once you say that by paying those people more, they will buy more stuff and that will create more jobs and that will benefit everybody. Now you’re talking to everybody and that’s how you take a thing that did poll at 30% when we first started it to 70%. So that was really critical. And when Heather and I started to work together, I was just incredibly clear without understanding the economics completely, which I do much more as you do that we were in a war. And the table thing she’s talking about is, there was this giant conference table and I’m like, look, there is [inaudible 00:14:05] trickle-down over there, and [inaudible 00:14:07] trickle-down is comprised of a bunch of ideas like raising wages kills jobs and tax cuts for the rich create growth and deregulation benefits everybody and all this stuff. And our job is to destroy [inaudible 00:14:19] trickle-down and replace it with something else, which is where we are today. And hats off to these folks for making it all happen.
Michael Tomasky:
Nick said, we see the intellectual assumptions to them for 50 years, but a lot of that work was undone by you and by people like you, economists like you, since the meltdown or before. You wrote a great piece in Democracy Journal about five years ago about that. Most people in this room probably generally know that story. But I think it’s worth you kind of touching on the high points of that story because it was really important in getting to the point where we are today, I think.
Heather Boushey:
Well, I think that one of the challenges with where economics has been, and I’m going to use the past tense, although there are people that what I’m sure disagree with me, but we’re going to set them aside for a moment. I don’t know if any of them are in the room. We can talk later. But where economics has been is that this idea that so long as you let markets do their magic, we will get what we call an economics Pareto optimal solutions, right? If you have markets, where things are generally fair and you’re not intervening, then the market’s going to deliver the optimal outcome. It’s the most efficient outcome. And we can go through, and I’ve written about it, lots of people have written about it. You can go through all of the math and the economic history of that, but it’s a very basic and very beautiful idea.
It says, “If you get politics out of the way, if you get people out of the way, then this magical thing called the market will deliver these great outcomes.” And the reality of course is that that doesn’t exist, right? Even the most basic markets are, there’s regulation in them. You have to have rules, you have to have standards, you have to have all of these things. And markets are never perfect. And as it turns out, when you just leave markets to their own devices, especially what we’ve seen over the past half century is that you see rising economic concentration across firms. And each time you do that, each time you get a little bit more inequality in income. And that calcifies into some sort of inequality and asset ownership, wealth or concentration across firms then that the next moment of your economy is weighted unfairly, because that entity that has more wealth, more resources is able to hoard the opportunity or they’re able to make better, they’re able to keep other folks out.
And then that just increases the-
Nick Hanauer:
That’s the compounding effect.
Heather Boushey:
… then that’s the concentration. It just keeps going. So that’s sort of the basic logic. And what government does, what we do as citizens is, we continually try to unpack it. I mean, the way I often think about it’s each iteration of the economy, it needs to be fair. So you got to do what you got to do to make sure that happens. In economics, where that led to over time was that too many people were abstracting from all of that reality, and from the reality of what concentration meant. And I think some of it, I mean I can’t really prove this, but some of it is that the period over which so much of the economic theory that really dominated in the latter half of the 20th century happened in an era of low inequality. When you didn’t have to worry about investing in schools or a high degree of economic concentration across businesses, because we’d already undone all of that.
We were doing those things from earlier in the 20th century. And so then you had all these people who could kind of pretend that you didn’t have the unions or government playing these really important roles. And then that led to a narrative, and it came out of, as soon as FDR started passing things, economists started arguing that we didn’t need government in the way and culminated, of course, in the famous Laffer Curve, the famous napkin.
But what happened really starting in the ’90s is that economists got new computers and they got a lot of new data. And what that led them to do was to look at questions in a new way. All these new tools. And really one of the most important bodies of work that really pushed that forward was Alan Krueger and David Card’s work on minimum wages. So if you believe in markets, then if the price goes up, then how much you buy of it falls. That’s like sacrosanct, right? Okay. Well, that means that if you raise the minimum wage, obviously you’re not going to hire as many workers. Well, that’s just obvious. And what Card and Krueger did is they looked at New York and New Jersey, one of them saw their minimum wage go up. They looked across places and found out actually it wasn’t that big of an employment effect.
So that was the new data, new tools, and it was like, oh, wow. And it blew the minds of economists. And we did an event with them, of course, Alan is now deceased, which is just still a national tragedy. But we did an event with them to mark the anniversary of the book [inaudible 00:19:30] Equitable Growth. And to hear them talk about the way they were treated by the profession, and esteemed people storming out of seminars and just saying, “This can’t be true. It’s wrong. It’s wrong.” But it was, and it was part of this empirical revolution in economics, where more and more scholars have been studying the consequences of inequality, what that means for the economy and how it functions and sort of unpacking these basic things. And so what we did at Equitable Growth was we funded a bunch of people to ask these questions, and then we tried to tie up what does that mean.
And so I wrote a book right before that came out in 2019, right before the pandemic and before the election about what all that research shows us. And it shows us that inequality systemically constricts our economy by distorting the way we invest towards the people who have the most. It obstructs opportunity, leads to opportunity hoarding and a whole bunch of other things. And it subverts the institutions that manage the market. And you can see that body of work. I mean these ideas from hundreds upon hundreds of scholars, you can see those in the policy work that we’ve been able to do because we’re like, no, it wasn’t that magical, markets are wonderful, they deliver great things, but they’re crafted by humans, and we have to make sure that we get those rules right. And that’s when I think about middle out, it was about making sure that those markets are working to bring the middle out. That was a long answer, but you asked, it was a big question. It summarized a hundred years of history.
Michael Tomasky:
It’s a great answer. And it made me on the subject of the criticism that Card and Krueger got, it reminds me of the story of, I think it was at the Brookings Institution, where they were presenting their findings and they were talking about their evidence, their evidence, their evidence, and somebody raised their hand and said, “Well, theories are evidence too.”
Heather Boushey:
No, no, no, no, no, no.
Nick Hanauer:
So those guys were characterized in the pages of the Wall Street Journal by James Buchanan, a Nobel Prize-winning economist, as I quote, camp following horse for having the temerity to challenge economic orthodoxy. I mean, that’s how crazy that stuff got. Anyway, fascinating, right?
Michael Tomasky:
Yeah. We’re inching toward talking about narrative, political narrative, which is something I’m a big believer in. I’ve written a lot about it. We’ve run a lot of pieces about democracy. You wrote about this with Eric Liu and have continued to. Talk about the importance of that.
Nick Hanauer:
Yeah. So narrative, everybody in this room uses that word narrative, frequently, probably. But I do think it’s really important to unpack the role that narrative plays in human cognition, because understanding it at that level I think is very interesting. So the human brain is an evolutionary adaption, is largely designed to assess cause and effect. That’s what brains do, is if this, then that. And narratives are a way that humans have found to make cognitive shortcuts. It’s how you know that you shouldn’t jump off a building without having to learn physics. And so economic narratives are incredibly consequential to human societies because they situate people within the society and explain to them how things work in that society. And we have always, since the code of Hammurabi, we have had economic narratives, and they’re insanely important. And what’s, I think most consequential for folks like this to understand is that they Trump facts, narrative Trump’s facts.
So if you believe the narrative that raising the minimum wage kills jobs, you operate in the world in a very particular way. And if you believe that narrative, even if you see evidence that it’s not true, that evidence will bounce off your brain. And so this is very sophisticated group who reads fancy political journals and things like that. But for most people, they’re not reading Kruger and Card, they’re absorbing economics as stories. And so the idea that if you make rich people richer that it will trickle down. If you embed that in people’s heads, then all of the evidence which does not fit that narrative will bounce off their brains. And that is why this narrative, that’s why this middle out thing isn’t just an alliteration. We are retraining humans how to see economic cause and effect. Again because if you believe that a thriving middle class is the consequence of economic growth, then you will operate in a very particular way.
If you believe that as we do, this is the whole point of middle out that a thriving middle class is the cause of economic growth. You will behave in a fundamentally different way. And so for us to win the long-term policy fights, we have to win the narrative war. Policy is tactics, narrative is strategy. Policy tells you what to do, but narrative tells you why you’re going to do it. And if people don’t understand why you’re doing something, then when you do it, it makes no sense to them. So this narrative is so important. And we are in a 50-year hole. For 50 years, we have let the other side tell people about economic cause and effect.
Not all of us, but most of us. And so we have a lot of work to do to retrain people to see the economy in a fundamentally different way. And that’s why narrative is so important. It’s not this sort of extra thing that we do when we can. Progressives are wonks. We love our policies, but telling people what we want to do without telling them why we want to do it, it will not work. You got to get it the other way around. Or at least do them both at the same time.
Michael Tomasky:
Heather, I’m sure everybody wants to know something about what your day is like, what it’s like to try to do what you and your colleagues are doing because you’re trying to turn the Titanic around, in historical terms. And I mean, does it feel like that or are you just focused on this on Tuesday and that on Wednesday?
Heather Boushey:
Well, so I’ll say two things. I will come back to the Titanic in a second. But I will say that, I mean, this role that I have now, working in the White House and working for this president has just been just the joy of a lifetime, because so many people in this room have served or are still serving, although you guys both left, the ones I’m looking at. I don’t know, I feel like there’s other people in here. So many people from this community and from this work have participated in this administration. And so it has not felt like we were pushing against the Titanic internally. It is felt like people came in understanding that this is what we needed to do. And so many people came in understanding that workers matter, how we treat workers, their right to organize.
I remember during the transition, I actually don’t know if it was the campaign or the transition, it was all via Google back then. Because it was a pandemic, but also I could use Google, which I’m not allowed to in my current job. And I remember going through some document for one of the, I think it was the campaign, and I was annoyed at how many times the word union showed up in this document. I was like, this is repetitive. And then I was like, I will not be editing this out, but what a joy to work for a candidate, for whom the word union was repetitive. That felt really good. So I felt very welcomed from day one in Joe Biden’s campaign and transition and in his presidency, that so many of these ideas, the ideas that markets are shaped and that we have to actively shape them, that we can’t have economic concentration, that unions matter, that care is about infrastructure. This month is Care Worker Appreciation Month. Care Worker Appreciation Month.
Come on. That’s so great, right? Connecting the dots. And when we started off, there were people at my level in every agency I worked with, that understood that we have to get, again, we had to get the production side right. It’s why we’ve embraced industrial strategy, but we’ve embraced it for a lot of reasons. One of them is that you can’t just expect markets to deliver the things that are most important to you. They cannot deliver the things that for too long, economists have just said, “Oh, that’s a negative externality. Somebody should deal with that, but we have our nice little markets over here.” But when it comes to clean energy, when it comes to care, when it comes to technologies that are too expensive for anyone firm to do on their own, you need government to intervene in those industries. And whenever you engage, you need to make sure that you’re creating the kinds of industries that are going to benefit this country.
So the Titanic, it hasn’t felt that way because what’s opened my eyes to all the different ways that my colleagues were seeing us implement these ideas. So in my mind, it was a theory, [inaudible 00:29:32] the economist, and then my colleagues were like, “Well, this is how we’re going to implement.” I was like, “Oh my God, that’s so cool. You’re right. Great. Okay. That’s so awesome to see.” I will say that on the outside where I feel the Titanic, where things are so hard is that what we’re doing here is paradigm change, right? Let’s be clear. We can use a big word in this room. We won’t say that when we go on TV, although the president has more than once. That isn’t just one thing, that’s like a million little paradigms that have to change. It’s a million little narratives in everybody’s area of expertise where you’re torquing their perspective, and that is hard.
And then because it’s not government giving you something, but it’s government empowering the economy to grow from the middle out, how do people know what we are doing? And that’s I think what we’re up against. And also the forces outside that do not want to believe that production matters, that jobs matter, are so well organized, and our forces have just been winnowed down in many ways. So I think it’s telling that story and being able, we can’t tell the story up here at the 60,000-foot level given the 30,000 foot. We have to tell the reality of all of those different changes, what those meaning communities all across the country, so that those people will see that in their life, and then they’ll be open to the larger narrative change. It doesn’t start here, it starts so we have to have a bottom up telling the story, which is what we’re trying to do in the administration right now, and that is it’s time-consuming and we need your help.
Michael Tomasky:
Yes. Yeah.
Speaker 7:
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 peek behind the podcast scenes on Instagram at Pitchfork Economics. As always, from our team at Civic Ventures, thanks for listening. See you next week.