Eleven years ago, Democracy Journal released a special issue on “The Middle Out Moment” that explored the implications of what was then the brand-new theory of middle-out economics. The moment may not have fully arrived back in 2013, but no doubt it’s here now. So this week, Democracy Journal is publishing a follow-up edition called “The Middle Out Moment Part Two,” marking the fact that what was once a new idea has now gone mainstream. In this episode, we’ll hear from several of the economists, researchers, and former administration officials who contributed to the special issue as they explore how middle-out economics has been put into practice — and discuss the work that lies ahead as middle-out economics becomes the new mainstream.

Guests include: Felicia Wong, Bharat Ramamurti, Tara McGuinness, Sandeep Vaheesan, Todd Tucker, Ronnie Chatterji, Neale Mahoney, and Heidi Shierholz

The Middle-Out Moment is Here: https://democracyjournal.org/category/magazine/72


Michael Tomasky – @mtomasky

Felicia Wong – @FeliciaWongRI

Bharat Ramamurti – @BharatRamamurti

Tara McGuinness – @taradmcguinness

Sandeep Vaheesan – @sandeepvaheesan

Todd Tucker – @toddntucker

Ronnie Chatterji – @RonnieChatterji

Neale Mahoney – @nealemahoney

Heidi Shierholz – @hshierholz

Website: https://pitchforkeconomics.com

Twitter: @PitchforkEcon

Instagram: @pitchforkeconomics

Nick’s twitter: @NickHanauer


Speaker 1:

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.

Speaker 1:

Middle-out economics is the answer.

Speaker 2:

Because Wall Street didn’t build this country. Great middle class built this country.

Speaker 1:

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.


Hey, Pitchfork listeners, Goldy here. If you’ve listened for a long time, you know we talk a lot about middle-out economics. That’s our thing. And so we’re really excited to have coming up, I think actually released today, a whole issue of Democracy Journal dedicated to the middle-out moment. And here to talk with me a little bit about what’s in the issue is the journal’s editor, Michael Tomasky. Michael, welcome.

Michael Tomasky:

Thanks, Goldy. Great to be with you.


Yeah, so I know at least two of the authors in this issue, Nick and I have a piece.

Michael Tomasky:

That’s right.


Give me a little background on the inspiration for this issue and what’s in it.

Michael Tomasky:

This goes back a ways, but I’ll try to do it fast. As you know, Nick Hanauer and Eric Liu started writing about middle out economics and coined the phrase back in 2011, 2012. They discussed it with me and some other people too, and I immediately thought, “Okay, this is where we need to go here economically in this country.” This is an alternate theory of growth to supply side theory of growth that hell holds that instead of giving big tax cuts to the people at the top and waiting for them to invest it, we need to invest in the middle and working classes and create a robust middle class. That was music to my ears then, it is now.

Democracy Journal did its first issue called The Middle Out Moment in 2013. Nick and Eric wrote in that and a whole bunch of other people, some of whom I think reappear maybe in this current iteration of it. But anyway, I say this just by way of telling people that Democracy Journal has been in this fight for more than a decade to try and advance middle-out economics. And you’ll recall that Barack Obama used the phrase for a while back in 2013, 2014, and then dropped it. So along comes Biden in 2019, 2020 as a candidate and starts using it regularly.

So it’s revived. So we said, “Hey, we’ve been here on the ground floor since 2013.” And then I saw Nick last year sometime in Washington, and we decided, it was his suggestion actually, that this was a great time to revisit it and do another issue called the Middle Out Moment part two. And that’s what’s coming out, as you said, today online. And then later this spring in April, we’re having a big conference in Washington in conjunction with this issue, but also more broadly to just try and spread the gospel.


And this Middle Out Moment is a little different from the last, I’d say the last one was more… It was the right moment for the idea and for a new narrative. But this Middle Out Moment feels a little more concrete because Biden just doesn’t talk middle-out. He governs that way.

Michael Tomasky:

Yeah, that’s exactly right. And so this set of articles has three or four pieces that look at what the administration has done through a middle-out lens and says, “Here’s what’s succeeded. Here’s what hasn’t succeeded quite so well, and here’s the work that remains to be done.” But yeah, now we have tangible legislative victories and regulatory victories in the antitrust realm, for example, that we can point to and say, “Here’s how this is working on the ground.”

And we don’t say it’s all perfect because what is that involves human beings? But we do say that this is a great start and that we are changing as we have long wanted to do the economic paradigm away from free market neoliberalism toward something that is more built around public investment, promotion of worker welfare, and promotion of competition.


So we’re going to hear a little from some of the authors talking about their pieces on this episode, but give us a little heads up of some of the people contributing to this issue.

Michael Tomasky:

Sure. Well, some former administration officials have written pieces that benefit from their experience. Bharat Ramamurti worked on the American Rescue Plan. He writes about that. Ronnie Chatterji worked in the administration and writes another piece that looks at the investment in workers welfare. And then other people who just are very close to the story and know what’s going on. Heidi Shierholz, the head of the Economic Policy Institute. Sandeep Vaheesan of Open Markets Institute. Felicia Wong and Todd Tucker of the Roosevelt Institute, all people who are very immersed in this and really know the score.


But before we hear from those authors, tell us a little bit about the conference that’s coming up. When is it? Is it open to the public?

Michael Tomasky:

It’s not exactly open to the public, although if people hunt down my email and want to write me and see if they can come, they can probably-


Well, we have a very elite audience here, so you may be hearing-

Michael Tomasky:

I know.


… From more people than you imagine.

Michael Tomasky:

No, I know. Well, that’s fine. I did this accidentally. I mentioned everybody but one person. So I’m going to mention Tara McGuinness of New America, who’s a great champion of this work and who wrote a terrific piece for the issue. So those are all the contributors, along with Goldy and Nick. Now the conference, in Washington, April 8th, 9th, and 10th at the Salamander Hotel. And we gave it this name, Redefining the Center: How to Make Middle-Out Economics the New American Mainstream. So it’s going to unfold over two and a half days or so. We’re going to have a couple of plenary speakers at dinner as you usually do.

And then we’re going to have about a day and a half worth of panels and breakout sessions. We’ve got a great roster of people, I got to say. We’ve got a lot of administration officials coming and X Administration. Ron Klain is going to be on a panel. Gene Sperling is going to be there, [inaudible 00:07:11] will be there. Rohit Chopra, the head of the Consumer Financial Protection Bureau will be there. Katherine Tai, US Trade Representative. Heather Boushey, council of Economic Advisors. I hope I’m not forgetting anybody, but that’s a pretty heavy-hitting lineup of high ranking administration officials.

We’re going to have some members of Congress and then we’re going to have a lot of people who, well, some of the folks I just mentioned will also be at the conference. Bharat Ramamurti, Ronnie Chatterji, Heidi Shierholz, Tara McGuinness, Sandeep Vaheesan, Todd Tucker. So I just think it’s a terrific group of people and a terrific set of panels, and it’s broken basically into two parts. Part one is the substance of middle-out economics, what it is, what its principles are, what it has accomplished, and what remains to be accomplished. Then part two is the marketing. How can we sell it better?

Because you and I both know, we all know, Biden’s approval numbers aren’t good. His approval numbers on the economy aren’t good. A lot of people don’t know what he’s done. They don’t associate him with it. I saw a poll just the other day, or not a poll, but a description of somebody who did some focus groups about the $35 insulin cap. Most people in the focus group didn’t know that Joe Biden had the first thing to do with it. So we’ve run into some big roadblocks there in the selling. So the other half of the event will be about that, how we do a better job at that.


I’m looking forward to the issue. I’m looking forward to being at the conference. I’m planning to attend, and I’m looking forward to this Middle Out Moment sticking a little more than the last one did, but mostly I’m looking forward to hearing from some of the contributors.

Michael Tomasky:

Yeah, they’re all really smart, dedicated people, and I think this Middle Out Moment already has stuck more than the last one. And whatever happens in this election, we now have built an infrastructure, a community that is dedicated to this project and that is going to keep pushing this project forward, whether there’s a friendly president in office or not. And of course we hope there is, but we’ll keep up the fight.


Well, thanks for joining me today and thanks for all your work.

Michael Tomasky:

Thank you.


And of course, we encourage you to read this latest issue of Democracy Journal and there will be a link in the show notes.

Felicia Wong:

So I’m Felicia Wong, and I’m president and CEO of the Roosevelt Institute. I wrote a piece for the Middle Out issue of Democracy Journal that is about building economic power. One of the questions that a lot of people ask is, “Well, what is middle-out economics? What is the new economics?” And a lot of emphasis has been put on industrial policy, government spending money to make sure to build stronger semiconductor supply chains, to build a new green economy. That’s what a lot of the legislation over the last three years has been about, and that is really important.

But what my piece did was to stitch together that government spending argument with a building power argument because the other thing that middle-out economics really does is to move more power to workers and more power to working people. So the building of the labor movement, the fact that President Biden is a strong supporter of labor rights and actually walked the picket line at the UAW and is a strong person in support of higher wages and a full employment economy. That is the other really important part of middle-out economics.

So you have to marry government spending for new sectors of the economy and new kinds of economic growth with a way to ensure that workers have enough power to take all the benefits of that growth. We have been working to build a middle-out economy, to build an economy where workers have more power for at least the last 10 years. So what have we learned? I wanted to answer two questions. Why have we won what we have? Because we have won a lot, new government power, new government investments, new government support of the labor market, really important. So why did we win those things? And then the second question I tried to answer is, what are we going to need to do to win more? So that’s what my piece was about.

Bharat Ramamurti:

My name is Bharat Ramamurti, and from 2021 to 2023, I served as the deputy director of the White House National Economic Council. My piece was about the American Rescue Plan, which is the legislation that President Biden proposed shortly after entering office, and that Democrats passed through Congress in March of 2021. And my piece is about why the American Rescue Plan or ARP is one of the most effective pieces of economic recovery legislation that we’ve had since World War II. And to do that, I really just want to set the scene about where things stood back in January of 2021 when President Biden took office.

It seems like a long time ago, but the unemployment rate at the time was well over 6%, and job growth had really slowed to the point where it looked like, at the pace we were on, it was going to take several years just to recover all of the jobs that had been lost during the COVID recession. And at the time, fewer than 5% of Americans were vaccinated for COVID. If you remember, we had just gotten the vaccine, but the Trump Administration had not left any vaccination plan in place, and so the administration had to come in and set up a vaccination plan as well.

So the point was that we were in a moment of really high uncertainty and deep need, and we knew that without action, we would have a slow grinding recovery, which would mean more people unemployed for longer. It would mean lower economic growth. It would mean that there’d be a lot of slack in the labor market, which meant that employers could dictate terms to workers, offer them lower wages, worse benefits, less flexibility. And people would have no choice but to take it because that would be the only job available to them. What the president determined early on is a couple of things.

Number one, in this moment, given all the uncertainty about the future path of COVID and economic conditions internationally, it made sense to err on the side of making sure people had enough support to get through whatever ups and downs were to come. And the second thing he decided was that because we could not count on Congress to give us a second bite at the apple, in other words, if this first piece of recovery legislation wasn’t big enough, didn’t quite do enough, it would be hard to come back and get more. That’s what history had shown us.

And that was another reason why he believed that we needed to err on the side of making sure people had enough to get through this crisis. And what ended up being proposed or what ended up getting passed through Congress was one of the most effective pieces of legislation, one of the most middle-class, lower income focused pieces of legislation that we have had in this country’s history. There were stimulus checks or stabilization checks, $1,400 that went to basically every adult and child in the United States that made a middle-class income. There were some tax cuts for parents with young children.

There was money that went to state and local governments to help stabilize their budgets to make sure that they didn’t have to cut back on really important programs or lay off a bunch of state and local workers. And there was money to make sure that people didn’t get evicted from their homes, money to make sure that renters could keep up on their payments, money to make sure that people could keep up with their mortgage payments so they wouldn’t be foreclosed upon. The result of that has been a truly extraordinary recovery in a few respects.

Number one, traditionally during a recovery, lower income families are hit the hardest and take the longest to recover. But what we’ve seen in this recovery because of the American Rescue Plan is that actually lower income folks have benefited the most. Their wages have gone up the most quickly. They’ve gained a lot of wealth during this period of time. And if you look at things like their disposable income and credit card delinquency rates and so on, they’re in a much more stable position than they were before the crisis. Economic growth has been through the roof.

People were projecting something like two or 3% economic growth. Instead, the United States hit almost 6% economic growth in 2022, and then another year of robust growth in 2023. More than 14 million jobs created under President Biden, which is the 10 million that we were down from COVID plus another 4 million ever since then. And in this recovery, we have hit the lowest Black unemployment rate, the lowest Hispanic unemployment rate, the lowest unemployment rate for people with disabilities that we’ve ever had in recorded history in the United States. So it has been a truly middle-out, bottom up recovery.

Now, of course, a lot of the critique of the American Rescue Plan is from people that say, “Oh, this is what led to all the inflation that we have.” And that’s really not borne out by the evidence, and that’s the last thing I get into in my piece. There’s been a lot of different analysis of this from a lot of objective researchers, and what they have found is that yes, the American Rescue Plan in conjunction with all of the other relief that went out during the Trump Administration probably contributed two or three percentage points to inflation. And if you remember back in 2021, 2022, when inflation peaked, it was at about 9%.

So really what folks are saying is that instead of maybe six or 7% inflation, we had 9% inflation. And so we still would’ve had really historically high inflation even if we hadn’t passed the American Rescue Plan. That’s because we had all these supply side disruptions. And so the world in which we hadn’t passed the American Rescue plan, yes, maybe we would have slightly lower inflation, but still high inflation, but we would have way less growth, way lower employment. We wouldn’t have had all of these incredible benefits for lower income families, and we would be in a much worse position economically than we are right now.

And you can see that because other countries, other leading economies took a very different approach than the United States. They took the approach that some of these critics would prefer, which is they didn’t do a lot of support. They said, “Okay, the economy is going to recover on its own terms. We don’t need to provide support to our citizens.” And what they have had is really high inflation, but much lower growth. And as a result, the typical middle class family, the typical lower income individual in those countries is really struggling in a way that they are not based on the data here in the United States.

And so my final point is, to me, this shows the roadmap for a successful economic recovery bill, which is when you have this kind of downturn, what you want to do is act quickly to stabilize the finances of your typical American household. You do that by giving them cash, by giving them tax cuts that they can feel immediately, and by really trying to insulate them from the worst downsides of an economic decline.

So making sure that evictions aren’t happening, making sure that foreclosures are minimized, making sure that people aren’t defaulting on their other forms of debt because that has all sorts of lasting consequences. And so what you really have in the American Rescue Plan is a guide for future policymakers about how to avoid long downturns and how to have a very bottom up and middle-out economic recovery.

Tara McGuinness:

My name is Tara McGuinness and I am the executive director of the New Practice Lab. This is a policy shop, but also a research and design team working to help 3 million families who’ve been excluded from the economy, access government benefits through a combination of policymaking, but also delivery forums, call centers, how you actually get your tax credit. My piece is titled An Economy with Ethics, and it focuses on the old 20th century paradigms of rugged individualism that are fractured today and ask the question of what will come next.

I call for an economic vision that aligns not only with middle-out economics, but really elevates America’s loftiest aspirations. I’ll make the case that we’re at the apex of what it looks like when you have had decades of trickle-down economics driving our political economy. So we are at peak inequality. The gap between the rich and poor has grown. We are at peak racial wealth gap. This has been increasing year over year, peak coal, peak oil, peak greed. If you think about the gap between the CEO and worker compensation hitting an all time high in 2021.

But we’re also at, I think, peak ego if you look around in 2024 and peak loneliness. And really, this is measured in a number of different ways, but that we’re really in the United States falling from purpose, and that purpose part matters. In fact, it’s really interesting in research for my piece, I went back and reread Milton Friedman’s essays in positive economics, and he wrote that, “Economics should be independent of any particular ethical position.” Meaning it shouldn’t concern itself with questions of purpose. But if you look at what has happened with trickle-down economics, it has framed the largest sticky framework of purpose over the past decades.

And if you trace the original word economy back to its Greek roots, economia, you find a much deeper meaning in what was considered the economy a much closer connection to ethics and the good life, the ancient Greeks who wrote about economia believed that humans lived in a world of natural abundance and had what they needed to survive. And this is a really different framework for how we think about the economics of today. This piece engages the idea that middle-out economics of course must seek concrete policy goals.

There’ll be other pieces you’re probably featuring on fair taxation and higher wages and consumer protections, but that we can’t forget that we seek more than policies, that we seek a better life. And I paint a picture of what a new economic order could look like in my piece. One in which we put the market back in its place as subordinate to human flourishing, not the other way around. And I paint a picture of what it could be like in the 2030s, quite granularly. And then I walk us back to 2024 and some of what I describe as glimmers that suggests maybe things could be different from the peak era we’re living in.

For example, in 2022, more electricity was generated from renewable energy than coal for the first time. You see a change in how we’re making things and where we’re making them. West Virginia, former coal miners are among the first production workers and some of the new cobalt free battery plants that are being built across the country thanks to federal investments. There’s also been a real shift. I think it’s hard for people to imagine in this very tough era that we’re making huge grounds for care workers.

Care worker power building has been underway for decades, but the Biden administration and Congress invested 25 billion in the ARP that’s going to every single state in the country to raise wages for home care workers. So if you look closely, there are glimmers today of how things could be differently. People should read my piece because I take issue with this core tenet of trickle-down economics that Milton Friedman wrote, “Economics shouldn’t be attached to any particular ethical position.” He sought out an economics that deals with what is, not what ought to be.

And my piece makes the case that if middle-out economics is going to help us thrive, it must tackle what ought to be, must move beyond this stuck frames of the individual versus the community. And it has to hold space for both human dignity, development, and the reality that we’re both all better off when we’re all better off, and that we’re more deeply connected with each other. It has to honestly confront the fact that economic wholeness can’t make us happy. We need each other.

Sandeep Vaheesan:

I am Sandeep Vaheesan. I’m the legal director at the Open Markets Institute, which is an anti-monopoly research and advocacy organization based in Washington. So I examined the Biden Administration’s antitrust record thus far. So President Biden has made antitrust and competition policy a central piece of his economic agenda. He issued an executive order in July of 2021 called Promoting Competition to the American Economy that laid out 72 directives and recommendations on what different departments and agencies in his administration should do to promote fair competition and a more fair and equitable marketplace.

And this level of presidential interest in antitrust has not been seen in a very long time, maybe not since Franklin Delano Roosevelt in the 1930s. This is a very exciting time for those of us who work on antitrust issues. There’s a great deal of public and political excitement and energy in this area, something we haven’t seen in a very long time. The president and many people he’s appointed have tried to make antitrust the stuff of everyday popular politics rather than something dominated exclusively by antitrust lawyers and economists.

And full disclosure, I say this as an antitrust lawyer. So this is a very exciting time. And in my piece, I look at what’s been accomplished so far. What remains to be done. The Department of Justice and the Federal Trade Commission are the two main federal antitrust enforcers. And one way to evaluate their record is to look at how they’re fairing in court. Are they winning more often than they’re losing? And based on this criterion, the record thus far is a little bit disappointing. The two agencies have lost a number of major cases in court.

For instance, the FTC failed to stop Microsoft from acquiring video game developer Activision. That case is still on appeal, so things might get better going forward, but they lost in front of the trial court. Similarly, they failed to stop Facebook from acquiring virtual reality app maker, Within. Similarly, the Department of Justice has lost in a number of merger challenges in court. They haven’t lost across the board. They have won some important cases. So the DOJ stopped a major merger in the publishing industry between Penguin Random House and Simon & Schuster.

But on the whole, the win-loss record is not where we’d all like it to be on. The losses thus far exceed the wins, but that’s obviously not the whole story. We can’t just count up wins and losses and assess their performance based solely on that. We also need to look at the type of cases they’re bringing, the industries that they’re prioritizing. And I think there’s been a noticeable shift. So for instance, the two agencies are committed to protecting workers from employer power. So the DOJ has brought many cases challenging wage fixing and no higher agreements between employers.

The FTC proposed a major rule at the start of 2023 where they proposed to ban non-compete clauses for all workers regardless of income or occupation. So there’s a real interest in protecting workers, and that’s new. We haven’t seen that arguably ever. So the two agencies are breaking important new ground here. Second, they’re taking corporate consolidation more seriously than past administrations. They’re trying to stop mergers between competitors, but then also mergers between firms in a buyer-seller relationship or what we call vertical relationship.

So the Microsoft/Activision merger was a vertical merger. Microsoft makes the Xbox gaming console, Activision produces video games. They’re not head-to-head competitors. Nonetheless, the FTC tried to stop that. The FTC has successfully stopped a number of other vertical mergers, including between Nvidia, the chip maker and ARM, which controls technology used in those chips. So you’re seeing a real step up in anti-merger enforcement and the agency showing interest in wider range of corporate consolidations, not just mergers between competitors, which is where the agencies have been focused for a very long time.

So those are two notable and worthy changes under this administration. Obviously I haven’t mentioned the elephant in the room yet. These are the cases against the big tech company. So right now we have federal cases pending against Facebook, Amazon, and two against Google. These cases have the potential to be transformative. They could create a much more equitable digital economy. But in many ways, these cases build on what came before. Some of this actually started under the Trump Administration, which might surprise many people. And then many states have also been moving against these tech companies.

So if you look at the tech lawsuits, this is an area where the DOJ and FTC are doing important work, but really building on what came before President Biden took power in January 2021. And then last but not least, I think we also need to look at what remains to be done. And I think the agencies have done a good job turning the battleship, but they’re still in the very early stages of turning the battleship. And I think there are a number of things they will need to do if the president gets a second term this November.

And this includes promoting fair competition through rulemaking and other forms of policymaking, limiting top-down control in the economy, whether it’s in the fast food business or the gig economy. And then last but not least, allowing more small players and independent workers to organize. So right now, and this is probably surprising to many people, but independent contractors in our country do not have the right to form unions and go on strike. And in fact, if they do, they may be committing an antitrust violation.

So in some ways, we need antitrust to be a lot more aggressive with respect to the Fortune 500, but then we need antitrust to pull back with respect to powerless actors like gig workers and Amazon Marketplace sellers. But these are important things that remain to be done in a second Biden term or future democratic administration. So all that said, I think some positive changes are underway. The president’s interest in this area is really remarkable and exciting, but a lot of work remains to be done.

Todd Tucker:

I’m Todd Tucker. I’m a political scientist and I work at the Roosevelt Institute. The focus of my work is on industrial policy and trade. In the Democracy Journal piece, I tried to look at what I think is one of the most interesting ideas to come out of the Biden Administration, but not one that has been widely talked about or discussed. And that’s the idea that Bidenomics and this turn that the United States is doing towards more active industrial policy, that it’s not only good economics and good for jobs and good for the climate, but that also it’s ultimately good for democracy itself.

And I think that’s a really interesting and under-explored idea. As someone who spent a lot of time thinking about development economics and economic policy, economists are really comfortable with numbers and things that you can easily quantify. We don’t always spend a lot of time thinking about the quality or depth of democracy, or even thinking about how democracy could be connected to economic policy or economic outcomes. So that was an interesting idea, and it emerged primarily in a speech that the National Security advisor for Joe Biden gave at the Brookings Institution in 2023.

This was a speech by Jake Sullivan where he made this big case that the turn towards building clean energy, building new infrastructure could actually be something that could help the quality of domestic democracy and combat authoritarianism at home, but it also could combat authoritarianism abroad. And I thought that was just a really rich and interesting idea, one that I wanted to unpack more. And so Democracy Journal was gracious enough to let me do this in thousands of words in their pages, but I take that idea and break it into two parts.

The first part is, does bad economics weaken American democracy at home? And could good economics make for better democracy? That’s part one. And then part two is, can the US… If that’s true, that good economic policy can deepen American democracy, is that the kind of thing that we can actually export abroad where we can export sort of an economic democracy machine to other countries? So those are the two parts that I look at.

And I think that the interesting thing in preparing this report is I had a chance to do what I love doing best, which is just read a bunch of academic research on the topic and then try to distill it and make sense of it for a broader audience. But I think that one of the things that we see in the economic literature is that there is actually a link between people’s sense that the economy is working for them and their likelihood of supporting democracy and the rules of the game. There actually is quite a bit of research on that.

And indeed, if you look at the international literature on things like authoritarianism or one party government, for them it’s actually a really easy calculation, which is basically they’re often quite repressive regimes, but the people will not revolt so long as the people are getting fed. That’s the idea. So for them, it’s actually just a really simple equation. It turns out in democracies it’s a little bit more complicated. The economy doing well gives people a deeper satisfaction with democracy.

But then whether that translates into actively supporting democracy as the rules of the game of checks and balances and all those, one person, one vote, all those norms of democracy, it’s a little bit more attenuated. So basically it’s like, mission number one for policymakers is to be doing stuff that makes people satisfied with democracy. And then if they’re satisfied enough with democracy, you might actually get them to support the idea of democracy as well. And so it’s a challenge and I think it’s a balancing act. So there’s a lot of good evidence, but it is a complicated story.

I think in the US context specifically, what we’ve definitely seen is during the neoliberal era, just a lot of policymakers since the ’70s are basically, we’re just leaving more and more economic outcomes totally up to the market and letting elites, letting corporations decide whether and how to produce which things, where domestically or abroad. And that’s something that I work at the Roosevelt Institute, and part of our job is to study the legacy of Franklin Roosevelt and that administration. And that was definitely not how they were doing things in the FDR era.

They were using a strong publicly accountable, small d, democratic hand to guide some of the most important economic decisions and actually put the thumb on the scale of working people and a robust government role in the economy. So we’ve lost a lot of that in the neoliberal era, but I think that the promise of Bidenomics or the new industrial policy or whatever you want to call it, is that you begin to reverse that and have there be more small d, democratic input over the shape of the economy. And then again, to go back to the thesis of the whole thing that if you can make the economy work better, you might be able to make democracy work better and be more supported.

Ronnie Chatterji:

I am Ronnie Chatterji. I am professor of business and public policy at Duke University in Durham, North Carolina, and I was most recently the White House coordinator for the chips and science program.

Neale Mahoney:

I’m Neale Mahoney, professor of economics at Stanford University. Most recently, I was a special policy advisor for economic policy in the White House National Economic Council.

Ronnie Chatterji:

So Neale and I were both economists working together in the Biden Administration, and I have to say we were fortunate to work there at a time when there was a lot of interesting policy going on, and one of those areas was the beginning again, or the restarting of big public investments. One of the key pillars in middle economics that was happening during the Biden Administration across both the American Rescue Plan and the bipartisan infrastructure law, but notably the Chips and Science Act and the Inflation Reduction Act. And that’s really what formed the impetus for us to write the piece.

Neale Mahoney:

I think the last three years were a special time. There had been a longstanding interest among Democrats, but I think also people in the center to make the investments to tackle climate change. And there had also been, I think across the board interest in making investments in our nation’s infrastructure, in our roads and bridges and ports and airports, but people hadn’t got it done, and there were these longstanding interests.

Then coupled with I think two events, both COVID, which I think really underscored the importance of our supply chains for having the critical goods that we needed and increasing geopolitical tensions. If you think about the Russia-Ukraine war as the most salient example, again, sharpening our thinking about supply chain risk. Those two issues basically created this moment where we could do big things.

Ronnie Chatterji:

And picking up on that, Neale and I would talk about this all the time, that this tradition of public investment is not at odds with economic theory and policy in the past, the way that Neale and I learned it. In fact, economists for a long time have recognized that there’s really significant market failures. And the cases where those market failures exist, there’s a role for government to address them. And so as Neale and I walked through each of the bipartisan bills, in particular the infrastructure law, the Chips and Science Act, as well as the Innovation Reduction Act that was passed by party line vote.

We identified some of these key market failure arguments from economics that were embedded in these arguments for the legislation as well. So take infrastructure, economists have long said that if you make appropriate investments in infrastructure, you can boost economic activity. And that when you have lower transportation costs, firms can actually do better by accessing a broader set of customers. Now, firms aren’t necessarily going to have the individual incentive to invest in that road themselves, but you can create these public goods through these kinds of investments, and that’s really powerful.

It’s the same thing around R&D, whether it’s in the semiconductor industry or for the energy transition. We know that R&D is something that companies aren’t going to invest sufficient amounts in. And so the government’s always played an important role and with a lot of bipartisan support in investing in these areas. The last one I’ll say, which is newer for the conversation now, but has historical resonance as well, is national security.

The idea that our computer chips are manufactured predominantly in a part of the world that might be disrupted due to geopolitical tensions is the market failure that the government can seek to address by making big investments in manufacturing here in the United States, but also through alliances and partnerships with other countries and working within the global value chain to make supply chains more resilient.

And that’s really what the Chips and Science Act is all about. And it was fun actually, as Neale and I worked on this article to discover that a lot of economic policy and economic history was really consistent with what we were doing. And some of this stuff is new and some of this stuff is just making a comeback because the issues that we’re talking about today are different than they were 10 years ago.

Neale Mahoney:

We also came into this with a understanding of the political economy, and I think as we all recognize, many communities have been left behind and are at risk of being further left behind with the energy transition and trying to make sure that our investments end up providing the most economic activity in places where there’s the risk of having not enough opportunities, I think is an important recognition.

I think also on the global side, I think we have an acute understanding that for us as a world to meet our climate targets, that it’s not just making energy clean and cheap in the US, but that India and China and emerging economies need to grow in a clean way as well. And so the investments in basic science that can drive down the costs of solar and batteries and wind end up providing huge benefits geopolitically as we as a world try and meet our climate targets.

Ronnie Chatterji:

The other thing Neale and I tried to put into this piece, which is maybe for the future Ronnie and Neale’s out there who are going to be doing these jobs in government, it’s just a call to be very rigorous about how we evaluate the impact of these programs. It’s really about building up trust for this key pillar of middle-out economics. And to do that, we have to evaluate whether the Chips and Science Act and this constituent programs, whether those tax credits under the Inflation Reduction Act are actually having the impact that we think they will.

And I think that’s something that we can do both with data from inside government. And I’m sure there’s a lot of researchers at the Commerce department at Treasury and others who can take this on, but also through collaborations with academics. You can think about these investments that are going to galvanize industry in particular place, but comparing it to other places where that investment did not occur, that look very similar to the place that received the investments could be a really interesting approach.

And there’s many more methods that economists and other social scientists have used to do these analyses, but we really think it’s important and we hope wherever possible that the key government agencies in this effort are going to share the administrative data with appropriate controls and transparency, so we can do these studies. Because at the end of the day, I think if we can figure out what works and under what condition it works, we’re going to be better positioned in the future to make these public investments to the benefit of the American people. And that’s really the motivation for the piece and what it’s all about.

Neale Mahoney:

I’ll just say one more thing is that I think Ronnie and I have clear understanding that the job is not yet done, that we’ve passed this legislation, we’re starting to write checks, but I think what the American people want to see, and I think what we want to see is people who care about the quality of our infrastructure, scientific progress, the clean transition is for factories to be built, for people to be employed, and ultimately for new technology to be installed in people’s homes all across our nation.

And so I think for people who care about this initiative, I think they need to recognize that we’ve maybe run the first lap or the second lap, but for this period of time to be looked back on as a successful one, we actually need to implement and we need to build.

Heidi Shierholz:

My name is Heidi Shierholz, and I’m the president of the Economic Policy Institute in Washington, D.C. In the decades following World War II, the US economy totally thrived. We had strong growth and we had growth that occurred across the income distribution. It wasn’t just high-income people that saw growth. It was low-income people, middle-income people, high-income people. I’m not at all saying everything was perfect in the ’50s and ’60s. It wasn’t. There were major inequities by particular race and gender, but one thing really worked, and that’s that as the overall economy grew, people all across the income distribution saw gains.

We really did have shared growth in that period. And the thing that I think is core about that is it wasn’t inevitable. It was a policy choice that made that happen. It was macroeconomic policy makers that were targeting sustained low unemployment. It was federal policy makers that increased the minimum wage rapidly regularly. It was well enforced. It was the federal government really safeguarding workers’ rights to unionization. It was regulation protecting many other labor rights and on and on and on. So we had this strong, broadly shared growth, and it was a policy choice.

We were making policy choices that made that happen. But starting in about the late 1970s, we saw a big shift like this neoliberal, trickle-down, supply side. Those are all names for the same thing. That paradigm took hold and members of both parties really thought that that trickle-down economics was the right way to manage the economy. And so policy makers from both sides of the aisle really went about dismantling the policy bulwarks that were really crucial to that broadly shared growth that we had seen in the earlier period. So macroeconomic policy makers started to tolerate really excess unemployment.

The increases in the federal minimum wage became much smaller, much rarer. Policy makers totally failed to update labor law to keep up with just the relentless attacks on unionization and collective bargaining. There were anti-worker deregulatory pushes all over the place. And what we saw, we all know how that era played out, that we went from a period of strong growth that was broadly shared to a period of much weaker growth that was not shared at all. There was much weaker growth. And then the growth that did happen was largely captured just by corporate executives and other highly paid professionals and capital owners.

Inequality absolutely skyrocketed. The wage growth for low and middle income people really tanked. That was also a policy choice. That did not have to happen. That is what happened because of this change in paradigm that led policymakers to make these changes that meant that growth was not broadly shared, but was being captured by the people at the very top of the income distribution. We can reverse that choice. We can make a different choice. And the one thing that I think is really useful as a backdrop to thinking about making a different choice now is that there’s not one thing that’s going to turn it around, there really was a really sweeping set of changes.

And we need another sweeping set of changes to halt and reverse those trends. And just talking about what those changes will look like as far as working people go, the changes that will make it so we see not just strong growth, but fair growth. We need to do things like keep unemployment low. The macroeconomic policymakers at the Fed, they really need to target low unemployment. And when their tools aren’t enough, the members of Congress need to step in with fiscal relief to make sure that we have robust jobs recoveries, like they did with the American Rescue Plan Act that has landed us right now in one of the fastest jobs recoveries on record.

So keeping unemployment low is really important. That means wages for working people grow much more strongly. We need to boost unionization. Right now, there’s great interest in unions. The popular support for unions is at near record highs, but there is a massive gap between the share of people who are in a union and the share of people who want to be in a union. And that gap is policy. That gap is labor law not actually truly protecting workers’ right to unionization, not protecting their rights to collective bargaining. And so policymakers need to step in and reform labor law to make sure that workers who want to join a union actually are able to join a union.

And we know that that has a really important effect in making sure that the growth that companies are seeing that happens in the economy is more broadly shared. We need to strengthen labor standards and their enforcement. The minimum wage is incredibly low. The federal minimum wage right now is $7.25 an hour. It hasn’t been increased since 2009. It’s just an outrage. Some states have increased their minimum wages, but there are many states that have the federal minimum wage, and it is just abysmally low. So strengthening the minimum wage, strengthening overtime protections, and making sure that those things are well-enforced so that the workers actually see those rights.

That’s a key thing. Another set of things that policymakers should focus on is making sure that workers aren’t allowed to be forced to sign away their rights as a condition of employment. And I’ll tell you what I mean by that. Right now, it happens all the time that workers are required to sign non-compete agreements in order to be able to work at a company because condition of employment, you have to sign non-compete agreement.

I think a useful way to think about why employers want to use non-compete agreements for their employees is because if you’re not in a union, basically the only source of power that you have vis-a-vis your employer is the implicit threat that you could quit and go work somewhere else. You have no other leverage over your employer. You’re just one person there, the firm that you work at. But it is a source of leverage that you have. So when employer makes you sign a non-compete agreement saying, if I’m going to work here, I am saying that I will not take another job at a competing place for some certain amount of time off, and it’s like two years.

That means that the employer has just taken away that one piece of leverage that you had with respect to them. And so it reduces your wages in the long run. So we need to do things like ban non-compete agreements, ban forced arbitration agreements, ban collective and class action waivers. These are all kinds of things that employers are doing. It’s a power grab to try to take power from workers that would otherwise lead to higher wage growth for workers. So those are the kinds of things. It’s like the portfolio of policy changes that we need to really halt and reverse the trends of rising inequality and stagnant wages for working people.

And I alluded to it earlier, but the other dynamic that’s happened since the late 1970s. We haven’t just seen skyrocketing inequality, we’ve also seen much weaker economic growth overall in that second period than we did in the couple of decades just falling World War II. And a key reason for that weak economic growth of the more recent period is rising inequality itself. What rising inequality does is it puts more of the income in the hands of people who already have everything they want, they can already buy, they’re not constrained. Their purchasing is already not constrained.

And so when you get them more money, they’re the folks who are way more likely to have the luxury to save. And that dampens economic growth. If you, on the other hand, get money into the hands of low and middle income people who are the people who are much more likely to really have no choice but to spend that money on goods and services, that generates more economic activity. And so as we’ve seen rising inequality, that has also slowed growth. But if you instead do this portfolio of policies, which often referred to as a middle-out economics approach, what it does is it generates increases in wages that in turn generate increase in aggregate demand, and that strengthens growth.

So I think that’s the key that if we make this shift away from neoliberal policies towards this middle-out economic approach, we will not just see less inequality. We will also see stronger economic growth overall. And it’s not just good for fairness in the economy, it’s actually good for the economy full-stop. And then I just think even though everything I’ve just said is true, so it seems like a no-brainer that we would want to do this. I think it really is. It’s just far from inevitable that policymakers will choose to make those kinds of changes.

It is true that the tide has begun to shift a little bit. You see this thinking and talking seeping in, but there’s just an enormous amount of work left to be done. There are just incredibly powerful forces that have been on the real winning end of rising inequality and are fighting to keep that neoliberal model in place. And so it’s just incredibly crucial that we seize this moment and just mobilize in support of a middle-out economic policy regime.

Speaker 14:

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