2023 was a big year for middle-out policy and research, so we are recapping some of the biggest middle-out moments that are improving people’s lives and helping us close the book on America’s neoliberal era. Today, Civic Ventures writer Paul Constant joins Goldy to help recap the biggest middle-out successes of 2023 that have benefited workers, and are changing the way people think about economic cause and effect. This episode shines a light on policies, movements, labor actions/strikes, groundbreaking reports, and research that have made a real difference in people’s lives and is changing the way economists and policymakers think about and manage economic policy.
Voicemail: 731-388-9334
Email: pitch@pitchforkeconomics.com
Bidenomics is Real Economics https://time.com/6343967/bidenomics-is-real-economics
The Transformation at the Heart of Biden’s Middle-Out Economic Agenda https://prospect.org/economy/2023-02-09-biden-middle-out-agenda
Minimum Wage Effects and Monopsony Explanations https://justinwiltshire.com/minimum-wage-effects-and-monopsony-explanations
Website: https://pitchforkeconomics.com
Twitter: @PitchforkEcon
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Nick’s twitter: @NickHanauer
David Goldstein:
I am David Goldstein, senior fellow at Civic Ventures.
Paul Constant:
I’m Paul Constant, and I’m a writer at Civic Ventures.
David Goldstein:
Paul. Hi. Hey, Paul. You feel like a winner?
Paul Constant:
Well, do you mean personally because, no, I’ve got a little case of Charlie Brown syndrome, but do you mean economically, then I-
David Goldstein:
Professionally? Economically? Yes.
Paul Constant:
Yes.
David Goldstein:
Why? What’s going on? What’s going on this year?
Paul Constant:
Well, I mean, it’s always a complicated question when you talk about economics, right? You always have to acknowledge that the system is, in some respects, failing a lot of people in terms of housing, in terms of costs at the grocery store is still too high, but when you look at where we were just three years ago when the pandemic was underway and all of these people were unemployed and we weren’t sure how or if the economy was going to rebound from that, really, we are in the middle of one of the most remarkable economic recoveries that this nation has ever had, and I mean that literally. I’m not being hyperbolic here.
David Goldstein:
Well, I’ll do you one better, Mr. Sunshine. If you look at where we were just one year ago when eminent economists like Larry Summers were predicting a 100%… Oh, well, he never said it. Well, who was it? Bloomberg? Bloomberg. A 100% chance of recession within the coming year, spoiler alert, it didn’t happen.
Paul Constant:
Yep, and Larry Summers, I think he got up to maybe 50 or 75% chance of recession impending right around the corner all year he was predicting this.
David Goldstein:
Right, and telling us that we needed two years of 7.5% unemployment to get inflation under control. Again, didn’t happen.
Paul Constant:
Right, and to put that in perspective, that’s tens of millions of Americans who would not have worked for years, months up to years, depending. All year, we’ve had these doom-and-gloom predictions of recession that was always just around the corner. It’s always right around the corner, but at the same time, when you look at what I think is the single most important metric of how the economy is doing, which is workers, how are workers doing, Americans were employed and wages were growing up faster than inflation. Paychecks were growing higher than those grocery store costs, and especially wages were going up at the bottom of the income scale, which is exactly what you want to see. We saw near record compression between the lowest earners in America and the highest earners in America this year which is, to my mind, one of the most important things you can ask the economy to do is to bring that raging inequality a little bit under control.
Now, granted we are working from 40 years in the hole, so we have a lot more to do. We have a lot further to go, but by most economic metrics, the economy has been pretty great this year.
David Goldstein:
I think, just as importantly for us on this podcast, it hasn’t been great by accident. It’s been great because at least partially due to policies that have been implemented under the Biden administration as part of their Bidenomics agenda which is, quite frankly, a middle-out agenda.
Paul Constant:
Do you think we need to take a minute here, Goldie, to parse those two things out? We don’t want to use Bidenomics and middle-out interchangeably because there is a distinction, right?
David Goldstein:
In fact, it’s funny, we’re recording this the morning of December 8th, which is the morning that Nick Hanauer’s most current piece in Time Magazine has come out entitled Bidenomics is Real Economics. In this piece, we make the argument that there is a coherent economic philosophy underneath Bidenomics which is largely middle-out economics, and that essentially you can think of Bidenomics as a policy agenda that is based on middle-out economic theory. This contrasts very nicely to the Reaganomics policy agenda that has dominated politics and policy for the past 40 some years, which was based on a trickle-down agenda, that middle-out is to Bidenomics what trickle down was to Reaganomics and that, in fact, the Biden Revolution is as real and as consequential as the Reagan Revolution that preceded it, that what we are seeing now is a paradigm shift in how we think about, talk about and manage the economy that acknowledges that, in fact, as Biden has said repeatedly, the economy grows best from the bottom up and the middle-out, that prosperity does not trickle down from the top, and we have 40 years of empirical evidence to prove that.
Paul Constant:
Right, and while Goldie finally takes a breath, I just wanted to say that it’s important to not just talk about the grand scheme of things, but to talk about how these things are actually playing out. I’ve been looking back at the year in review. I’ve been doing a little bit of research in 2023 in economics. It’s funny, there are some things that happened this year that I completely forgot about. The SVB Bank collapse was this year and several mid-size banks that collapsed, and that was the beginning of the doom saying that happened this year was people thought that the economy was about to go into another great recession, which didn’t happen in part because the Biden administration found buyers for those mid-size banks that collapsed which calmed down Wall Street, which eventually saved the economy from a potential bank collapse.
We also had skyrocketing egg costs this year. That was the beginning of this year when the cost of eggs doubled, even tripled in some metro areas. Of course, that was used as an example of how inflation was going to continue to skyrocket out of control when, in fact, it turned out that it was actually just a case of price gouging.
David Goldstein:
Right, and in fact, in Washington state, the Attorney General has achieved a settlement with egg and chicken producers in which they’re going to be sending checks to hundreds of thousands of Washington households in compensation for that price gouging.
Paul Constant:
Yeah, and also federal court just last month uncovered decades of price fixing on behalf of chicken producers. They were colluding to wipe out competition in the market and to raise prices. We started the year really concerned about whether inflation would continue to rise and, at the end of this year, we’ve got a much clearer picture that a lot of those higher prices that we’re paying at the grocery store are in fact just greed. It’s not going to increase costs or to fix supply chains. It’s just going to increase quarterly profit margins and probably, eventually, fund stock buybacks.
David Goldstein:
Yeah. I mean, come on, how else are you going to pay for all those stock buybacks if you can’t fix the price of chicken, eggs and everything else?
Paul Constant:
Yeah, but I could complain forever. I think we should look at some of the highlights of the year. I think maybe one of the best places to start was in President Biden’s State of the Union this year, which I thought was a particularly strong State of the Union. You don’t see any speech writer will tell you the State of the Union is the most feared assignment in the White House speech writing pool because it’s just a list of things and it’s not particularly inspiring, right? It’s not quite like a budget, but it’s a set of priorities, and it’s just hard to be inspirational or moving in that space. I was pretty inspired by the State of the Union because Biden was talking directly to American workers. He was directly addressing them and talking about how he was going to help the economy grow for working American families, which I think has not happened in my recent memory anyway.
David Goldstein:
Right, and again, I think, getting back to what we talked about in the Time magazine piece today, what he’s explaining about Bidenomics, about middle-out economics is really it’s this story about cause-and-effect. The old way we thought about the economy that justified the trickle-down policies was that the economy basically grows wealthy when people invest in creating jobs, when the wealthy invest their capital, the job creators. Our policies in the past had been focused on enabling job creators to invest their money in creating jobs and, eventually, the benefits of having more jobs would trickle down to everybody else.
What Biden relentlessly tells us, and which he tells us in the State of the Union, is that, no, you got cause-and-effect backwards, that in fact it’s the middle class that is the primary cause of growth, that when the middle class does well, everybody does well, and so he outlined an agenda for investing in growing and improving the capabilities of middle class Americans.
Paul Constant:
What does that look like in action? What does that look like in terms of policy?
David Goldstein:
Right, so we’ve seen the policy very specifically and, again, the Biden administration has been clear about that, that there are these pillars of Bidenomics. One of them is investing in America. We’ve seen that most clearly in the CHIPS Act, the Inflation Reduction Act. We’ve seen this, and so, again, we’re going to talk about a really important departure from Orthodox economic thinking. One of the core arguments of trickle-down is you want to get government out of the way, that government spending investment is always less efficient than the market and that, when the government spends money, when the government tries to invest, it crowds out private investment.
That’s not how the CHIPS Act and the Inflation Reduction Act were intended to work. What they’re doing is investing in things like semiconductor manufacturing and green technologies in the hope of attracting more private investment, and we have seen exactly that. We have seen hundreds of millions of dollars of private investment into semiconductor manufacturing in the United States, and this is real. They are building those plants now. These are jobs that are created now, first, in construction and then, later, in manning these plants, and this has happened before any of the CHIPS Act money has actually been spent. It has simply been the promise of that government investment and government subsidy that has attracted the private investment.
It’s proven to be, rather than crowding out private investment, it has crowded it in. That is very different from the policies of the past which have been maybe we’ll give some tax credits after the fact. Another pillar of Bidenomics and, again, this is according to the Biden administration, is this focus on empowering workers. This is really important because we’ve seen two different economic theories operating at once over the past couple of years. On the one hand, you have the Federal Reserve which has been working as hard as it can to disempower workers.
That sounds cynical, but let’s be clear. That is the economic theory behind raising interest rates. It’s not just to make it more expensive for consumers to buy stuff by increasing credit card and mortgage interest rates. It is mostly to slow the economy by decreasing investment in expanding jobs, building semiconductor manufacturing plants and hiring more workers and so forth. The reason why you want to do that is this idea that inflation is largely the result of a wage price spiral, that when wages go up, inflation goes up.
The Fed has always preferred to have low inflation than low unemployment regardless of what its actual mandate is, so the Fed was raising interest rates in an attempt to raise unemployment to reduce the power of workers to demand higher wages. That is the core mechanism through which raising interest rates is supposed to bring inflation under control.
At the same time, we have the Biden administration spending hundreds of millions of dollars investing in creating new jobs, in trying to build new manufacturing plants and expand these industries. They’re working at opposite ends, and it turns out that the Biden administration has been much more successful on their part than the Fed. Let’s be clear, inflation has come down, but the Fed’s proximate goal of driving up unemployment never happened. We have gotten disinflation at the same time. In fact, I think, just this morning, the November jobs report came out, and the unemployment rate dropped a tick to 3.7% which, let’s be clear, historically, is just to have it under 4% for so long is just unheard of. It’s truly amazing.
The third pillar, again, I’m sorry, I am taking breaths here, Paul. It’s an old radio trick that you can breathe and talk at the same time. The third pillar is this focus on competition. You see this in the administration’s 180-degree turn on antitrust enforcement. We are seeing the executive branch for the first time in 40, 50 years really working to prevent mergers and acquisitions in ways that are anti-competitive. Again, under the old Reaganomics’ trickle-down regime, the thought was, well, if competitive market leads to a combinations and monopolies, well, that’s efficient because you get these economies of scale, and our focus should be above all on promoting economic efficiency, that when the economy is operating efficiently, everybody benefits from it.
Bidenomics has a very different take on that, and that is competition is always more important in the long run than these so-called deficiencies and that we should be regulating the markets in a way that keep them competitive and prevent large players from dominating and being able to do things like, I don’t know, just hypothetically, Paul, fixing egg prices.
Paul Constant:
Yeah, I just want to go back and fill in some of the gaps there, Goldie, that you left because we often think of pillars as some sort of three distinct things that don’t cross contaminate. The important thing is investing in building semiconductor factories and in creating jobs and infrastructure. A lot of those policies incorporate the advancement of things like providing free or low-cost childcare to the workers, benefits for the workers, higher wages than our standard in their communities and things like that. That’s also empowering workers. I don’t want people to think that these things are three disconnected things because, when you invest in America, you are empowering workers especially when you have smart policy that is written, built in from the start with workers in mind.
David Goldstein:
Yeah, I think it’s important that you bring up the childcare issue because Biden was roundly criticized for, I think, the term was piggybacking childcare onto the CHIPS Act as if bringing semiconductor manufacturing back home has nothing to do with creating good jobs for working Americans, that they’re totally unrelated. Why would you dare attach the two together? You’re absolutely right that, all these pillars, it’s a nice way of dividing it up in an outline on a document, but, in fact, they’re all working together.
Paul Constant:
Yeah. Yeah. This is a trick I’ve learned that economists tend to use is they strip these things out and look at them singly. They want you to believe that raising the minimum wage will raise your costs and cut jobs, which it doesn’t. As we learned during the pandemic that, if you don’t have childcare, then you don’t really have a working economy because Americans have to take care of their kids and they can’t go to work. All of these things are connected.
We finally have a policy that is nuanced and thoughtful enough to address all of these things at once so that the companies can make money and make their products and make their semiconductors and distribute them without supply chain snags, and the workers are making money. This is all part of the same piece because, as you are so fond of saying, we all do better when we all do better.
It’s kind of impossible to talk about the year in economics without talking about the labor of it all, the hot labor summer that eventually turned into a hot labor fall, and I think we’re currently in the middle of a hot labor winter. I think one of the most striking economic images of the year was President Biden walking the picket line in September with the United Auto Workers. This is the first time at least in modern history that a president has so overtly sided with striking workers. He got a lot of heat for that. People said it was unprecedented and that it was unbecoming of him to take a side in this strike, but I think that it was actually a really consequential moment. To be clear, the workers won that strike. The workers workers got a 40% raise. They improved working conditions. They reversed a plant closure. They made all these incredible gains that more than made up for the losses that they’ve suffered since the Great Recession when they had to take a pay cut to save their companies from going under.
David Goldstein:
Right, which was pitched at the time as temporary, oh, until we get back on our feet.
Paul Constant:
Yeah. Yeah. Yeah. Well, they got back on their feet this year and through no help of their employers. We’ve seen strikes in places that they don’t usually happen. We’ve seen doctors go on strike to protest both low wages and low staffing in COVID. We’ve seen hotel workers in Los Angeles go on strike. We’ve seen Hollywood screenwriters and actors win on strike. Specifically, they wanted restraints on artificial intelligence which is encroaching into their field, and they made some important strides. They got the big studios to admit that artificial intelligence isn’t labor, that no artificial intelligence will ever be credited with writing a screenplay. I think that’s something that’s actually going to play out across a bunch of industries in the next few years. It was a major gain for workers.
David Goldstein:
These aren’t just gains for unionized workers. They’re gains for non-union workers as well. In an economy where only 8% of private sector workers are unionized, we saw, specifically and most dramatically with the auto workers strike, that after the big three automakers settled with the unions, the non-unionized companies, Hyundai, Toyota, Mercedes, et cetera, they granted similar gains to their workers obviously because, otherwise, they risk losing their workers to the unionized factory. Everybody benefits when labor does well. It just illustrates one thing our benevolent overlord Nick Hanauer always says, which is that employers don’t pay you what you’re worth. They pay you what you can negotiate. That’s why empowering workers is such an important part of the middle-out and Bidenomics agenda.
Paul Constant:
Finally, I think, in conjunction with all of these big middle-out gains that have been made this year both from the Biden administration and labor unions and just workers benefiting from a really strong job market, there has been a bunch of research this year that has gone a long way to proving that middle-out economics actually works and that trickle-down economics does not actually work in terms of growing the economy.
The biggest study this year that I don’t think got nearly as much attention as it should have because the media was so busy focusing on Larry Summers yelling about a recession coming any minute now, there was a report by Justin Wiltshire, Carl McPherson and Michael Reich that showed that raising the minimum wage to $15 an hour didn’t just not kill jobs, it actually created jobs. That’s a really important distinction. We always knew that that was the case. We always knew that, when workers had more money to spend, when restaurant workers had more money to spend, they would spend it in restaurants and create jobs with their spending. The studies are finally catching up to our understanding of the economy and they’re proving that middle-out economics actually works in the way that we’ve said it does.
David Goldstein:
Right. Again, as Nick always says, when workers have more money, businesses have more customers and hire more workers. Let’s be clear, most of the economy is in the bottom 80% of workers. The people at the top, with all that money, they can’t spend it all. It’s impossible. Our economy, 70% of GDP is consumer spending. When you impoverish the majority of Americans, when you have stagnant wages, stagnant incomes like we’ve had for the past 40 years, you are going to have a slower growing economy. When you increase wages faster at the bottom and the middle, well, these people are going to spend most of that money, and that’s going to be good for businesses in general, even the businesses who are paying higher wages.
After that litany of accomplishments, Paul, are you ready to declare victory? Have we won? Has this been the year of middle-out?
Paul Constant:
Well, I think it has been the year of middle-out, but I think that we have a long way to go before we completely change the economic paradigm. I don’t want us to die of a toxic positivity over here or anything. It’s important to remember that, as I said, we have a long way to go. We’ve got 40 years of damage to repair before we can get back to the point where the American middle class was at its strongest. There’s much to do
David Goldstein:
Right, and stories are sticky. We both know that as writers. Well, it’s really encouraging to seeing that middle-out narrative start to take hold and start to be used by politicians and pundits. It’s too early to think that we’ve won this battle. We need to keep pushing to change how people talk about the economy which, of course, is the whole purpose of this podcast.
Paul Constant:
Exactly. We’d like to close out this year by throwing it to you, the listener. If you have any stories of middle-out economics that you think that we haven’t talked enough about, if you have any questions for us, if you have anything to say about the year in economics of 2023, we hope that you will either send us a voicemail or an email. We’ll have the contact information in the show notes.
David Goldstein:
Since this is the last episode of the year, on behalf of everybody at Pitchfork Economics and Civic Ventures, we’d like to thank you for listening, and we hope you have a very happy New Year.
Paul Constant:
We’ll see you next year.
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@civicskunkworks and peek behind the podcast scenes on Instagram, @pitchforkeconomics. As always, from our team at Civic Ventures, thanks for listening. See you next week.