Part 3 – How Could Such a Great Economy Be Such a Bad Economy?

Working-class Americans are being left behind. There are now 44 million working-age adults without college degrees who are not earning a living wage and do not have enough income to maintain a middle-class standard of living. They come from all races and ethnicities, from rural and urban areas, and they have seen their futures undone by globalization, automation and of course, the Great Recession. Three-quarters of the jobs lost during the recession were held by those with a high school diploma or less. And through the post-recession recovery, it was the workers with at least some education or training beyond high school who captured nearly all of the job growth. Those with less education were the first to be cut and were never hired back. Now, those with only a high school education are 50-percent more likely to live in poverty than are those with some college or a two‑year degree. So, even as economists point out how we are in the tightest labor market since the 1990s, far too many Americans are disconnected from good work.

Against that backdrop, policymakers have suggested a host of solutions ranging from changes to federal tax policy and higher-education financing to unemployment and disability insurance programs. Albeit promising, policy solutions to the woes of our modern labor market have been stymied by the complexity of  restructuring entrenched systems — or a lack of political will to advance the transformative change that is required. It is a challenge complicated by shifting economic goalposts: Jobs are changing, and skills are being defined differently. In a Business Roundtable survey, 95 percent of CEOs reported they struggled to find workers with the requisite skills for the job openings. Fortunately, we need not craft new solutions from scratch. A growing cadre of on-ramps to good jobs already exist but rarely penetrate a national discourse focused on the growing disconnect between education and employment. They can be for- or nonprofit and have names like JobTrain, STRIVE, i.c.stars and Techtonic. And they are having a profound impact. On average, on-ramp programs report that at least 80 percent of their participants find a full-time role upon completion of the program, often doubling, tripling or even quadrupling their incomes.    

Things clump together; the periphery cannot hold. As you read this, Democratic presidential hopefuls are crisscrossing Iowa, trying to assure farmers that they share their concerns. Commentators are publishing opinion pieces about how Democrats can win back rural voters. Think tanks are issuing manifestoes about reviving heartland economies. There’s nothing wrong with discussing these issues. Rural lives matter — we’re all Americans, and deserve to share in the nation’s wealth. Rural votes matter even more; like it or not, our political system gives hugely disproportionate weight to less populous states, which are also generally states with relatively rural populations. But it’s also important to get real. There are powerful forces behind the relative and in some cases absolute economic decline of rural America — and the truth is that nobody knows how to reverse those forces.

Put it this way: Many of the problems facing America have easy technical solutions; all we lack is the political will. Every other advanced country provides universal health care. Affordable child care is within easy reach. Rebuilding our fraying infrastructure would be expensive, but we can afford it — and it might well pay for itself. But reviving declining regions is really hard. Many countries have tried, but it’s difficult to find any convincing success stories. Southern Italy remains backward after generations of effort. Despite vast sums spent on reconstruction, the former East Germany is still depressed three decades after the fall of the Berlin Wall. Maybe we could do better, but history is not on our side. What’s the matter with rural America? Major urban centers have always been magnets for economic growth. They offer large markets, ready availability of specialized suppliers, large pools of workers with specialized skills, and the invisible exchange of information that comes from face-to-face contact. As the Victorian economist Alfred Marshall put it, “The mysteries of the trade become no mysteries; but are as it were in the air.”

But the gravitational pull of big cities used to be counteracted by the need to locate farming where the good land was. In 1950 U.S. agriculture directly employed more than six million people; these farmers supported a network of small towns providing local services, and some of these small towns served as seeds around which various specialized industries grew. Nor was farming the only activity giving people a reason to live far from major metropolitan areas. There were, for example, almost half a million coal miners. Even then, rural areas and small towns weren’t the “real America,” somehow morally superior to the rest of us. But they were a major part of the demographic, social and cultural landscape. Since then, however, while America’s population has doubled, the number of farmers has fallen by two-thirds. There are only around 50,000 coal miners. The incentives for business to locate far from the metropolitan action have greatly diminished. And the people still living in rural areas increasingly feel left behind.

Some of the consequences have been tragic. Not that long ago we used to think of social collapse as an inner-city problem. Nowadays phenomena like the prevalence of jobless men in their prime working years, or worse yet, the surge in “deaths of despair” by drugs, alcohol or suicide are concentrated in declining rural areas. And politically, rural America is increasingly a world apart. For example, overall U.S. public opinion is increasingly positive toward immigrants. But rural Americans — many of whom rarely encounter immigrants in their daily lives — have a vastly more negative view. Not surprisingly, rural America is also pretty much the only place where Donald Trump remains popular; despite the damage his trade wars have done to the farm economy, his net approval is vastly higher in rural areas than it is in the rest of the country.

When General Motors idled its auto plant in Lordstown, Ohio , this month, President Trump adopted a familiar strategy: He issued a nasty string of tweets blaming other people and promised, in effect, that he would restore the past. Trump’s angry, backward-looking approach may still appeal to some Rust Belt voters. But in the Ohio and Pennsylvania towns that helped win the presidency for Trump in 2016, his vow to turn back the clock hasn’t worked out very well, and there are signs the Rust Belt may be corroding for him politically. Lordstown’s struggles, like those of other nearby factory towns, illustrate the harsh fact that manufacturing is a dynamic process. Old jobs are disappearing because of changes in technology and consumer preferences.

Trump’s response to Lordstown was to attack David Green, the United Auto Workers Local 1112 president, implying that he was at fault along with GM, and demanding that he “get his act together and produce.” Green had sent letters to Trump in July 2018 and February 2019 warning about threats to the plant. Trump didn’t respond. After Trump’s Twitter tirade, Rep. Tim Ryan, the Ohio Democrat who represents the Lordstown area, fired back: “The President’s tweet . . . is offensive and does nothing to help bring back the manufacturing jobs he promised to my district.” Ryan argued that “the best thing is to help” GM renovate the Lordstown plant and perhaps build electric vehicles there. Local residents said much the same thing to the Vindicator newspaper of Youngstown, Ohio, over the past few weeks: GM or a new owner should focus on new technology and making products people want to buy, rather than restore production of the low-selling Chevrolet Cruze.

Trump is vulnerable in the Rust Belt because he made such extravagant promises when he successfully wooed voters in 2016. “He won this area — a largely Democratic area — and he has not said a word yet, and that’s just pathetic,” warned Jim Graham, a former union leader at GM Lordstown, during an interview with the Vindicator back in November, when GM said it planned to halt Cruze production there. Local residents remember Trump’s proclamation at a July 2017 rally in nearby Youngstown: “Those jobs [that] have left Ohio, they’re all coming back . . . Don’t sell your house.” Tommy Wolikow, a former Lordstown worker, told the Vindicator: “I kind of turned into a Trump supporter at that time. I believed what he said. Almost two years later, I’m seeing nothing but job losses.” Homeowners in Youngstown certainly haven’t seen a boom. According to Zillow, the online realty broker, the median price of homes currently listed in Youngstown is $39,900. The national median price of homes currently listed is $279,000. Browse the real estate ads for factory towns across Ohio and Pennsylvania and you’ll see just how tough it is to be a Rust Belt resident, trapped in a downward cycle.

In Canada, everyone in the country is guaranteed access to health care by the government. The same is true for France, the United Kingdom, Germany, Netherlands and every other country that we think of as comparable in terms of levels of wealth, democracy and economic development. In spite of providing universal care, these countries also all spend much less on health care than the United States. In Canada, per person spending is 60 percent what it is in the United States. In Germany spending per person is 56 percent and in the United Kingdom just 42 percent of what we spend. And these countries all have comparable outcomes. People in other wealthy countries not only have longer life expectancies and lower infant mortality rates, they also have comparable outcomes when looking at more narrow health issues like treatment for cancer or heart disease.

The basic story is that we spend roughly twice as much per person as people in other wealthy countries and we have pretty much nothing to show for it in terms of better health. This is the context in which critics of Medicare for all are telling us it is not possible. If the argument is that it won’t be easy, the critics have a point. The reason we spend twice as much for our health care is that big actors in the industry get twice as much money here. Drug companies get away with charging us twice as much for drugs as they do in other wealthy countries. The same is true for medical equipment companies who charge far more for kidney dialysis machines and MRIs than in France and Germany. And our doctors and dentists get paid twice as much on average as their counterparts in other wealthy countries.

In addition, we spend more than $250 billion a year paying insurance companies to administer our chaotic system. Doctors’ offices, hospitals and other providers spend tens of billions more on administrative personnel who have to deal with the paperwork and issues that are caused by having a range of insurers, each with their own payment rules and practices. These interest groups will use all of their political power to protect the income they get under the current system. The pharmaceutical industry will fight measures to rein in their profits in the same way the tobacco industry fought public health advocates who sought to curb smoking. The same is true for the medical equipment industry. And doctors and dentists will fight like crazy to preserve a pay structure that puts most of them in the top 1 percent of wage earners. This will also be true of insurers faced with a more efficient system that will put most of them out of business.

While a well-designed pathway can get us to Medicare for all, even we can’t do it all at once. For beginners, we can look to lower the age of Medicare eligibility from the current 65 to 60 or even 55 in an initial round. We can also allow people of all ages to have the option to buy into a public Medicare-type system. We can also look to start getting our costs down. This means lowering drug prices, both by negotiating in the same way as other countries, and directly funding research so that newly developed drugs can be sold as cheap generics. We should do the same with medical equipment. And we can subject our doctors and dentists to the same sort of foreign and domestic competition that workers in other professions face. These steps can get us on a path to Medicare for all, on which we will quickly be extending coverage to millions of people, while substantially reducing the cost of care for everyone. We are smart enough to be able make the same sort of guarantees on providing health care as every other wealthy country.

One key flaw in the logic is that Trump’s brilliant new policy agenda does not actually exist. The Economic Report calls for a massive new infrastructure investment program. That probably would increase growth. But Trump never bothered to negotiate any such plan when his party controlled Congress. His current budget proposes to cut infrastructure spending. And Trump’s regulatory agenda of putting lobbyists in charge of all the agencies, and allowing coal plants to spew more pollutants into the air, and so forth, is working whatever market magic it’s ever going to work. The Trump tax cuts were a massive lump-sum transfer to business owners from everybody else. Other than temporarily give the economy a slight jolt at a huge permanent cost to the Treasury, that’s all they did. Even Trump’s own economists are finding it impossible to pretend that their promises are going to come true.

More Ideas & Suggestions for Dems

Options for more progressive taxation, especially relevant in this era of ballooning income inequality: vox.com/2019/3/19/18240377/estate-tax-wealth-tax-70-percent-warren-sanders-aoc

See these excerpts in the opening to democrats-aoc-ocasio-cortez-socialists-pelosi-congress-left-tea-party:

A wave election in midterms leading to a new House majority, won with victories by moderates in swing districts. A few freshman members in some of the safest seats in the country pursuing an ideologically “pure” agenda that riles up the party’s base but could endanger the moderates who were essential to winning the majority. It’s all so familiar. And I would know. In 1994, I was part of a Republican wave that retook the House for the first time in four decades. I represented Northern Virginia, where many voters are centrists and expect their representatives not to be beholden to the extremes in either party. And over my seven terms—including a stint leading the National Republican Campaign Committee for two election cycles—I saw my conservative credentials questioned and denied by some on the ideological right. It was a prelude of things to come.

After I left the House in 2008, I watched as the Tea Party wave crested in 2010, the House Freedom Caucus formed, and a new GOP House majority succumbed to infighting where members from the most safely deep-red Republican seats set the terms of the debate, held legislation hostage and endangered the reelection of moderates and more pragmatic members. I witnessed the transformation of my party into one increasingly challenging for centrists. And now, I’m seeing the same thing happening to the Democrats. Just as her Republican predecessors had to manage the Freedom Caucus’ demands for legislation that would endanger more vulnerable Republicans, Speaker Nancy Pelosi has to govern around the left’s highly energized and emergent “Herbal Tea Party” segment. That wing, led by vocal freshmen, is rooted in solidly Democratic, highly urbanized areas where incumbents’ only worry is securing their party’s nomination—and to do that, they need to appeal only to the base. Meanwhile, the many freshmen Democrats elected in traditionally red districts—who must hew to the center to have any chance of being reelected in 2020—get painted with the same brush, imperiling the party’s majority.