Is the US Economy Working? One Influential Economist Says No

CHRISTIANE AMANPOUR: Now, the United States economy is going through its longest expansion in history, but is it working for everyone? That, of course, is the battleground on which the 2020 election is being fought. Heather Boushey is CEO of the Washington Center for Equitable Growth. And she warns that wages aren’t rising as quickly as the economy. And she tells journalist Tanzina Vega the answer must be political.

(BEGIN VIDEOTAPE)

TANZINA VEGA: Heather, thanks so much for joining us.

HEATHER BOUSHEY, PRESIDENT AND CEO, WASHINGTON CENTER FOR EQUITABLE GROWTH: Thank you. It’s a real treat to be able to be here today.

VEGA: So, the most recent job numbers have unemployment at less than 4 percent. This caused a fury on social media. People were saying, the economy is so great. People have jobs. Are they right? Is the economy doing on great?

BOUSHEY: Well, yes, on the one hand, right? We have low unemployment. We’re in the longest economic recovery in recorded U.S. history going back to the mid-1800s, when we started counting the business cycle. Stocks are up. Profits are up. So there’s a lot of indicators that the economy’s doing really well. And yet, for far too many families, they’re not seeing that kind of economic progress. And, in fact, when unemployment is low, we actually haven’t seen wages rise as much as one would expect, given the low rate of unemployment. So this is an economy where it’s moving forward, but it also isn’t benefiting everyone to the extent that we think it should and we think that the economy could be.

VEGA: Now, I don’t want to rain on the economy’s parade, but there are a couple of things that stand out to me when I think about whether or not we’re in a good economy. And here’s what I’m thinking. Health care is still really expensive. A lot of Americans are still paying out of pocket. Retirement savings, a lot of folks still don’t have what they need. Rent and mortgage payments are going up. Savings are kind of flat for a lot of folks, and just overall wealth inequality is growing. So can we still say the economy is strong for most Americans if all those indicators are still at play?

BOUSHEY: I don’t think we can, right, because implicit in what you just asked, or the way you just laid that out, is that there’s one thing called the economy, and then there’s something else, which is how people are experiencing changes in their living standards, changes in their economic security. Those are the same thing, right? So it is the fact that we have these jobs, we have — we do these investments, we have these firms. They create this thing that we call the economy. And if people aren’t benefiting from it, then we have to sit back and ask ourselves, well, what is this thing we call the economy? What is it for? Who is it benefiting? And, I mean, that is, I think, where the most interesting new research in economics is really asking that big question. But — so the short answer to your question is, no, things aren’t going well in the economy if, is it actually delivering across our society?

VEGA: So the rising tide isn’t lifting all boats, if you will?

BOUSHEY: No, not at all. And in fact, I mean, it used to be the case, right? It used to be the case, in the 1960s and ’70s, that when the economy grew, everyone benefited. And, in fact, we grew — we were a country that grew together. And really, since 1980, late ’70s, early ’80s, we have been an economy that’s been growing apart, where a rising tide no longer lifts all boats. In fact, when we get those numbers on gross domestic product on how well our — quote, unquote — “economy” is doing, now economists have shown that actually 90 percent of Americans are experiencing growth that is less than that average. It’s only those folks in the top 10 percent, the top 10, that are seeing growth that is at the average or above. So we really are no longer a country where a rising tide lifts all boats.

VEGA: How do you explain the consolidation of wealth in the United States into this top 10 percent, into the top 1 percent, even? Like, what’s driving that?

BOUSHEY: So, there’s a number of things. So, one, sort of mathematically, rising incomes, right, rising income inequality, with those at the top getting more and more, sort of naturally transmits itself into rising wealth inequality, right? So those at the top have more and more income year after year. They save a lot of that money because they don’t need as much, and so then that sort of calcifies into rising stocks of wealth. So that’s one way that we’re seeing it. But we’re seeing something happening across firms as well. So we have been seeing the ways that firms pay out dividends, the way that we have seen this rise in firm concentration is also connected to this rise in the concentration of wealth. So you have a smaller and smaller number of firms across a lot of industries in the United States, and fewer and fewer people benefiting from those firms, which is also connected to this rising concentration of wealth.

VEGA: So, when I think about American workers today in particular, I think about — there are many strains of American workers. But one idea that comes to mind is the fact that people are really out there asking for a standard wage, $15 an hour for a lot of folks, a minimum wage that they can at least live on. And you think $15 an hour in New York is almost impossible.

BOUSHEY: Right.

VEGA: But, at the same time, there’s this feeling that American workers are just on a hamster wheel, that they’re constantly trying and just not able to keep up. You have written about work-life balance. Is that possible when you’re still trying to just get to $15 an hour? Is it possible to really achieve something like work-life balance today, when companies are just making more and more and worker productivity is really high, and yet we can’t make ends meet?

BOUSHEY: It’s a great question. And it starts with the fact that, as you pointed out, we are an economy that is creating value. We are creating — there’s a lot of money being made. We continue to live in one of the richest countries the world has ever seen. Right? So there’s a lot of firms that are making a lot, but how is that being shared? And how are we investing in those workers and making sure that they have the wages, so that they can support their families, so that they have the money to afford the kinds of care that they need? Are we making those public investments so they have access to child care and other elder care and the kinds of things that families need to adjudicate that work-life, those conflicts day in and day out? And do we have a set of rules around the labor market that give people the right to stay home when they’re sick or when they need to care for a new child or need to care for an ailing family member? So, I think on the — I think, certainly, we can certainly that, but it requires coming to terms with the fact that that’s going to — we’re going to have to push firms to share those — the benefits of economic growth. And the challenge right now is that we have fewer people in unions today as a share of the private sector work force than we did before unions — before people had the right to collectively bargain in the 1930s. So our unions are back to where they were over almost a century ago, and we don’t have the institutions in place to give people that voice at work to make those policies happen. And we’re going to need to be thinking long and hard about how we’re going to make that next generation of supports and opportunities for that kind of voice and engagement.

VEGA: How do we get Americans or more Americans to understand and connect the dots here between lack of day care services, for example, the pay gaps that we’re seeing, and all of the ways that poverty in particular affects different types of communities? I mean, I’m thinking, in the most severe situations, we’re thinking criminal justice, right? If they’re not able to be employed, if there aren’t opportunities there, whether they are education or otherwise, the pads are pretty different. And so we’re spending so much money as a nation on incarcerating people, as opposed to educating them. It almost cost more to incarcerate someone than it does to educate them. How do we get Americans to make that connection, and not just progressive Americans, but really across political lines to understand, that, without these investments, we have — we’re going to spend more than we are in one way or another, right?

BOUSHEY: I mean, that is the question of our times. And how do we do that when we’re starting from a place where we’re so divided? So we have been working hard with folks on the Hill to introduce a new way of thinking about aggregate economic output, about gross domestic product, this indicator that we get every quarter that shows how well the economy’s doing, and saying, we need to not just look at that top-line aggregate, but we need to look at that, what that looks like across families, so that we can see, OK, if we hear from the government, oh, the economy grew by 2.5 percent over the last quarter–

VEGA: What does that mean?

BOUSHEY: Yes, who did that go to? And so we actually have the capacity. Economists have worked out how you can actually show, oh, well, of that 2.5 percent growth, one of those 2.5 percents went to those at the very, very top. And this little bit just went to the bottom half of the American people, and what that looks like across race, across place, and cross families. So we have the capacity to do that. And we have been working with folks on the Hill to introduce legislation and to get the government to actually shift the way they’re doing that. That’s not the whole answer. But I think if we can unpack our metrics of economic success, and talk about what that actually looks like, for families all across the United States, all across the income distribution, we will have a very different conversation about how well we’re doing. And we won’t be sort of confused by saying, oh, well, it looks like the economy is so good, but some people aren’t benefiting. And I think it would also help us see that those investments that we’re making in people and families aren’t just about those families, which is very, very important, but it’s also about how that is benefiting our whole economy, and that we’re going to be stronger as an economy if we make those investments in those communities.

VEGA: There are people, however, who will say the economy is working great for me. Why should I care? What do you say to them?

BOUSHEY: Well, I mean, so what I can tell you from the data is that most of them are at the very top of the income ladder. And that’s awesome. That’s really great. But I also think we all can recognize that we are a country that is experiencing a lot of political polarization. And it feels like every day you see these different maps of the United States that show that growth, right — you can see how growth is concentrated in certain parts of the country, and not others, and that not everyone is benefiting. So, yes, it is true that some are doing quite well. But if we want to maintain our identity as one nation, right, where were we value what’s happening to our fellow citizens, I think that — like, sort of tugging on the fact that it might be great for you, but we’re not going to be able to maintain that sense of common purpose if we don’t take some time to attend to the common good.

VEGA: We have not been able to solve the problem of growing wealth inequality across political lines. Is there — and I know this is a tough one with this election coming up, but do you see a way for us to be able to do that?

BOUSHEY: So, here’s the interesting thing about the political divide and economics. So one of the things that you saw with the rise of Donald Trump is that he has, in many ways, upended the conservative economic narrative. I mean, on the one hand, he was for tax cuts, in the same way that we have seen conservatives putting into place for many decades. But he also spent a lot more time talking about jobs and the rule of using the bully pulpit to encourage firms to do the right thing, when he first came to office and he talked about the Carrier plant. And, of course, he’s been really willing to raise tariffs and to change the way you think about the global economy. Having said that, there’s also, I think, a really important story of how we have thought about how we see economic progress, how we see economic growth and what that means. And for the latter half of the 20th century, we were told a story and policy-makers really believed in a story that said that it was about the individual investments that those who had money were making, and so the best thing we could do for the economy was to get out of the way, don’t tax them, don’t regulate them, and they will create those investments that then will create the jobs that everyone will benefit from.

VEGA: Trickle-down economics?

BOUSHEY: Yes. There was this idea that the economy could really deliver this kind of — sort of almost utopian, that it was optimal. You could show in these models that economists used. What we’re learning now from the research and the evidence is that we have had that story wrong, or, at the very least, that story doesn’t work when you have high economic inequality, that you actually need institutions that constrain inequality at the top and create a countervailing force to balance that concentrated economic power to create the kind of investments and opportunity that are going to move the economy forward. So this question of why we have this polarization, right, we have this economy that isn’t delivering, it’s mysterious to people, people don’t — we have been told this story about how it’s going to work. And yet it hasn’t. And I think we’re in this moment of real change in our policy-makers and how economists and the public are thinking about what we can do to create an economy that works for all. And so moments when you’re changing your understanding of the world around you, I think, can lead to this polarization, can feel very chaotic. But the research and the evidence that we’re seeing coming out, especially over the past 20 years, and increasingly over the past five or so, really does show that addressing economic inequality, and especially inequality at the top, is going to be imperative to creating strong, stable and broadly shared prosperity in the years to come.

VEGA: We’re on the precipice of a major presidential election in this country, with candidates representing all sides of the political spectrum, but also the economic spectrum. When you look at what President Trump and his philosophy is on big business and corporations slashing the corporate tax rates, et cetera, and you look at some of Bernie Sanders and Elizabeth Warren, for example, and how they’re approaching — Elizabeth Warren is — some would argue, is frightening big corporations, because she wants to tax them. Which message is really resonating with Americans, do you think, right now?

BOUSHEY: I’d like to focus on two things, right?

VEGA: Sure.

BOUSHEY: So, first, you mentioned that — President Trump’s view on corporations and how he’s seen about the economy. And, of course, he put into place that — with Congress’ help — that significant tax cut in December of 2017 that went disproportionately to corporations and disproportionately to families at the top of the income ladder. It has been clear before that legislation passed and after that the majority that the American public has recognized that that really wasn’t going to benefit them. And what we have seen is that that legislation, instead of spurring investment, as President Trump said it would, it actually led to a lot of firms doing stock buybacks, not increasing wages, not making the investments that we were told, if you cut their taxes, they will use all that money to invest. That hasn’t been happening. And you see that being reflected in polls and the way that people are responding. So, my understanding is that a lot of people see that, oh, that was just a boondoggle for those at the top. It didn’t actually benefit me, my community or to create those good jobs. But the second big economic issue that you’re hearing a lot of people talk about now is the role of economic concentration across firms. And alongside that, you have actually seen a decline in the level of investment in the United States that one would think, given the level of profits out there. And economists have been tracing this to the rise in economic concentration. And so it’s like, well, if you’re the only — if you’re one of two or three players in a big market, why do you need to invest? You’re already — people have to buy whatever it is you’re selling, because there’s not a lot of competition. That really doesn’t benefit workers and their families. And I think you hear a lot of candidates talking about this issue. And I think you’re seeing this also bubbling up in the polling and how people are talking about the economy. You’re seeing people, I think, start to recognize this for what it is, which is monopolies and oligopolies, and that that’s also not good for their jobs in their communities.

VEGA: Heather, thanks so much for being with us.

BOUSHEY: Thank you. It’s been a real treat.