We meet the two economists outside a gourmet coffee shop where laughably expensive beverage prices have somehow, in contradiction to all known economic theories, failed to reduce the length of the line. It matters not. We're not here for java. We're searching for that very elusive thing known as The Economy.
Everyone has a general notion of what The Economy is. It's American business. It's the gross national product. Wages. The unemployment rate. Housing starts. Durable goods. Not-so-durable goods. It's all these things and many more, mixed together, a seething, frothing brew of human activity, somehow reduced, through the miracle of modern partisanship, into a political issue. The Republicans and Democrats, with their different philosophical eyewear, see radically different economies.
To sort it out, we called in the experts. Kevin Hassett and Jared Bernstein are your classic Washington economists. They normally spend their time in think tanks (Hassett at the American Enterprise Institute, Bernstein at the Economic Policy Institute -- "Two blocks away in distance, miles away in ideology," notes Bernstein). You've probably heard them on the radio or seen them on TV, mulling the Leading Economic Indicators or the latest incremental change in the unemployment rate.
The conservative Hassett has a rather precocious way of smiling -- it's really almost a sly grin -- as he talks. Perhaps this is because Hassett thinks the economy is in grand shape, humming along nicely.
The liberal Bernstein has worry lines on his forehead. You might argue that he wears a scowl, though he's the friendliest wonk you're ever likely to meet. He's alarmed by what's happening in the economy. Job growth is still too sluggish, and wages -- wages! -- are appalling, coming nowhere close to keeping up with resurgent corporate profits.
They agree on one major concept: that America has a lot of inequality. That boom times for the affluent do not necessarily translate to boom times for the poor. But that's about where their agreement stops.
We're going to drive around town, check the economic scene, meet real people, put our assumptions to the test. We're going to decide if the economy is good or bad. Mostly we will be stuck in traffic.
Gators in the D.C. Swamp
The Economy is not easily pinned down. It's not a single thing.
"It's everywhere," Bernstein says.
His office is just above us, at the corner of L and 17th. Away from his desk, where he keeps his statistics and position papers and charts, he's an unarmed economist, forced to survive on his wits. Bernstein is someone who responds to many questions with a variation of the line, "I've got a graph on that."
He says to Hassett: "You ever have your kid ask you what you do for a living? It's much easier to explain if you're a policeman or a teacher. She definitely understands that I make a lot of graphs."
As they're talking on the sidewalk, the air is suddenly filled with the sound of screeching rubber and crashing steel. A fender bender. A cab has bumped a commuter's sedan. When you're a professional economist you can take such an event and translate it into economic terms.
"That's a productivity killer and a GDP enhancer at the same time," Bernstein says. Sure, the commuter and the cabby and the cabby's passengers will be bollixed up for a while, coping with the traffic mishap, being unproductive, but the accident causes the instant obsolescence of a lot of stuff that must now be replaced -- a radiator, a hood, a side panel. This will drive the Gross Domestic Product forward. Maybe the commuter will go buy an entirely new car.
"Misery makes GDP go up," Hassett says. If you want to stimulate the economy, "a hurricane is excellent," Hassett says. On this midsummer morning it's just a hypothetical, and no one has yet heard of Hurricane Charley.
Economists are as plentiful in Washington as gators in the Everglades. This is the great swamp of statistics, the place where raw data is assembled, processed and analyzed for the purpose of creating rational economic policies. Statistics become ammunition in partisan wars. Each side accuses the other of using old, deceptive or irrelevant numbers. It would be easy for a citizen to decide that no one is telling the truth, that it's all just a game. But at the core, there's a legitimate debate about the interplay between the government and the private sector. Ours is a "mixed economy." Everyone has their own recipe for how much of this or that should go into the mix.
We're barely underway in our journey, heading east on L Street, when Hassett sees a city bus and floats the idea of privatizing bus service. It's outrageous that it's illegal, he says, to run a private bus service to compete with public bus systems. What is driving Hassett's argument is the conviction that competition is good for the consumer.
Bernstein is appalled. Hassett's plan, he says, would result in a system with a class of elites scooting around town easily while "the middle class would be royally screwed."
"I totally disagree with that," Hassett responds. "In New York, with these jitneys and vans, they mostly serve the poor."
Bernstein disputes that. He did social work in New York, it's just not true.
"You want private transit, jump in a taxicab!" he tells Hassett.
As we're passing the Cato Institute, the libertarian think tank, the topic somehow shifts to, of all things, dogs in China. The Chinese, Hassett says, have high taxes on pets. If you want a pet it's going to cost you. The result is that you can cross the country and rarely see a dog.
This detour to the little-appreciated Chinese dog question is a reminder that today's economists have to keep an eye on the rest of the world. Indeed, to a remarkable degree the morning's conversation keeps veering into questions about foreign economies. The economies of nations are now inextricably linked. As jobs are outsourced to places like India and China, American workers often are thrown into unemployment.
"I think there are very significant transitional costs," Bernstein says, speaking the tongue of the economist. "It creates losers and winners. We've had huge classes of workers who have been hurt. Right? Do you agree?"
Hassett concedes the point. He even agrees, in general, with the notion that there are Two Americas, a concept made famous on the stump by Democratic vice presidential nominee John Edwards. He defines them: "The big America where most people live, where if you've got spunk and drive you can achieve great things and great happiness. And then there's the small America where even if you are blessed with those things, you're dealt such a bad hand at the start, you're stuck there."
Hassett doesn't think this Second America, the one left behind, is as large as the Democrats say it is. More to the point, he doesn't think the Democrats have the right policies to help the poor. He argues that tax hikes on the rich could translate into a weaker economy, which would translate into job losses and wage cuts for the poorest Americans.
Both men come from modest backgrounds. Both, in fact, are the sons of schoolteachers. Hassett's parents taught English and kindergarten. His mother was the first in her family to go to college. Bernstein's mother taught physical education. Bernstein's father, a physicist, died when he was 7 years old. That youthful trauma, he thinks, made him more sensitive to the plight of the disadvantaged. His grandparents were Ukrainian Trotskyites -- he thinks he has social consciousness in his blood. He spent several years in New York as a jazz musician, playing bass, and then decided to become a social worker and eventually an economist.
Both look pretty out of place at our first stop, the wholesale food market north of Union Station, one of the under-appreciated landmarks of Washington. It's Globalization Central. Half the signs are in Chinese. Retailers come here to pick up foodstuffs of every imaginable variety. Fresh beef knuckle. Cow skin. Cow feet. Smoked goat.
A guy in a sleeveless shirt stands behind a van that is being loaded with clear plastic bags of fresh bean sprouts and cardboard boxes of frozen Uruguayan beef ("frigorifico matadero carrasco"). He's Erik Rutkowski, a law school grad waiting to be admitted to the bar in Pennsylvania. Where he lives, he says, a Corning plant closed recently, putting 2,000 people out of work.
"You want to know how bad it is? People don't hire attorneys if they're not working enough," he says.
When the economists walk away they agree that Rutkowski is perhaps underemployed, shuttling food to Pennsylvania. But that doesn't mean globalization is inherently bad, or that the Corning plant should have been prevented from closing.
"We don't want to protect the buggy whip industry," is how Hassett puts it.
"The debate is really about what kind of trade we want to have," Bernstein says. "How can you amplify the benefits and diminish the costs?"
There's no obvious answer to that. Indeed there's a good reason economics is called the dismal science: No one is really sure of anything. Most of the statistical measurements of the economy were devised in an earlier, simpler era, pre-globalization, when you really could get a pretty good sense of the country by looking at, say, durable goods orders.
Statistics can be deceptive. They don't measure what really counts, the quality of life. The economy can be going full throttle, for example, even as many workers become increasingly concerned about rising health care costs, crumbling schools, the tensions and frictions of modern life. The economy doesn't move as a single unit. There are leading indicators and lagging indicators. Corporate profits boomed last year while wages remained nearly flat. In any conversation about the economy one must stipulate whose economy you're talking about. The longshoreman's? The trial lawyer's? The recent college graduate's? The chief executive officer's?
There are strange times -- this could be one of them -- when "the economy" does a bit better than "the people."
We drive to H Street, a depressed commercial thoroughfare north of Capitol Hill. There are boarded-up storefronts, trash in the streets.
"The job market is slow, especially for youngsters and ex-offenders," says Elijah Williams, strolling down the sidewalk with two colleagues from D.C. Employment Services. Many young men in the neighborhood have little interest in job training, they say, and are more likely to be lured into the drug trade.
"Most of the young ones, nowadays, they hustle. They can make more money in a day than they can here in a week," says another of the men, Anthony White.
The brief exchange triggers a debate between the economists. Hassett likes the idea of training vouchers -- giving an individual the money directly, rather than funneling it through a jobs training program. Bernstein would rather the government create jobs that can siphon up the "excess labor capacity" -- that is, people who are ready to work but can't find it.
"So Jared is on the record as saying that D.C. has too few public employees," Hassett says.
"Absolutely," Bernstein says.
We hit Pennsylvania Avenue SE, a gentrified strip. The economy here is thriving. A couple of electricians are taking a cigarette break on the sidewalk. They're union guys, they make about $30 an hour, they got trained in union school, paid to learn a skill. The recession barely put a ripple in their lives, they say.
"With all the government work, we probably didn't get as much of a dip as some of the other cities," says Jason Walter, 31. His good job and steady pay allow him to drive a 2004 Ford Explorer.
Here's another wrinkle in the economy discussion. The electricians are like walking advertisements for organized labor. Hassett, as a pro-business conservative, argues that unionization itself isn't responsible for their success.
"Those were some smart guys, I think they'd be successful whatever they'd do," he says.
"Aha!" says Bernstein. "He thinks the world's a meritocracy, and I totally disagree with that."
Here we've come to a fundamental fault line in the conversation. If Hassett is right, the economy is pretty efficient at distributing rewards -- "on average the economy does a very good job at matching able people to positions where they can contribute," he says.
But Bernstein thinks the economy isn't that efficient. It needs help from the government. It needs intervention, some tweaking, pushing, shoving if necessary. Bernstein has graphs ("transition matrices") showing that, despite much rhetoric among conservatives about creating an "opportunity society," Americans in recent decades have shown no improvement in their ability to climb the socioeconomic ladder. In fact, the numbers show that it's becoming slightly harder for an individual to migrate upward, and that the most affluent Americans are more firmly ensconced at the higher levels of income.
Hassett, for his part, says, "The question is, is the 'two Americas' problem growing better or worse? I think on that we don't know."
But there will be some more numbers along any minute to help us figure it out.
Two Sets of Facts
As we head back toward our starting point, the economists start talking about -- here we go again -- Germany. The labor market in Germany! Hassett says unions have far too tight a grip on the German labor market and no one who is out of work can ever get a job; Bernstein says poor people in Germany at least have health care.
"They're moving here!" Hassett roars.
"No, they're not!" Bernstein says.
Bogged down intellectually. You can't have a debate when you can't agree on the basic facts of the matter.
And even then, Bernstein thinks, the political system will distort the argument.
"You have a real faith that the truth will out," he says to Hassett. "I'm not as optimistic as you are."
Back at the corner of 17th and L streets, they pose for a photo as the city hustles and bustles around them, thousands of people rushing somewhere, producing, analyzing, servicing, cleaning, buying, doing innumerable things that express the human drive to consume, build, change, reinvent.