More will come. Several contenders for the 2016 GOP nomination, including Romney and Marco Rubio and Jeb Bush, have adopted what you might call populist rhetoric on middle-class stagnation. Political reporters are declaring this the defining issue of the campaign.
Middle-class Americans have heard lots of happy talk like this before, and they’d be right to be skeptical. The last several elections were supposed to be about the economy and getting working people back on their feet. You see where that got us. What’s different now?
Proof will come in the details – specifically, on two questions candidates and think tanks must answer as they churn out their plans to get the economy working for middle-class workers again.
The first question is, what’s new? Which plans attempt to target the real kinks in the economy that are holding middle-class workers back – and which ones just coat new paint on the same ideological jalopies that candidate or group has been pushing for years?
The second question is, do those proposals, new or not, seek to solve the real problems at hand?
The strongest plans will come with a real theory of the case. Be wary of the simple ones. Anyone who tells you that middle-class stagnation is all about regulations, or about unionization, or about immigration or trade or robots, is vastly understating the nuances of how the American and global economies evolved over the last quarter-century.
CAP, the liberal think tank that released the mammoth “Report of the Commission on Inclusive Prosperity” last week, has a theory. It boils down to, to get middle-class incomes rising again, workers need more power and education – and companies need better incentives.
The report is a blend of classic liberal economic agenda items – raising the minimum wage, empowering labor unions – and several fresher ones. Most of the newer material comes from the corporate incentives side of the equation. The report’s U.S. policy proposals section leads off with ideas on expanding worker profit sharing; later, it endorses several changes in the tax code meant to influence corporate behavior, including raising capital gains taxes in the manner Obama endorsed over the weekend and other disincentives to high executive compensation.
“The reality is that if you look at the last five years, corporate profits are very high, at historic highs, and the value of firms is moving to dividends and to management,” Neera Tanden, CAP’s president, said in an interview last week. “The value is moving up the company, not down. The question is, how do you realign incentives to change that dynamic?”
Other dynamics affecting the middle class go unaddressed in the report, though. Most notably, there’s nothing big on reviving entrepreneurship, a longtime vehicle of American economic mobility that has eroded over the last few decades, even as it surged in other wealthy countries.
This is an opening for future reports and future candidates, from either major party. There are others, too – mysteries of how to help low-income students complete community college (just giving them money for tuition could be a start, but research suggests it’s probably not enough) and how to encourage the brightest American students to take jobs that foster innovation that benefits the economy as a whole, and not just their own pocketbooks (in other words, how to steer more top students away from Wall Street and K Street).
Tanden said last week that “the feeling and the reality of declining prospects for the middle class, particularly in the U.S., is reshaping politics in a fundamental way.” She’s undoubtedly right. The question that matters, for Obama tonight and for the candidates to come, is whether policy can keep pace.