The struggle of the middle class is "not because the economy is unfair or because the deck was stacked," says Jim Kessler, Third Way's senior vice president for policy. "It's because the economy has fundamentally changed."
The difference there is crucial, for policy and for messaging. One side believes what's gone wrong for the middle class is that wealthy and powerful players have rewritten the tax code, trade deals, labor law and other policies in order to advantage themselves, at the expense of workers. Middle-class stagnation, in this view, is a choice that can be corrected by shifting power back to workers, at the bargaining table and elsewhere.
The other side, the Third Way side, believes that the stagnation is a natural consequence of a globalizing economy, which has disproportionately benefited people with high skills and people who own stock, businesses and other forms of capital. That's the story Kodak is meant to represent. Its demise wasn't imposed by someone else's policy choice, it was a failure of the company to adapt. To boost the middle-class, by that logic, workers need to be given the means to adapt.
This is a live and sometimes acrimonious debate in the Democratic Party
. It is a debate between populists, such as Sens. Elizabeth Warren and Bernie Sanders, and what you might call party traditionalists such as Bill Daley, one of President Obama's former chiefs of staff.
At the center of the debate is a big political question: How do Democrats speak to the anxieties of middle-class voters and win them over on Election Day?
Right now the populist story is winning in the party. Among the three remaining major Democratic candidates for president — Hillary Clinton, Bernie Sanders and Martin O'Malley — there is broad consensus that the nation's economic power dynamic has shifted to disadvantage working families. The party has placed widening income inequality at the top of its economic agenda.
Sanders, in particular, blames inequality and middle-class stagnation on policies deliberately pushed by the wealthy and big corporations. His proposals to counter those trends include large expansions of government programs and regulations, such as massive infrastructure spending to create jobs, higher taxes on the rich, a $15-an-hour nationwide minimum wage and single-payer health care.
Clinton, who is more moderate than Sanders and the front-runner in the race, has embraced much of Sanders' rhetoric — and she's moved close to him on key policy areas. These are all wins for populists, and for the liberal economists who are pushing the idea that the rules of the economy must be de-rigged, if you will, for the middle class to thrive again.
The Third Way report released Tuesday — "Ready for the New Economy" — pushes back against that populism. It starts by asserting that populist arguments about rules and fairness have been losers for Democrats in recent elections. It also says populist prescriptions won't work to restore middle class prosperity.
The reports notes that Kodak "was not undone by economic unfairness,"but by economic changes. To get the economy working again for the middle class, the group says, workers must be given access to better skills, more jobs and more mechanisms to build wealth. The system doesn't need to be overhauled, in other words. Workers just need better help to thrive in it.
“We propose that Democrats be Democrats," says Jonathan Cowan, Third Way's president, "not socialists”
It's on the 70-plus policy recommendations that the group really splits from a Sanders-style agenda.
Third Way argues for some things that make government bigger (though it would pay for new programs through other savings and limits to tax deductions that benefit the rich. Mostly it argues for making government better — and making government spending do a better job of spurring private investment.
There is, for example, a $400 billion "strategic investment initiative" focused on infrastructure and research. There are efforts to improve education at every level. There's a higher minimum wage, but not a blanket one for the country - how high depends on where you live. There's a mandate for companies to divert 50 cents an hour from every worker's paycheck and put it in a retirement fund, in hopes of giving every America a larger chunk of capital. There's an increase in the top capital gains tax rate to pay for economic development in low-income areas across the country.
will almost certainly be criticized by some other Democrats as too timid and too corporate. Ultimately, the argument, at least in the short term, will have a single arbiter: the party's 2016 nominee, which Third Way assumes will be Clinton. The group's leaders acknowledge she's grown more populist in her rhetoric since she last ran for president eight years ago. But they note she hasn't endorsed the $15 an hour federal minimum wage or the Sanders health care plan, and they hope that means she'll tack back their way in a general election.