Yes, the Rust Belt demands an answer. But does anyone know what it is?

November 29th, 2016 at 9:37 am

This WaPo piece by James Hohmann makes a strong point that one hears a good deal these days: the Hillary Clinton campaign failed to provide hope that her administration could bring good jobs back to key swing states like Ohio, while the Trump campaign succeeded in hammering that message home.

The piece focuses on a foresightful memo written in May by David Betras, a Democrat operative in Ohio, warning that Ms. Clinton was getting beat on the jobs message:

“More than two decades after its enactment, NAFTA remains a red flag for area voters who rightly or wrongly blame trade for the devastating job losses that took place at Packard Electric, GM, GE, numerous steel companies, as well as the firms that supplied those major employers,” Betras…tried to explain to the Clinton high command. “Thousands of workers in Ohio … continue to qualify for Trade Readjustment Act assistance because their jobs are being shipped overseas.”

“Look, I’m as progressive as anybody, okay? But people in the heartland thought the Democratic Party cared more about where someone else went to the restroom than whether they had a good-paying job,” he complained. “‘Stronger together’ doesn’t get anyone a job.”

“The messages can’t be about ‘job retraining.’ These folks have heard it a million times and, frankly, they think it’s complete and total bulls**t,” he continued.“Talk about policies that will incentivize companies to repatriate manufacturing jobs. Talk about infrastructure … The workers we’re talking about don’t want to run computers; they want to run back hoes, dig ditches (and) sling concrete block. … Somewhere along the line we forgot that not everyone wants to be white collar.”

Like I said, that’s a perfectly smart, defensible rap that in hindsight looks awfully prophetic. But something very big and very important is missing from Betras’ warning and Hohmann’s analysis: neither Democrats nor Republicans really know what to do to help these workers and their communities.

Trump was either devious or smart enough–choose your adjective–to pretend he had/has a solution and to successfully sell a nostalgic vision to these voters. Frankly, I’m not sure many believed him as much as they didn’t see much reason for going with her and figured they’d give him a chance. If he fails to deliver, as I suspect he will, they’ll throw him out when they get the chance.

Hillary Clinton was a lot more fundamentally honest about this issue of bringing the factory jobs back to the swing states in the Rust Belt. Instead, she told a more complicated story about reshaping globalization through better trade deals and investing in advanced manufacturing, and yes, retraining workers. Precisely the stuff Betras correctly said would not resonate.

But as long as we’re being honest, we must admit that neither side has a strong, convincing plan to restore high-value added jobs to the many communities that have lost much of their manufacturing base.

We’re much better, as Democrats, at policies that help the poor. Higher minimum wages and strong work supports like the Earned Income and Child Tax Credits can combine to make what would be a $15,000 job a $30,000 job (e.g., raise the minimum from $7.25 to $12 and add $5K of refundable tax credits; sprinkle liberally [sic] with affordable health care).

But when it comes to pushing back on the impact of globalization–to “repatriating manufacturing jobs” as Betras called for–we’re at much more of a loss.

This must change, and not just for political reasons (though that should be a strong motivator for politicos), but for policy reasons.

The deeply flawed premise through which elites have long operated is that trade is a net plus for everyone as long as the winners compensate the losers. But in the real world, the winners both fail to do so and use their winnings to buy tax and deregulatory policies that further screw the losers.

I’ve studied this problem for years and don’t have anything like a complete answer. I do know that we must start by lowering our economically large, persistent, and distortionary trade deficit, especially to the extent that it is pumped up by other countries manipulating savings and exchange rates. Also, Betras is right about a robust infrastructure program, but that’s a temporary fix.

But I would strongly urge my colleagues in the progressive policy analytic community (and the foundations that support them) to move this problem–the loss of good, middle-class jobs in significant swaths of the nation–to the top of their agendas. We’ve gone too long without an answer to this one, and the consequences are not at all pretty.

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57 comments in reply to "Yes, the Rust Belt demands an answer. But does anyone know what it is?"

  1. Smith says:

    No, Hillary was more dishonest than Trump. She threw the occasional bone to displaced workers, but she supported TPP before she was against it, “the gold standard of trade agreements”. She clearly stood for more globalization and immigration. “We’re not going to stop trading with 95% of the world.” According to her, trade and globalization was an inexorable force.” This blog is dead wrong that nothing can be done.
    Just one example, UTC, owner of Carrier, is the 9th largest contractor of the government. That’s enormous leverage. Even without that leverage, the government could stop them cold from moving the factory to Mexico. Anything and everything should be on the table. Everything from special A/C tariffs to nationalization. Unions can’t organize boycotts due to Taft Hartley, but people can. How many picket lines outside Walmart or Best Buy saying buy American, boycott Carrier, save jobs in Indiana, would it take to hurt sales and negate the gains from cheap Mexican labor. While we’re at it, why not boycott, divest, and sanction all Mexican goods due to substandard wages and lack of full labor rights. It’s really easy to keep factories open, but if you can’t do that, you can’t do anything. In Germany, it could never happen. If you don’t know why, you haven’t done your homework. Saying Democrats don’t have a plan may be true, but it’s also pathetic. They don’t have a plan because they don’t want to have a plan. Yes some are too intellectually lazy to see what other countries do, or what labor unions before Taft-Hartley could do, or what common sense and decency says you must do.

    • timm0 says:

      Very well said.

      It boils down to whether or not you’re a “pragmatic politician” or a “leader” (at least a person who can be perceived as a leader). In truth, Trump is probably just a blowhard, but that’s not relevant yet.

      The reason Obama was elected was because he said essentially what Trump has said – but since Obama had no track record as a career political hack and had the courage to say he’d take stands against the powerful on behalf of the powerless, he won (and then, sadly, immediately sold out to the Clinton mafia by staffing his Cabinet with made members of the gang). Trump, though grotesque, had credibility because he dared say things that upset the establishment (while offending many others, too).

      Clinton’s most ardent, self-proclaimed (and most damning) “strength” was being pragmatic. As her track record of terrible mistakes has shown, “pragmatism” isn’t correlated to intellect in any way at all. Pragmatism is laziness. It’s an excuse to rationalize doing nothing. And it’s why, despite the screeches of the Clinton fans, a non-pragmatic leader like Sanders would’ve crushed Trump in the general election. The time for pragmatism, as you’ve said, is long over.

      Clearly, the game is rigged for those [international as well as US-based] billionaires and political influence peddlers. Since Clinton was clearly a power-brokering political hack for the billionaire class, anything she said had no credibility. Sanders was a credible opponent of the status quo. And based on the results of this election, it seems that that is just about all you need to be to win against lifetime, self-indulgent politicians.

  2. Denis Drew says:

    “neither Democrats nor Republicans really know what to do to help these workers and their communities.”


    EVER HEAR OF GERMANY — OR CONTINENTAL EUROPE — OR CANADA (or French Canada where they have something called centralized bargaining — but I digress)?

    High enough union density and unions become the economic cop on every corner: sniffing out for-profit-so-called-colleges, snuffing out $100,000 HepC prices for drugs that cost $150 to manufacture, insisting on raising income tax for over $2 mill incomes to 90% (thereby getting back maybe 10% of the 20% of income going to the top 1% — Jimmy Hoffa would definitely support).

    Somebody just has to start the state by progressive state movement to make union busting a felony — to fill in for the NLRB which by design (!) has no enforcement power.

    “I calculated the growth in real median incomes vs real GDP per capita from about 1980 to 2010. If the two had grown at the same rate, the bar would be 100%- In fact, median post-tax US income only grew by about a quarter of the pace that real GDP per head did- quite unlike other countries. ”

    (my rounded off translation of bar chart)
    US 25%

    Canada 70%
    France 75%
    UK 125%
    Spain 125%
    Norway 145%
    * * * * * *

    Fed min wage was $11 almost half a cent ago in 1968 — double the per capita income ago. Bottom 45% of our workforce takes home 10% of overall income — top 1% takes 20% (down from 10% past).


    • yastreblyansky says:

      Unions play a central role in Germany’s continued manufacturing power, but they do it (cooperating with management, because management in Germany is not insane) with the help of a huge and ceaseless government investment in—-RETRAINING. (Not by rejecting “globalization” as if that was an option, but by working to control it.)

      • Smith says:

        You are 100% wrong. It’s the law in Germany forcing management and unions to work together. German management is otherwise just as insane (see VW for proof). In Germany unions have a say in running the company (though less than 50%) because it’s the law. (see “Were You Born On the Wrong Continent”). In Germany there is no at will employment, which has some good and bad effects, but definitely strengthens workers who are permanent employees (vs. contract workers). Germany does reject globalization to the extent that factories don’t close, not least because they can’t be closed and relocated. The biggest globalization effect Germany accepts is exporting goods while hoarding the surplus, adding to continued global economic recession. They also rely on immigrant labor because their population is falling, similar to Japan. Except Japan rejects immigration (and severely restricts access to domestic markets by other countries both by law and cultural norms).

        The 1% are not easily giving up an additional 10% of national income. They run things. Their interests are allied with the top 10 to 2% who also gained 10% more of national income. Hillary Clinton’s additional 5% tax on the rich ($5 million plus in income) would have reduced at most (do the math, what’s 5% of 20%?) 1% so the suffering 1% would not be left with a mere 19% of national income.

        Even Bernie Sanders didn’t come close to raising marginal tax rates to Eisenhower levels good through 1960 (the 90%) Picketty proposes an equivalent 80% at $1 million in his book, but unfortunately everyone focused on the wealth tax instead.

    • Procopius says:

      Even when I was a kid, before Taft-Hartly, lots of people didn’t trust union leadership. Throughout the ’50s the Teamsters were derided as tools of The Mob. Why do you think the Republicans were able to get Taft-Hartley passed? Why do 31 states have “right to freeload on the unions” laws? My father was amazed to discover, after the company he worked for unionized, that in fact unions are good for management as well as workers. Up to that time he had always opposed unions. You can’t just wave a hand and poof unions are going to appear. The Republicans, tne NMA, the Chambers of Commerce, the right-wing think tanks, the elite, have been selling the idea that unions are bad for 250 years. At the end of the 18th Century governments had to impose horrific punishments to try to prevent workers from organizing, and they were only partly successful. At the end of the 20th Century they don’t have to, any more. Workers don’t have faith that the union makes us strong. How are we going to revive that?

      • Anonne says:

        Conditions have to hit rock bottom before people stop buying the bs about jobs being hampered by unions. It will have to get much worse before people put aside their fears of socialism to get back to a reasonable position where workers bargain for more of the profit that comes from their work. The problem here is that corporate management has come to see outsized compensation as not just possible but an entitlement. It is going to take a revolt of some sort because the docile workers of the US are trained to withstand a lot in the name of “freedom.”

    • Benoit Essiambre says:

      You think stronger unions are going to make more companies want to open new factories!? The money might be there but stronger union is only going to cause it to hide itself away further.

  3. Denis Drew says:

    How about a word somewhere, anywhere for the one thing (the only thing) that has the potential to resurrect the connection between higher productivity and higher wages in the 21st century: re-inventing labor organizing at the STATE level?

    I presume that states may double up on federal protection of organizing a collective bargaining unit — just as states may add (not subtract) from the minimum wage and/or work safety rules …

    … except that there is no FEDERAL protection of organizing (no civil fine, no criminal sanction, no recourse like mandating an election upon finding of unlawful interference, it IS against the law). There is placebo protection for organiz-ers: after waiting years they can get their jobs back only to mostly be fired again for “something else” (with no union protection).

    Which brings up the CONSTITUTIONAL factor: a First Amendment right to associate commercially.

    Federal preemption may bar states from making up their own labor organizing setup …

    … except for farm workers who are left out — not because of anything in the written words of the federal law but because FDR (lied?) and told Congress the law would not apply to them to get it passed — so on the strength of that …

    … with a FUNDAMENTAL constitutional right at stake — federal law cannot force that right down a road that is impassable. Federal law cannot preempt something with nothing. Even the 6% union density in private business would not if most of those unions had to start from scratch in today’s conditions.

    America has to learn at a basic cultural level that labor markets are just like any commodity market — that it is unfair and unethical for one side in an inherently adversarial process (ALL markets are inherently adversarial processes) to muscle the other out the maximum price the buyer will pay (and has to learn that the REAL buyer in a labor market is the ultimate consumer).

    Now, suppose in rush to preempt or in a pang or conscience Congress should make union busting a felony — would that bar states from doing the same or disempower similar state legislation? Wouldn’t that be more like states paralleling bank robbery prohibitions?

    Answer may be that even if there were no federal or state organizing setup (prescriptions for certification, etc.) — even if the ONLY pertinent federal law made muscling collective bargaining a crime, there would be no reason states could not mirror that also.
    I would go so far as assert that as long as the federal setup remains a road to nowhere that states can make their own certification rules (just like with farm workers) — until and unless the fed comes up with an organizing setup that actually protects the First Amendment right to collectively bargain — INSTEAD OF ACTUALLY BLOCKING IT.

    • Smith says:

      No, strengthening the right to organize is not the answer. 1) Conditions have changed to make organizing much more difficult and 2) It turns out not to be a necessary condition to strengthen labor.

      One could write a book delineating the above two points, so I shall try and succinctly here point the way.

      1) Why are factories easier to organize? Everyone is in one place. It’s also easier to see the power of organizing a factory. Employees and employers know this implicitly. Factories that were organized, as well as coal miners, steel workers, and longshoremen, concentrated labor in large numbers at central locations. This makes it more difficult to replace those workers. Our service economy doesn’t work that way. Walmart stores average 280 workers per store. The now famous Carrier factories in Indiana employ 1,400 workers. A MacDonald’s has about 15 employees, but 800,000 total in company owned and franchises combined. It’s fairly easy to replace 15 disgruntled employees. Generally you try to replace anyone with a tendency to agitate in the workplace before it spreads to other employees.
      2) $15/hour is now being phased in for New York and California (those states combined equaling 15% of the U.S. economy by GDP). This was done without unionizing the fast food chains, Walmart, or countless other low wage employers. It was done with crucial existing union support of existing unions. It was done through a legislative measure, not contract negotiation. It was done with other political considerations in mind, leverage from cities passing similar measures, and Democratic control of legislative and executive branches of government, which followed fairly recent Republican administrations and split legislatures.

      The way forward: Campaign for Democrats, protect existing unions, and union jobs, press for legislated worker benefits, end exempt status, mandate paid vacation, paid sick leave, government paid childcare, path to single payer universal healthcare, end exploitation of immigrant labor, especially employer sponsorship requirement.

      Pass a law, no factory closings for cheaper labor, or lax environmental restrictions. Done.

      • Denis Drew says:

        Do you have something against (I’m sure you don’t; just a way of putting it) employees simply being able to organize a collective bargaining unit if they want to — if they feel like it? Don’t you realize that ownership’s breaking the back of any such effort is a strange anomaly, not found in the rest of the first world? Strange. Ownership doesn’t even want to anyplace else (in the first world); it’s just not in the culture.

        So you and I can argue about the efficacy of protecting that wish (also a First Amendment right) — but employees should just simply (there’s that word again) be able or bargain effectively (meaning collectively) if they feel like it — INSISTING ON THE SAME FAIRNESS IN THE LABOR MARKET THAT WE INSIST ON IN EVERY OTHER MARKET. 🙂

      • Procopius says:

        Factories also made it easier to fight unions. Don’t you know about Henry Ford’s “Service Department?” Haven’t you ever heard of General Motors “Black Legion?” Not to mention the organizations outside the factories like the Pennsylvania Coal and Iron Police and the Pinkertons. That’s one of the reasons why it’s so important for the Fed to raise interest rates when unemployment goes down to the point that the reserve army of the unemployed might become depleted, like now.

  4. Nick Batzdorf says:

    Lowering the trade deficit is a theoretical no-brainer, but is infrastructure investment really only a temporary fix? Question, not assertion.

    My operating concept – courtesy of JMK – has always been that public investment (+ insuring the top executives don’t pocket all the $) would free up the capital glut and cause our economy to spring green sprouts and world peace and stuff.

    • Jared Bernstein says:

      I was being a bit fast and loose there. We can be sure that infrastructure creates some jobs for laborers while the road, bridges, ports, water systems, etc. are being fixed. But these are time-limited programs.

      Beyond that, there is some evidence that infrastructure investment can boost productivity growth and that in turn can lead to faster overall growth, more jobs, tighter labor market. EG, fix a road, supply chains become more efficient, generate more demand.

      But there are a lot of steps to that part of the story and they’re less certain than the job that lasts the length of the project.

      • Smith says:

        Aside from the temporary or limited term job, and long range advantage of better infrastructure, you’re not explicitly citing the immediate and potentially long lasting beneficial spillover effects. Having a full employment economy creates a virtuous cycle that can continue after initial stimulus creates momentum. Not a few notable economists predicted a return to the great depression economy after WWII. There was a short lived recession, but by and large, the make work type functions of war economy were transferred to civilian production. Obviously, there could be a problem when you reach the last bridge that needs rebuilding, but I think we can rebuild that bridge when we come to it.

        • Flex says:

          If properly planned, by the time the last bridge needs rebuilding, the first bridge does too.

          • Watermelonpunch says:

            I think the first bridge will need fixing long before the last one is rebuilt for several cycles. Okay I live in ne Pennsylvania. Ha. Where just seeing with my own eyes it’s pretty obvious that it would take a long time for us to catch back up to a maintenance level.
            Yeah the bulk might be temporary… But after the past 8 years I think people would consider it a golden age just to have a decent boost to the job market with BOnus! A commute without potholes that can swallow a miata whole.

      • JF says:

        It is about investing. Investing where and how does this affect people?

        The reason to invest is because we want US residents to gain the advantages of an economy – work, a decent place in which to live, now and ongoing. Sounds like good reasons to invest.

        Investing eksewhere, not in the US, sends a different signal and plainly does not offer work or help maintain, build or sustain, or improve the places in which people live.

        So the public’s goals should be obvious leading to better public policies, one hopes.

        Do our trading ‘partners’ share the same views of what they have as goals? Probably, and this ought to be the basis of trade deficit talks that assist in accomplishing the public’s goals, now and ongoing.

      • Nick Batzdorf says:

        Whops. I meant *ensuring*, not insuring. Ensuring that all the $ doesn’t just go to the top executives. Embarrassing! 🙂

        And thanks for the reply.

      • urban legend says:

        A truly robust infrastructure program is not temporary except in a theoretical sense because (1) the deficiencies allowed to fester for over a generation are so huge that it will take over a generation just to catch up — imagine, for example, how long it will take to bring our urban and long-distance transportation systems into even minimal equality with those of other advanced counties (or even Uzbeckistan, for cryin’ out loud); (2) the deficiency level itself needs a permanent fix — more of our economy, very simply, should on a permanent basis be devoted to maintaining and continuing to modernize our infrastructure an adequate level.

        A robust infrastructure program, with its implications for trying to reach full employment (of the genuine variety) by generating more demand for labor and pushing incomes and aggregate demand upward, would do a hell of a lot for the “Rustbelt.” Unfortunately, the Clinton campaign never made that case in its all-important mass advertising; all they did was appeal to the female vote by showing what a jerk Trump is. A diligent effort in informative and persuasive advertising to share an economic vision, and to attack mercilessly the platform of the Republicans, would have gotten Clinton easily more than enough votes to win all the close swing states. Somebody made the huge strategic miscalculation that the only thing that mattered was shifting suburban women.

      • emptywheel says:

        What do you make of the Chattanooga broadband story?

        As it is, we have disinvested in infrastructure because we’ve been spending that money elsewhere (on our real industrial policy, which is making expensive F-35s that don’t fly, as well as on war generally). But it also seems like we’re just struggling to fund the infrastructure that needs to happen to keep bridges from falling, not investing in the kind of infrastructure that can turn Appalachian towns (so presumably also Rust Belt towns) into thriving cities again. Part of that, of course, is a hands off approach to Silicon Valley, and an emphasis on IP protection at the expense of policies that foster more growth.

        • Watermelonpunch says:

          I thought that many times too. Thanks for bringing that up we all should be. Sometimes I just can’t get past the holes in the road to think of building not just stopping things getting worse and that’s the tragedy.

        • Jared Bernstein says:

          Let’s see a link to the “Chattanooga story.”

  5. Peter K. says:

    I voted for Sanders in the primary and Clinton in the general. Trump’s rhetoric was focused directly at these marginal voters about how things need to change. Hillary’s message was that things are pretty good and we just need to tinker. It was an establishment message. Even Obama’s message was about hope and change. People feel that things can’t go on as they are and they are mad at elites who have been selling them lies about how globalization will bring us utopia. The Democratic establishment became complacent and smug (not everyone!).

  6. Susan Hall says:

    Is there any way to get to a reduction of the 40-hour work week (to something like 35 or 36) without significantly reducing salaries and while maintaining benefit levels? If the total amount of work to be done is being significantly lessened by automation, this would serve to spread the remaining work among more people, thereby creating jobs.

    On an unrelated note, for those in the gig economy, or with multiple part-time jobs, what about a “shared security” system in which employers (or contractors) must contribute benefits on a pro-rated fractional basis for every hour of work done by an employee (or contract worker)? See description here:
    (I know, likely not happening in a Trump administration…)

    • Smith says:

      Read what happened when initial 44 hour, and then 40 hour work weeks were mandated by law. Of course you can reduce hours while maintaining salaries and benefits. There are many ways.
      1) Tell workers they only have to work 35 hours. This morale boosting stress easing exercise in enlightened management has been shown to significantly add to productivity thus costing employers nothing. See parts of historic US and present day Sweden.
      2) Just pay them the same for less work. This will cause a little bit of inflation. But it won’t add12.5% (5 hours of 40) to the inflation rate because labor accounts for a fraction of the cost of things, even in our service economy. Take a conservative approach and allocate 1/3. Now we’re down to 4%. Phase it in over 4 years, it’s 1%. Take some ill gotten profit margin the 1% has stolen from labor over the past 30 years, your answer is less than 1.
      3) You could allocate yearly productivity gains to reduced hours, generally at 1 to 2%, so that in five to 10 years, voila, 35 hour work week with no reduction. Keep in mind how much of the productivity gains over the last 15 years went to higher wages. Zero, nada, bukus. (unless you’re in the 1%)
      4) One expects decreased unemployment from 35 work weeks (though not exactly an elixir, see France). Thus aside from spreading wages more evenly among workers even at the possible cost of increased inflation, less unemployment could have other beneficial side effects on the economy, thus mitigating costs.
      5) Uhmm, some combination of the above, and probably some paths of which I’m unaware. Keep in mind many jobs requiring 40 hours bear no relation to the work done or goals accomplished. That’s also a facet of the service economy. The consultant may get less billable hours, but is 5 hours more per week really improving the quality of his marketing presentation?

  7. Jan Rooth says:

    Is there any reason to think the supply of good paying jobs will ever return to a level that allows the bulk of the population to live a decent life? We can’t all flip burgers or work at Wallmart for half of a living wage. What happens when self-driving vehicles are perfected? Say goodbye to long-haul trucking as a profession. Say goodbye to driving for Uber or Lyft or your local taxi company. That’s 8 million decent jobs gone there. Same will begin happening with more routine white-collar jobs over the next couple of decades. There will probably always be jobs only humans can do, but will there be anywhere near enough to sustain our current model?
    We need to be doing more than putting a band-aid on this issue. We need to be rethinking the future of work and the future of income.

    • Smith says:

      No we barely have to rethink anything. You’re under the illusion make work makes up a small sector of our work force. Let’s start with the bloated financial services sector. People move money around and speculate without knowing what their doing, or obtaining results better than chance. That’s 17% of the economy. The coffee shop business is make work. You could make coffee at home but you don’t. You’re already paying $3.50 for a cup of coffee, so the incremental gain from eliminating people would mean nothing. Yes ATMs eliminated most bank tellers. But that happened at the same time the financial sector exploded, and then imploded. Automation is nothing new, look up the Allen Sherman song. If we already survived an agricultural revolution that left only 3% of the population working in agriculture, industrialization that wiped out craftsman, automation that already relegated factory workers to a small fraction of cost input, I don’t robots and more automation are revolutionary.
      The economic sickness blamed on automation is really attributable to income distribution and lack of opportunity, and hoarding of capital. Give people money and they will spend it, and other people will turn a profit on their spending, it matters not one cent if robots and computers do all the work. All that matters is ownership of the computers and robots. You just need to make everyone share.

      We don’t need to rethink income, but rather income tax. It’s not actually rethinking, it’s restoring. Return to Eisenhower rates to make the country run like it once did. The alternative of Democratic half measures don’t work, and so you’re left with Trump.

    • reason says:

      The shortage is not of potential work, it is of potential spending power. Somebody up above pointed out the continued good labor market after WWII. I think the secret was healthy balance sheets because of forced savings during war time. If you spread income and wealth around, it continues a healthy positive feedback cycle. If you concentrate income and wealth ever tighter you get a negative positive feedback cycle. That is why I seriously don’t think there is an alternative to redistribution and we need to fight to make the need for redistribution accepted by the bulk of the population (it will never be accepted by the 1% but they only have 1% of the votes). It is a bit like a predator/prey situation, if the predators become too strong, the whole system collapses. My solution is a basic income, but I think it is easier to sell if you call it a national dividend and phase it in.

      • Smith says:

        The alternative to redistribution, a bad idea, is exactly what previously worked.
        1) Marginal tax rates of up to 90% at $1 million, this not only takes away the money accumulating to the 1%, but takes away the incentive to attempt taking that income in the first place. They don’t need it, they can’t spend it, they just invest with it, and bid up prices, and keep money otherwise available to the masses.
        2) Stop controlling prices and inflation with interest rate hikes. This causes economic slowdown, unemployment (reserve army of labor) and low productivity (due to both over capacity and cheap and available labor). Using the bludgeon of interest rates prevents promoting alternatives to control prices, such as competition, transparency, regulation (for natural monopolies like my cable/internet supplier), efficiency, and labor power. If all labor sectors are known unwilling concede price hikes which erode real wages, management will cease to escalate price levels. Likewise management must know the Fed won’t take them off the hook. It appears management plays a game where they are unaffected by recessions or slowdowns, don’t fear it, but labor is very much at risk. That needs to change. Small businesses are also more easily wiped out by downturns. That can be a net plus for larger businesses gaining market share.
        This is not a new idea, Galbraith advocated price controls to achieve full employment in the late 1950s. I disagree with that solution, as I’ve pointed out the various alternatives.

        • Watermelonpunch says:

          That’s redistribution too. Just less obvious. The problem with less obvious is that most won’t realize what they’re getting ….. And won’t know what they have to lose.
          Oh right that’s already happened. Doh.

          • Smith says:

            Wrong. It is not redistribution to essentially put a cap on income, and collect needed revenue to balance the budget or reduce the deficit (deficit are good only for emergencies like our present sagging economy or wartime necessity)
            But the main advantage is the conservative nature of higher marginal rates, it cuts the deficit. You are not raising taxes to redistribute money, you are raising taxes to balance the budget. Any redistributive effect is a side effect built in to a progressive rate structure. You are taxing the rich at higher rates because “that’s where the money is”, not some leftist socialist state controlled notion of redistribution. Likewise benefits are universal and not need based.

            These are important distinctions.

            The other main component of raising marginal rates is that you are not “raising” you are “restoring.” Again, important distinction, huge difference, not a social experiment, just a return to Eisenhower rates first implemented to pay for WWII. Depression era rate hikes were very large, but WWII was when the largest, most substantial hikes went into effect. The 1% submitted because the alternative was Hitler. But these rates stayed on the books for nearly 20 years, and erosion in the 1960s still left much higher rates through the 1980s. 1963, 90% at $1 million, 1986 50% $184,000 , 2013 33% $184,000 top rate 40% at $416,000

            Don’t propose cockamamie schemes that may or may not work. Promote tax regimes with a proven record of success. Those tax rates were a gift from Hitler and Tojo. Don’t throw them away so easily. Likewise the G.I. Bill is looked at as veterans benefit. It was not, because an entire generation was forced to take up arms and thereby qualified. The meaning of the G.I. Bill is a universal tuition benefit works. It covered tuition at Harvard plus a stipend because colleges had yet to gold plate their administration.

            People readily understand the universal benefits of medicare, social security, public education, roads, highways, and bridges.
            What they resent, and rightfully so, is redistribution, taxing one group to give exclusively to another, even if need based. Unemployment and medicare are insurance, available to all, understood as different than just giving money to the poor.
            They do understand paying down debt, and taxing the rich more than others, and that Eisenhower with 90% was a conservative centrist.

            Which path you take to more equitable society matters (see Communism). How you frame the road to freedom also matters. Thus stuff above comes from being aware of economic history of the United States. That stuff matters. Study it.

  8. elkern says:

    If I ran the zoo, said young Gerald McGroo,
    I’d make a few changes, that’s just what I’d do.

    1. Infrastructure: Smart public investment CAN have positive economic effects, long after the construction jobs are done. But what is “smart”? The US canal system seemed like a great idea in 1800, but it was obsolete by the time we built it (railroads won out). Yes, we should definitely fix all those crumbling bridges, etc, built by FDR, but that’s just past-due maintenance costs; the effect is prevention of decline, which is improvement only in relative terms. I’d suggest big public investment in: renewable energy, power transmission, education, health-care, and data access. (Nationwide fast data could be the modern equivalent of FDR’s very successful Rural Electrification).

    2. Single-payer health care. ALL businesses would benefit; but the ownership class would have to bear higher taxes, so it’s “politically impractical”.

    3. Revive progressive taxation; tax capital more & Labor less. Tax (all?) financial transactions; a little bit of friction would make those markets more stable anyway. (frictionless systems are generally heterostatic).

    4. Increase Over-time pay percentages and decrease the standard work-week. Let the robots do the dirty, dangerous work, but make sure the profits get distributed better. Push businesses to hire more people to do less work. Yeah, they’ll scream, but they can’t vote (yet).

    5. Tax Carbon ( + other pollution + non-renewable resource extraction).

    6. Tax ocean transport. Mexico didn’t take all those jobs, China did.

    That’s a start.

  9. Clarence Signor says:

    Spectacular. This is groundbreaking thinking that is results oriented.

  10. Deplorable says:

    It isn’t hard to understand, person. Are you playing a part in the deception, or do you really want to know? I’ll assume the latter in my following response because otherwise, this would do more harm than good.

    The US trade deficit with China and Mexico has cost millions of American jobs. Millions. Multiple Millions.

    Do you want to get philosophical? My advice to most people: Don’t take that bait. But in this case:

    Most Americans were shielded from the results of imperialistic behavior by the press. Russia was always countering it, but that was ‘communism’ or ‘socialism’ vs. capitalism. This should have never reemerged after 1991. The US screwed this up.

    Many small nations in history turned socialist to avoid US capitalistic imperialism.

    What is the answer, if you are living in Cuba, to US imperialism in South America? Is imperialism better for the people than the alternative offered, Communism? It is a clouded picture even today.

    We needed a reset. A real reset. Obama had no understanding of the limits of capitalism. Trump knows them first hand.

    I don’t want to speak of the ‘wisdom’ of elections. I believe elections are very unwise. However, I can always look to the good outcome, the good side, the good result. I think we’re ok.

  11. Deplorable says:

    How many examples are there? Eastern Europeans and Russians grew unhappy with Czarist/capitalist control. They chose the violent rout to change. God bless their souls for their efforts…

    This should never have ended up as a division. Rather, it should have been alternate views. It should have been resolved during Bush the first’s presidency.

    We screwed up in moving Russia to a more capitalistic system. We screwed up in moving Russia to a more capitalistic system.

    Yes, I said this 2 times. We screwed up! How to get along with Russia?

    It isn’t hard. We elected a person that will make that happen.

    You fools!

  12. George says:

    Basic income,negative income tax, demogrant…..whatever name we give it, its time to take it seriously.

    It doesn’t create jobs direct;y, but it provides a safety net, and gives workers more flexibility.

  13. Lee A. Arnold says:

    People are going to have to get over the psychological needs to believe that we have to work for a living, and that money is a real measure of value. There is enough stuff in the world to give everyone a decent standard of living, and the only scarce thing remaining to haggle over is real estate.

    I agree it’s a real problem. Infrastructure is time-limited (like housebuilding booms) and is debt-financed — or else it will be privatized to scoop-up user fees. Manufacturing will never come back: factory labor is shrinking globally; factories are now 78% automated and going towards 100%.

    If we cannot depend long-term on 1. infrastructure/house construction or 2. manufacture, then the only big sector remaining to depend upon for sustainable jobs is 3. services. But services have low productivity rates and the labor force is nearly big enough already.

    Artificial intelligence will take away 1/2 of white collar jobs. It doesn’t need to be Terminator robots (although they are on the way, too). AI just simulates most forms of “inductive” reasoning (as opposed to “deductive” inference, which simpler computers already do) and so it will be able to supplant most managerial and semi-creative decision-making in business.

    So what remains, to grow economically? Thinkers in the 19th Century saw this problem coming, and two world wars and the mid-century Western middle-class boom only delayed the inevitable, and made it seem like a silly old science-fiction fear.

    Meanwhile, China is about to step in as the arbiter of world trade. TPP is flawed but destroying it will give them the last push to get other countries on board, and not just in the Pacific area. In 5 years, there may be tribal villages in Africa with better cable and phone service than many US suburbs.

    The US can join with the Brexiters to have a big flea market and swap old Beatles vinyl.

  14. dwb says:

    There is an answer to repatriating jobs, you just don’t like it and refuse to believe it. When you tax labor or impose labor costs, labor demand declines. More environmental regulations, more labor regulations, more zoning laws, higher taxes, none of these save the planet, help workers, or encourage affordable housing.

    Free trade means that the risk and dirt merely gets shuffled to a different jurisdiction where the rules and regulations do not apply, onto workers willing to take the safety and health risk. Products still get built. Chinese manufacturing by the way is helped by a large amount of dirty coal. Every time you look at your solar panels, wonder how much coal was burned to make the silicon. While viewing this on you iPad, think of the 3000 workers chemically cleaning the screen of your iPad with n-hexane during manufacturing. The environment still gets dirty, and some workers still may be harmed. Just not US soil or US workers. Add to that all the No 2 fuel oil, jet fuel, and diesel fuel burned to transport the products back to the U.S.

    If economists are going to have a voice, they need to be intellectually and brutally honest about the trade-offs of free trade, combined with higher environmental and labor costs. The US trade deficit cannot go on forever.

    When inflation was high in the 1990s, the flip side of the trade deficit was that we imported unemployment and deflation. That was good then. Now, those forces are caustic – we can no longer afford to export employment.

    As some point, we either fix what ails us, or foreigners stop buying our assets and the dollar crashes. We either need to curtail free trade, so that we can keep our environmental and labor laws, or we reduce regulations so that workers can compete. It sounds like under Trump we will get some of both.

  15. Flex says:

    My wife kids me that I think more long-term than most, but the suggestions I would recommend are not quick.

    The first thing I’d consider doing is taxing capital gains as normal income (or even higher), and dividends at half (or even zero) rate. The market should be something people invest in to generate cash flow, rather than hope (or manipulate) stocks to fluctuate. A longer term benefit would be that executive boards would try to maximize dividends rather than stock prices, which requires actually understanding the business and investing in it. An even longer term benefit would be a reduced workforce, as people who have invested wisely decide they have enough income from their dividends to live comfortably. A reduced size of workforce will help those who are still working. I think small changes can have large impacts over time.

    On the business side of things, I’d re-vamp property taxes to move toward a VAT. Eliminate all taxes on inventory. One of the reasons for off-shoring is to avoid paying taxes on unsold stock or work-in-process (WIP) in storage. One of the justifications for just-in-time (JIT) manufacturing is to avoid paying taxes on WIP. I don’t know the tax status of scrap (parts which can no longer be sold for whatever reason), but both the value of scrapped parts, and the cost of properly disposing of it, should be a tax credit. The other justification of JIT manufacturing is to reduce scrap costs. Okay, eliminate it. These two changes in tax laws will encourage businesses to return to the USA simply because the costs of logistics will become greater than the costs of local production.

    For workers, lets put a federal law in place which requires, mandatory, payment of time-and-a-half overtime for all workers who work over 40 hours a week. No exceptions. If some workers don’t claim it, that’s fine. But anyone who is working more than 40 hours a week should be compensated for it, including CEOs. You can argue that this would encourage off-shoring, but I don’t think it would have that much of an impact on the off-shoring decisions. First, manufacturing workers on the assembly lines generally already have union contracts which require this. Second, the companies which are exploiting the workers in this fashion are generally companies who are unable to off-shore, McDonald’s and Walmart need people in the stores. Third, companies in between, who are exploiting white-collar employees are generally ones which need the experience and knowledge of those engineers/technicians/lawyers/production managers/etc. They cannot easily off-shore them, and that is where a lot of the middle-class works. This would also encourage employers to hire more people in order to avoid paying over-time, so some jobs would open up.

    Next, national, single-payer, health care. And the way to achieve this is not to ask the congress to support it, but a concentrated effort at showing corporations how much this would reduce their operating costs. Start with the big corporations, if you get them on board because it removes a 10% budget item, you will get some powerful allies. For the middle-size businesses, you need to show them how much easier it will be to hire employees, temporary or permanent, if the business didn’t have to offer a health-care package. The businesses which currently are small enough to not offer health insurance would also benefit through the improved health of their employees. If you can sell it to the businesses, the rest of the country will follow. Pushing it through congress will be very hard if the businesses are actively fighting it. (Mind, you will have active opposition from the health insurance industries, but that is unavoidable.)

    For looking really long term, my joke is that we will all be working in the tourist industry. But it’s not as much of a joke as it may seem. If our society gets to the point where manufacturing is entirely automated, and transportation is entirely automated, and information is largely cost-free, what do we have left to do with our lives? Some have argued that we could live in a post-scarcity world, and so our understanding of economics breaks down. I am skeptical of that outcome. But I think we could reach a world where the economy is mostly service-based; I mean that >99% of a person’s income is spent on other services, not goods. We all take in each others washing. This is not a bad thing, it’s the flow of money which is important to the economy, not the aggregation. But, one of the biggest things people like to do is to go see things, tourism. I suspect this trait comes from our primate heritage. So, I can easily imagine that a large proportion of people will work in the tourism industry; as local guides, hand-making local products, serving regional cuisine, and providing the support for these activities through the building trades, banking, and information services. Then all these people who work in the tourism industry locally will travel somewhere else in the world on their own vacations.

    Mind you, for that outcome probably a few hundred years in the future. If it’s a future we would like, it’s something to aim for. And it’s something that a local community can start promoting today as a way to generate local jobs.

    • elkern says:

      Flex, YES to all.

      I really like the idea of taxing Dividends below Capital Gains – seems like it would encourage long-term investment – but there it would need a progressive component in the details (otherwise, those smart dicks on Wall Street will find ways to fudge it).

      Yes, Single-Payer Health Care would relieve companies of a huge burden, of both money & effort. It would remove one of the big reasons that so many people are stuck with multiple part-time jobs. Only owners & top managers would be “hurt” (taxed relatively more).

      in the medium-long run (100 years?), most human effort will either be devoted to Science, Tourism, Culture, etc, or to killing each other. I’ll take Door #1.

  16. Ken Wallace says:

    It seems capitalism works best when it can exploit something or someone. Be it non-renewable resources like oil, coal or minerals, or foreign workers and environment. This predatory form of capitalism is convincing many that socialism, communism or religious extremism are not so bad. Saving capitalism from itself, as Robert Reich says, amounts to rewriting the rule book. We have allowed corporate lawyers to write it for globalization, a big mistake.

    A piecemeal approach will not bring back manufacturing, only extensive reform of global tax and trade deals can purge the perverse incentives and direct investment back to the USA. A place to start is “The New Rules of the Road: A progressive Approach to Globalization” by Bernstein & Wallach.

  17. Deplorable says:

    Before taking office, Trump has already accomplished what no other president would even dare to try. He retained Carrier jobs for the US and he killed the job-killing TPP.

    Why do analysts and reporters continue characterizing politics as right vs. left? It is total nonsense! They do it because they know the strategy of ‘divide and conquer’. Divide the people and you can run the world!

    I’m almost 100% in favor of everything that Jared says. Almost 100%. It dismays me to see how many people are caught up in irrelevant politics.

    Jared, what is required is creativity. I realize creativity and economics are a strange mix. This is precisely what has gone wrong, that people inclined to studying economics are not very creative by nature. We need new, creative input to this profession, don’t you agree?

  18. lawrence e stirtz says:

    We have heard it all. In the news this morning was the story about Pence strong arming United Technologies and saving 1000 jobs in Indiana at Carrier. Ford also gave in to some kind of suggestions they not move some jobs to Mexico. This is one way and maybe ok if these jobs would have been lost just to cheaper labor and then the products shipped back into the US.

    I do know it is not letting the market work but I guess the next question is should it in this instance? I have no idea we must have done something different after the war to bring Japan and Germany etc back how did we do that without exporting jobs????????

  19. Rick McGahey says:

    There isn’t any one “answer.” But restoring labor’s bargaining power (including raising the floor for work), running a real full employment economy with some inflation, real fiscal stimulus plus a real green economy program like Bob Pollin has laid out ( would all help. Metropolitan areas need structural reform, less power in suburbs, that’s very hard to achieve. But a combination of progressive local political movements, like in Los Angeles where unions, communities of color, and environmentalists work together, along with real full employment and rebalancing labor’s bargaining power and raising the floor, would go a long way.

    Anything that says all the jobs are coming back won’t work, but also won’t be well received. Retraining doesn’t appeal to these communities, and in any case is too supply-side when the problems are institutional and demand/macro. It is true that this isn’t politically feasible now, but it isn’t true that progressives can’t figure out an economic strategy. It is the politics that continue to confound us.

  20. Rich P says:

    For years I have championed good jobs for the working class. Jobs they like and want to do. In addition to infrastructure.

    Build ships with steel and outfit them with desalination systems and power plants. Lease them to the 85 percent of global population living in costal areas who need power and clean water. Maintain and update over time.

    Good jobs for working class, Good/needed to address climate change. Addresses world increasing need for clean power and water.

    We do it or leave this huge market to China.

  21. Fred says:

    Great Post. I think we need to reexamine what we think the American Dream should be in the 21st century. Two thirds of the population does not have a 4 yr. degree, and the median income is $56,500 and the trends are to replace high paying factory jobs with low paying ones, and if trends continue, the self-employment, per Gig economy model. Costs have increased for education — even the public universities are largely privatized, and we’ve changed retirement from a defined benefit to a defined contribution system, and health care costs more and more every year and is out of control cost wise with games being played everywhere.
    To my thinking, you have to get more income to the middle class and reduce costs to them. You could start by requiring per gig models (like uber drivers ) to be employees as without that self employment taxes kick in. You could continue with reducing costs on the health care and education side. On the income side, yes you should strengthen unions, but that won’t be enough. You have to deliver more income to this group. If you don’t, society will end up paying for the cost of health care, the cost of education the cost of housing, because there isn’t enough income to save for retirement, pay self employment tax, save for education of kids, and pay for healthcare, pay child care, housing, food and transportation.
    Others have suggest basic income, but I struggle with the framing of it. I don’t see rural or proud middle american folks who won’t take a handout, seeing this as a good thing. So one of the above suggestions of delivering more overtime is perhaps one way. As also noted above, the only way to get more income or reduce costs to them is by changing the structure of taxes and through redistribution in some way.

    • Smith says:

      Wrong! ( in the words or should I say word of the immortal John McLaughlin ) $56,000 is not the median income, it’s the median household income, with about 1.3 wage earners per household when income reaches that level, and 1.5 wage earners already at the 60th percentile. At the 75th percentile you’re up to 1.8 wage earners. The median income is $30,000, although that includes part time and temporary workers. The median wage for full time workers is actually around $40,000 per year.
      Unless you want a race to the bottom with the rest of world meaning every country not a developed West European Social Democracy, the U.S. must seek peaceful disengagement. Labor rights are not coming to China anytime soon, neither are open markets, rule of law, or respect for intellectual property. Aside from destroying the American economy with their trade surplus, the sheer size of the economy will enable them to start buying up American companies if not blocked by security concerns. Economists would say this is good because it would help balance trade. If you think the influence of the Chamber of Commerce and right wing think tanks are bad now, wait until the Chinese oligarchs start to take over with influence and dollars funneled through American entities. This is just one example because the entire world outside of Europe may yet follow the Chinese model, not Communist, not Capitalist. The American worker can not compete against markets that are closed to American goods. China insists on partnership investing only, partly to steal technological know how, partly to deprive any American dominance of a profitable sector, partly to enrich the oligarchy. These problems of trade would be true even without the fact of substandard wages which suppresses a consumer economy, while providing incentive for American companies to relocate even if eventually only saving pennies.
      Mexico is also a problem, in terms of development, labor rights, wages. Try fixing that. Why is an oil rich country of 100 million just to the South of us paying workers 1/6 of what they’d earn in the U.S?

      • Fred says:

        I agree, household income. What I was trying to say is: at what income level now, and in the future given trends, can we provide the social contract, AKA the American dream, with the middle/working class family that enables the family unit to save for retirement, save for college, pay for healthcare, education, buy a house and in general not put a burden on society now or in retirement? And if we don’t like that number, what has to change, or does the premise have to change? As pointed out, neither Democrats nor Republicans have a solution and bringing automated factories back and lower tax brackets for the middle/working class isn’t sufficient. My belief is that the progressives have to win enough, through changes, of this population, by making this work for them, to win in the future. Maybe your suggestions are part of the answer.

  22. Chris G says:

    > But something very big and very important is missing from Betras’ warning and Hohmann’s analysis: neither Democrats nor Republicans really know what to do to help these workers and their communities.

    If Trump keeps jobs in the US a couple thousand at a time then he and his minions we hold power for the foreseeable future. (I doubt he’ll be able to keep it up but if he does…) People whose jobs are saved won’t care if his approach doesn’t work in theory so long as it works in practice.

    That Clinton – and Democrats in general – didn’t campaign on the promise to keep those Carrier jobs in Indiana is beyond me. Failure to do so was political stupidity and malpractice of the highest order. If you are the champion of working people then you come down hard on the side of working people. (Weren’t Democrats the champions of working people once upon a time? I could’ve sworn they were.) You don’t say, “Well, sorry, I don’t really know if I can do anything for you.” Lead with that and you deserve to lose. Promise to help and then do everything you can to try to help. If you try but fail perhaps you’ll be forgiven. If you can’t be bothered to try then no one will want anything to do with you. It’s retail politics. It’s not that complicated.

    Related reading from Senator Sanders – That’s what you do.

  23. Raven Onthill says:

    I think Trump’s solution might “work,” in the sense that raising trade barriers would indeed make manufacturing products in the USA for sale in the USA more profitable. Problem is, we’d be imitating the old Soviet Union, which refused to allow the import of good-quality Western products and instead forced its public to buy shoddy Soviet-made products. If, say, law required smartphones sold in the USA to be made in the USA they would be poor-quality products, and more expensive and less capable than what China could manufacture for at least two decades.

    One thing that would help level the playing field would be to advocate that world manufacturing raise its pay, environmental, and workplace safety standards. Workers of the world, unite–oh, wait.

    • Smith says:

      Actually trade barriers would be imitating Madison Tariffs helped protect American manufacturers from cheap imports, like textiles from India (in the 1820s). Are economists today just dumber? Or is it that the elites are able to skim profits more efficiently. You need to figure out how to remove the incentive for American corporate executives to profit by gutting manufacturing. It used to be the opposite. In the past the foreign manufacturers weren’t owned by Americans. The profits of cheap labor in India accrued to the British, not rich American capitalists. If tariffs worked previously, why are they a bad idea now? They are not. It’s a myth for example that Smoot Hartley precipitated the Great Depression. Also comparative advantage means nothing when workers are paid 1/6th of American wages as they are in Mexico. You can’t have a free trade area with zero transportation costs and 1 to 6 wage differential. That’s even accounting for the fact that companies (Auto and Air Conditioning) save pennies because labor input costs are less than 20% (estimated 10 to 15% for automobiles). Americans are more than willing to pay for quality, they pay huge premiums for Japanese reliability and German performance (see auto imports) and likewise for pocket timepieces with additional functions, also known as smartphones. America is a very rich country that can afford to pay extra to keep rust belt workers employed.
      How disappointing Trump only saved 1,000 of the 1,400 jobs in Indiana. Just pass a law, no moving factories.

  24. Henry Carey - forgotten American economist says:

    Bringing back tariffs would save the Midwest. Japan had sky high tariffs in the 1945-1980 period of high growth; every other successful East Asian economy did the same. Why is the US so special that the laws of economics apply in East Asia but not here?

    The US was rich when it was a protectionist economy. Since the 1970s everything has gone to garbage – this era is also the “globalization” period of free trade. You can dispute facts all you want but eventually on the military battlefield US free trade may face Asian or Russian protectionism and the results will be similar to the US civil war. Economics aint rocket science folks.

  25. Stan Sorscher says:

    1) Acknowledge that the neoliberal approach is exhausted – drop the focus on maximum possible trade, lowest possible costs and investors first. Not everything is about money. Strategy and well-being are not always represented in a price tag.
    2) Focus on the two defining problems of our time – inequality and climate change
    3) Look at national strategies for manufacturing, energy, carbon emissions – that is, industrial policies
    5) National interests are legitimate,especially when the global economy is so far from any stable equilibrium.
    6) We should let legitimate national interests drive our trade policy, not the other way around

    China, Japan, Korea, Germany, Denmark and other countries have always behaved this way. We have been silly to think we could “free trade” our way to prosperity.

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