Opinion

Answering the Mail

It’s no mystery that many ordinary households are frustrated and angry about their economic situation.

Stagnant real wages have been the norm for middle class households for most of the past four decades. Except for the 1990s, households have managed to increase their incomes only by working more hours. But from 2000 – when women’s labor force participation stopped growing – middle class household incomes stagnated.

The shock of the financial crisis and the Great Recession, created by the deregulation of the financial system, turned income stagnation into unemployment, income decline and wealth destruction.

Moreover, industries, regions and groups have been forced to deal with the consequences of a badly regulated trade system, and full employment has been harder to reach because our persistent negative trade balance has reduced domestic demand.

The right has exploited this situation in classic fashion. During the presidential election, Donald Trump stoked the anxiety and anger that comes from economic stress, exploited racist sentiment, identified immigrants as scapegoats and promised an undefined nationalistic “greatness.”

This strategy produced no mandate for a right turn. The Republicans won the presidency through the Electoral College, but lost the popular vote.

But with control of both the House and Senate, Republican legislators are likely to enact their long-standing policy wish list: giving massive tax cuts to the wealthiest individuals and corporations; gutting environmental, financial and labor regulations that protect our citizens from harm; and repealing the Affordable Care Act, which has extended health coverage to some 20 million Americans.

Moving forward, progressives must unite to limit the damage that these initiatives will cause. In itself, this will be a demanding effort. Those who stand to gain from these changes are well funded and well organized. And if the events of the presidential campaign are any indication, proponents will also be willing to distract attention by, say, reverting to racist appeals or launching attacks on a vulnerable immigrant population. Progressives must do everything possible to fight back against this kind of demagoguery and protect innocent people.

But progressives must also do something that wasn’t effectively done during this election: advance a clear, well-formulated response that directly addresses the economic distress that motivated many voters.

The proximate causes of that distress are pretty clear. Labor standards and other regulatory protections have eroded and the real minimum wage has declined. Meanwhile, legal fictions have allowed employers to treat an increasing share of the workforce as independent contractors who are not entitled to minimum wage, workmen’s compensation and unemployment insurance or antidiscrimination protections.  Worker bargaining power has been degraded through sustained attacks on collective bargaining and unions, limiting the ability of middle class households to secure a fair share of productivity gains, and to organize politically.  The negative domestic effects of global competition have been ignored by policy makers. Deregulation and a lax approach to antitrust have enabled some firms and industries to extract significant rents, and thereby reduce the real incomes of the people who buy from them. And seven years after the Great Recession, the labor market recovery remains incomplete, with employment rates significantly below previous cyclical levels.

This is not an exclusive list of the causes of distress, but it’s a reasonable starting point.

Progressives must articulate strategies that go directly at these causes of economic distress. Basic labor standards and protections need to be rebuilt. Innovations in labor law, such as allowing sector-wide wage bargaining to reduce the incentive of individual firms to resist wage negotiations, and to increase workplace cooperation and productivity, need to be supported. Trade policy must limit the global race to the bottom, and prevent mercantilist trading partners from exporting their employment problems.  Regulation and competition policy needs to strengthened to protect households and reduce noncompetitive rent extraction. Monetary and fiscal policy must be used to run a high-pressure, full-employment economy that will tighten labor markets and raise wages.

To be sure, this is not a comprehensive list of policy responses. But progressives need an agenda along these lines to show the middle class there is a workable alternative to the agenda that will actually be enacted.

While it may not be obvious now, a clear progressive economic agenda will get a hearing. The incoming administration has, thus far, shown little real interest in addressing the economic distress of the middle class. As their lack of concern becomes more evident, it will again be the turn of progressives to answer the mail from those who really do need help. This time we ought to be ready.

 

Marc Jarsulic is the vice president of economic policy at the Center for American Progress Action Fund.

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