NDN Blog

EJ Dionne on the economy and the elections. Rising gas prices have given the Republicans a fillup, but as he points out, from a low base. But the other economic fundamentals - wages, incomes, price rises, slow job growth - haven't changed.

The GOP is still in trouble on the economy. The New York Times/CBS News poll published Thursday found that 36 percent of respondents thought the economy was getting worse, compared with 17 percent who saw it getting better.

But this is actually good news for Republicans, considering that in July the same poll found that only 12 percent saw the economy improving while 47 percent saw it declining. And in the Pew survey, the proportion of voters listing gas prices and the constellation of issues around energy as the country's most important problem fell from 14 percent in May to 7 percent this month.

And so it begins. We've known for a while that the Republicans have planned to trot out a tax increase message, as a siamese twin to "cut and run." There have been reports that the GOP would run the national campaign on security, but in local races would try to capitalize on voter concern about the economy by running hard on tax. This makes sense, particularily if you listen to reports like this on NPR this morning, showing discontent over the economy in rural areas (and noting that Dems were doing surprisingly well amongst rural voters.) And, so, no surprise yesterday when President Bush began to roll out the tax message, during a sweep through Florida yesterday. 

Predictability notwithstanding, there is something rather fantastic about all of this. The President says that, if the Democrats win back the House, they would raise taxes. In fact he says they plan to raise taxes. I might be ignorant on this matter, but i no of no such plan. And i can't think of any particular reason why a Democratic house would to do this. Come 2008 Democrats will have to cope with the unexploded bomb of whether to repeal the Bush tax cuts and get slated for raising taxes, or to suck it up and forgoe any hope of returning to fiscal balance. Mark Warner fired the most recent shot on this battle this week, and it'll run all the way through the elections. But that is not relevant in this election. 

The Democrats have neither plans for a tax increase on anything, nor planned increases in spending so large as to infer that a tax increase would be needed, nor any chance of enacting such an increase with a Republican President and a likely Republican Senate. Naively one might that in order to say they will Republicans would at least feel obliged to concoct some sort of rationale for the claims. But no. Check out the RNC - where you will find not a single fact-sheet or issue brief giving any reason why the Democrats might actually raise taxes in practice. Add this together with their other frequent dissembling over rising wages, fast-growing job numbers and falling deficits and it seems clear that out there, beyond the outer-rim of the reality-based community, a passing familiarity with the truth is no longer something to which one should even aspire.

Interesting. Very Interesting. Chris Cillizza's blog over at the Post tells of a new type of "telephone townhall" campaigning technique, otherwise known as a giant conference call, being used by Republicans in the Kentucky 2nd. I've never heard of this being used as a way to talk to voters. Seems like a smart way idea, especially in rural areas. The video clip says more about how it works. 

The sophmore edition of Democracy: A Journal of Ideas. NDN is a big fan both of the journal, and its two founders, so we'd encourage you to sign up regardless. Luckily, though, issue 2 looks just as interesting as the first, and showcases a number of hip policy concerns.

First, a controversial article on China, that gives progressives a spin normally more associated with neo-conservatives. China's rise is an ideological threat, rather than a generally good thing mitigated by a few ethical and economic glitches:

The rise of China presents the West, for the first time since the fall of the Berlin Wall, with a formidable ideological challenge to that paradigm. The "China model" powerfully combines two components: illiberal capitalism, the practice and promotion of a governance strategy where markets are free but politics are not; and illiberal sovereignty, an approach to international relations that emphasizes the inviolability of national borders in the face of international intervention.

(Interestingly, there is a small story in the FT today about German Minister Michael Glos saying something fairly similar, in particular noting that "China's aggressive attempts to secure energy supplies in developing countries constituted a "breach of international rules of behaviour." The diplomatic, ethical and ideological implications of China throwing her weight around are clearly underappreciated. The piece is a timely reminder.)

Second, there is also a plug by Barack Obama's policy head Karen Kornbluh for this month's hot social policy: the revival of social insurance systems. Kornbluh notes that "mass layoffs, globalization, rising costs of living, and lower real wages" means that "Americans no longer rely on stable careers, nor do they assume that they will earn enough to raise a family on one salary." We need "a national commitment to mitigating the new risks to the economic well-being of families." This sounds similiar to Jacob Hacker's ideas in his new Hamilton paper, and elsewhere.

All in all, interesting "big ideas" of the sort Democracy was meant to be hawking. Get yourself a copy.

A thoughtful continuation of the ongoing half-full, half-empty debate in the Economix collumn in this morning's Times. To Recap briefly. Some thinkers look at flat wages and incomes in combination with rising costs, and see Americans struggling. Not so fast, say others of more centrist or right wing bent - people's incomes now get them a far superior basket of goods, better health and the like. Here is how the Times puts it:

For the last few weeks, there has been a roiling debate, both within the Democratic Party and between Democrats and Republicans, about how to describe living standards in this country. Among Democrats, the debate is really about how to talk to voters about the economy as the party tries to reclaim control of Congress this year and the White House in 2008. One group of Democrats says that it’s time to stop pulling punches and acknowledge that, at best, life is marginally better than it was a generation ago. The other group argues that the middle class’s current problems should not obscure enormous progress made over the last few decades. President Bush and his aides agree with the progress part and go on to say that the middle class continues to do quite nicely today. Each group has its preferred numbers, which can be dizzying, but you don’t need to dig into them to figure out what’s really going on. You just need to understand snow blowers. [You have to read the article to understand why the example of snowblowers explains so much]

Of course, the latter group are right to a degree. Brink Lindsey, a libertarian guest at last friday's forum at the Hamilton Project, put the thought experiment well. If things are so awful, would you, he asked, swap today's median income, basket of goods and life chances for that in (say) 1973? Give up the iPod? Give back those couple of years of life expectancy? Few would. Nonetheless, these issues - precisely how inflation is counted in the CPI, or whether better consumer products make life better - only take us so far. As Dean Baker points out on his TAP blog, the extent of this goods bias is in question. And even then it doesn't explain why Americans are so grumpy about their economic prospects, or why they are unwilling to give the Republicans the credit they think they deserve for an economy which has grown at a fair clip since the end of the last recovery. And so it seems fair to say that the democratic critique of the Bush economy - like the one we put out last week - is not undone by these issues. People aren't content for a variety of reasons. Their incomes aren't going up, or at best they aren't going up as fast as they used to. They see other people's going up faster. They are sensitive to fast price rises in consumer goods, like gas. They feel less secure because the consequences of a job loss are ever-more severe. They feel less secure because the odds of income loss have risen substanially. And no ammount of talk of cheaper, inflation proof snowblowers seems to make people think otherwise.

The Economist this week has an exceptionally good survey on the changing global economy. The best piece of all is sadly subscription only, but deals with problems of the unequal share of globalization's benefits. The piece concentrates on the wage problem:

Most of the fears about emerging economies focus on jobs being lost to low-cost foreign competitors. But the real threat is to wages, not jobs. In the long run, trade and offshoring should have little effect on total employment in rich countries; rather, they will change its composition. So long as labour markets are flexible, job losses in manufacturing should eventually be offset by new jobs elsewhere. But trade with emerging economies can have a big impact on both average and relative wages.

There is an interesting piece in Today's Roll Call, about the new push by Democrats on economic issues. It quotes a GOP spokesperson, showing off their new economic attack line. “Wait, is the economy yet another ‘new direction’ for the Democrat leadership?” says one GOP staffer quoted in the piece. “Good luck. Gas prices are down, jobs and wages are up and security is still the top concern.” For the final time, especially for those who haven't been listening at the back, real wages have not risen. And here is the Economist to prove it:

Over long periods of time, real wages tend to track average productivity growth. But so far this decade, workers' real pay in many developed economies has increased more slowly than labour productivity. The real weekly wage of a typical American worker in the middle of the income distribution has fallen by 4% since the start of the recovery in 2001. Over the same period labour productivity has risen by 15%. Even after allowing for health and pension benefits, total compensation has risen by only 1.5% in real terms. Real wages in Germany and Japan have also been flat or falling. Thus the usual argument in favour of globalisation—that it will make most workers better off, with only a few low-skilled ones losing out—has not so far been borne out by the facts. Most workers are being squeezed.

The GOP approach to the economy this cycle looks clear. They are running a twin track strategy: (1) tax-raising accusation and (2) outright disembling on incomes and wages. But how can they get if even the Economist and the FT aren't prepared to give them a pass?

As Paul Krugman writes this morning, whether or not the "typical American family better off than it was a generation ago" has become the subject "of an intense debate these days, as commentators try to understand the sour mood of the American public." Its been a fascinating debate to watch unfold over the last month or two, much of it happening online (and being summed up publically in Krugman's collumns) . The catalyst was the updating of a landmark academic study during the summer, complete with stark new figures on income concentration. This debate is particularily germaine here in America because the same trends simply don't show up in lots of other countries. Simply put: the French trade more than the US, have more mobile phones, use the internet just as much, and have plenty of immigration. But their society has got no more unequal over the last 20 years.

Krugman references an ongoing debate about the middle class, a pretty clear not to this ongoing scrap at The American Prospect, in which Steven Rose of 3rd Way and Larry Mishel of EPI go statistical toe to statistical toe over the fullness of America's middle class glass. The gist of the debate is this. We know incomes and wages haven't risen much since the mid 1970s, with the exception of the late 1990s, with the last few years especially bad. On the way we gained iPods and the internet, which is nice. But our parents took all the good beach front property, and our commute got longer. Are we better off? Krugman says this is "the wrong debate" - instead we should be trying to find out why all the iPod and internet goodness (meaning productivity and technological advancement) hasn't made us even better off. This is an odd argument, on the face of it. The question of whether we actually are better off would seem to me prior to whether we ought to be better off than we are. Nonetheless, the argument is well put:

The United States economy is far richer and more productive than it was a generation ago.... In 1973, there were no personal computers, let alone the Internet. Even fax machines were rare, expensive items, and there were no bar-code scanners at checkout counters.....Yet in spite of all this technological progress, which has allowed the average American worker to produce much more, we're not sure whether there was any rise in the typical worker's pay.

That's why the debate over whether the middle class is a bit better off or a bit worse off now than a generation ago misses the point. What we should be debating is why technological and economic progress has done so little for most Americans, and what changes in government policies would spread the benefits of progress more widely.

Simon and Rob released a new Memo from NDN today, on trade policy. The text of his e-mail is below.

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This is a critical time for those of us who believe in open markets and trade liberalization.

The current global trade negotiations, the Doha Round, have collapsed. In the wake of five years of accelerating globalization, during which American wages have stalled and job creation has slowed, the national consensus to continue to liberalize trade –one that has helped America and the world prosper for more than fifty years -- is under threat.

Today Rob Shapiro and I are releasing a detailed new memo – Rebuilding the National Consensus on Trade - outlining why Democrats and Republicans must act now to reverse President Bush’s failed leadership on trade liberalization.

You can read the memo online here, or download a PDF version here.

In the memo we examine why poor Republican leadership and greater economic anxiety explain Doha’s collapse. We also outline 6 specific areas where progressives can fight back this fall, and lay out the beginnings of a strategy to help rebuild our national consensus on liberalization in the future.

Best,

Simon Rosenberg 

President
NDN

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There is a sense in which you know something is on the agenda only when the other side begins to fight back. So Edward Lazear's remarks yesterday are just a further example of the administration's coming-to-terms with its poor ratings for economic handling. There has clearly been a concerted push on national security since the Vice-President's Sunday interview. But, spurred on by a certain cheeryness about the fall off in pump prices, there seems to be an ongoing campaign to talk up the economy also. The FT piece - written by Edward Luce, who also wrote the first front page story on the subject a month ago - gives a good account.  

Mr Lazear on Tuesday pointed to a 4.1 per cent increase in nominal workers' compensation in the first six months of this year as evidence that employee remuneration was starting to catch up with productivity growth, which has achieved an average annual 3 per cent increase since the US economic recovery began five years ago.

However, critics of the Bush administration say that real wage growth, which excludes the inflationary cost of healthcare that has fuelled compensation growth, continues to languish at or below annual inflation...... met with growing scepticism among economists who point out that real wages for most Americans are marginally below where they were four years ago, in spite of strong overall growth in gross domestic product. According to the Bureau of Labour Statistics, the average hourly wage for private sector non-farm workers was $8.17 in August 2006 (at 1982 prices) compared with $8.23 in August 2002.

8.17 plays 8.23. Its like split times in the 60 yards dash. Woosh! Wages are rising so fast they are just a hair's breadth from zooming passed where they were four years ago. I think this cartoon in the Post a few days back put it best.

Tony Blair is a dead politician walking after the palace coup staged against him last week. Still, given the furore over the President's not-quite-what-you'd-call-non-partisan remarks of a few days ago, i'm still impressed by the ability of the British PM to properly describe world events. This is from a speech he gave yesterday:

Globalisation is so often debated today that it can just elicit a yawn. 'The world is interdependent' has become a cliche. What isn't cliched, however, is the response to it. For the first time, I can sense building up, here and round the world, a division, not of ideology but of attitude, as to how we deal with the consequences of globalisation. Ten years ago, the response was reasonably clear and adopted by consensus.Yes, globalisation was at one level frightening, in its pace and reach; but the only rational response was to manage it, prepare for it and roll with it.

I don't think there is that consensus today. There is a mindset of fear that is different and deep. People see the burgeoning economic power of China, India and the emerging economies threatening jobs and stability.....What has changed is the interplay between globalisation, immigration and terrorism. Suddenly we feel under threat: physically from this new terrorism that is coming on to our streets; culturally as new waves of migrants change our society; and economically because an open world economy is hastening the sharpness of competition.

A stretch to think he might have managed the world "interplay", but imagine if President Bush had said something like that instead. But he won't. Perhaps the best option would be a Blair-for-Connecticut write-in campaign after all.