Friends,
When it comes to choosing the stories that headline the next day’s newspaper, editors employ a tried and tested axiom that seems ghoulishly appropriate for our Halloween issue: “if it bleeds, it leads.” If the news is bad, in other words, the story is published in the attention-grabbing real estate at the top of the front page. This is a great way to sell newspapers, but leading with bad news often encourages news consumers to feel overwhelmed and misjudge how many awful things are happening in the world at any given moment. The same holds true for economics news—the disasters, the negative trends, and the worst-case-scenarios tend to get the most attention.
So I thought I would lead with some positive news for a change. Specifically, Eric Levitz wrote a hell of a positive thesis statement about the Biden Administration’s economic policy: “...America is enjoying an exceptionally swift economic recovery, rising household wealth, falling income inequality, a resurgence in labor’s economic power, and soaring capital investment,” before concluding that by these metrics, “Bidenomics has proved to be a smashing success.”
Joe Wiesenthal goes even a step further than Levitz, enthusiastically tweeting, “LET'S TALK ABOUT THE ECONOMIC BOOM.” Both Levitz and Wiesenthal make the case that headlines and top stories about inflationary fears, labor shortages, supply chains, and increased government spending completely miss the fact that President Biden’s policies have effectively guided us out of a recession and onto solid economic footing for a recovery that could benefit ordinary Americans for a change, rather than corporations and the wealthiest few.
Please note that I’m not saying that everything about America’s economy is perfect—and Wiesenthal and Levitz aren’t saying that, either. Income inequality is still higher than it’s been in about a century, and that kind of wealth disparity is unsustainable. Too many Americans—particularly those who have systematically been discriminated against for their race and/or gender—have been left behind in this recovery. Just today, it was announced that the economy grew at a lackluster 2 percent last quarter due to slower-than-expected consumer spending. And there’s a long way to go before we return the tens of trillions of dollars that have been taken from the paychecks of working Americans.
But we can’t begin to fix those enormous problems without a solid foundation of economic growth to build from, and that’s exactly what the Biden Administration is providing right now. We finally have economic leadership that understands where true prosperity is created—America’s great middle class. Those leaders are guiding investments directly to working Americans, whose spending will then spur even greater economic growth that will benefit everyone.
This has the potential of being a once-in-a-generation economic realignment, a refutation of the trickle-down Reagan years and a new economic era of prosperity for us all. And the signs of positive change are everywhere you look—except in the headlines of newspapers and cable news.
The Latest Economic News and Updates
Is the Build Back Better Act a trick or a treat?
Matt Phillips at the New York Times notes that the stock market is hitting record highs as Congress appears to have finally reached the end of a drawn-out negotiation process over the infrastructure bill and the Build Back Better Act. As I always like to say, the stock market is not the economy—too few Americans actually own stocks for Wall Street’s mood swings to be truly representative of our shared wealth. But in this respect, the stock market’s relief at the potential passage of the bill seems to echo that of average Americans.
Before this morning’s announcement that the Build Back Better Act was nearing completion, Felicia Wong at the Roosevelt Institute warned about “Zombie Neoliberalism” sneaking back into the negotiations over the twin spending bills. The full report stands as an excellent primer on all the monkey wrenches that trickle-downers throw into government programs in order to make them less effective and, thusly, less popular: Strict means-testing, deregulation, counting on markets to do the job that government used to do, and so on.
Wong proposes several avenues of attack for Democrats who seek to behead zombie neoliberalism before it regains its grip on Washington DC: Focus on disrupting markets, not working with them; be transparent as possible; replace programs that don’t work; and don’t be afraid of going big. This is excellent advice for anyone going into elected office, and a potent reminder for Democrats in Congress that the line between effective legislation and trickle-down policies that only exacerbate income inequality is very thin and easily crossed.
At the moment it looks like the Build Back Better plan that Congress has finalized includes significant investments in universal Pre-K, quality child care, strong environmental protections, and health care. Paid family leave appears to be off the table, as does prescription drug pricing regulation and the billionaires’ tax. I’d love to hear your thoughts on the bill, and I look forward to sharing my thoughts and analysis in coming weeks.
How high will wages go?
According to Axios, nearly 60 percent of business leaders reported that they raised wages in the third quarter of 2021, and roughly the same number expects raises to continue to climb for the foreseeable future. Self-reporting surveys are not always the most credible source, but this report seems to reflect reality, with American wages up 4.5 percent over this time last year.
Unsurprisingly, those wage gains are not spread evenly across all industries. Axios reports that “the sectors most in need of more workers have seen outsized gains: construction pay has jumped 7.1% and leisure and hospitality surged 11.2%.” That’s good news, because blue-collar workers—the kind that business interests uncharitably refer to as “unskilled workers”—were most in need of a raise:
Of course, as Matt Stoller pointed out, workers have a long way to go before they’ve fully made up the wage losses they’ve suffered since their paychecks started shrinking in the late 1970s (please note that the dotted line and question mark to the far right are editorial projections, not based on data.)
Inflation is this Halloween’s scariest story
In her Substack, Stephanie Kelton makes a case about “The Bright Side of Higher Inflation.” Stephanie’s newsletter is well worth the subscription fee, so it’s worth ponying up to jump over the paywall. But to sum up, she argues that paying high prices on certain items is well worth the pain of economic growth and higher wages, as opposed to the painfully slow recovery we experienced from the 2008 Great Recession.
And it’s worth pointing out again that corporations are choosing to pass high prices on to consumers. It would be easy for most businesses to swallow temporary price increases caused by supply-chain issues, but that would require them to give up a tiny sliver of those record-high profits in exchange for happier customers. Very few CEOs seem willing to make that choice.
Meanwhile, the next time you see a pundit tell a scary story about runaway inflation, just refer back to this chart showing inflation expectations for the last 20 years or so and you’ll see that we are well within historical bounds for price increases following a recession:
It’s easy to panic about inflation when experts tell spooky stories, but when you turn on the light of reason and look around, you see that there’s nothing to be scared of.
Being good is good economics
Last week, I wrote that doing the right thing morally is also good economics. When we reduce poverty, for instance, we’re not just doing the right thing by our fellow humans—we’re also improving the economy for everyone by adding to the growing pool of consumer demand that creates jobs and powers small business.
Our friends at the Economic Policy Institute put together a comprehensive report proving that moral policy is good economic policy. And bad economic policy—particularly policies which build on the trickle-down tenets of deregulation, lower wages, and lower taxes on the rich—creates bad moral outcomes.
I was especially moved by this chart, which argues that had income inequality not skyrocketed over the last four decades, we likely would have effectively ended poverty in America:
The piece ends with ten policy proposals that would simultaneously make America a more moral and a more prosperous place to live. “Such policies will help us not only live up to the constitutional and moral commitments this country was founded on but also revive our economy,” the authors write.
They conclude, “By organizing against the policies that have pushed millions of people out of the political narrative and increasingly out of any economic power, we can begin a path to recovery that will reduce inequality, increase workers’ power, and morally and economically benefit us all.”
The next time someone tries to tell you that you have to choose between doing the right thing and preserving your prosperity, you should keep this in mind: A world where more people are able to pursue the things that make them happy is, by definition, a more prosperous world.
Real-Time Economic Analysis
Civic Ventures provides regular commentary on our content channels, including analysis of the trickle-down policies that have dramatically expanded inequality over the last 40 years, and explanations of policies that will build a stronger and more inclusive economy. Every week I provide a roundup of some of our work here, but you can also subscribe to our podcast, Pitchfork Economics; sign up for the email list of our political action allies at Civic Action; subscribe to our Medium publication, Civic Skunk Works; and follow us on Twitter and Facebook.
On Civic Action Live this week, we will discuss the economic boom that nobody else is talking about, analyze the (hopefully) final Build Back Better legislation that Congress just passed, and we’ll take your questions about the latest economic news. Join us Friday morning at 10:30 am.
On this week’s episode of Pitchfork Economics, Goldy and Nick talk with Vote.org CEO Andrea Hailey about why inclusive voting laws make a democracy even stronger, and what you can do to help reform voting laws in every state of the union. Here’s one mind-blowing takeaway from the episode: Hailey is the leader of the nation’s largest nonpartisan digital voter engagement organization, and she had to wait in line for seven hours to vote in the last election in her home state of Indiana. Election systems in many states are deeply broken—and the fact is that they’re broken by design.
In his Business Insider column, Paul talks about the ways the American social safety net proved to be surprisingly strong during the pandemic—and how we can learn to rebuild the safety net so that it provides those strong economic protections all the time, not just in moments of national crisis.
Closing Thoughts
As the Build Back Better Act moved toward passage, a chorus of voices took up a new call to Congressional Democrats to tax the rich. Civic Ventures founder Nick Hanauer tweeted a thread earlier this week calling on Congress to tax the rich. “It’s wildly popular because it’s the right thing to do,” Nick tweeted. “The super-rich have made a mint during this pandemic, just adding to our already-huge piles of wealth. Instead, that money could be moving through the economy and creating growth.”
Nick also shared a link to an earlier piece he wrote for the New Republic about the importance of taxing the wealthiest people in America, adding that “Taxing the rich is good for the economy!”
Paul Krugman also made a strong economic case for taxing the rich in a New York Times editorial titled “Tax the Rich, Help America’s Children.” Krugman suggests that investing revenue from a wealth tax directly into policies that benefit children would have the longest-term economic payoff for everyone, because anti-poverty and early education programs have been proven to improve outcomes decades down the line.
The Build Back Better plan as it currently stands includes a significant overhaul of taxes, with a much-needed tax on stock buybacks, a minimum corporate tax, a tax surcharge on the wealthiest Americans, and a big investment in the IRS to catch big-money tax cheats. This is all welcome news!
But Krugman and Nick are both making the case that we can tax high-earners even more in future legislation, and if we do so the wealthiest few thousand Americans will not experience any difference at all in their day-to-day lives, while the lives of ordinary Americans will be improved on a fundamental level. What we see in the Build Back Better plan now in terms of taxation is a great first step, but there’s more that our leaders can do in the months and years to come.
When a Nobel laureate in economics and a zillionaire find agreement on taxing the rich, that should give even the most rabid tax critics pause. Both Krugman and Nick agree that ordinary Americans can do more with that hoarded wealth than the super-rich could ever do: Their spending will create jobs, their kids will earn more in the long run, and economic outcomes for everyone—including the super-rich—will improve. It’s just common sense, which is exactly why 61 percent of Americans approve of raising taxes on the wealthy.
Be kind. Be brave. Mask up. Get vaccinated.
Zach