Where Economic Distress Meets Political Dysfunction

Robert Kuttner 

The economy generated almost 300,000 jobs last year and cut the nominal unemployment rate to five percent. But family incomes for most people are still deeply depressed. 

Yet a lot of experts seem to think this is the best the economy can do. The Federal Reserve last month actually voted to raise interest rates on the premise that growth would soon pick up, and inflation might be a threat.

Meanwhile, slowing growth has made fools of the Fed's experts. The collapsing stock market in China produced reverberations around the world and projections of slower growth at home and abroad. 

The U.S. economy is relatively strong compared to the rest of the world (faint praise). But as the deep slide in domestic stock markets during the first week of the New Year suggests, we are hardly immune to global trends. 

Nor is the current American economy strong enough to serve as a growth engine for the rest of the world. And nothing in the mainstream policy debate would significantly change the economic outlook for ordinary working families and the economy as a whole, though the proposals of the Sanders campaign are at least a down-payment.

What the economy needs is a massive program of investment in public infrastructure to provide jobs and domestic growth that is relatively insulated from global trends. Such a program could also accelerate an overdue transition to a greener economy.

That would require on the order of about half a trillion in outlays a year, some of it financed by higher taxes on the rich and some of it financed by debt. Try to find a mainstream politician calling for that level of public outlay.

But look around you at the appalling state of basic public infrastructure. On my block on Boston, some basic repair of electrical systems is going forward at a glacial pace because the spending has to be stretched out for lack of funds. In New York, the a new subway line is literally taking decades because only a little money is available each year.

Our coastal water and sewer systems are sitting ducks for the next surge of sea level rise. Basic roads, bridges, tunnels, electrical systems have deferred maintenance bills stretching into the trillions. Our internet access systems are technically behind those of most of Europe and some in the Third World -- and far more costly to consumers. And don't get me started on Amtrak.

Here's where the economics meets the politics. As a number of commentators have pointed out in recent days, the Republican Party is on the verge of splitting wide open between grass roots right-wing populists and the GOP establishment, based on "class divisions." 

But while a recently New York Times front page piece quotes several Republican leaders on this concern, the piece offers little insight on what working class Republicans are so angry about. Here is an extract:

'The Republican Party has never done anything for the working man like me, even though we've voted Republican for years,' said Leo Martin, a 62-year-old machinist from Newport, N.H., who attended Mr. Trump's Claremont rally. 'This election is the first in my life where we can change what it means to be a Republican.'

Patrick J. Buchanan, a Nixon and Reagan adviser who ran for the Republican nomination in 1992 and 1996 by stressing the economic and cultural concerns of working-class Americans, said these voters were roiling the party because they had "suffered long enough."

Mr. Buchanan cited years of job losses and wage stagnation that he blamed on free-trade deals and cheap labor from illegal immigrants, as well as hardships from foreign wars that have hit families whose children enlisted in hopes of better lives.

Dig a little deeper, and you'll see the problem. Wage stagnation is indeed partly the result of trade deals, but those trade deals have been supported by both parties and most recently championed by the Clintons and by the Obama administration.

The other leading causes of wage stagnation are union-bashing and too much license for Wall Street to make off with the lion's share of the economy's gains.

The Democrats have also been complicit in the liberation of Wall Street. 

Immigrants are a small part of the hit to working class wages. But in the absence of other remedies, they are a handy scapegoat.

In short, there is little that Donald Trump of Ted Cruz is offering that would change the life circumstances of voters like Leo Martin. But they channel his frustration that neither party cares about people like him.

Democrats, meanwhile, champion the rights of minorities, women, gays and lesbians. That might be easier for white guys like Leo Martin to swallow if the Dems were also doing more for people like him.

There was a the time when Democrats could point to popular and populist programs like Social Security and Medicare to solidify working class affections.

But the latest Democratic achievement on that front, the Affordable Care Act, doesn't seem to have that effect.

One reason: Unlike Medicare, the actual insurance you get under the ACA is private. Only the unpopular mandate to buy it or pay a fine comes from the government.

So Dems are not reaching enough voters like Martin, who are converting the Republican Party to a (largely fake) instrument of working class rage.

This brings me to the general election. A recent poll surprised a lot of insiders by suggesting that Bernie Sanders would do better against Donald Trump than Hilary Clinton would do better against Donald Trump than Hilary Clinton would--beating Trump by 13 points.

This was confirmed by an NBC-Wall Street Journal poll. 

But this should be no surprise at all. With a lot of angry voters in a populist mood, they would likely opt for the real economic populist rather than the fake one.

In a Trump-Sanders matchup, each succeeding debate would reveal that Sanders had actual solutions while Trump offered mainly bluster and BS. This matchup is a long shot of course, but it's a very useful thought experiment. Then again, you never know...

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Robert Kuttner is co-editor of The American Prospect and professor at Brandeis University's Heller School. His latest book is Debtors' Prison: The Politics of Austerity Versus Possibility.