Democrats would do well to focus on economic growth, not redistribution

After the crushing and, for most people, surprising defeat of both Hillary Clinton and many Democratic congressional candidates, the requisite gnashing of teeth and recriminations have begun: It was because of ballot fraud. Comey. Putin and Julian Assange. Racist voters. The electoral college. Clinton running a bad campaign in which she made bad choices such as spending time in Arizona instead of Michigan. And of course, Clinton herself.

In other words, blame everything and everyone other than the core message of the campaign. For while President-elect Trump’s core message was simply that he was going to “Make America Great Again,” starting with the economy, Clinton’s message was more muddled. She pitched “an economy that works for everyone,” offering a detailed series of promises to discrete groups such as Latino communities, African-American communities, and others, all under the rubric of “growing together.” But it was a message that did not focus on actually growing the economy—much less championing policies that would accomplish that goal. Instead, Clinton’s plan stressed redistributing wealth from those “at the top” to those in “the middle.”

You’d think this would have resonated with Trump voters in swing states, most of whom do not have graduate degrees or high incomes. But they clearly didn’t buy it. No doubt, to the extent they heard the message at all, Trump voters interpreted it to mean that government handouts and corporate redistribution would be going to a select few minorities. What they needed to hear instead was a clear and convincing message that there would be the kind of strong economic growth that would really benefit everyone, including themselves.

But we shouldn’t be surprised that the Clinton campaign embraced an economics of redistribution. There was a time, starting in FDR’s day, when Democrats were the party of growth—widely shared growth, but growth nonetheless. In fact, Democrats from FDR through Bill Clinton (whose internal campaign slogan was, “It’s the economy, stupid!”) saw robust and vibrant economic growth as progressive. But in the last 15 years, most Democratic leaders and activists have lost the faith they once had in growth as a “rising tide that lifts all boats.” Indeed, it’s been an article of bitter faith among many on the left that JFK’s famous phrase no longer applies, if it ever did. For them, growth only helps those fortunate enough to be perched at the top.

Democratic pundits in recent years have argued explicitly that growth no longer benefits American workers. For example, liberal pundit Bob Kuttner wrote in 2007 that productivity was up 19 percent in the aughts, but median earnings were down. And in 2012, liberal economist and columnist Paul Krugman lamented that wages had been stagnant since the 1970s, despite big increases in productivity. But it was Thomas Piketty’s 2013 book Capital in the Twenty-First Century that finally sealed the deal, making redistribution the main goal for most Democrats, for Piketty claimed that between 1979 and 2007 more than 91 percent of the income gains that were due to productivity growth were captured by the wealthiest 10 percent of the population. Stephen Rose, writing for the Information Technology and Innovation Foundation, has shown that Piketty vastly overstated the case. (In fact, the bottom 90 percent earned between 42 and 47 percent of growth; still unequal, but certainly a lot better than a measly 9 percent.) But Piketty had given the Democratic left exactly what it wanted: sweeping and seemingly incontrovertible “evidence” to support its redistributionist economic agenda. After all, if productivity increases no longer benefit average Americans, then why have growth as the central goal of an economic agenda?

And Secretary Clinton did not. Rather, her campaign’s economic message was fundamentally about redistribution. Her proposals included an array of benefits that government would provide for working and middle-class Americans either by raising taxes on the wealthy or by forcing companies to offer them. The former of these included free college, a higher minimum wage, more social security, subsidized housing, and increased spending to reduce poverty. The latter included employee profit-sharing, more unionization, paid family and medical leave, and equal pay for women. You can agree or disagree with any of these policies on their merits, but one thing is abundantly clear: They are about reallocating money to provide benefits to working and middle-class Americans—and they would do very little, if anything, to spur economic growth or productivity, which is a sine qua non for increasing people’s standards of living.

Given the prominent role that policy experts from the liberal Center for American Progress played in Clinton’s campaign, this focus should not be surprising. (John Podesta, founder of CAP, was Clinton’s campaign manager. Neera Tanden, the group’s current president, served as policy director for the campaign. And Heather Boushey, a former CAP economist whom the media dubbed an “inequality expert,” was tapped to be the Clinton transition team’s chief economist. In other words, the CAP economic agenda became the campaign’s.) The CAP/Clinton agenda was enumerated in 2015 in a voluminous policy tome called the “Report of the Commission on Inclusive Prosperity,” which articulated the dominant economic narrative of the left—that the central challenge of our time is inequality and dwindling opportunity, and that economic policy must focus on more equitable distribution of the economic pie, not growing the pie.

The commission’s “middle-out” agenda was not a growth agenda, but a redistribution agenda that served as a prelude to Clinton’s. Among the policies the report champions that would do nothing for growth, but something for redistribution: increasing mortgage lending; giving more rights to “independent contractors”; encouraging more unionization and more profit-sharing arrangements; increasing the minimum wage and overtime pay; eliminating support for banks that are now designated as “too big to fail”; raising taxes on corporations and the rich; addressing climate change; expanding low-skill immigration; and providing more government subsidized goods and services (from housing to infrastructure to education).

Despite what many on the left claim, especially after November 8th, voters are not stupid. When it comes to the economy, most want fast growth and a fair chance to get ahead. Trump got as many votes as he did from people who felt economically disenfranchised, because he promised to grow the economy. He spoke of “winning the global competition,” making America “wealthy again,” “thinking big once again,” and “massively increasing jobs, wages, incomes and opportunities.”

If Democrats want to win more of those Trump voters in the future, they will need to jettison “middle-out” economics and replace it with “growth economics.” This has to start with embracing a new narrative that the most important goal in economic policy is not redistribution but growth. It then needs to include growth-spurring policies like stronger tax incentives for companies to invest in new machinery, software, and R&D; increased funding for research and development; and building new infrastructure that is integrated with digital technologies, as opposed to just repairing existing roads and bridges. Without a clear and robust economic growth agenda, Democrats will be largely dependent on Republican mistakes to regain power, rather than their own vision.

Robert D. Atkinson (@RobAtkinsonITIF) is the founder and president of the Information Technology and Innovation Foundation, a think tank focusing on the intersection of technological innovation and public policy.