Join 350,000+ subscribers and keep yourself informed with a selection of
The Week’s most interesting, enlightening and entertaining stories - plus daily puzzles.
You are now subscribed
Your newsletter sign-up was successful
Want to add more newsletters?
An account already exists for this email address, please log in.
This Silicon Valley Democrat has a $1 trillion idea to help the working class. It won't work.
Maybe it's time for some smaller but achievable plans?
Give Hillary Clinton this: She may have a run a lackluster and uninspiring presidential campaign, but it wasn't idea-free. Far from it. Her website included more than three dozen issue areas, each containing numerous policy proposals and lengthy white papers. Surely you remember many of them: Free college. Medicare for all. Breaking up the big banks. A trillion-dollar infrastructure plan. Fight for 15!
Actually, of course, those weren't her ideas.
You know that because those ideas are memorable. Clinton's small-ball policies — whatever their wonky merits — lacked a certain stickiness and excitement. Meanwhile, Trump was talking about The Wall, killing trade deals, replacing ObamaCare with "something terrific," and a $10 trillion tax cut. Of course the Trump "plans" weren't much more detailed than bullet points, not that voters cared.
The Week
Escape your echo chamber. Get the facts behind the news, plus analysis from multiple perspectives.
Join more than 350,000 subscribers and keep yourself informed with a selection of The Week’s most interesting, enlightening and entertaining stories - plus daily puzzles.
Join more than 350,000 subscribers and keep yourself informed with a selection of The Week’s most interesting, enlightening and entertaining stories - plus daily puzzles.
But don't expect Democrats to let Republicans out-ideate them again. They seem ready to go big and bold with ideas to help workers deal with globalization, automation, and inequality. Maybe the next Democratic presidential nominee will support single-payer health care and breaking up JPMorgan and Goldman Sachs. Maybe they'll even favor the current hot policy idea on the left, a universal basic income.
If there's support for a UBI, it might look like a new proposal from Ro Khanna, a first-term congressman from Silicon Valley. He's fashioning a bill that would greatly expand the Earned Income Tax Credit, the federal wage subsidy. The EITC is a great antipoverty program that both raises living standards and encourages work for millions of Americans. The embryonic Khanna plan would basically double the current maximum credit for families to $12,000 from roughly $5,500 and to $6,000 from about $500 for childless workers. So an estimated trillion-dollar expansion of a program that, as is, will cost nearly a trillion dollars over the next decade. As Khanna told The Atlantic recently:
The fruits of the economy and all the advantages of technology and globalization have gone far more to the investor class and the professional class and not as much to the working class. … That's where this idea of a trillion-dollar proposal came from. We would give a 20 percent raise to the bottom 20 percent of households in the income distribution, to compensate them for the stagnancy of wages since 1979. [Khanna, via The Atlantic]
This definitely qualifies as big and bold. While folks on the left and right have supported some expansion of the EITC, none of them proposed anything as massive as this. For instance, former President Obama and House Speaker Paul Ryan have proposed doubling the maximum earnings subsidy to $1,000 for childless workers. So it's not surprising that a plan of this magnitude is unlikely to become law anytime soon, at least not with Republicans in charge of Washington. Debt hawks would attack it for its cost (an argument less persuasive if Republicans vote for massive tax cuts that lose trillions). And small-government types would complain about the existing program's wastefulness. The IRS estimates the EITC has a 22 to 26 percent improper payment rate, which Republicans call a "fraud" rate.
So the Super EITC has political problems, which Khanna is aware of — yet he still thinks a future Democratic president might actually sign such a bill.
Sign up for The Week’s Politics Recap newsletter
Making sense of the week's political news, delivered every Wednesday
But it also has policy problems. The EITC tries to help poorer Americans by nudging people into the workforce by making work pay better. Khanna's dramatic increase goes far beyond what's needed to make that happen.
Second, it pretty transparently tries to turn the EITC into a proto-basic income plan. Which is not surprising. Many in Silicon Valley are worried about tech progress creating mass tech unemployment. And some see UBI as eventually a necessary safety net expansion, not to mention protection against an anti-tech backlash. Likewise, many proponents on the left see it as a logical progression of the welfare state.
But that seems premature. The history of automation is one of difficult transitions but eventually greater prosperity and opportunity for most. This time may be different, of course. Forecasts show a great range of possible job-market outcomes over the next few decades. For now, a better policy would be to make sure workers are prepared for the jobs of the future and that employment opportunities are more evenly spread across America. So maybe increase the EITC benefit for childless workers, and then move to other ideas to help workers, such as modernized work-based training programs. Khanna favors that, as well as some regional pro-growth initiatives such as putting more federal agencies and jobs in states outside Washington. There are folks on the right who like both those ideas.
Big and bold proposals are great, but they often don't happen — especially when only one sides likes them. And they often sacrifice soundness for sexiness. Maybe we just need more smaller but achievable plans.
James Pethokoukis is the DeWitt Wallace Fellow at the American Enterprise Institute where he runs the AEIdeas blog. He has also written for The New York Times, National Review, Commentary, The Weekly Standard, and other places.
