Republicans have a big new economic idea. It's terrible.
Trumponomics forces conservative wonks to embrace the absurd
Faster economic growth is good for workers. It means higher incomes, more jobs, and greater opportunity. Just look at the U.S. economy. After a nasty recession, the long expansion has driven unemployment down to the lowest level in decades, and wage growth is accelerating — especially for lower-income workers.
Two key ways to make the economy grow faster over the long term are trade and immigration. Which means some Republican-leaning policy wonks face a conundrum in the Age of Trump: How can you be pro-growth, pro-worker, and yet also anti-globalization?
If there's a way to square that circle, it won't be found in The Once and Future Worker, the new book by Oren Cass, a think tanker and former Mitt Romney policy adviser. Although praised by several high-profile conservative wonks and writers, the only thing The Once and Future Worker really demonstrates is that it's devilishly difficult to make sense out of nonsense. And trying to do so forces one to embrace the absurd.
Yet Cass goes there. One of his innovative analytical insights is that economic growth from globalization is bad for workers. While the elitist "openness agenda" of immigration and trade has helped triple the nation's gross domestic product since the mid-1970s, pretty much only the elites have benefited, according to Cass. (If you're a Bernie Sanders supporter, let me apologize in advance: Much of this critique will be boringly familiar.) For many of the rest of us, globalization has brought only stagnant living standards, a collapse in social mobility, and a decline in work. The inescapable churn of globalization's creative destruction just wasn't worth it, Cass concludes.
This is a terrible reading of history through the lens of Trumpian economic nostalgia. America would be worse off today if it had somehow kept the closed "golden age" economy of the 1950s and 1960s. Its lack of openness greatly harmed American workers once the rest of the capitalist world finally rebuilt itself after World War II. Too much of American industry became complacent, unproductive, "and collapsed at the first sniff of competition," note Alan Greenspan and Adrian Wooldridge in their new book, Capitalism in America. Likewise, would America have a more thriving economy today without Silicon Valley? Most of America's biggest tech firms and fastest-growing startups were founded by immigrants or their kids. The closed agenda is a recipe for economic stagnation.
Unfortunately, Cass' reading of the data isn't much better as he adopts the stance of many leftists that most Americans are no better off than decades ago. Yet a recent Congressional Budget Office study shows a nearly 50 percent increase in middle-class incomes since 1970, with incomes for the bottom fifth up some 80 percent when you include tax credits and government transfers. Government should certainly do more to help the struggling working class and poor, but they haven't been abandoned. The safety net has worked pretty well to boost living standards and materially reduce deprivation. Using the standard of living of the poor in 1980, the consumption poverty rate fell from 13.0 percent in 1980 to 2.8 percent in 2017, according to economists Bruce Meyer and James Sullivan.
The flipside of Cass' view that past workers were screwed by the bad growth from globalization is his belief that future workers will be saved by the good growth of technological progress. Cass is a techno-optimist who thinks that if advances in AI and robotics could be economically transformational. And fears about robots taking all the jobs are unfounded.
Yet just as Cass overplays the downside of globalization, he underplays the potential disruption for workers from automation, including the impact machines have already had on the job market. Economist Daron Acemoglu has done some of the best work on the potential impact of technology on jobs. He doesn't think all the jobs will disappear, but warns that "the future level of employment and labor share may be lower in the future than the past." Just as with globalization — not to mention the Industrial Revolution — there might well be lots of losers as AI spreads throughout the economy, at least for a time. And when you obsess about protecting existing jobs rather than helping workers adjust to change through education and a work-encouraging safety net, you give aid and comfort to modern Luddites who would ban ride-sharing and kiosks at fast-food restaurants. Neither jobs nor the communities they're located in are protected over the long run if shielding them from globalization and technological advance means an uncompetitive private sector that eventually sheds workers or doesn't expand as much as it would have otherwise.
Perhaps some future populist president will rage against the machines like the current one does trade agreements. If so, Cass might have just provided the blueprint for such attacks.