The Last Chapter Problem

By James Kwak

Like many analytically minded liberals, I’m good at identifying problems and less good at coming up with solutions—a common disease sometimes called the “last chapter problem.” I recently finished reading The Reconnection Agenda by Jared Bernstein (which you can even download from his blog), which takes the opposite approach.

The problem he addresses is one that we all know about—inequality, stagnant real wages, the divergence between productivity gains and living standards, etc. Bernstein recalls a meeting with a group of insiders in 2014, when a pollster interrupted a discussion of the post-Great Recession economic recovery to say:

If you mention the word “recovery” to people, they don’t know what you’re talking about. And they conclude you don’t know what they’re talking about. It’s not just that they feel disconnected from an economy that’s supposedly growing. It’s that they don’t think anyone understands or knows what to do about their situation.

And he aptly summarizes the state of inside-the-Beltway economic policy debate between “you’re-on-your-own” Republicans and Democrats:

The YOYOs run around arguing, unconvincingly to most, that government is the problem, while most Democrats nibble at the edges with YOYO-light, maybe sprinkling in a minimum wage increase. Everyone treats the private market economy like a delicate vase that mustn’t be bumped.

(That near-consensus on the magic of market forces is also the subject of my new book.)

But Bernstein, to his credit, gets the description of the problem out of the way in the first two chapters. He devotes the rest of the book to solutions: policy tools that can not only increase growth but, just as importantly, ensure that the benefits of growth are widely shared throughout the income distribution. Some are relatively standard Democratic fare, like expanding automatic stabilizers, spending more on infrastructure, universal pre-school, and maintaining a symmetric monetary policy—that is, not pretending you have an inflation target when what you really have is an inflation ceiling.

More generally, however, Bernstein focuses on the importance of using economic policy to change the pre-tax distribution of income—bolstering the bargaining power of workers so they can demand a larger share of the gains from increases in their own productivity. Among other things, that means making it easier for workers to form unions, subsidized jobs and apprenticeship programs to help people gain skills, and ban-the-box rules that help people with “criminal records” (which can mean just an arrest with no conviction) compete fairly for jobs. These are not policies that all Democrats support. But, as Bernstein writes, turnout by Democratic constituencies “may well hinge on whether they believe a candidate will try to implement a set of policies that convincingly relinks growth and their living standards.”

As I’ve written about previously, this presidential election has become a referendum on Donald Trump. But for Democrats to have any chance of maintaining our congressional gains in 2018, we have slightly less than two years to convince the public that we care about something more than fiscal responsibility and overall economic growth.