Democrats Answer the False Choice of Growth Versus Redistribution With Inclusive Prosperity

03/12/2015 06:08 pm ET | Updated May 12, 2015

Which do you think is the bigger problem in America today: That the economy offers too many rewards for people at the top, or that the economy is not working well enough for people in the middle and bottom? Some would say both are serious problems with emphasis on the corrupting influence of the super-rich in the political process following the Supreme Court decision in the Citizens United case. However, a far larger number of Americans would say the real problem is stagnant wages for low wage and even middle class workers. Most Americans are less concerned with lowering the ceiling than raising the floor.

When Democrats use phrases like "closing the income gap" or addressing "inequality" they are not being clear whether they really mean they want to hold back income from the very rich, increase income for everyone else, or a combination of the two. These are somewhat abstract concepts that inspire many Americans but are viewed as divisive by many others. The aspirations of the majority of American workers can be addressed more concretely in terms that nearly everyone sees as offering a direct benefit to their own family: a growing economy that is providing jobs with higher pay for all income levels. "Inclusive prosperity," the goal of a growing economy where the benefits of growth are broadly shared, is a more potent economic frame for Democrats to appeal to the forgotten middle class heading into the 2016 election.

A battle for words and concepts.
Coming from different places, Republicans and Democrats now both would like to say they are best for growth of the economy, and for making sure the middle-class gets a larger share of the benefits of that growth. As Democrats articulate a clear economic vision of growth leading to higher incomes for workers at all levels -- and detail the demand-side and supply-side policies to make a compelling case that they can achieve these goals, Republicans will find themselves wanting to use the same words but lacking the policies that would make their claims credible. Democrats have huge substantive advantages on policy and if they battle smartly, they have the ability to stake out a strongly advantageous position.

At this point, the economic battlefield for 2016 is shaping up as a battle for ownership of words and concepts that will resonate with voters. Republicans are staking claims on the words "growth," "mobility" and "opportunity" for the "middle class." They would like to argue that liberals are obsessed with redistributing income from the rich to the poor, while conservatives champion economic growth that benefits everyone. There is good reason for this choice as pollsters for both sides know the growth frame has more political potency than the redistribution frame. Whenever Democrats talk about shrinking the "income gap," they are emphasizing redistribution rather than talking about growing incomes for American working families, which is a more appealing way of stating the same goal.

Inclusive growth.
By framing economic growth as inclusive, where everyone shares in the benefits, Democrats need not make a false choice between growth and re-distribution. The substantive policies Democrats are promoting embrace both in order to strengthen the middle class, while Republicans continue to promote trickle down policies in the name of growth that only benefit the wealthy.

The emerging Democratic inclusive and pro-growth agenda that strengthens the middle class is the theme of a recently released Center for American Progress Report of the Commission on Inclusive Prosperity. The concept of inclusive prosperity provides a definition of a goal that includes both growth and its distribution in a way that unites rather than divides. The problem is defined as decades of wage stagnation for all income levels except the very rich. The specific planks of the long list of policy proposals can be debated, but the articulation of the broad goal of inclusive growth should be embraced broadly by Democrats heading into the 2016 election cycle. Raising the minimum wage is but a single element in a broader strategy to increase wages at every income level. To put the goal in language everyone can understand: Hard-working American families need more take-home pay.

It is important to express the various elements of inclusive prosperity in the language real people use. The problem is not "inequality" or an "income gap." The problem is the difficulty many people are having finding jobs that pay well. We do not need to "pass along productivity gains." We need to pay workers more. These are not "pocketbook issues." Fewer than half of voters own a pocketbook, but nearly all voters have hands. When we say we need to get more money into the hands of hardworking American families, we are talking to everyone.

Supply-side and demand-side.
All of the specific proposals in the Inclusive Prosperity report can be classified as either demand-side or supply-side strategies, and many elements offer both at the same time. This is a strong feature, because it reframes an old debate as a comprehensive new solution. Anyone who has taken a single economics course knows that supply and demand must be addressed, and this framework provides a road map to help people understand how all of the policy elements fit together into a coherent approach.

The words supply-side have echoes from the past. During the Reagan Administration Republicans made the claim that their "supply-side economics," in the form of tax cuts mostly for the wealthiest, and reductions in business regulations would deliver economic growth and shrinking budget deficits. Just the opposite happened, and in the face of a stalling economy and skyrocketing deficits, Reagan's successor George H. W. Bush had to reverse course and raise taxes. This was despite having uttered the "Read my lips, no new taxes" pledge. In many ways, the Republican economic policies are little different today than they were then -- even though the same policies nearly destroyed the global economy during the administration of the second President Bush.

Democrats can now claim to have superior proposals for both the demand-side and the supply-side of the economy. We have many good and popular ideas to get more money in the hands of hardworking families to increase demand. These include raising the minimum wage, supporting equal pay for women, funding needed road, bridge and other transportation infrastructure projects, and investing in school modernization and upgrades to the nation's energy and data networks.

Democrats have bold supply-side proposals to improve the productive capacity of American businesses and American workers. These include the same improvements to roads, highways, railways, ports, airports and data and energy networks because businesses need all of these to get their work done. It also includes investments in education and jobs skills training so businesses have the high skilled workers to compete in the global economy, and workers have the skills that command higher salaries.

These proposals will put more money in the hands of middle-class American families through job creation and a living wage so that people have more money to spend in their local economy. Businesses need modernized infrastructure to get products to market and reach their customers. They need a stable and well-trained workforce to succeed and consumers with money in their hands to spend on goods and services. Consumers and business together can become the job creators the economy needs right now. This is the virtuous cycle we need right now to fuel an inclusive and prosperous economy in the future.

Close tax loopholes for a fairer tax system that supports growth.
Some of these proposals require some form of government spending but many others including raising the minimum wage or requiring equal pay for women as men in the same job do not have a line item in the budget. Where government spending is called for it cannot be termed excessive. Instead it is normal and necessary spending that is basic for what governments do to help citizens and help the economy grow. A wrongheaded conservative ideological attack on all government spending has caused us to fall behind in keeping up to date our transportation systems, education system, data networks, and other shared resources individuals and businesses need to compete in the modern economy.

Republicans often accuse Democrats of wanting to punish the rich for their success, but this is just a rhetorical tactic. The truth is Republicans agree with the vast majority of Americans that the wealthiest should have to live by the same rules as everyone else and pay their fair share of taxes. Even if they can afford to use their wealth and influence to gain special treatment and special provisions in the tax code that allow billionaires to pay taxes at a lower rate than middle income filers, this is not the American way. The wealthy should contribute their fair share of taxes in order to finance needed investments in the society and economy from which they draw the greatest benefit.

Closing loopholes is something economists in both parties have been talking about doing for decades, and we have seen both sides come together to do this several times in the past with good results. A deal to close loopholes in either the personal income tax code or corporate taxes, or even both at the same time could allow lower tax rates for everyone in a fairer tax system where millionaires and billionaires pay at least as high a rate on their income as the rest of us who work for them.

Jobs are increasing, the deficit is shrinking.
Republicans, who have been predicting government spending and budget deficits, would be "job-killing" have seen just the opposite happen for several years. Jobs are increasing and the deficit is shrinking. The most important answer to budget deficits is stronger growth. Spending money to fix roads and schools is a perfect example of investment in future growth. Government spending in the category of necessary public investment in projects that will help businesses prosper and create jobs will create inclusive growth and growth is what has been bringing down the federal deficit in recent years.

But if the economy is getting stronger, why haven't the Democrats opened up a lead in public confidence to manage the economy? In the 2014 election Democrats faced a deficit on this measure of public opinion. The answer is simple: Democrats have not done well at all in telling their story and explaining their policies in a coherent manner. At the same time Republicans have been doing at least as well in addressing their message to the middle class voters.

In recent weeks Republicans have started talking about the middle class, stagnant wages and the gap between the rich and the poor, but voters are unlikely to take seriously this sudden conversion unless Republicans offer policies to address these concerns. In many cases this will require reversing their past positions. Voters have held a clear image of Republicans favoring the wealthy long before Mitt Romney's well publicized discussion of the 47 percent. Unless Republicans put as much effort into working through the details of their proposals to help the middle class as progressives have, their professions of concern are likely to ring hollow.

But substance on the Democratic side will not translate into confidence in their economic leadership unless Democrats dramatically improve their economic communications. Democrats need address middle class voters, who feel left out and forgotten as their wages have been stuck for decades. Republicans have very little of substance to say on these issues, but they are aware they need to address the middle class. Democrats have the substantive policies but need to fill the vacuum with a clear and compelling story. After years of neglect we can all hope the next election is fought over which political party has the most credible plan to ensure that lower and middle-income families share in economic prosperity. This would certainly be a political debate worthy of the voters who will decide the next election.