Who’s Afraid of the New Economy?

By DAVID BROOKS
The New York Times
February 11, 2007

Once, there was a bridge to the 21st century. But no major Democrat today speaks as confidently about globalization and technological change as Bill Clinton and Al Gore did a decade ago. No major Democrat today speaks as optimistically about free trade as Gordon Brown does in Britain.

In the Democratic Party today, neopopulists and economic nationalists are on the rise. The free-traders are on the defensive. The Democratic view of the global economy has grown unremittingly grim. When John Edwards talks about the economy, you think he’s running for the Democratic nomination of 1932.

Which is why the report to be released tomorrow by the Democratic activist group Third Way is so remarkable. Here is a group of Democratic economists and strategists who are taking on the rising neopopulists.

The first thing their report, “The New Rules Economy,” does is challenge the neopopulist depiction of economic reality. Neopopulists are good at describing the suffering in towns like Mansfield, Ohio, and Flint, Mich. But they act as if they’ve never been to Charlotte or Phoenix, where office parks are shooting up.

The authors of this report, Anne Kim, Adam Solomon, Jim Kessler and Stephen Rose, try to blend all the diverse pieces of American reality, and to expose what they call “the myths of neopopulism.”

The first myth, they write, is the myth of the failing middle class. It’s true there are more households headed by young and old people, who tend to have lower incomes. But if you take households headed by people in their prime working years, 25 to 59, you find those people are not failing. Their median income is $61,000. If they are married, their median income is $72,000. Those are decent incomes in most parts of the country.

Moreover, their living standards are not stagnant. Between 1979 and 2005, the percentage of prime-age households making over $100,000 in current dollars rose by 12.7 percentage points. As Ben Bernanke, the Fed chairman, said last week, incomes at all levels are rising; it’s just that incomes at the upper end are rising much faster.

The Third Way authors also dispute recent warnings of wildly increasing income volatility. The main reason incomes have grown more volatile over the past decades is motherhood, they write. As women play a more significant role in the economy, their movements in and out of the labor force to care for children increase volatility.

The report goes on to challenge the direst warnings about rising credit card debt (household assets have risen faster than debts), rising corporate profits (they are cyclical and pretty much normal for this stage in a recovery) and American decline.

The Third Way authors are not saying everything is hunky-dory — far from it — but they are saying Democrats tend to lose when they are relentlessly grim and when the reality they describe is detached from the reality most Americans experience.

Moreover, they are restating the truth neopopulists are loath to admit: that no nation on earth is better positioned to take advantage of an ever-more-open economy, and today’s challenge is not to retard openness but enable more people to take part in it.

The second half of the report describes how government can help people adjust to the new economic rules. Frankly, I wish the authors had been a bit more creative here, asking, for example, why so many people don’t heed the huge incentives to finish high school and college. There are deeper mental and cultural processes in play than can be dealt with by the usual mix of tax credits.

Still, the significance of the report is that at least some Democrats have the guts to take on the neopopulists, who are masters of vilification.

In fact, their political method is based on vilification over explanation. They vilify unpatriotic executives, but the vast majority of job losses are caused by technological change, not outsourcing. They vilify overpaid C.E.O.’s, even though their pay packages have nothing to do with the stagnant wages of the unskilled. They vilify foreign governments for not living up to the rules of “fair trade,” even though developing countries could enforce every labor and environmental regulation under the sun and their workers would still be cheaper for low-skill tasks.

The neopopulist caucus in the Democratic Party is like the anti-immigrant caucus in the Republican Party. Both speak for loud and angry minorities who have been hurt by globalization. But the party that mistakes their experience for the central reality will doom itself for years to come.

COMMENT: Granted, Brooks is a PNAC-friendly Weekly Standard-associated putz but we have to post his stuff anyway so it may be intelligently criticized &/or learned from, by negative example. We should always try to know what our enemies are thinking.

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