May 2016 Features

The Odds for Inclusive Prosperity

Rivlin_2One of the nation’s most influential economists and public policy experts for more than 50 years, Alice Rivlin ’52 came back to Bryn Mawr in February to deliver the latest in a President’s Office lecture series that showcases Mawrters making significant change in their communities.

“Dr. Rivlin’s leadership has been sought by many organizations, and her work has received many honors,” said President Kim Cassidy in her introductory remarks.

From her home base at the Brookings Institution Economic Studies program, beginning in the late 1950s, she pursued a distinguished career that included serving on the senior staff of the Department of Health, Education, and Welfare during the Johnson administration and as the first director of the Congressional Budget Office (CBO), where she served from 1975 to 1983.

At the CBO, she built an organization respected as a nonpartisan, independent agency committed to integrity and rigor in producing projections of the budget and economy, estimating the budgetary impact of legislation, and providing budgetary economic analysis for Congress.

During President Clinton’s first administration, she served in the White House Office of Management and Budget, first as deputy director and then as director. Following that, she was vice chair of the Federal Reserve and chair of the District of Columbia Financial Assistance and Management Authority.

Rivlin has made major contributions to two bipartisan efforts to address the federal budget deficit. President Obama appointed her to the National Commission on Fiscal Policy and Reform, which is charged with identifying policies to improve the medium-term fiscal situation and to achieve long-term fiscal sustainability.
With former U.S. Representative Pete Domenici, she co-chaired the Debt Reduction Taskforce of the Bipartisan Policy Center. The Taskforce’s report, Restoring America’s Future, also known as the Domenici-Rivlin Plan, made the powerful argument that economic stimulus and deficit reduction were both critical and could occur simultaneously as the U.S. sought to recover from the 2008 recession and plan for its economic future.

Rivlin, who was awarded a MacArthur Fellowship in 1983, was the first woman president of the American Economic Association, is a distinguished trustee emeritus of Bryn Mawr, was the inaugural winner of the Daniel Patrick Moynihan Prize of the American Academy of Political and Social Sciences, and was the recipient of the biennial Stanford Institute for Economic Policy Research Prize for “her dedication to enhancing economic policy to improve people’s lives.”

Is Inclusive Prosperity Achievable in America? The answer is a resounding yes, and there are some fairly obvious economic policies that would put us on track, that could actually command broad bipartisan consensus, and that we actually know how to implement.

I’m talking about modernizing our infrastructure and investing in science and technology, improving the skills of the future labor force, especially those with low earnings. I’m talking about investing in early childhood education, especially in low-income neighborhoods. I’m talking about making our tax system both more progressive and more conducive to growth. I’m talking about simplifying regulation and making government programs work more effectively, about comprehensive immigration reform, and about taking steps that would reduce the size of our national debt in the future.

The Hard Part: Our political system has broken down so much that it is no longer doing what we need a political system to do in a big, diverse country, namely, to produce policy compromises that are necessary to move forward. If we’re to get back on a track to inclusive prosperity, we need a president and a congress that recognize the need to work together across party and ideological lines. That’s the hard part, relearning the art of compromise.

The Good News: Despite “the sky is falling” rhetoric of some presidential candidates, the U.S. economy has recovered more completely from the Great Recession than that of any other developed country. In my opinion, the credit goes partly to the remarkable resilience, flexibility, and innovative capacity of the U.S. economy and partly to the rapid policy response. Once the crash happened, the monetary and fiscal authorities did most of the right things very quickly and with bipartisan support. And that includes restoring financial stability—otherwise known as bailing out the banks—which was absolutely necessary to prevent a much worse downward spiral.

The Bad News: On inclusion, we are falling disturbingly short. Most of our increased income is flowing to the top, with the 2 percent, 1 percent, the top 1/10 of 1 percent doing very well. But average wages and median family income are not growing. Workers without a high school diploma or with only a high school diploma are falling behind on income and suffering most from unemployment and underemployment. No wonder people are angry when so many feel that their own life is hard and fear that their children won’t do better while, at the same time, a small group of lucky people are getting unbelievably rich and have outsized influence on politics and policy.

A Sense of Hope: While it’s not possible for everyone to do better all the time, inclusive prosperity means that all major groups—racial groups, ethnic groups, geographic groups—share in the improving standard of living and expect their kids to do better than they do. A sense of fairness and hope for the future are both necessary in a sustainably prosperous economy.

There’s accumulating evidence that economic growth and broad distribution of the gains reinforce each other. So we need policies that enhance sustainable economic growth, or make the pie bigger, and we need policies that share the growth more equally, or make the slices more equal.

My List: My list of potential consensus policies could all be crafted to enhance both goals at once.

  • A major investment in public infrastructure would create jobs while modernizing roads and bridges; building faster and more reliable rail and mass transit systems; creating safer, more efficient airports and air traffic control; and building more reliable and wider-spread Internet.
  • Then there’s early-childhood nurturing and high-quality preschool programs that have growing public support across party lines.
  • Increased college access featuring more generous grant programs and less reliance on student loans, especially for low-income students, is a worthy cause.
  • Comprehensive immigration reform would bring more young workers into our aging society, and while we need to enforce the system, we also need to get law-abiding, undocumented immigrants out of the shadows and able to take better-paying jobs.
  • With reform to the tax system, we can pay for some of these things. Both parties have, over the past few years, worked together on individual income tax reform that would make it more progressive, raise more revenue, and lower the rates. Corporate tax reform is harder but not impossible. Our rates make us uncompetitive with the rest of the world, but we could raise more revenue if we got rid of some exemptions and exclusions. And I can’t leave the tax question without saying that we also need a carbon tax. If we’re going to have sustainable energy use over time, we’ve got to make it more expensive.

The Challenge on the Left: With the possible exception of tax reform, this list sounds as though it would appeal more to Democrats than to Republicans. But at least three essential items would challenge many Democrats.

  1. Simplifying regulations and getting rid of unnecessary ones. While I suspect that many conservatives greatly exaggerate the economic burden of regulation, there’s fire under all this smoke, and liberals and progressives would do their cause good by taking the lead in a serious, detailed reexamination of federal regulation.
  2. Restructuring and modernizing federal programs. My own experience convinced me that the government has too many small domestic programs created years ago by well-intentioned legislators and signed by many presidents, most of them grants to states, communities, and nonprofit organizations. Here is an opportunity for a bipartisan commission that is prepared for a real slog of hard work.
  3. Reducing the growth of federal debt. Right now, we’re not adding to the debt very rapidly, but the big worry is for the future as the baby boom generation ages into Medicare, Medicaid, and Social Security. Again, it would take bipartisan compromise to hammer out a plan for preserving these vital programs and at the same time reducing the growth in debt.

The Real Catastrophe: This campaign is a reflection of the polarization of the parties, but elections always emphasize differences, especially at the primary stage. The real evidence of our broken political system is the behavior of Congress in the past few years. The Republican party has been captured by a right-wing minority that wanted a Democratic president to fail, even though he was overwhelmingly reelected. And Democrats are no more willing to take the risk of talking to Republicans than Republicans are of talking to Democrats. This is the real catastrophe.

A Word to the Next Generation: Your generation, according to the polls, is idealistic and service-oriented but doesn’t want to have anything to do with politics. You want change, but change takes sustained effort and working with people who don’t agree with you. So participate in political campaigns and vote. Vote in primaries, vote in off-year elections, support organizations that want to make voting easier, support policies that can be negotiated across party lines, and practice the art of dialogue and finding common ground. You’ve got to learn how to do it. Seek out people who disagree with you, and engage with them. Listen. Try to understand why they think what they do. See if you can get them to ask you why you believe what you do. Some of your answers might surprise you.