This is In Real Terms, a column analyzing the week in economic news. Comments? Criticisms? Ideas for future columns? Email me, or drop a note in the comments.
Midway through his big economic speech in Detroit on Monday, Donald Trump said something I never thought I’d hear a Republican presidential candidate say. No, not the part where he called the unemployment rate “one of the biggest hoaxes in modern politics” (it isn’t), nor the part where he said Hillary Clinton “accidentally told the truth” about her plan to raise middle-class taxes (a literal slip of the tongue — Clinton left the “t” off the word “aren’t”). Rather, it was this seemingly innocuous phrase: “according to the Economic Policy Institute.”
That might not seem so surprising: EPI is a well-regarded Washington think tank with a longstanding opposition to the kind of trade deals Trump is fond of criticizing. (He cited their research on the number of jobs lost to such deals.) But it’s rare for Republican politicians to quote EPI, which is backed by big labor unions, gets funding from liberal activist investor George Soros and routinely produces research supporting a higher minimum wage, more government spending and increased taxes on the rich. Yet Trump name-checked the group twice in his speech, and an analysis by Betsy Woodruff of The Daily Beast found that Trump cites EPI far more often than traditional conservative think tanks such as the Heritage Foundation. (Woodruff notes that EPI isn’t exactly thrilled by Trump’s apparent endorsement — Larry Mishel, the organization’s president, calls the candidate “a bigot.”)
Trump’s unrequited love for EPI might seem like another petty irony in a campaign full of them, but it hints at something larger about how Trump has scrambled the usual economic battle lines of American politics. The 2016 race, more than any other in recent memory, has focused not on how to accelerate economic growth but on how that growth should be distributed.
This is the basic state of the U.S. economy heading into the election: Unemployment is low, and the crisis of the Great Recession has faded, but many families still earn less than they did before the recession began. That’s hardly an unusual backdrop for a presidential race; it’s pretty much the same one the U.S. faced in 2012 and, with some details changed, in 2004, 1992 and 1984.
The usual Republican response to these challenges is to advocate policies — lower taxes, less regulation, more trade — they believe will increase economic growth. Make the economic pie bigger, the old metaphor goes, and everyone will be better off. Democrats have historically focused less on growth and more on distribution — how the pie is divided up. Economic growth, they argue, doesn’t do much good if it all goes to people at the very top. (It isn’t quite this simple, of course. Democrats also argue a more equal economy will grow faster, while Republicans argue that Democratic policies hurt many of the people they are designed to help.)
Ever since Bill Clinton became president, however, the Republican focus on growth has largely won out. Clinton adopted many previous Republican positions — free trade, a reduced welfare state — and reframed Democratic proposals around growth rather than distribution. Subsequent Democratic candidates, successful and unsuccessful, have largely followed his lead. When Barack Obama told “Joe the Plumber” that he wanted to “spread the wealth around” during the 2008 campaign, it was widely seen as a gaffe.
But now the pendulum may be swinging back in the other direction. Trump doesn’t use the word “distribution,” but the idea lies just beneath the surface of much of his economic rhetoric, particularly on trade. And Hillary Clinton, both in her language and her actual policy proposals, is talking much more about distribution than other recent Democratic candidates, including Obama.
The shift is clearest on trade. Economists broadly agree that free trade boosts overall economic growth but hurts some workers who lose jobs to foreign competition. Recent presidents from both parties have argued the tradeoff is worth it, though Democrats have pushed to provide more assistance for displaced workers. Trump, however, breaks sharply with that position, instead bashing trade deals as job killers. In his speech Monday, Trump called NAFTA — the 1994 trade deal signed by Bill Clinton — “a strike at the heart of Michigan and our nation as a whole.” Hillary Clinton has been more restrained in her language, but she has come out against the Trans-Pacific Partnership, a trade deal that was negotiated by a Democratic president and that she supported as secretary of state.
Mishel, a longtime critic of U.S. trade policy, allowed himself a bit of a victory lap.
“We’re having a breakout moment where no one is able to pretend that somehow pushing trade treaties is going to be good for workers,” Mishel said in an interview. “I think Trump and Bernie [Sanders] have blown the cover on this. We’re never going to go back to the status quo ante, and I think that’s a good thing.”
Mishel noted that on other issues, Trump hews much more closely to Republican orthodoxy. He wants to cut taxes for the wealthy and for businesses, eliminate many regulations and help big energy companies. And though Clinton moved to the left to fend off Sanders’s challenge — she cautiously embraced a $15-an-hour minimum wage and adopted a less generous version of Sanders’s “free college” proposal — she has shied away from proposing to use the tax code, welfare policies or other tools to redistribute wealth more directly.
But rhetorically, at least, both candidates have tried to speak to voters’ sense that they aren’t benefiting from the growth in the broader economy. Trump routinely refers to the economy being “rigged” — language usually more associated with Democrats — and his attacks on official government statistics, though misguided, speak to the skepticism many Americans feel about the supposed improvement of the economy. (In a press release Thursday, he accused Clinton of being a “trickle-down globalist.”) Clinton, meanwhile, has since the start of the campaign argued that we need a “growth and fairness economy” (“You can’t have one without the other,” she said in her first big economic speech last year); today her main economic theme is “an economy that works for everyone.”
Don’t expect that rhetoric to change any time soon, no matter what happens in November. In recent years, growth has been weak not just in the U.S. but worldwide, despite aggressive efforts by the Federal Reserve and other central banks to jump-start the economy. A growing number of economists worry that the aging population and other trends have caused the underlying growth rate of the economy to slow. Economists aren’t sure why that is, or what can be done about it. But with less growth to go around, the distribution of that growth will become an ever more important political issue.
No magic at Macy’s
Macy’s this week said it would close more than 100 stores (about 15 percent of its total) amid slumping sales and falling profits. The company has tried to frame its struggles as reflecting trouble in the broader retail sector — “We are not counting on the consumer to spend more,” CEO Terry Lundgren told investors in May — but that’s a tough case to make at a time when consumer spending has been strong. Macy’s real problem is the incredibly rapid collapse of department stores as a retail powerhouse.
How rapid? Since the recession ended in 2009, overall retail and food-service sales are up nearly 20 percent, after adjusting for inflation. Department-store sales, on the other hand, are down more than 20 percent — during what was meant to be an economic recovery. Since 2000, department-store sales are down more than 50 percent. Amazon and other online retailers are stealing many former department store shoppers, while malls are favoring specialty retailers. All of which means Macy’s struggles don’t reveal much about the state of the economy as a whole.
Number of the week
American workers worked 1.8 percent more hours in the second quarter of 2016, the Bureau of Labor Statistics reported this week, but their output — the value of goods and services they produced — rose just 1.2 percent. In other words: American workers became less productive.
Productivity has now fallen for three straight quarters, the longest such streak since 1979. And the slump has been even longer than that; annual productivity growth averaged just 1.3 percent from 2007 to 2015. That’s bad news for the economy, and for workers: If employees don’t produce more per hour, over the long term, companies won’t be able to pay them more.
Experts aren’t sure what’s behind the slowdown, or even if it’s real: Some economists think official statistics are missing the impact of new technology. But unless the problem is a total fiction — and few economists think that’s the case — then this week’s data suggests that the longer-run problems facing the economy are getting worse, not better.
Elsewhere
The Wall Street Journal’s Bob Davis and Jon Hilsenrath look at how trade with China — and the jobs it cost — contributed to Trump’s rise.
More Americans of all ages are living in multigenerational households, according to new research from the Pew Research Center.
Trump and Clinton talk plenty about how to help working Americans, but they largely ignore the poor, writes Binyamin Appelbaum in The New York Times.
The trouble with letting local communities decide their own housing policy? The decisions affect more than just the people who live there, writes Emily Badger in The Washington Post.