Conversation with David Leonhardt — The State of the US Economy

23:50and we've just seen a massive crowding effect of the spoils into the top 1%. Am I oversimplifying it? No, I think that's right. We have seen that. And although the 1 % is a useful cutoff, we've seen even more of a crowding to the top 0.1 or 0.01, and we've seen some crowding to the top 10%, right? And so we really have seen a huge increase in inequality. I one of the things that this is a book of history. It's a book of stories, much more so than a book of of of economics or numbers. And I end up with a with a core criticism of both the political right and the political left in our country. And they are two different, very different criticisms.

24:38I think the political right about 50 years ago, Ronald Reagan being the key figure, offered this prescription for what ailed our economy in the 1970s. And it wasn't a crazy prescription. Our economy really was struggling in the 70s. And Reagan and the people around him came along and they said, look, if we cut taxes, particularly for rich people, and we shrink labor unions, and we shrink regulation, and we let companies get really big, and we move toward this neoliberal economy, it'll be better for everyone. And it hasn't been. I mean, you and I just went through the statistics, whether it's on income or wealth or life expectancy.

25:13This economy really for decades hasn't been working very well for huge numbers of Americans. And we see parts of the Republican Party start to question that laissez-faire model. But for the most part, the dominant economic policy of the Republican Party is still this economic policy that really hasn't worked that well for most people. And then on the left, we have a lot of Democrats who say, why is it that these working class people are so irrational that they won't come and support our party because we believe in different economic ideas? And that is true. But it's also true that the Democratic Party has increasingly become a party of college graduates and relatively affluent professionals and has adopted a whole set of policies on other issues.

26:00Immigration, arguably the number one one right now in the debate that really are alienating to huge numbers of working class people. And for a while, Democrats said, well, that's because those people are ignorant and they're hateful and they're racist. I think that was obviously racism plays a big role in American politics, but I think it was wrong to suggest it was all that in five or 10 years ago. And it's clearly wrong now because we have seen substantial numbers of voters of color move away from the Democratic Party in the last five years, mostly working class voters who look at the Democratic Party and say, that's not a party I want to be a part of.

26:37And when you put these two things together, neither of our parties reflects the interests and the values of working class people and is out there trying to create an economy that works better for them. So let's start there. An economy that works better for more people. What do you think are some of the building blocks of restoring or greater distribution of this immense prosperity? I think labor unions are really important. And I'm a bit self-critical on that. I've been writing about the economy at the New York Times for most of the last 25 years, and I don't think I've paid enough attention to labor unions.

27:13Now, labor unions are not perfect. I have been in a labor union and at times been frustrated. Me too. I manage people in a labor union. I understand that labor unions can sometimes be an impediment to important change. But when you look at the history and the research, the dominant experience is that labor unions lift the wages of workers and they don't cause companies to go out of business. They instead basically redistribute money that would go to top executives and to shareholders and instead increase the wages of workers. And yes, labor unions are flawed, but so are corporations. And when you don't have flawed labor unions checking the power of flawed corporations, you end up with the kind of highly unequal economy that we had in the 1920s and that we have had for the last few decades.

28:02So I want to unpack that, and I'm generally open to learning here. I think the intention, the stated goals, kind of the gestalt of unions and labor are positives. My issue is that 46 of the 47 countries that have unions have seen their membership decline dramatically. Union membership here has been cut in half. The bottom line is, by most metrics, America just doesn't buy into unions. And unless you can have a union that represents a majority of workers in an industry in a large region, you have a brace to the bottom. And that is states that are anti-union end up attracting more business and there's a lower tax base and fewer jobs for those union towns.

28:49And let me propose a solution. There should be one union. It should be the federal government. And we should raise minimum wage to 25 bucks a share, maybe some exceptions for exceptionally low income or low cost of living regions. All the admirable aims, they don't work as a construct. I'm a little more optimistic for a few reasons. One, if you look at polling, huge numbers of Americans say they would like to be part of a labor union. Labor unions have higher approval now in polling than they've had in decades. It's true that many of them struggle to join unions. But the fact that there aren't unions isn't isn't on its face evidence that there couldn't be.

29:31There also weren't labor unions in the 19 teens and 20s. And then government policy changed and the share of workers and unions changed. And then to your point about this sort of race to the bottom, we've had an interesting change in our economy that most people recognize, but they don't necessarily recognize why it can lead to a larger share of organized labor. Our economy is increasingly a service economy, right? It's less a manufacturing economy. It used to be. It's more a service economy. That's not going to change. So if your fear is that, hey, if that factory unionizes in Pennsylvania or Michigan, a rival company or that company can just move to a non-union state like Alabama or can move to a much lower wage country like in Latin America or, say, Vietnam, and then just make the same product and undercut the union wages.

30:24So even if you have that concern, think about just how much of our economy now that doesn't apply to. So your local Starbucks can't move to another state or another country and still be your local Starbucks. Your local hospital can't move to another state or another country and still be your local hospital. The Amazon warehouse that serves your community can't move to another state or another country and still be your local warehouse. And so in a service economy, it is much harder for companies to simply get around unions by leaving the area. And if we had different federal policy, I actually think that a service economy makes it possible to have a meaningfully larger share of workers represented by unions and able to take advantage of collective bargaining than we now do.

31:12I think that's a compelling argument. Wouldn't it be more efficient to just take minimum wage if minimum wage would catch up with productivity? I mean, here's what we've had. The last 40 years, we've had unbelievable gains in productivity. Workers haven't shared in it. Their wages have gone flat, productivity is up into the right, and the gap between the two is literally trillions of dollars in stakeholder value that is accreted to shareholders and the top one, if not the top 0.1%. So the question is, how do we shove more money into the lower 99, quite frankly? And it'd be good for the economy.

31:41They spend the money. You know, the 1 % invests, which brings interest rates and costs the capital down. And you could argue they're more efficient. They do crazy things like build rockets and endow, you know, new wings at universities with their names on it. There's some good to that. But it's not as good as putting more money in the pockets of middle class and low income people because they spend it all. It's sort of stimulus, right? The multiplier effect is greater. So if that's the goal, and we all agree that that makes sense, wouldn't it be more efficient to just have, again,$23 or$25 an hour minimum wage or some sort of negative income tax where everyone makes$10 ,000 no matter what?

32:19And if you make zero, you get a tax rebate of$10 ,000. And if you make, you know, and you figure out some sort of sliding scale that gives people the motivation to work. But have it be for, you have a social security number, you're in a union, right? Right. Technically, wouldn't that be a more efficient way than trying to because for all you talked about Starbucks. I'll use that as an example. 300 Starbucks have unionized, have voted to unionize, is my understanding. But not one has come to a collective bargaining agreement. And so for all the talk about this great resurgence of unions, it's not it's not having any much impact as far as I can tell.

32:53Oh, I agree. But I think we would need changes in federal law, basically, so that what happens now is a Starbucks store unionizes and Starbucks basically refuses to negotiate with them. They somehow find violations by the people who helped organize the union and they let them go. But federal law could change and could basically say, look, when workers unionize, companies really have to recognize them and work with them. So the fact that that hasn't happened so far, to me, it could still happen. We do need changes in federal law for it to happen. On your point about minimum wage, look, I think a higher minimum wage would have tons of benefits, but it is a minimum wage.

33:31It isn't going to have that much of an effect on middle class people. And so we can raise the floor, but I don't see how a minimum wage or a higher earned income tax credit can help working class and middle class people nearly as much as labor unions do. Because what we're talking about now are someone who right now might be, you know, earning$40 an hour, but actually because of their productivity should be earning$50 an hour. That isn't something that a minimum wage is going to address. A minimum wage and EITC are really good for helping lower income people and we should help lower income people.

34:13They're less good at helping working class and middle class people. Mm-hmm. So labor or renewed strength or maybe laws that make it easier to unionize, that's one solution. Talk about some other solutions or recommendations. I think investment is enormously important. Investment defined really broadly. So private sector investment, as you just noted, is really important. We need companies investing in things that are going to help in the long term. But there are a whole set of things that the private sector on its own doesn't tend to invest enough in. The private sector doesn't tend to invest enough in basic research and development because it's impossible to know how to profit from that in the moment, right?

34:58There's a reason that the federal government built the internet. There's a reason that the federal government essentially financed the entire early computer industry in this country. Because at the very beginning, it was hard to know exactly who would profit from it. And not only that, but, you know, IBM was a big was a big maker of punch cards. And so initially, IBM said, well, we don't need a computer. We have this profitable business in punch cards. And so when the government doesn't invest enough, you tend to end up with a society that that doesn't have enough basic R &D. It doesn't tend to have enough transportation infrastructure.

35:34And really crucially, it doesn't tend to have enough of an educated population. So if you're over 65 in the United States, you're part of the most educated generation in the world. There is no other country where people over age 65 are more educated than Americans are. If you're younger, you are not part of the most educated generation in the world. And so to me, a whole set of policies where we decide we're going to spend money today to make life better tomorrow is another really important part of creating an economy that is more prosperous for most people than our current economy is. We'll be right back.

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37:43Talk to us about what are your views on immigration? And I'd be curious if you could tie it back. It strikes me that it's going to probably be either the number one or the number two issue in the campaign. But give us your view of the atmospheres around immigration and what the right and the left are getting wrong and what you think, how you think it's going to play out in the election. The chapter in my book on immigration is the one that I was most uncertain. And if I'm being honest, nervous about what the response would be. And I actually think it's been the one where the feedback I've gotten has been the best, which makes me feel really happy because it also might be the chapter that I learned the most while researching and writing.

38:26There's probably a relationship between those two things. And so I spent a ton of time in the archives, retracing the history of the 1965 law that has really created our modern immigration system. And that law has a really one really heroic piece of its legacy and one much less heroic piece of its legacy. The heroic piece of its legacy was that starting in the 1920s, our country basically said, we will only take immigrants from Western Europe. The one other exception was at the time there were no limits on immigration from Latin America, which may seem shocking today. But at the time, there just weren't that many people coming from Latin America.

39:13So our country basically said, we won't take people from Eastern Europe. We won't take them from Southern Europe. We won't take them from Africa. We won't take them from Asia. Obviously a racist policy, right? It was just taking them from white countries. And the 1965 law got rid of that old system, and they said we will treat all people who want to immigrate to our country equally. At the same time, the advocates for that 1965 law promised repeatedly, we're talking about LBJ, Ted Kennedy, who managed the bill in the Senate, Republicans and Democrats who pushed the law. Repeatedly, they promised, we are only changing who can come in.

39:48We are not changing how many people come in. They promised Americans again and again and again, we are not meaningfully increasing the level of immigration. If they hadn't done that, the bill couldn't have passed. Americans did not favor a huge increase in immigration. And yet, for technical reasons that I won't bore your listeners with, the bill did in fact lead almost immediately to an enormous increase in immigration, mostly involving exceptions with family members who didn't count toward the cap. But basically, what happened in the 1960s was we vastly opened our immigration system and Congress and the president sold it to the American people under false pretenses.

40:30And I'm not saying that all of our immigration policy and all of the toxicity of the debate around it stems from that one decision. But for people who tend to be in favor of much higher levels of immigration, very high levels of immigration, which I would say are basically two groups of Americans, kind of business friendly Republicans who see it as a way to increase the workforce and probably hold down wages. And then progressives who believe in high levels of immigration from sort of a social justice standpoint. For people who believe in higher levels of immigration, it's worth grappling with the fact that the history of this is not a simple history in which the people who were in favor of more immigration were on the side of light and truth, and the people who were worried about it were not.

41:17And I think that we have lost this tradition that we had for a very long time in our country, in which there were progressives who worried about the effects that immigration would have on recent immigrants and on lower income Native born Americans. Historically, civil rights leaders and labor leaders and progressives were not in favor of huge levels of immigration in this country. And we've sort of lost that. And to me, it's really an important part of why so many working class people across races look at the Democratic Party today and say, oof, I'm not completely comfortable with that party. And on the flip side, the Republican Party just engages in this really, really stark and nasty xenophobia on immigration.

42:05And we've sort of missed this middle ground where we have people saying, look, we should welcome immigrants. We are a nation of immigrants, but we also need borders and we need border security. And everybody who wants to come to this country because it's a richer country than most countries can't simply come because they want to. And I think that kind of summarizes where we've ended up on immigration and frankly, why it's become such a huge problem for Joe Biden.

42:33And what it strikes me is such a political hot potato. When you think about an approach to immigration, who would you point to or what policy would you point to that you think is as a way forward? A figure who I talk a lot about in the book is Barbara Jordan, the former congresswoman, late congresswoman from Texas. one of the first post-Reconstruction Black Americans to represent the South in Congress. She became famous during Watergate. And she, if you read some of her historical positions on this, she said, look, we need to be pro-immigrant, but that doesn't always mean being pro-immigration.

43:16We need to reject the xenophobia and racism that often greets immigrants, but that doesn't mean that we should have an open border. I think that is the position that, first of all, tends to reflect what most Americans believe and also has very strong economic arguments behind it. And today, I think where you tend to see that a lot is you tend to see it from Democrats who are mayors and governors and who've actually had to grapple with some of the really costly and chaotic influxes that we've had over the last couple of years, but also reject some of the race baiting that many Republicans use. So, David, you're obviously, you have your finger on the pulse.

43:58I just want to, as we wrap up here, I'm just very curious to get your view on the role that age and this presidential race is going to play. I mean, one of the hardest questions right now, right? Here's one way that I think about the overall frame. Age is absolutely a legitimate issue to talk about, and it's important to talk about it with both candidates. It's also important to acknowledge that there are several ways in which Donald Trump seems more energetic and presents as less old than Biden. There are other ways in which, you know, Trump says a whole bunch of things that don't make any sense and forgets things.

44:39And there are other ways in which Trump's aging seems to be at least as much of a problem as Biden's does. At the same time, as a journalist, I'm a little bit haunted by a Gallup poll that came out after the 2016 campaign that asked Americans what they'd heard about each candidate. And the number one thing that most Americans reported hearing about Hillary Clinton was about her emails. I think Hillary Clinton's emails were a legitimate story. Surely they were not the most important thing about Hillary Clinton in 2016. And I worry a little bit that those of us in the media are at some risk of repeating that and talking so much about Joe Biden's age in particular that we come to make it seem like the only issue in this election.

45:32Joe Biden's performance as president suggests he absolutely can do this job. And so we're not dealing with someone who appears to be incompetent as president, whether you agree or disagree with his policies. Just look how much legislation he's gotten passed, more than I expected, quite frankly, much of it bipartisan. I don't have a nice, like a kind of nice pat answer here, Scott, but I'm just trying to get at the fact that on the one hand, it's a legitimate issue. And on the other hand, I think sometimes the media, those of us in the media have a tendency to take a legitimate issue and make it seem like the only issue.

46:04And I think we'd be making a big mistake if we did that with Joe Biden's age. David Leonhard is a senior writer at the New York Times, where he writes The Morning, the Times flagship daily newsletter. He's also been the newspaper's Washington bureau chief, an op-ed columnist, a staff writer for the New York Times magazine, and the founding editor of The Upshot. He won a Pulitzer Prize for commentary in 2011. David's also the author of Ours Was the Shining Future, the Story of the American Dream, which Atlantic and the Financial Times called one of the best books of 2023. He joins us from his home in our nation's capital.

46:41David, really appreciate your time. Scott, thank you so much for this good conversation.

46:53Algebra of happiness, build yourself a time machine. I was watching The Black Mirror. I'm watching Black Mirror with my son. He really likes it. It's kind of disturbing, probably inappropriate for a 13-year-old, but we've been watching. It reminds me of the old Twilight Zone. I love the old Twilight Zone. Anyways, I watched San Junipero this episode. It was really nice about, I won't spoil it. It's about two women who are very much in love, and they're in a simulation, if you will. And it got me thinking about the following. I want you to build a time machine, and I want you to imagine you're in a simulation.

47:24Imagine that, say, you're my age, 49, 59, but say you're 49, and in 50 years, you live 50 years, you've been working out, you've been taking your testosterone, you've been eating fairly well, fairly well, you're happy, people love you, people you love, and you live to 99, and you're at the very end. And in 50 years, they've advanced the technology, and they've said, okay, okay, we can actually, for a short period, send you back in time, and you get to do whatever you want for a short time. and you're 99, you're at the end, this is it, right? You're never gonna walk on the sand again. You're never gonna hang out with your dogs on the couch with your boys and watch Black Mirror.

48:06You're never gonna get in bed with your wife or your partner and spoon them. You're never gonna get to, you know, have the frustration of walking around a foreign city with your boys as they're bitching and complaining, and then at night, I'll go have dinner together. You're never gonna do any of this stuff, right? You're never gonna know what it's like to sweat again. working out. None of that. It's all gone. It's over. This is it. Maybe you're like me and think, okay, this is really it. This isn't a dress rehearsal. It's over. And they have the technology to put you in a time machine and send you back and send you back for a little while, right?

48:41Imagine that. You're at the end, but you can come back. But you got to write down what you would do when you come back, like how you would behave differently, right? What would you do more of? What would you do less of? Well, now I want you to convince yourself this has happened. And I want you to think about, okay, I'm back to 99. What am I going to do differently? And I guarantee you, or I would speculate, that it's not going to be about buying more shit. It's not going to be about trying to be more of a baller. It might be maybe taking more risks. But I would guess if you really put yourself in that spot where you imagine no more, this is it, it's going to be things like telling people you love them.

49:20It's going to be, I'm going to decide to spend more time with people who are important to me. I'm going to be kinder to myself. I'm not going to beat myself up as much. I'm going to move on. I'm going to channel my anger and any sense of revenge towards just having a fucking amazing life. I'm going to do shit I want to do. I'm going to be the person I want to be. Not what my parents want me to be, not what my religion wants me to be. write a list of things that you would do differently if you're there at the end and come back. And here's the thing. It's happening. It's happening. You're 99 and you're at the end, and this is a simulation.

50:04You're here now. What are you going to do differently? This episode was produced by Caroline Chagrin. Jennifer Sanchez is our associate producer, and Drew Burrows is our technical director. Thank you for listening to the Prop G Pod from the Vox Media Podcast Network. We will catch you on Saturday for No Mercy, No Malice as read by George Hahn and on Monday with our weekly market show.

50:34Okay, we're going with the sex with a horse joke then because it's just more appropriate.