I’ve argued that the next president needs a solid reconnection agenda (RA): a policy set whose aim is to reunite economic growth with the prosperity of middle- and low-income families. In a high-profile speech this past weekend, candidate Hillary Rodham Clinton provided listeners with her version of the RA.  Her goal was to outline the broad architecture of the agenda, not the detailed floor plans. The question is thus: Are these the right blueprints? Did Clinton provide a policy structure upon which she could build out an RA that would work, one that would give those on the wrong side of the inequality divide a chance to fairly share in the productivity growth they’re helping to generate?  I thought she did just that. The details will be crucial, and there were some salient holes in what was otherwise a trenchant diagnosis of the disconnect between growth and prosperity. As far as prescriptions, there was broad signaling of a spate of smart policies about which I assume Clinton will later add details. In the meantime, I’ll add some of my own.  First, her diagnosis, with my commentary in brackets:  Advances in technology and the rise of global trade have created whole new areas of economic activity and opened new markets for our exports, but they have also displaced jobs and undercut wages for millions of Americans.  [Ask an economist or policy maker why inequality has increased so much, and they’ll invariably say “globalization and technology.” That’s true, though as I’ll point out in a moment, there’s a lot more to it than that. But what’s notable here is the recognition that these forces have been far from benign for many Americans.]  The financial industry and many multi-national corporations have created huge wealth for a few by focusing too much on short-term profit and too little on long-term value . . . too much on complex trading schemes and stock buybacks, too little on investments in new businesses, jobs, and fair compensation.  [A very important signal and another key contributor to the disconnect. One of my great concerns is that when/if we finally get to full employment, the underregulated finance sector will again blow it up.]  Now, we can blame historic forces beyond our control for some of this, but the choices we’ve made as a nation, leaders and citizens alike, have also played a big role.  [This is a critical part of the argument. The factors behind the disconnect are not really technology, globalization, the growth of finance. Those are trends that have been ongoing for centuries. What matters is the context in which they unfold. What matters is who has — and doesn’t have — the power, clout and position to reap their benefits or suffer their costs.]  Prescriptions, with my comments again in brackets:  Less short-term trading and more long-term investing  [This grows out of the “too much financialization” diagnosis above. One policy idea in this space is a small tax on financial transactions. Even a tax of a few hundredths of a percent would seriously dampen high-frequency trading. Note that candidate Bernie Sanders supports a financial transaction tax and uses the proceeds to fund free higher education.]  Rewrite the tax code so it rewards hard work and investments here at home, not quick trades or stashing profits overseas.  [An important goal of more progressive taxation, shutting down overseas tax havens for multinational corporations will incentivize more domestic investment and raise some much-needed revenue. Also, it won’t happen unless congressional politics are realigned (a critique that of course applies to almost all of this stuff).]  I will give new incentives to companies that give their employees a fair share of the profits their hard work earns.  [As inequality has gone up, the share of national income going to profits has gone up while that going into paychecks has declined. Profit sharing might be a way to reverse that trend, but we’d need to see the details. I tend to take a jaundiced view toward tax incentives in this space, as they’re complex and can be gamed.]  We will unleash a new generation of entrepreneurs and small business owners by providing tax relief, cutting red tape and making it easier to get a small business loan.  [Meh. Everyone would like to “unleash” such energy, and maybe Clinton has something new here. But again, I don’t see how you get there through “tax relief.” My broad concern is that the power of large corporations and their ties to favorable public policies is killing Schumpeter’s creative destruction function.]  And we will make America the clean energy superpower of the 21st century. . . . Developing renewable power – wind, solar, advanced biofuels. . . . Building cleaner power plants, smarter electric grids, greener buildings. . . . Using additional fees and royalties from fossil fuel extraction to protect the environment. . . .  [Another important signal, for which details will be important. Real potential here for accomplishing two critical goals: job creation in a new, green sector.]  We will also connect workers to their jobs and businesses. Customers will have a better chance to actually get where they need and get what they desire with roads, railways, bridges, airports, ports, and broadband brought up to global standards for the 21st century.  [The next president must help reverse our infrastructure disinvestment, beginning with highways, where gridlocked politics is doing real damage. Clinton has long favored an infrastructure bank, which is a public-private partnership approach to infrastructure funding. It’s a sound idea and a good way to put idle capital to work for the public good, but the idea never has gained much traction.]  Other ideas included making preschool and quality child care available to every child in the nation and helping working families better balance work and family life. As I’ve stressed in many places, both of these are at the intersection of good policy and good politics, and I especially expect the latter — work/family balance — to be at the heart of Clinton’s campaign.  That covers a lot of ground. So what were the holes I mentioned?  First, international trade. Political advice is above my pay grade, so with all this TPP stuff swirling around, I’ll let others figure out what the smart strategy is here. However, once Clinton made the point that the context in which globalization unfolds determines its impact on the living standards of “everyday Americans,” she issued a strong invitation to herself to say a good deal more about that context.  Second, as someone who has been writing and thinking about reconnection agendas for a long time, I view Clinton’s opening salvo quite favorably. But a linchpin of my own diagnosis of the disconnect is the absence of full employment, where strong labor demand provides working-class people with the bargaining power they’ve lacked for so long. We need to hear more from all the candidates about what they would do if the slack that has characterized our job market for the most of the past 35 years remains in place.
The next president must explain how their platform will reconnect growth and broadly shared prosperity. Ms. Clinton is off to a solid start.