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Do Democrats have a gloomy vision of America’s economic future?
“Democratic pessimism today stands in contrast to the optimism that followed the elections of 2006, 2008 and 2012,” writes Thomas Edsall in the New York Times. Not only did the 2016 presidential election produce a shock result, but future elections might produce more bad news. According to an election autopsy performed by a Democratic super PAC, the party has a problem with the broad working class, including core constituency groups. And one big problem for Democrats when it comes to white working class voters is that they are deeply suspicious of the progressive agenda. As one pollster put it:
White working-class voters’ negative view of government spending undermines their potential support for many progressive economic policies. While they want something done about jobs, wages, education, and health care, they are also fiscally conservative and deeply skeptical of government’s ability to make positive change. So political populism not only differs from economic populism, but also serves as a powerful barrier to it.
So an agenda built around Medicare for all, free college, and a universal basic income might be problematic. Then there’s this tweeted critique of the autopsy by former Minneapolis Fed president Narayana Kocherlakota:
Perhaps electoral pessimism has its roots in economic pessimism. Why ridicule GOP claims that achieving even 3% GDP growth is crazy talk? Why accept long-term CBO forecasts of 2% GDP growth as unalterable reality? Maybe more tax cuts and fracking won’t get us there, sure. But there are other ideas out there. Again, this chart from McKinsey:
Maybe this is overly optimistic, but at least it tries to offer a positive path to a more prosperous future. Let’s not assume, for instance, automation and tech progress won’t produce lots of good jobs and greater prosperity. Maybe something more like this will happen (via PriceWaterhouseCoopers):
The more significant offsetting factor is that these new automated technologies will boost productivity considerably over time (if not, they will not be adopted on economic grounds). This will generate extra incomes, initially for the owners of the intellectual and financial capital behind the new technologies, but feeding into the wider economy as this income is spent or invested in other areas.
This additional demand will generate increased jobs and incomes in sectors that are less automatable, including healthcare and other personal services where robots may not be able to totally replace, as opposed to complement and enhance, workers with the human touch for the foreseeable future. The historical evidence suggests that this will eventually lead to:
• broadly similar overall rates of employment for human workers, although with different distributions across industry sectors and types of jobs than now;
• higher average real income levels across the country as a whole due to higher overall productivity;
• but quite possibly also a more skewed income distribution with a greater proportion going to those with the skills to thrive in an ever more digital economy – this would put a premium not just on education levels when entering the workforce, but also the ability to adapt over time and reskill throughout a working life.