It certainly wasn’t be the big headline following last night’s debate. In fact, for thenearly 69 million Americanswho tuned in, Hillary Clinton’s two mentions of a relatively unknown theory of growth might have been one of the least consequential moments of a fiery evening.
Venture capitalist Nick Hanauer noticed, though—mostly because his phone began “blowing up” with texts from friends and colleagues, congratulating him. The woman who could very well be the next President of the United States had mentioned his idea—not once, but twice.
We are going to ask the wealthy corporations to pay their fair share. And there is no evidence whatsoever that that will slow down or diminish our growth. In fact, I think just the opposite.We’ll have what economists call middle out growth. We’ve got to get back to rebuilding the middle class. The families of America. That’s where growth will come from. That’s why I want to invest in you. I want to invest in your family. And I think that’s the smartest way to grow the economy, to make the economy fairer. —Hillary Clinton
“It’s awesome,” says Hanauer. “But obviously we’ve been working on it for a long time and talking to a lot of people.”
The idea was “middle-out economics,”—as in, the opposite of trickle-down economics, which Hanauer defines broadly as “tax cuts for the wealthy, deregulation of the powerful, and wage suppression for everyone else”—and defining and spreading the word about it has been one of Hanauer’s key interests for years.
Working with Eric Liu, a former domestic policy advisor to President Bill Clinton, Hanauer (who, in the interest of full disclosure, is my boss) first used the term “middle-out economics” in their 2011 book,Gardens of Democracy.
Then, ina lengthy 2013 articleoriginally published inDemocracy., they expanded on it. In the piece, Hanauer and Liu make the case that the traditional framework of economic thinking that so many of us are taught and have come to believe—what people talk about when they talk about “Econ 101”—is not the singular, bulletproof truth, but rather,oneway of thinking about how an economy could be. That summer, Democracy made“The Middle-Out Moment”their feature package; it included essays by Neera Tanden, Bruce Bartlett, and Heather Boushey.
“The starting point for understanding where the phrase ‘middle-out economics’ comes from is to recognize that, until you can frame how the economy works as a choice between competing theories of growth, you can’t get people to see what they’ve consciously and unconsciously already accepted as true.”
Basically, he says, “middle-out economics was created to frame the choice as a choice.”
In his work on the campaign trail—he was a big backer of Seattle’s watershed $15/hr minimum wage and is a major donor the Washington Stateballot initiativewhich would raise the minimum wage to $13.50—Hanauer has seen just how internalized the trickle-down mentality is. When wages go up, people will tell him, jobs go down. When taxes on the super-wealthy are raised, they create fewer jobs.
But, as a successful businessman, he never found that to be true. Instead, he had found that when people were paid more, businesses had more customers. When industries were held to a higher standard of operation, they made better products, innovated more, were more profitable. He started looking for an alternative theory which described all of this—which showed that reduced income inequality was an economic boon.
When he could find none that were concisely named and outlined, he began consulting highly regarded economists and strategists and arrived at his own.
“The core idea of middle-out economics is that a thriving middle class isn’t caused by growth; a thriving middle classcausesgrowth,” he says. “That tax cuts for the richdon’t create growth;investments in the middle class create growth. Thathigher wages don’t kill jobs;higher wages create jobs.
Middle-out also challenges commonly-held assumptions about the role of middle and lower earners. Rather than including those who earn the least into the economy out of an obligation or a belief of fairness, middle-out argues that they are actually the drivers of growth and change.
“The conventional, trickle-down way of seeing the economy is to believe that, if and when we have growth, we should try to include people in that growth, for moral reasons,” explains Hanauer. “But we now know that view is both wrongandbackwards. Including more people more robustly, as consumers, innovators and citizens, is the fundamental mechanism thatcausesgrowth in technological market economies. And that’s the cornerstone idea of middle out economics. Growth does not trickle down from the top. It is built from the middle out.”
The time is right for middle-out, says Hanauer, because people are actively searching for something new; income inequality, the rapid loss of manufacturing work, and any number of solutions to poverty and homelessness have pressed voters to wonder if what they know about money and the economy is really true at all.
“People in our country have been told for so many years that tax cuts for the rich, deregulation for the powerful, and wage suppression for everyone else is how you create growth that they’ve unconsciously internalized this theory.”
For this reason, Hanauer and many others—Liu, SEIU 775’s David Rolf, teams at various think tanks and policy shops likethe Center for American ProgressandEPI—have been trying to change the conversation in concrete ways, explaining the ways that growth which is driven by the middle class, not the highest earners, is not only attainable but sustainable.
It’s working, to some degree; Colorado’s minimum wage initiative features a distinctly middle-out message, do some of the campaign materials around theemerging predictable scheduling laws.
And of course, there was last night.
Though politicians have long focused on the middle class, rarely do the policies they propose actively aim to help the earners in the lowest rungs of the economy. Instead, policies which have been peddled as beneficial to the average workers have benefited the so-called “job creators” at the top and assumed the savings and profits would necessarily be good for those at the bottom.
I think when the middle class thrives, America thrives. And so my plan is based on growing the economy, giving middle class families many more opportunities. —Hillary Clinton
Not so with Clinton’s substantive policy answers last night; Hanauer says he was especially pleased to see her go deep on the policies that he sees as characterizing middle-out economics.
“What’s exciting is the way in which future President Clinton seems to have internalized the strategic logic of middle-out economics, and the way in which she expressed it causally in her remarks.”
Though middle-out offers plenty of complex policies and data for wonks to get lost in, part of its appeal is its simplicity; it offers a chance to reframe the kinds of laws and lawmakers most regular people come across every day in a way that’s easy to identify.
We know in our hearts that when Donald Trump pays likely nothing in income taxes, it’s not fair—but with a middle-out mindset, we also know that it’s terrible for the economy on the whole. We know that despite protest from lawmakers like Chris Christie about the vast good it would do to repeal the estate tax, mathematically, it doesn’t add up to the greater good, and thus, can’t possibly be an agent for economic growth.
By contrast last night, Trump also, inadvertently, offered an example of why middle-out might be so compelling to voters. When pressed on the fact that he may not have paid tax returns, he was anything but contrite. In fact, he was almost gleeful as he expressed the fact that he took advantage massive tax loopholes not because it was good for the country, but because it was good for him—and if anyone, particularly Clinton, wanted to stop it, they “should have changed the law.”
That’s exactly what Hanauer hopes to do by helping spread the message of middle-out.
“Holding all of us—including our institutions—to ever-higher standards is how we make our society better off…including people turns out to be the fundamental driver of growth in capitalist economies. And that’s what middle-out economics is,” he says.
Video Link
https://paymewhatyouowe.me/what-hillary-clinton-meant-when-she-said-middle-out-economics-7c06a6ca3503#.hdxm75hvu