After Iraq, the most contentious issue in politics is “economic insecurity” — a jumble of items that includes stagnant wages, inequality of incomes and opportunity, globalization, outsourcing of jobs and immigration.
It’s the Lou Dobbs agenda — the list of complaints that the CNN anchor rails about each night, which has given rise to protectionist populism in both parties and which cries out for some straight talk and novel remedies.[IMGCAP(1)]
The worst temptation will be for Congress to reject trade agreements that the Bush administration is preparing to submit, cutting the United States off from both export and import opportunities. Instead, the U.S. needs to improve its competitiveness and bolster the safety net for workers who lose their jobs.
One idea that’s received little attention —but should get more — is wage insurance, a relatively inexpensive program to make up part of a worker’s salary loss.
Robert Litan of the Brookings Institution, a major proponent of the plan, estimates that it would cost just $3.5 billion a year — charged to employers at $25 per worker — to provide permanently displaced workers with 50 percent of their lost wages up to $10,000 a year for two years.
Litan argues that current U.S. safety-net programs, including unemployment insurance and trade adjustment assistance, are inadequate, hard to obtain and actually discourage workers from finding new jobs.
The potency of the insecurity issue was on display when Sen. Jim Webb (Va.) devoted half of the Democratic response to the State of the Union address to it, asserting that “the middle class of this country, our historic backbone and our best hope for a strong society in the future, is losing its place at the table.”
“The stock market is at an all-time high, and so are corporate profits,” Webb observed. “But these benefits are not being fairly shared. When I graduated from college, the average corporate CEO made 20 times what the average worker did. Today, it’s 400 times.”
President Bush was compelled to respond on the issue with a pair of speeches last week touting the strength of the American economy, defending his policies of tax cuts and free trade but acknowledging that “income inequality is real,” blaming it on disparities in education, not greed.
However, he also was compelled to urge corporate boards to “pay attention to the executive compensation packages that you approve. You need to show the world that American businesses are a model of transparency and good corporate governance.”
All of the 2008 Democratic candidates for president are likely to make economic insecurity a mainstay of their campaigns, and Republicans — if they are smart — should pay attention to it as well.
Last week, in a speech to the New America Foundation, Sen. Hillary Rodham Clinton (D-N.Y.) called for “a new 21st century American bargain” to help the middle class, including a universal health insurance plan (yet to be outlined), “baby bond” savings accounts established for each child, and “American Dream Grants” to encourage colleges to accept and graduate more students.
Her argument was that policies of the Bush administration had led to a “hollowing out of the middle” and “wage stagnation.” Productivity has grown by 17.5 percent since 2000, she said, while median household income has fallen marginally, health care costs have risen 81 percent and college tuitions have increased 50 percent.
The Bush administration argues back that average wages at last have begun to rise — 1.7 percent in the past year — and that income growth during the current economic recovery actually has been greater than during the boom times of the Clinton administration.
According to Labor and Commerce department statistics distributed by the White House, hourly wages have risen at a yearly average of 2.8 percent since 2003 but rose only 0.3 percent during the 1990s, and personal income has risen 3 percent, compared with 0.3 percent in the 1990s.
Democrats argue that income gains have been skewed to the highest-income earners and that wages for lower- and middle-income workers have been flat or falling.
Dobbs and other protectionists blame the trend on globalization — the drive of corporations to send U.S. jobs to low-wage countries — along with illegal immigration, which allegedly depresses wages for American workers.
Arguing for renewal of trade promotion authority — which allows for fast-track Congressional approval of trade agreements — the White House points out that 42 percent of the U.S. work force is employed in firms engaged in international trade and that jobs supported by exports pay wages 13 percent to 18 percent higher than the average.
Still, there’s strong pressure on Democrats to oppose trade agreements. Only 15 House Democrats and 11 Senate Democrats voted for the Central American Free Trade Agreement in 2005, for example. Both leading Democratic presidential candidates, Clinton and Sen. Barack Obama (Ill.), voted against it.
Former Sen. John Edwards (D-N.C.), running as a populist and trying to lock up union support, insists that all agreements contain tough labor and environmental standards, a demand likely to stifle trade negotiations.
Despite strong economic growth, economic insecurity is real. The challenge for Congress, Bush and the 2008 candidates is to deal with it constructively, not try to cut America off from the world.