YOU need a raise! Democrats need to focus on re-building the middle class

A few days before the last election, the Wall Street Journal published an article entitled, “Democrats lose their grip on voters with keys to the House.” The article began: “AITKIN, Minn.—The plumbers, drillers and truck drivers who arrive at the Birchwood Cafe before sunrise pour their own coffee, tuck away eggs and air gripes that help explain why some longtime Democrats now lean Republican. They are skeptical of President Barack Obama and don’t care much for his party’s support of federal safety-net programs. ‘You take a look at all the giveaway programs the Democrats have. Nobody wants to work anymore,’ said Dale Lundquist, a 69-year-old excavation contractor.”

The incomes of plumbers, drillers, truck drivers, and most other working class workers (not to mention most other Americans) have stagnated or declined over the last several decades. Workers’ productivity has continued to increase since the end of World War II, but their compensation became untethered from productivity in around 1979 and has not kept up since.

The median income of men with high school diplomas, adjusted for inflation, has fallen from $37,172 per year in 2001 (in 2013 dollars) to only $31,288 per year in 2013.[1] Plumbers, drillers, and truck drivers are falling behind despite working as hard as ever, but vote Republican because the Republicans have successfully branded the Democratic Party as the party that is in favor of taking YOUR money and giving it to “those people” who use it to avoid work.

A major sign Democrats need to change our economic messaging is that when registered voters were polled on “Do you think Republicans in Congress or the Democrats in Congress would do a better job of dealing with … the economy?” in late September, 50 percent said the Republicans would do a better job and only 39 percent said the Democrats. Voters are not diving into the details of what Republicans are actually proposing to deal with the economy, and Democrats are not doing nearly enough to help them understand what Republicans are really proposing. But Republicans know that the economy is the main issue, and have no problem staying on message that voting for them is voting for economic growth. Democrats need to pivot to focusing solely on a simple, compelling economic message while completely exposing the fallacy of the Republican policy prescriptions.

The Democratic Party is supposed to be the party of everyone who works for a living, or who recognizes that having a strong middle class is the surest way to broad economic growth. We are on the side of the white working class, who overwhelmingly vote Republican. We are on the side of everyone else who has seen his or her standard of living eroded over the years, because compensation has been unhooked from productivity, regardless of that person’s race, religion, or sexual preference. We should be the party that has proposals to do something about it, and that vows to fight for those proposals until they are implemented. Why should we cede the working class to Republicans?

We need one slogan that quickly encapsulates what we are about, that appeals to people’s self-interest, and that unites rather than divides us. The slogan needs to be simple, and focused on the one big thing.

It is: YOU need a raise!

Democrats believe that you should get a raise, and support policies that will give you a raise. Republicans support policies that prevent you from getting a raise.

While the specific proposals for giving YOU a raise are discussed below, Democrats should focus more on hammering on the slogan while explaining that Republican proposals prevent you from getting a raise.

Note that the focus is NOT on “income inequality.” People are less concerned about whether the rich have pulled so far ahead of most everyone else than they are concerned about how well THEY are doing. Giving YOU a raise has the effect of reducing income inequality without making income inequality a campaign slogan. Don’t demonize the rich per se, but do demonize the Republicans for advocating policies that have the effect of transferring wealth from the many to the few, that make sure that YOU DON’T get a raise.

The Democratic Brand

In an interview with the Washington Post’s Greg Sargent just before the 2014 election day, Guy Cecil, the executive director of the Democratic Senatorial Campaign Committee (“DSCC”), said: “It is our job to make Senate races about the two people on the ballot. Our advice to candidates is that when somebody disagrees with the president, they should say so, and that when somebody agrees with the president, they should say so… . For us to nationalize the election in a series of red states would play into the terrain that Republicans want us to play on.” 

It should be the job of the DSCC to promote the Democratic brand. If “nationalizing” the election makes a race more difficult for Democrats, we are doing it wrong. Democrats have let Republicans put us on the defensive, when it is Republicans who should be on the defensive. Their economic policies should be indefensible.

When the race is “about two people on the ballot,” people are just evaluating whether the Democratic or Republican candidate is a nicer guy, or by the end has the fewer negatives. We need to re-brand the Democratic Party as the party that wants to give YOU a raise, and to attack the Republican Party as the party that wants to keep your wages low. We should strive to get to the point where a majority of voters simply ask, “which one is the Democrat, that’s the one I’m voting for.”

Demand vs Job Creators

The Republicans’ policy prescriptions for “economic growth” uniformly proceed along the notion that it is businesses that are “job creators,” and that if businesses are just “unleashed” they will hire more people. Thus, all their policies revolve around cutting taxes for businesses or businessmen, or cutting back on regulations of businesses. Republicans have had remarkable success in implementing these policies, because they know what they want and go after them. Democrats have not had an organizing principle that tells them whether a policy that claims to be “pro-growth” is actually anything of the sort.

Here is the organizing principle: the problem today is not that businesses don’t feel enough love to hire more people, the problem today is a lack of what economists characterize as “demand.” Simply put, the customers of businesses do not have enough money to buy more from businesses, so businesses have no reason to hire more people or to invest. Republicans have this strange tendency to think that “customers” and “employees” exist in separate universes, and that if a business pays its employees less there will be no effect on customers.

The sound bite question to ask voters is: “Do you think the problem with the economy is that businesses are not making enough profits, or is the problem that YOU need a raise?” That distills the whole debate of supply versus demand down to an easy-to-grasp question, with an answer that most people would give, “I need a raise!”

Some Democrats are bound to ask: “What about our commitments to women’s reproductive issues, to immigration issues, to civil rights, to gay rights, to help for the poor?” Two answers: (1) The vastly overwhelming majority of women, immigrants, minorities, gays, are also people who need a raise. We are not stopping fighting for them when we change the focus from them as a separate interest group to them as a part of almost all of us, together, who need a raise; (2) Much of the backlash against women, immigrants, minorities, and gays comes from the powerlessness that so many working class people feel. People who are left behind tend to look for someone to blame, and Republicans have masterfully focused their attention on “undeserving others” who are getting goodies that are being denied to them. If people start to feel like they are getting ahead, they will be less resentful to others. Seeing to it that YOU get a raise will help all of those groups that Democrats traditionally fight for.

A word on education

More and better education is often advanced as a prescription for stagnating incomes. Be wary of claims that the problem with American incomes is that Americans need more education. It can be a way of trying to shift the blame for income stagnation on to the workers while continuing to implement policies that depress incomes. While more and better education is a great goal, this alone will do little to help with stagnating incomes. Consider that the median, inflation-adjusted income of men with bachelors degrees fell from $66,391 in 2000 (in 2013 dollars) to $58,270 in 2013. The income of men with doctorates fell from $96,409 in 2000 (in 2013 dollars) to $93,712 in 2013.[2] An individual may benefit from more education, as he or she moves up average income levels with each addition of educational degrees, but America has a whole does not see median income improvements, and without action on other fronts an increase in the number of Americans with bachelors, for instance, would tend to push down the median incomes as the supply of well-educated potential employees increases.

Democrats, therefore, should continue to advocate for policies that expand the educational opportunities for all Americans while resisting claims that these policies are all that are needed to address stagnating incomes.

How to Give Us Raises

There actually are policies that, if implemented, would give the American worker a raise. Republicans are against all of these policies, and will fight against them. That should give Democrats all the more reason to fight for them.

1.         Full Employment Policies. In practice, nothing produces across-the-board compensation increases like a tight labor market. To get an idea, consider that from January 1993 to January 2001, the period during which Bill Clinton was president, the number of employed people (total nonfarm) in the United States increased by 22.6 million.[3] From January 2001 to January 2009, the period during which George W. Bush was president, the number of employed people in the United States increased by only 1.3 million.[4]  In 2000, the per capita income in inflation adjusted dollars was 25 percent higher than it was in 1992.[5] In 2008, the per capita income in inflation adjusted dollars was 3 percent lower than it was in 2000.[6] Incomes were increased during the Clinton years because the labor market tightened as more people were hired, leading to increased demand, leading to more hiring, leading to higher wages, in a virtuous cycle. Incomes declined during the George W. Bush years because of slack in the labor market, pushing down wages, leading to decreased demand, leading to more job losses, in a death spiral.

How does America get closer to full employment? The Republican plans all insist that the way to do this is to cut regulations. For example, this was Ed Gillespie’s economic plan in the 2014 Senate election in Virginia: “The onerous tax and regulatory burden on U.S. businesses and American families is a boot on the throat of our economic recovery, and simplifying our complicated tax code and streamlining regulations are essential parts of any pro-growth agenda. We need to reduce one of the highest marginal business tax rates in the world to make American companies more competitive, while at the same time easing the tax burden on individuals and families, allowing them to keep more of their hard-earned money. Federal regulations should be subject to cost-benefit analysis, and outdated and unnecessarily excessive regulations should be repealed. Employers—and small businesses in particular—are being strangled by an unending cascade of burdensome regulations.”

Once again, the problem is NOT that businesses have too many regulations. Abolish all regulations tomorrow, and businesses would still have no reason to hire more workers because there would still be nobody out there who could afford to buy more of their products (and in fact businesses could very well lay off employees in charge of regulatory compliance without replacing them with anyone else). The problem is a lack of demand.

How does one create demand, when the crash in the housing market has left so many people with more debt than the value of their homes, when incomes are stagnating, and businesses are reluctant to hire? Republicans just hate the answer, and do everything in their power to deny it, but the answer is that when the private sector is unable to pick up the slack, it is up to the government to do something about it.

When the United States entered World War II, it had been recovering gradually from the Great Depression, but the economy still had a ways to go. The Federal Government immediately began a huge spending program to gear up to produce the weapons of war. The budget deficit exploded, but the Gross Domestic Product (“GDP”) nearly doubled in four years. Federal spending plummeted in 1946, but, after a short pause, the economy took off, as all the money that had been put into people’s pockets through that jolt of Federal spending were put to use to power consumer spending, which, in a virtuous cycle, stimulated more growth. Tax receipts rose as the economy grew and the Federal Government saw a balanced budget through the ‘50s. World War II increased the Gross Federal Debt by about $200 billion, but the growth of the economy after 1945 meant that this amount of debt was quite manageable. Americans agree that it was worth it to incur such debt.

We can do that again, except that this time we spend to re-build our infrastructure rather than on war machines. The benefits from infrastructure far outweigh the benefits from building B-17s, as repaired roads and bridges and upgraded power grids make our businesses run more efficiently and productively, whereas once a B-17 was built, it was sent overseas where it created a need to rebuild infrastructure in Germany.

The American Society of Civil Engineers has estimated that America will need $3.6 trillion in investments in infrastructure by 2020. At first blush, this seems like a lot of money, that would bankrupt America if the government spent this much on infrastructure over the next six years. Let’s put this amount into perspective.

The Congressional Budget Office projects that the total GDP over the ten years from the first quarter of 2015 through the fourth quarter of 2024 will be $188 trillion.[7] That’s clearly a figure that’s based on a number of assumptions, and the actual number could easily be within plus or minus ten percent of that number. So the $3.6 trillion needed for infrastructure represents just 1.9 percent of that projected GDP. Spent upfront in the beginning of that ten-year period could easily result in the GDP winding up being significantly higher than $188 trillion, just like all the spending for World War II jolted the economy into nearly doubling from 1946 to 1955. With interest rates on Federal debt so low these days, it makes sense to take advantage of these rates to invest in America.

The administration should invite the captains of industry into a room and tell them, “we want to pay U.S. businesses $2 trillion to rebuild America’s infrastructure, but, let’s face it, you’re not getting that money unless you can convince the Republicans that it needs to be spent.” Not only can we afford it, we cannot afford not to invest that money. It just takes the will to do it.

All that spending on infrastructure would require businesses to hire many more people to build that infrastructure, taking up a lot of the current slack in the labor market. The natural result would be that labor becomes tighter, and workers would tend to get higher raises.

2.         Strengthen Labor Laws and Enforcement. The business class has put a lot of effort into demonizing organized labor, and has worked tirelessly to weaken organized labor at the state and national levels. There is a reason for all that effort—organized labor works. Strong unions mean that workers get their fair share of the increases in productivity that the American economy generates. It is no mere coincidence that the unhooking of productivity and compensation came about as organized labor was weakened.

It has been the genius of the Republican Party that it has persuaded people to say, “look at all the things that union members get—they shouldn’t get them,” rather than saying, “look at all the things that union members get—I should get that too.”

It has been the genius of the Republican Party to call laws that weaken unions “Right to Work.” Thus, for example, Barbara Comstock’s Issues page on her web site in her 2014 congressional election in Virginia touted that she is a “Pro-jobs Right to Work leader.” The claim behind “right to work” is that if unions are crushed, there will be more jobs because businesses don’t have to pay each worker so much. While the lower pay part definitely works--

·         The average worker in states with right to work laws makes $1,540 a year less when all other factors are removed than workers in other states.

·         Median household income in states with these laws is $6,437 less than in other states ($46,402 vs. $52,839).

·         In states with right to work laws, 26.7 percent of jobs are in low-wage occupations, compared with 19.5 percent of jobs in other states

--the more jobs part does not. People in states that make less money, by an amazing coincidence, have less money to spend on the businesses that hire people based on the demand for that business.

Democrats need to fight back.

Not only do unions win higher wages for their members, but the competition for good workers forces even non-union companies to offer higher wages so that their workers will not defect to union shops. That’s what happened in the 1950’s and ‘60’s, as unions bargained (and sometimes went on strike) for higher wages. All workers benefited. When business stepped up its union-busting activities, all workers suffered.

Democrats need to do everything we can to roll back the laws that have weakened unions, and to make sure that the U.S. Department of Labor, and the National Labor Relations Board (and their state counterparts) work tirelessly to enforce the rights that workers have.

3.         Raise the Minimum Wage. The national minimum wage was last increased in 2009, when it rose from $6.55 to $7.25 an hour, the last of a three-step increase approved by Congress in 2007. The minimum wage had been set at $5.15 for the previous ten years. Republicans routinely and consistently block increases in the minimum wage. Current efforts before Congress to gradually raise the minimum wage to $10.10 are stalled due to Republican intransigence.

Twenty-one states and the District of Columbia have raised their minimum wages higher than the federal rate. Four “red” states—Alaska, Arkansas, Nebraska, and South Dakota—just voted to raise the minimum wage despite strongly voting for Republican legislators (another sign that Democrats have a serious problem convincing voters that we are on their side, or emphasizing strongly enough how Republicans are dead set against giving you a raises). A number of cities, e.g., Washington, DC, Seattle, San Francisco, San Diego, have set minimum wages that have or will rise considerably above $10.10.

Republicans always predict dire consequences if the minimum wage is increased. The problem with their arguments is that the minimum wage has been raised many times in the past, and there are numerous instances in which we can compare the consequences in a higher minimum wage state to a lower minimum wage state right next to it. The results are always that the dire predictions do not come to pass, while the workers always benefit from the higher minimum wage.[8]

Economist Jared Bernstein recently wrote: “Opponents of {minimum wage} increases complain that the pay raise will just lead to higher prices. But the question is one of magnitudes. Research finds that a 10 percent increase in the U.S. minimum wage leads to less than half a percent increase in the overall price level, with larger increases of 1 percent to 4 percent in low-wage sectors. In other words, here as in Denmark, even once you factor in price effects, low-wage workers’ buying power is a lot higher after the increase.”

Workers with higher minimum wages benefit, and taxpayers benefit, because those workers do not need to rely on food stamps to get by. Workers who currently make more than the minimum wage but make less than $10.10 would also receive pay increases to keep them from being paid only the minimum wage. The middle class benefits from increased demand generated from workers being paid more, thereby increasing the need to hire workers at all levels, resulting in pay increases for all workers, in another virtuous cycle.

 The Stump Speech

The Greatest Generation fought World War II. The United States government spent a lot of money to build the weapons of war and to pay the soldiers, and our economy finally came out of the Great Depression. When our soldiers came home, they went back to work in the reinvigorated economy, and built families, and bought houses and cars. Our businesses quickly pivoted from building for war to building for us. Businesses continued to become more efficient, so that each employee generated more and more revenue for that business.

And guess what? As each worker generated more revenue for that business, the businesses paid each worker more. For decades, workers’ pay rose in lockstep with the rise in revenue each worker generated. A solid middle class was built. Your fathers and grandfathers could see that they were getting ahead, and passing along a better life for their children. 

But things began to change right around the time that Ronald Reagan became president. Workers continued to generate more and more revenue for the companies that employed them, but companies started to take more and more of that revenue for themselves and their shareholders, and found ways to pay their employees less and less. You may have noticed that. Your company has announced record earnings, but those record earnings are no longer shared with you.

This has got to stop. YOU need a raise.

We Democrats, together, will do everything we can to get YOU a raise. Republicans will claim otherwise, and claim they are for “economic growth,” but when you look at the actual policies they propose, Republicans are really in favor of taking wealth from the many and giving it to the few. There may be “economic growth” as a result, but you haven’t been seeing it in your paycheck, have you?

The Republicans claim that economic growth will follow if we cut business taxes and cut back on regulations. That is the extent of their prescription for growth. Oh, and they will also tout making it harder for unions to organize. How will that help YOU get a raise?

Just ask yourself, do you think that the problem with the economy is that businesses need to make even higher profits, or is the problem that YOU need a raise? Just ask yourself, who are businesses going to sell to if your costs go up but your paycheck doesn’t? You know the answer. How will it help YOU get a raise if regulations are cut so that businesses find it easier to dump toxic chemicals into our water?

Instead, we need to invest in rebuilding our roads and bridges, and our schools, upgrade our electrical power grid, and fix our leaking water supplies and sewers. This gives us a double win. Our crumbling roads, bridges and schools are made better and more efficient. And if you don't have a job we put YOU back to work helping to build those things, while if you already have a job, the paychecks of those with new jobs helps the economy grow and leads to YOU getting a raise.  

Don’t let the Republicans tell you that we can’t afford it. We can. In fact, we cannot afford NOT to do it. Just like the spending for World War II finally got us out of the Great Depression and set us on the road to prosperity, spending for a new World War II, but for peace, will get us moving again. And that will help YOU get a raise, just like it helped your fathers and grandfathers get a raise.

We need to raise the minimum wage, not just in the states that have already enacted higher minimum wages, but all across America. Raising the minimum wage would mean that those of us working at Wal-Mart would no longer need food stamps in order to get by. Raising the minimum wage would put more money into the pockets of those of us who would put our higher earnings right back into the consumer economy, giving YOU a raise as well.

We need to recognize that ALL of us, whether driving a truck, working in a poultry factory, or working at the checkout line, are contributing to the increasing growth of our economy through our labor, but we have not been getting a raise. The extra money is going elsewhere. We need to be fairly paid for our contribution to our employers. Every one of us who works hard deserves to share in the greater prosperity that our hard work brings to America. We don’t want a handout, we just want to be paid fairly for our contribution, which has been happening less and less in America. Republicans do not want you to get a raise, but Democrats do.

YOU need a raise, but you will not get one if you elect Republicans.

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[1] Source: US Census Bureau, Historical Income Tables, Table P-16.

[2] Source: US Census Bureau, Historical Income Tables, Table P-16. The incomes for women with bachelors fell less but started out lower and stayed lower, falling from $41,147 in 2000 (in 2013 dollars) to $39,201 in 2013. The incomes for women with doctorates started out lower and fell more, from $69,610 in 2000 (in 2013 dollars) to $64,001 in 2013. Clearly, women REALLY need a raise.

[3] Source: Calculated from Bureau of Labor Statistics, Historical data series from the Employment Situation News Release, Series ID CEU0000000001.

[4] Id.

[5] Source: Calculated from US Census Bureau, Historical Income Tables, Table P-1.The per capita income increased from $24,152 (in 2013 dollars) in 1992 to $30,228 (in 2013 dollars).

[6] Id.

[7] Calculated from data in spreadsheet “Data Underlying Figures” at http://www.cbo.gov/publication/45010.

[8] Republicans often cite to a Congressional Budget Office report from February 2014, “The Effects of a Minimum Wage Increase on Employment and Family Income,” and claim that it concluded that raising the minimum wage would result in the loss of half a million jobs, never mind the millions more who would benefit. They focus on the sentence on page 9 of the report: “According to CBO’s central estimate, implementing the $10.10 option would reduce employment by roughly 500,000 workers in the second half of 2016, relative to what would happen under current law.” The footnote following that sentence reads: “A central estimate is one that uses values at or near the midpoints of estimated ranges for key inputs.” Later on page 9, the report states: “The overall reduction in employment could be smaller or larger than CBO’s central estimate. In CBO’s assessment, there is about a two-thirds chance that the effect of the $10.10 option would be in the range between a very slight decrease in employment and a decrease of 1.0 million workers; thus, there is a one-third chance that the effect would be either above or below that range.” Thus, the “central estimate” is simply the midpoint of all the studies that the CBO consulted, rather than the CBO’s own calculation of the effect. But the most rigorous research confirms what our observations tell us: minimum wage increases do not reduce employment.