The pace of economic and technological change is causing many U.S. workers to feel left behind. What is the responsibility of state and federal governments in ensuring Americans have the skills and education needed to thrive in the jobs of the future? CFR fellows Edward Alden and Robert E. Litan explore these issues as they discuss the findings of their new paper, A New Deal for the Twenty-First Century.
ALTER: Welcome to everybody who’s on the call. We are going to have a great discussion for the next 45 minutes about this Council on Foreign Relations report on a 21st century New Deal. And we have the distinguished authors of the report on the line with us now.
Edward Alden, known as Ted, is a senior fellow at the Council on Foreign Relations and the author of recent CFR book, “Failure to Adjust: How Americans got Left Behind in the Global Economy.” And he’s also written widely about immigration and served on various taskforces related to immigration. Robert Litan is an adjunct senior fellow at the Council. He is an economist, and an attorney, and a former deputy assistant attorney general in the antitrust division in the Clinton administration, and was later an associate director at OMB.
So they’ve written a very cogent and I think, for a lot of Democrats, inspirational account of where Democrats go from here, and progressives go from here, in terms of an agenda for those who have been left behind in the global economy, and for the United States in general. So I guess I wanted to start by asking you, Ted, how would you describe the sort of central economic challenge facing the United States right now?
ALDEN: I think the—you know, the central economic challenge, which we try to address in this paper and I think others are addressing as well, is a really a distributional challenge, not just in the sense of income but in the sense of work opportunities. I mean, in my book I wrote a lot about the various things that have led to the decline in manufacturing jobs. And I think one of the—you know, whatever one attributes the various causes to, one of the very notable things about those jobs was that they were well-paying jobs that could be done by people with modest levels of education—you know, high school or even less sometimes.
And the new work opportunities that are being created—and we know they’re being created. If you look at job openings in the United States right now, they are at record levels according to the Department of Labor Statistics—that those jobs require a level of education and skills that a lot of Americans have not developed. And figuring out how to help both, you know, the current generation of displaced workers and future generations to develop those skills is absolutely, I think, the critical challenge going forward.
I mean, we’re far from the only ones talking about this. Ben Bernanke gave a big speech this week that was, I think, aptly titled, “When Growth is Not Enough.” And he’s pointing out that, you know, despite reasonably good growth numbers, you know, if you look over the past several decades and you have stagnant earnings for the median worker and declining economic and social mobility, falling labor force participation, particularly among men. So a whole series of challenges that really have to do with how to prepare Americans to take advantage of the work opportunities of the future.
ALTER: So, you know, a lot of people, I think, know that deindustrialization really began in the 1980s, and that this has been a long-running challenge. But you quote a conservative scholar, Nicholas Eberstadt, I believe, saying that the great American escalator really broke down about 15 years ago at the turn of the century. And what was it that happened then that, you know, has led to where we are now, with the high suicide rates and diminished lifespan for people in the middle class, and the sense of economic alienation that helped lead to Donald Trump. What was it that happened at the turn of the century?
ALDEN: I mean, you know, I’m not sure that anyone completely understands that. And Eberstadt’s article is very good, but I don’t think that he comes up with a complete explanation either. I think it’s clear, if you look at the manufacturing work, that something changed very dramatically around 2000. You had had, prior to that time, you know, a kind of steady decline in the manufacturing share of the labor force, but the total number of manufacturing jobs had actually remained fairly stable from the ’70s through the late ’90s, at about 17, 18 million jobs. That fell off a cliff in the 2000s.
Some of that may be caused by trade and it’s coincidental with China’s entry into the World Trade Organization. Certainly, technology was a very big part of it. But you did see a real hollowing out of the manufacturing sector occur over that decade. And that has particularly significant impacts in certain parts of the country. And they were the parts of the country that helped put Donald Trump in the Oval Office.
So I think that that is—that is a significant part of the explanation. But, you know, there are other factors that I think were more cumulative. I think our educational system hasn’t kept pace. If you look at worker retraining efforts, they fell behind even more seriously in the 2000s. You had a huge decline in companies offering apprenticeships, for instance. So I think there are a lot of different factors that came together in that decade and really did make it not a very good one for a not-insignificant percentage of the American workforce.
ALTER: You mentioned trade. And something that many Democrats agree with Trump on—at least, the Trump of the campaign—is that, you know, we needed to pull out of TPP and ask a lot of hard questions about NAFTA. But neither of you believe—and maybe, Bob, you can tackle this one—that trade is at the root of what ails us, is that right?
LITAN: Yeah. I mean, most economists—a vast proportion of economists believe that technology’s mainly responsible for this, has been. Maybe less of a factor in the 2000s, as Ted has mentioned. I think there was a famous paper that was written by David Autor of MIT and his colleagues, which pinned roughly 2 million jobs in the manufacturing sector on China’s entry into the WTO. But apart from that paper—and even they would concede that even taking into account the extra trade effects of China, technology’s still the same story. And that’s why we designed our solutions, which I know we’re going to get to, toward really disruption caused by anything—whether it’s trade, or technology, or changes in consumer demand, or what have you. To the worker who gets displaced, it really doesn’t matter what caused it. We’ve got to be able to fix this, yeah.
ALTER: That’s a very important point, because people—there are a lot of recriminations about what caused this. And you both are basically arguing that Democrats need to move out of the critiquing business and into the proposing business. But before we get to those proposals—and they’re very, very interesting ones—I wanted to just linger for a moment longer on the status quo. And you say in your—in your article that the problem isn’t a job shortage but an income shortfall. Explain that.
LITAN: Well, I’ll take a first crack. I mean, if you just look at the job numbers—and the unemployment rate’s 4.3 percent. And even though we’ve had people drop out of the labor force, I mean, it’s still—at 4.3 percent it’s the lowest we’ve had in probably 15 years or so. So it’s obvious that the problem is incomes. Wages have only been increasing at roughly 2, 2 ½ percent, even in the last couple of years when we’ve had a stronger recovery. So and the distribution of those wages has been clearly uneven. People at the bottom have actually lost ground and people at the top have done better. So it’s wages.
ALTER: But is—so are the basic supply and demand curves that, you know, everybody learned in college, are they not really working when it comes to the labor force?
LITAN: Well, I think they are working. And I think that’s the problem. Is that at the bottom of the scale we have lots of people that are unskilled. And the demand for them has dropped and we have a big supply. So no wonder they’re not doing well. And conversely, the people at the top, relative to people at the bottom we have fewer people at the top, very high demand for skilled labor. And so, of course, people at the top 20 percent of the income distribution are doing fine. The people at the top 1 percent, of course, are doing really well.
ALTER: So these—so the job shortages drive up wages at the top, but even if there are job shortages for unskilled labor, that doesn’t drive up the wages for everybody else?
LITAN: Well, no, I’d say the job shortages are not necessarily unskilled labor. There’s a lot of middle skilled. And, you know, Ted can fill in, because he’s been talking about the jobless numbers, or the job numbers.
ALDEN: Well, I’m just saying that if you talk to small manufacturers and others around the country these days, they’ll say, you know, they have a very difficult time, you know, finding people with, you know, an array of technical skills—be it in, you know, computer-aided work, or in welding, or in repair, or in other things. There are in fact significant shortages of people, not with—you know, not with, let’s say, four-year college educations or advanced degrees, but with community college-level skills that make them far more employable. That’s where a lot of the job shortages are. They’re not in the unskilled dimension. And so one of the things that we’re trying to tackle in our paper is how you try to prepare more Americans for the job opportunities that are there.
And I did—I did just want to add one thing. I mean, when we—when we wrote this, we didn’t really see this just necessarily as a recipe for Democrats because, I mean, you have to give Donald Trump credit for actually raising a lot of these concerns during the campaign. And you know, we can talk about what the administration has done or not done so far, but I think this is a set of issues that clearly resonates in the Republican Party as well. So I actually do—maybe I’m hopelessly naïve—
LITAN: That’s a really important point. And—
ALTER: No, that’s an important point. And we’ll get—and, actually, it’s a good segue into what you call quick fix myths. I think we’ve already dealt with, you know, somehow blowing up trade deals as a—as a way out of this problem. But the first of the quick fix myths that you outlined is the Trump tax plan. So why is it a myth that that will help unleash economic growth and put people who need it back to work?
ALDEN: Well, the best evidence why it doesn’t work is look at—look at the Reagan tax cut, all right? So the major effect of the Reagan tax cut was to help us recover from a very deep recession, but it was not to expand what economists call long run of potential GDP growth, you know, what we’re capable of. And this is well-documented in Bob Gordon’s classic book, “The Rise and Fall of American Growth,” where he shows that basically since the 1970s potential output has been growing at a very slow pace. It’s been growing for 40 years at a slow pace. And the major tax cuts that we had at the top of the income distribution during Reagan did not affect it at all. And so if you want to have a Reagan tax cut on steroids, which is what Trump has been proposing, there’s no reason to expect any different result.
ALTER: So you can’t—you think even with a Reagan tax cut on steroids that you can’t jack up growth a little?
ALDEN: A little—
ALTER: By half a percent—half a percent? If you—if you jacked it up by half a percent—I’m just playing devil’s advocate here for an argument that I don’t believe myself—but if you jack it up by a half a percent, that’s a lot more people employed.
ALDEN: Right, but you know what? You’d be getting dangerously down to 4 percent unemployment. And I can guarantee you the people at the Fed would be very nervous about that. And you’d probably be inducing them to raise interest rates faster than they would otherwise. So I don’t think there’s much room left for so-called cyclical expansion. And so you’re not going to get that many more jobs. And of course, the jobs that you’re going to get, you’re going to give huge tax cuts to the wealthy. And you’ll be relying on trickle down. And we know, as I said, from just a wealth of economic evidence, that did not expand potential output before. It just didn’t.
ALTER: OK, so let’s talk about now a quick-fix myth from the left. And the one that you outlined is for a universal basic income. And why is that not a good idea—what is it, and why is it not a good idea?
ALDEN: Universal basic income is the notion that everyone in the United States will receive some check from the government which, you know, helps keep your head above water. Ten thousand dollars a year is the number that’s often suggested. There are different versions of it. You know, on the—on the left it tends to be sort of in addition to various existing social safety net programs. On the right, Charles Murray of the American Enterprise Institute has embraced the idea, but would cut a lot of the current income support programs.
I mean, I think there are two objections to it—actually, three. I mean, one is it’s being pushed very hard out of Silicon Valley. And I think you hear this notion, which I think believe is much inflated, that the technologies that are coming are so dramatic that we’re looking at this jobless future, and we really have no choice but to pay people not to work. I don’t think economic history tends to suggest that—that work will change but it won’t disappear. So maybe analysis is probably wrong.
But I think the other two things are, one, just tremendously expensive. I mean, there would have to be some kind of major reconfiguring of the tax system to make something like that possible. But then finally, I think the biggest objection is that you want government policies to support desirable activities of one sort or another. And I certainly believe—I think a lot of people believe—that work is very central to people’s lives. It’s an important contribution for the country. You want to use measures that are encouraging people to work rather than paying them not to work.
One of the troubling things that happened in the—in the 2000s with the big manufacturing job loss is that, you know, very few of the people who lost their jobs end up, you know, going—taking, for instance, the Trade Adjustment Assistance Program to try to retrain for other careers. And much higher numbers ended up on Social Security Disability, which is essentially a lifetime welfare program for not working. I think that’s clearly not what we want to encourage.
ALTER: Well, how about expanding further the earned income tax credit, which is the most successful antipoverty program of the last 50 years, and just raising the threshold of eligibility for the EITC up quite a bit beyond where it is now? That rewards work—rewards work—
ALDEN: I’ll talk about this in a little bit. I think we would absolutely support that. And then we talk in this paper about the idea of wage insurance, which is another similarly intended vehicle. Bob, do you want to tackle this?
ALTER: Yeah, so let’s get into—so now, in this part of the conversation, I want to talk about your three really interesting ideas. The one that was most intriguing for me is wage insurance. As a—you know, as a new—fresh, new plank and fresh new subject for discussion among people who want to actually address the problem. What is wage insurance and how would it work?
LITAN: OK. So, first, actually, it’s not so fresh. I’ve been writing about it for 30 years, and now finally people are paying attention to it. The idea is very simple. The idea is that if you get laid off and you take a new job at a lower wage, the government pays part of your wage difference for up to two years. There would be a cap. It was initially proposed at 10,000 (dollars), but Ted and I said, you know, why not go to 20,000 (dollars). And so what that says basically is that if you’re in Indiana, lose your job, and have to go take a job, you know, at—you know, you lose—you go from 50,000 (dollars) to 30,000 (dollars), the government would pay half the difference for a couple of years.
And that insurance doesn’t kick in until you actually take a new job. So it gives you very strong incentives to go back to work, it pays you to go back to work. It pays you to go back to work. And it also, in effect, subsidizes the employer to train you, because you’re initially starting out with lower productivity than existing workers. But over time, the idea is that you’ll become more productive and you won’t need the insurance. You know—
ALTER: So two—
ALTER: It would work for two—it would last for two years. The insurance would be good for two calendar years of employment. And—
LITAN: Yeah. From the day that you’re unemployed, yeah.
ALTER: And if it’s capped at 20,000 (dollars), how does that cost out in the aggregate?
LITAN: Well, at 10,000 (dollars), the CBO’s costed the whole thing out at $3 billion. So if you went to 20,000 (dollars), presumably it would be close to double that. But even at 5 to 6 billion (dollars), given the numbers that have happened—you know, we’ve been talking about lately, this is a rounding error. (Laughs.)
ALTER: Yeah, it is. And so—OK, so tell me, since you’ve been working on this for a long time, why have—I wouldn’t expect the people in the Republican Party who haven’t shown much interest in this kind of thing to embrace this, but why wasn’t this something that was in, say, the Democratic Party platform last summer? Or why is it not—
LITAN: Or four years ago, or 10 years ago, of whatever.
ALTER: Or 20 years ago. Why has it never been taken up by serious policy people in the Democratic Party?
LITAN: Well, I think one is because some congressmen worried their constituents would move to other areas in order to take advantage of job opportunities. And generally, politicians don’t want people to move. Secondly, I think Democrats just tended to consequence on the negative impacts of trade and would just prefer to stop trade. And I don’t think they felt comfortable going to their constituents and saying, well, look, you’ve got to change your life. And the government can actually help you change your life.
And Democrats, in our view, ought to actually adopt Republican language of personal responsibility, but then add a Democratic twist on it, which is to say: If you exercise personal responsibility, we, the government, will help you do that and make your adjustment easier. And toward that end, we also offer in our proposal lifetime loan insurance, the same idea, that you’d be able to borrow from the government to get retrained, also for moving expenses, and also for living support. And your repayment would be contingent on your future income. Again, the idea is personal responsibility, but the government safety net is there for you to help you. And so we convert the safety net into a trampoline rather than just a safety net.
ALDEN: I think to be fair, I think—as Bob knows, just quickly—I mean, the Obama administration towards the end did come to embrace a more expansive version of this in some of its final budget proposals. I mean, there have been sort of small pilot-type wage insurance programs through Trade Adjustment Assistance and others. But towards the end, the Obama administration did begin to embrace a broader notion of this. But as you say, it’s not something that outlived the administration and the campaigns of 2016.
ALTER: So you just used a metaphor that sounded very good to me, and that was the trampoline. You could see a trampoline agenda breaking through. Has part of the problem been with this idea and even the earned income tax credit, that they just haven’t been packaged very well? By the time you get from earned income to tax credit you can already see people nodding off. That these ideas have been named in boring ways and have not been put together, even as kitchen table agenda. There’s been no coherent effort to name and promote these income support ideas, right?
LITAN: Yes. Absolutely.
ALDEN: Bob, I wished we’d used that one. (Laughs.)
LITAN: Yeah, I know. I’ve used it in previous talks. I should have used it last week. Yeah, but I want to add an additional thing. Politicians traditionally don’t like to tell voters that they need to change their lives and that the government should help them. They prefer to tell them: You can have your job back. And essentially, that’s Trump’s entire campaign. We’ll give you all your jobs back if we have all these, you know, new trade deals. And people fell for it. But of course, we know as economists that that’s garbage. That’s not going to happen. Those jobs aren’t going to come back. And of the few manufacturing jobs that are going to be created, they’re going to be advanced manufacturing jobs, which require new skills, for which people will have to be trained.
ALTER: Right. So just one more question on the wage insurance. Premiums—would there be a worker contribution?
LITAN: No. No, this would be a government program, like unemployment insurance. And you can’t have the private sector do it, and you can’t really charge premiums for it, because of the same problem in health insurance, that if you let the private market do it only the people most likely to be unemployed would actually sign up for the insurance. So the government has to offer it. And same idea as in preexisting conditions, the same idea with health insurance. You need the government to do this.
ALTER: Second big idea in the New Deal for the 21st century, career loan accounts. What are they?
LITAN: So the idea is that if you want to get retrained for an entirely new career—whether at a community college, for-profit college or whatever—as long as the training center publishes statistics about their placement rates, so you wouldn’t be going into debt for nothing, we’d have the government lend you the money. And we’d also include, as I said, moving expenses and also some living expenses. And you could repay the money back based on your income, which is the way we do college loans now, except rather than have a one-shot deal for college it ought to be available for people throughout their entire lives.
And over the course of one’s life, there would be people that would more than pay the government back than what they owed, because they did well, and other people who do less. But overall things would balance out. And as you said at the top of the show, we’d have fewer people addicted to opioids, probably fewer people going to jail. So we’d have additional cost savings if we did this.
ALTER: But, you know, there’s been enormous college loan debt and unanticipated expenditures in college loans. Would this be one of those things that, you know, eventually ate the budget when it’s not in a position to be eaten?
LITAN: No, because—OK, so I want to talk about that. It’s a loan program. And most college debt is not income contingent. It’s a flat loan and you owe it back. And by the way, it’s not dischargeable in bankruptcy. You can’t get rid of it, which is why we have this big problem. Whereas, the newer forms of college debt, which Obama introduced and which actually existed when I was in law school, is they were income contingent. So if you don’t do well, you don’t pay as much money back. And if you don’t have a job, you don’t owe the money, so you don’t go broke. You only pay the money back if you do well.
In terms of a budget, you score only the subsidy element in the—in the loan, rather than the whole loan. And as I said, there would be winners and there’d be losers. And the winners would more or less offset the losers. And I don’t think you’d have a big budget impact. Now, I have to say—and then we can go to questions pretty soon—we’ve talked to a number of Democrats. And they—their response is, you know, free. Let’s give free college, free this, free that, and so forth. And we don’t want to go to loans. And my response to that is twofold: One is, we don’t have the money to go to free, all right, because we already have a budget problem. And it’s only going to get worse as the baby boomers age. And number two, people ought to have skin in the game. They’re more likely to take their retraining seriously if they actually have to pay for it.
Although I personally would be open—we didn’t talk about this in the paper—but I personally would be open to a mix of loans and grants, if we—if we could somehow find the money for it. But if we can’t, I’ll take the loan program.
ALTER: Well, also, you’re addressing older workers, whereas free college is for people who are, you know, under 35.
ALTER: This career loan account would be for somebody in their 50s who, you know, wanted another 15 years of employment and needed a little help as well, right?
LITAN: Well, it could—it could be used for a kid going to a college—
ALDEN: Yeah, but it could be earlier than that. It could be earlier. It could be 30, 40. I mean, I think one of the things—
LITAN: Yeah, no, I know them as well. But you could send—yeah. This is a lifetime—you know, this is—this is a proposal to try to address this challenge of lifetime learning, the reality that people are going to need to train up and reskill probably several times in their career. And how do you make it possible to do that? So it’s not just for the displaced 50-something worker.
ALTER: Right, no, I understand that. I understand that. But the free college is just for the younger ones.
LITAN: Mmm hmm. That’s true. That’s for kids, that’s right.
ALTER: So yours is more in line with lifetime learning, without the free.
OK, last big idea, something I’ve been very involved in for many years, national service, which you price out at—I guess Stan McChrystal—retired General Stanley McChrystal, priced out at 25 billion (dollars) for a million people in national service. Now, beyond the civic and character building and poverty fighting instructional social reasons for national service, which I don’t think we want to dwell on today, what are the economic arguments for national service?
ALDEN: Well, I think they give people—remember, this is the first thing out of school. And it gets people in a structured environment—many of whom may not be—gets them suitable for the workplace, in addition to the value that they are providing, whether mentoring kids and, you know, in disadvantaged schools, and so forth. They’re providing services right now that we need that we’re not paying for. So, but I wouldn’t under empathize all the other stuff that you dismissed—(laughs)—you know, which is the character building and all that, the kind of civic stuff, which is important—which is important.
ALTER: Yeah, it’s extraordinarily important.
LITAN: And one of the ideas is that—sorry—one of the ideas that we did not actually write into the paper, and just kind of came to us later—and, you know, we characterize this as a discussion paper, which means we’re planning to kind of refine it on an ongoing basis—but one of the ideas is actually link up the service portion with the lifetime learning accounts. So I mean, we want to encourage people into national service, whether military service of civilian service. Good thing for them, good thing for the country. And one of the ways to reward them would be to say, you know, your terms for all future borrowing in terms of improving your education and skills are going to be more favorable. You’ll have a higher subsidy component, lower repayment component. You could think of it as a kind of lifetime learning GI Bill. You know, the GI Bill was a one-shot deal to get returning veterans into college. You know, you could use it as kind of a reward for people who are undertaking national service, whether civilian or military.
ALTER: So the original AmeriCorps in 1993 was based on a campaign promise by Bill Clinton to do something very similar to this, to let people pay for college if they went into AmeriCorps. And more than a million people have, even though it doesn’t get very much publicity.
I want to open it up for questions from those who are listening. We have about 10 minutes left. And so I want to turn it over to the operator to get instructions on how to call in.
OPERATOR: At this time we will open the floor for questions. (Gives queuing instructions.)
ALTER: So while we’re waiting for the questions to que, the reason I asked about the economic impact of national service is that in the Obama administration a few federal agencies established AmeriCorps programs. And I know that FEMA Corps, for instance, found that it was considerably cheaper to use AmeriCorps members for some of their cleanup operations than contractors or straight government employees. And a few other agencies found that as well. So is it—is it possible that national service, if fully implemented, could actually cost less than 25 billion (dollars), even though that sounds like a bargain to me as it is?
ALDEN: I’m not sure it would cost less, especially if you add a residential component to it. I’m not sure you could go less. We’ve had some people say that actually we’re underpricing it. So the one amendment, though that I would make on what you just said is that I actually think that—this is my personal opinion—if we were running this program, I would delegate a lot of this to the states and let different states design their programs, because different states have different—you know, different job opportunities and, you know, different needs, as I said. Some states, in particular, would want to channel their kids into being mentors in schools with underprivileged kids, because one of the things we know from economic research is that one of the most important ways to get—you know, to close the education gap or the achievement gap is to have one-on-one mentoring. And this would be ideal for college graduates, in particular.
ALTER: So AmeriCorps is on the chopping block in Mick Mulvaney’s Trump budget. But the reason it’s survived all these years is because of what you just described, that unlike the Peace Corps it’s been decentralized and there’s been a lot of buy-in at the state and local level. AmeriCorps programs are, you know, existing nonprofits. And a lot of the selection of them is at the state and local level.
So I think we should have a caller on the line. Is the first caller ready? Is anybody queued up?
OPERATOR: No, sir, not at this moment. (Gives queuing instructions.)
ALTER: OK, let’s just continue the discussion. I wanted to, you know, ask a New Deal-related question. I wrote a book about Franklin Roosevelt’s early time in office, starting with the first hundred days. And he believed in direct hiring—first with the Civilian Conservation Corps and, you know, then with the WPA and other jobs programs. It’s fallen very out of fashion. We haven’t had it since the CETA program in the 1970s. But what is wrong with the government offering people infrastructure jobs—well-paying infrastructure jobs and directly employing them?
LITAN: Again, this is me personally speaking. Ted and I haven’t, you know, come to a conclusion on this. But the main problem with all the infrastructure stuff is—and this goes to Trump’s plan and everybody’s plan—is—in my view—is not just funding, it’s the delays. And Phil Howard’s talked about this extensively, that we need to go from 10-year projects to two-year projects. And so as an immediate, you know, job, you know, program, it’s not going to help much if you can’t build anything and can’t get the permits done. So that’s a big, big roadblock, so to speak, in getting direct employment.
ALDEN: Yeah, the other element of this—I mean, I’m not necessarily opposed to it. But the goal here is not—is not just employment. I mean, we’re talking about the sort of fundamental strength of the economy, its competitiveness. And, you know, if you look at why the United States got such a jump on much of the world, it was because we pioneered universal high school education before other countries did, educated our workforce to a higher level. In order to continue to maintain an economic advantage or to catch up, I would argue, in a number of areas we’re going to have to undertake that again. We’ve got to have a workforce that is educated and trained at a higher level than our workforce currently is. And just straight government hiring programs don’t really get at that. You’ve got to be responding in some way to the needs of the companies that are hiring.
ALTER: But it reminds me a little bit of what somebody in the Roosevelt administration said when they were testifying in the 1930s, and a critic of the New Deal started his sentence with: Well, in the long-term don’t you think we need—and the Roosevelt administration official cut him off and said: People don’t eat in the long term. They eat every day. And so if you’re talking about, you know, addressing the disaffected voter who may have voted for Trump or feels he’s been left behind, the retraining ideas and lifetime learning ideas can leave him cold. He just wants a better job and he wants it as soon as possible. And this is why maybe the most politically popular thing that Trump has said so far is that he wants to cut through that red tape and those licensing requirements that slowdown infrastructure projects. And if he manages to do that, even at the expense of the economy—of the environment, do you anticipate that we might be moving in that direction, because it’s popular with Democrats as well, towards some kind of an infrastructure fix?
ALDEN: I mean, I do—I do think we—you know, we tried to address, and, you know, we made no pretenses to being comprehensive here—but we tried to address both those sets of concerns. I mean, the lifetime career accounts are obviously more a long-term thing. Wage insurance is very much of a short term, you know, putting more money—getting people back to work and putting more money in their pockets. An expanded earned income tax credit, which we would very much support, would be—
ALTER: And a minimum wage increase you guys support as well.
LITAN: Limited. Limited.
ALDEN: We’re supportive—we’re supportive on a state level, not national. But, I mean, I think there are a number of things here that do try to address that, you know, deal with the short-term problem. You know, I think—I think infrastructure could absolutely be part of the package as well. I don’t think anybody thinks that, you know, there’s just one or two sets of measures here. I think you got to tackle them in both of these dimensions.
ALTER: And a more limited question of the minimum wage, did you see the study about how it has backfired in Seattle? And is that a—well, explain how that backfired and whether you think the study is accurate.
LITAN: Well, yeah, the study actually just came out a couple days ago. And I know the researchers involved at the University of Washington. And what they found is that at 15 bucks an hour in Seattle, what a number of firms did, in fact on average, is that they didn’t reduce the employment of minimum wage workers. What they did is they reduced their hours. And by reducing their hours, the people who were being paid $15 actually ended up earning on average less than they were before you raised the minimum wage. And I think the study—I think the study is valid. It’s not all-encompassing, because it did not include, to my knowledge, the big chains, like McDonalds and so forth. It included other minimum wage workers. But this is something you have to worry about, are unintended consequences, which is why in the document we said we were comfortable with the $12 hour as a floor for the nation, but anything higher than that, as Ted said, we prefer to let the states experiment. This is an example of an experiment that may have backfired and served as a warning shot to other places. Even high-cost areas, that you can have unintended consequences of going too high.
ALTER: I think that’s a great place to end it. A cautionary note for reformers about unintended consequences. I urge everybody on the call to go to the CFR website and to read the 21st century New Deal paper. It just takes a few minutes to read it and it’s outstanding. And I want to thank Ted Alden and Bob Litan for joining us today. And I look forward to more discussion of what I think we’ve all concluded should be the trampoline agenda. (Laughter.)
ALDEN: We should have retitled it. I like that.
ALTER: But something that—something that breaks through. Although, as a New Deal fan, I think 21st century New Deal is an outstanding frame as well. So thanks so much. And I look forward to doing this again someday.
ALDEN: Thank you. Bye-bye.