Richard Reinsch:
Hello and welcome to Liberty Law Talk. I’m Richard Reinsch. Today we’re talking with Michael Strain, author of the new book, The American Dream Is Not Dead: (But Populism Could Kill It). Michael Strain is an economist. He is resident fellow at the American Enterprise Institute, where he is the Director of Economic Policy Studies. You will know him, as I do, as a long time contributor to public debates and discussions from an economics perspective. He’s a regular columnist at Bloomberg, and is someone that I have found very useful in thinking about all of these issues surrounding debates about wage growth, labor productivity, unemployment statistics, and just sort of the general matter of discussion these days on economic questions.

Richard Reinsch:
Michael, welcome to the program.

Michael Strain:
Thanks so much for having me on. It’s great to be here.

Richard Reinsch:
So thinking about your book, now, you address the American Dream, the question of the American Dream, from an economics perspective. How are you defining the American Dream and why is it not dead?

I focus on that economic component and I look at some very standard economic questions. “Are wages stagnant?” “Do workers see the fruits of their labor rewarded?” “Do the gains from the economy only accrue to the top?” “Has quality of life improved?” “Has household income gone up?” “Have the forces of creative destruction created economic opportunities for middle-class American?” “And is America still upwardly mobile?”

Michael Strain:
So I think about the American Dream of being an amorphous kind of thing that encapsulates many things. People think about strong communities, people think about home ownership, and people think about strong families and things of that nature. I think central to anyone’s definition of the American Dream is a large economic component. The idea that hard work will pay off, the idea that you can better your economic situation and see your wages and income go up, and especially the idea that your children will do better economically than you.

So in the book, I focus on that economic component and I look at some very standard economic questions. “Are wages stagnant?” “Do workers see the fruits of their labor rewarded?” “Do the gains from the economy only accrue to the top?” “Has quality of life improved?” “Has household income gone up?” “Have the forces of creative destruction created economic opportunities for middle-class American?” “And is America still upwardly mobile?” I define in part, the standard questions that people ask. “Do kids grow up to do better than their parents?” I look at all those.

And I walk away with the conclusion that the American Dream is alive and well. Now, that’s not to say that we should be satisfied. Of course, we can always have even faster wage growth, even faster income growth, even more upward mobility. And it’s not to deny any of the real challenges that are facing American workers in American households. Most notably the coronavirus spread, which materialized after the book was published. But at least to say that when you kind of look over the long sweep, when you look over a 30-year period, a three-decade period, you see substantial economic progress. The progress is not uninterrupted. There are of course challenges and setbacks that occur along the way, and right now we’re facing a serious challenge with coronavirus. But the long story is the story of economic progress.

Richard Reinsch:
I want to get into the book. Real quick, as an economist looking at the recent stimulus bill that was passed and how the federal government is managing the situation, do you see troubling long-term trends that could develop from this? Or is it as many would say, the government is reacting to this unprecedented crisis in a novel way, but things can hopefully be put back together again once it’s over?

Michael Strain:
Yeah, I think the government’s response has been about right. The scale of this crisis and the suddenness with which it hit the economy are unprecedented. Right now, there are something like 250 million Americans being told to stay at home, over three-quarters of the people who live in this country. Over 30 states have lock-down orders. Well over a dozen cities have lock-down orders, and Washington DC is locked down as well. Just this morning we learned that in the two week period that ended on March 28th, 10 million people filed for unemployment insurance benefits for the first time. That dwarfs by a factor of 10 any previous weekly increase in unemployment insurance claims.

Richard Reinsch:
Yeah, that’s a massive number.

Michael Strain:
It’s a massive number. I mean, obviously it’s very hard to forecast, but we could easily end up with annualized quarterly GDP growth of negative 30% or higher for the current quarter. We can end up with a 10% or 15% unemployment rate as peak. I mean, this could be a really, really bad economic situation. And so, I think Congress was right to act very quickly and aggressively, and I think the program they put together has a lot of really good components to it. The million dollar question is, of course, how aggressive will this virus be? And we don’t know. We don’t know that. If the virus, if it’s on a more aggressive side, we may need even more. If it’s on the less aggressive side, then we will be back open in the late spring or early summer and things may be relatively normal. And so I think it’s just very hard to know.

Richard Reinsch:
Do you see anything bothering you though? Things that I’ve read, the extent of Treasury having something like a $500 billion portfolio to loan out money to businesses. And then of course, it seems what I’ve read, a new step of Treasury taking ownership stakes and companies that were buying bonds, corporate bonds, commercial paper, things like that to float companies forward. I understand that, but sort of making our economy more centralized and more brittle long term.

Michael Strain:
I’m worried about the potential downsides of that $500 billion fund, for sure. I think that there will be some extraordinary and unusual things that the government is going to do. I don’t expect any of those things to be permanent. I mean, the government took an ownership stake in some companies 12 years ago with TARP. TARP ended up making money for the taxpayer, and the government no longer owns car companies or owns any stakes in car companies, or things of that nature. So I think everybody recognizes that extraordinary measures have been taken, but that they’re emergency measures that won’t last. Giving that much money to Treasury to allocate as it sees fit is something that raises an eyebrow, and we’ll see how they do with that. Hopefully everything with that works out reasonably well. That’s one part of the larger package. I mean, the total amount of money that’s been spent on this is $2 trillion, $2.2 trillion, something like that. And for that, $500 billion is kind of a minority part of the whole package.

Richard Reinsch:
Yeah. Thinking about your book then, or returning to the American Dream, you have an opening passage that I wanted to read and then I’ll ask you a question and get your comment. You say, “The American Dream is not dead. It is surprising that such a sentence would be so controversial, but it is. If you’re looking for bipartisan consensus, start here. Leading politicians and presidential candidates from both parties have voiced agreement on these points: America is no longer an upwardly mobile society.” And then a couple of lines down, “The game is rigged for everyone but those at the top.” Why is that sentiment so pervasive?

And I’ll say 2016, 2017, that’s actually how I came across your work. I started to think maybe my own thinking about the free market and the American story, that I had missed a lot of facts to have the political situation turn out the way it had. And so I was willing to question a lot of my prior beliefs and did a lot of my own research. And of course, it’s not something that’s gone away. It’s been a part of the Democratic primary contest, and it’s sort of become the lingua franca of a lot of particularly younger conservatives as they think about politics.

Michael Strain:
Yeah. I mean, I think it’s a combination of things. I think one factor, and I talk about this in the book, is that we do have real challenges. If you’re an adult male worker without a high school degree, you have a hard time. Now, that’s a very small share of the overall population, but that’s a serious concern to be sure. There are some towns that have been left behind by technological automation. Again, it’s a very small minority of towns. It’s even a minority of towns that back in the ’70s were manufacturing centers. But those problems do exist. The opioid epidemic was a real thing, is a real thing, excuse me. We have seen a very troubling increase in the number of suicides. And I could go on as well.

So there are real pockets of problems in American society and in the American economy. I think we focus so much on those pockets of problems that we miss the broader story. So what I wanted to do was zoom out to the 30,000 foot level and say, okay, yes, there are problems. There are challenges. There’s no question about it. Don’t want to deny those, don’t want to minimize them. But most people are not residents of a failing town. Most people are not 50 year old men without a high school diploma trying to make it in today’s labor market. I wanted to characterize what is the experience for typical Americans in typical situations. What does the economy look like at the 30,000 foot level for most people.

And so that’s the purpose of the book. I mean, there are other reasons too, I think, that this narrative is so common. One reason is that bad news sells, and if you’re an aspiring politician trying to get people to vote for you, you need a rallying cry. And often that rallying cry is more successful if it focuses on bad news rather than good news. Another reason I think this narrative is so prevalent, it’s the Great Recession. And the Great Recession was really, really bad. And millions and millions of workers and households were hit so hard financially and economically from the recession. And until three weeks ago we were, economically speaking, we had recovered from the Great Recession. But we had not like psychologically recovered from that. And I think it still lingered quite a bit in people’s minds. So there are a bunch of reasons of why I think the narrative is so prevalent. But, I also think the narrative is wrong, and that’s what I tried to demonstrate in my book.

Richard Reinsch:
You talk about isolated cases and maybe things that aren’t so representative. Many though point to just generally say, “Well, wages haven’t gone up for people in the 50th percentile, much less people in the 20th percentile, 30th percentile of income, their wages have been stagnant. That’s constant.” And I think I’ve heard that for going back since I was a college student, I remember people saying this or reading this, that’s not necessarily new, but it’s sort of the way we think about the economy now.

And this is sort of the support for increasing the minimum wage or having the government be more involved in healthcare, things like that. People on, not just on the left, but also traditionally conservative minded people like an Oren Cass have argued this should bring us back to an industrial policy because what’s missing are the evaporation of industrial jobs, only to free trade and some do automation, although it’s more automation than free trade. But, we should bring these things back and this would help get wages up. This would help get men back into the workforce. This would solidify families, small towns and these are, I think they would argue more general things, not just isolated things. How do you respond to that?

Michael Strain:
So, I question the premise. In the book I share a bit, if you look over the last 30 years at average wages for production and nonsupervisory workers. That is average wages for workers who are production workers in manufacturing and construction workers in construction or workers who aren’t managers in the services sector. That’s about 80% of all workers. You can think of those as workers, not bosses. Average wages for that group have gone up by a third over the last three decades. I show that median wages have gone up. I showed the wages at the 20th and 10th percentile have actually gone up faster than the median over the last three decades. I showed that income, which includes wages, but also includes other extremes of financial resources, has gone up even more over the past three decades.

So the first thing I would do is just dispute the premise. When you mentioned that you heard that when you were a college student, the data shows that average wages for a typical worker did stagnate or decline from say the early 1970s to the early 1990s. So if you were hearing this, as a lot of people were when Bill Clinton was running for President, the message was true at that time. And a lot of people are still kind of stuck there. So it’s not to say that there’s nothing to this story, but if you go back over 30 years, if you go back from 1990 to 2020, what you actually see is the stagnation story is just not right. It’s just not accurate. It was accurate for the ’70s and ’80s, it’s not accurate for 1990 to the present. And that I think is … it’s something that has just been missing from the debate.

Richard Reinsch:
Something that I’ve found, and I’d like to get your comment maybe just broadly on this, because I know you’ve encountered this in doing research as an economist. And I’m a non-economist, I’m a lawyer by training. But when I read studies of income growth, I am whipsawed by how many different conclusions people come to, or I say how many different, but different stories we might say of decline, of stagnation or of growth. I mean just help people, when people see these studies, measuring, comparing incomes, what’s generally your approach to thinking about that? What are people doing when we see consistently incomes decline?

And one of the things you talk about in the book is which deflator do you use? I’ve noticed Oren Cass, who someone who is claiming that wages have stagnated or declined, always uses CPI, but you make a claim, Scott Winship, another person who argues wages have increased, insist on using the PCE deflator, which seems to be a better way to account for how people actually navigate in the marketplace with prices. Could you talk about that some and just the difficulty of measuring income?

Michael Strain:
Yeah, it’s very difficult. I mean you have to, the first thing you have to do is define income. So what counts as income? Do you include wages? Yes. I think everybody agrees that you should include wages. What about non-wage benefits like health insurance, things of that nature? Do you include that? Do you make allowances for taxes? Do you subtract tax payments from people’s wages to compute their income? Do you add in government transfer payments? Some of those payments take the form of cash. Some of them don’t. Do you, for example, include Medicaid benefits in people’s wages? If you do, how do you value and how do you assign a dollar value to Medicaid benefits? So you have to define income. Then you have to define whose income. Are you talking about individual workers? Are you talking about households?

If you’re talking about households, how do you adjust for the fact that household size has changed so much? The third thing you have to do is account for inflation. As you mentioned, there are different ways of accounting for inflation over time. And another thing you have to do is figure out over what time period you’re interested in making the comparison. So I think you’re right that a lot of this debate among analysts comes down to this question of how do you account for price changes? That’s a difficult question to answer. What I’m trying to do in the book is move the debate away from a debate about how you measure price changes and toward a debate about what time period do you care about

Richard Reinsch:
Yeah.

Michael Strain:
If you want to say wages have been stagnant for decades. Okay. Define for decade, and define it with some precision.

Richard Reinsch:
You choose 1990. Why did you choose 1990 as the starting point for an income basis?

Michael Strain:
I choose 1990 because that was … I choose it for several reasons, but I choose 1990 because that’s three decades ago. Three decades is a long time,

Richard Reinsch:
In the life of a worker.

Michael Strain:
Yeah. In the life of a worker. When politicians and opinion leaders say wages have been stagnant for decades, I think a lot of people hear that message as referring to their own wage. When you go back 50 years, not a lot of people who are working today were working 50 years ago. I think 30 years is maybe even too far to go back. But, certainly I think you don’t want to start the comparison further back from 30 years ago. Another reason to start in 1990, is the reason I mentioned earlier, that there was this period of stagnation and decline in the ’70s and ’80s, and then since the early ’90s we’ve seen an increase.

And so, I think you don’t want to conflate those two different eras. You want to look at, if you want to go back 50 years, fine. I think you’ve got to say wages were stagnant or declining in the ’70s and ’80s, and then from 1990 to the present, wages have been increasing. I don’t think you want to conflate those two eras, because wages behave so differently during both of those eras.

Another reason to start in 1990 actually relates to the inflation question. The further back in time you go, the harder it is to account for price changes. So if you look at, you mentioned the CCI and the PCE. If you look at those two theories, and there’s a graph in the book that shows this, if you look at those two different ways of accounting for inflation, they actually agreed quite a bit over the last 15 years. They even agreed quite a bit over the last 30 years, whether or not you use the CPI or the PCE, you still find that wages have not stagnated for the past three decades. But the further back you go, when you try to make these comparisons starting in 1970 or 1973, the further back you go, the more it matters which price index you use. So, that’s just another reason not to try to go back too far.

Richard Reinsch:
I noticed in his response to you, you had two responses in the book. One from E. J. Dionne, the well known progressive columnist in the Washington Post, and also Henry Olsen, also now of the Washington Post. But, more of a conservative populist writer. Dionne points to your use of 1990 and says you’re cherry picking. And that the relevant comparison is the early 1970s. So I think, why does he want to insist on, I think he says 1973, what’s so magical about that year?

Michael Strain:
Well, look, I mean I think he’s just wrong. And you’re right, E. J. and Henry Olson offer response pieces that are in the book. And I think that’s great. Because it gives the reader the opportunity to see some really interesting and thoughtful counter-arguments to my argument right there in the book. And then I conclude the book by responding to both Henry and E. J. So I think that’s a great part of the book. And the editor, I’m sorry, the publisher wanted to put that in the book. And I think it’s really terrific.

People want to start in 1973 for a bunch of reasons. I mean, that’s when wages started to decline. The decline I mentioned that starts in the early ’70s and goes through the early ’90s, the stagnation and decline, that starts in ’73, that’s one reason. People are concerned about … a lot of people want to kind of link this to the rise of income inequality. And so you see people want to start in 1979. A lot of it, I think is just people think about the kind of post-war era, the ’50s and ’60s as ending, that era kind of ending in the early ’70s, so people start the comparison in ’73 for that reason as well. We had oil price shock. I mean, there are a bunch of reasons. And look, these are good reasons. But, for exactly the same reason that I think it makes sense for analysts in the 1990s, let’s start your calculation in 1973 rather than in 1950. I think it makes sense for analysts in 2020 to start the calculation in 1990 and not in 1973. I think we just shouldn’t be conflating information from these very different eras.

Richard Reinsch:
On just this point, you argue, and I think this is what people will read in the book and might think, no, that can’t be right. So you say people in the 20th percentile of wage earning, meaning 80% of the people make more money then, we’re in the 30th percentile, have over the last 30 years in America, have seen their wages grow. One question I had for you, yes, but if that involves a lot of transfer payments, which is something we can really hang our hat on?

Michael Strain:
Some of it involved transfer payments. That’s true. Not all of it. And I think you’re right, it’s counter to the narrative that you hear and I would encourage people to buy the book and look at the data. It’s right there.

Richard Reinsch:
I’ve had that question and one thing about transfer payments, of course that’s the decision collectively that’s been made as to how we’re going to allocate resources. And so one has to take that into account in measuring income. But I’ve always, I’ve just thought incomes have grown but so much of that is transfer payments. Have they really grown or by how much? And then thinking about how that builds into mores and how people think of their own independence as well.

Just the wages at the 10th percentile have increased by 36% over the last three decades. At the 20th percentile they’ve increased by 34%, and at the 30th percentile they’ve increased by 29%. So that’s not stagnant, that’s significant growth.

Michael Strain:
Just to be clear on that, you can look in the book at the statistics on market income. So that doesn’t include transfer payments. And you see that’s gone up quite a bit for households at the bottom of the income distribution as well. So your point is well taken, that we want to look at at income that people earn in the market and we also want to look at income that people receive from whatever source, whether that’s from income earned in the market or whether that’s from government transfers. And I think it makes sense to know what’s going on with both, but both have gone up, and that’s not the common narrative for sure. But if I can find the chart in the book, which I’m looking at right now, I’d be able to tell you how much.

Richard Reinsch:
And you also make the point as well, which people don’t realize how expensive their healthcare is for their employer. Of course their employer’s getting a tax break for providing it, but that also is a part of your income and you may not think about it, but it goes up generally every year. It has to be accounted for at some level when you think about compensation. Most people don’t think about it in that way.

Michael Strain:
That’s correct. So I found it here. I’m sorry it took me a minute, but wages, so not income, just the wages at the 10th percentile have increased by 36% over the last three decades. At the 20th percentile they’ve increased by 34%, and at the 30th percentile they’ve increased by 29%. So that’s not stagnant, that’s significant growth.

Richard Reinsch:
Question on labor share of productivity, you also see this: people argue has been stagnant or declining and the conclusion they draw from that is well capital or employers are cheating them or not sharing the rewards with them at some level and this is unjust and should require intervention by the government. E.J. Dionne makes that argument in his response to you. How do you respond to that?

Michael Strain:
I think it’s a more complicated issue than I think a lot of people make it out to be. If you actually look at what’s driving that particular industry, and there’s a lot of churn beneath the headline statistic, I think what matters more is what’s the relationship between productivity and pay. If you see productivity at the macroeconomic level go up, does that translate into worker’s pay going up? The answer from the most recent and best economic evidence is yes. There’s a good paper written by Larry Summers who, or coauthored by Larry Summers, I should say, who was Bill Clinton’s treasury secretary and the top White House economic advisor to President Obama and is also an eminent economist. And he concludes in a paper published about a year ago, that the relationship between productivity and pay are very strong. After I published the book, a new paper came out by Ed Lazear at Stanford where he used a different methodology but came to exactly the same conclusion. And of course basic economic logic suggests that the same thing should be true as well.

Richard Reinsch:
Well, markets would have to be non-competitive in significant sectors of the economy for it to be true, I would think.

Michael Strain:
Yeah. I think that’s right. And again, if you just look at the evidence, productivity and wages are very strongly related in a statistical sense in the data. And how does that relate to this? That suggests that workers do receive the fruits of their labor. That suggests that hard work does pay off. These are key tenets of the American dream and the evidence shows that they’re alive and well.

Richard Reinsch:
Talk about another thing that comes up a lot is income mobility. You talk about that in the book. Many arguing that there’s much greater mobility in the Nordic social welfare democracies, perhaps America should look more like those countries. That’s been a theme. Of course, it’s been a theme of the Bernie Sanders campaign. Is there mobility amongst quintiles of income in America or is there still mobility but it’s gone down in recent decades?

If you were raised in the bottom 20% and you’re in your forties today, 86% of you have a higher household income than your parents did. So that, to me, suggests that there is significant upward mobility in the United States.

Michael Strain:
So I spent a good amount of time on that question in the book and when you just look at the basic question, do people grow up and end up having a higher income than their parents did? That’s the question that people want an answer to when they’re thinking about the American dream. Are my kids going to do better than me? And what the data show… So what I did was I found a bunch of people who were in their forties today. I got a data set that had… I represented the sample, a statistically valid sample of people who were in their forties today, and I computed their income. And then I looked at their parents’ income and I computed their parents’ income. So I’m matching individual people with their parents and I say how many people who are in their forties today have a higher household income than their parents had when their parents were in their forties, when their parents were the same age? And the answer is about three quarters. About three quarters of people in their forties today have a higher household income than their parents did.

Then I say of all the people who were raised in the bottom 20%, how many of them, how many of those 40 something year olds today have a higher income than their parents? 86%. If you were raised in the bottom 20% and you’re in your forties today, 86% of you have a higher household income than your parents did. So that, to me, suggests that there is significant upward mobility in the United States. I also looked at wages. So that’s household income, but I wanted to say how are people doing in the labor market specifically. And so I compared male workers who are in their forties today with their fathers, how much money are men earning today in the labor market, and how does that compare to how much money their fathers earned in the labor market. And there, again, the solid majority of male workers in their forties are earning more money than their fathers did. So it’s just inaccurate to argue that America is not characterized by upward mobility.

Again, 86% of people born in the bottom 20% are out-earning their parents. I wish that were 100%, so we could have more mobility. We shouldn’t be satisfied. We should have public policy that helps even more people to have higher incomes than their parents did at comparable ages. But on the question of whether or not America is economically mobile, upwardly mobile or not, I think the answer really is that America is an upwardly mobile society.

Richard Reinsch:
Do you find, just thinking, and maybe you could talk a little bit more about how we get these quintiles of income, do we find though people who are, say in the second quintile or the third quintile, which would be working class or middle-class, moving up into, say the top 20%? And I guess my sense is most people answered the question, I don’t know most, but I’ve read a lot, people are concerned. Don’t think their children will do better than them by very large numbers. Is there a sense of that? The data support a sense of, well, if you’re in the top 20%, top 10% it’s pretty fixed and there could be a lot of institutional reasons for why that is. Things need to work better, but that there’s no longer movement along those lines.

Michael Strain:
Yeah, so I look at that too. And what I find is is that even by that measure you still see a good amount of upward mobility. One thing you want to know about is the rags to riches stories. So if you’re born at the bottom, can you make it up to the top? And I find that about seven percent of people who were born in the bottom make it to the top. That’s, I think, actually very good. You certainly wouldn’t expect everybody who was born in the bottom to make it to the top.

Richard Reinsch:
No.

Michael Strain:
And so what you would expect, I think, is that that kind of a rags to riches story, it should happen often enough that it’s not shocking when we see it, that it should be something that happens regularly, but not often. And so then the question is, does that seven percent suggest that that is true for America. And I think it does. If seven people out of every 100 who were raised in the bottom make it to the top when they become adults, to me that suggests that the rags to riches component of the American dream is alive and well. Concurrently, about eight people out of every 10 who were raised in the top end up at the bottom. So there’s a lot of downward mobility on that front to. So I don’t think we’re too sticky.

Industrial policy really isn’t the solution to any problem that America is facing. First of all, it doesn’t work. We’ve seen that President Trump’s trade war has actually reduced manufacturing employment rather than increase it. So, not only is it raising consumer prices for the rest, not only is it hurting export intensive industries like agriculture, it’s not even helping manufacturing.

Richard Reinsch:
And your book is exclusively an economics book. There’s a lot more we could say about why mobility may not be what we want it to be, as well that goes to other actors. Thinking about though, the deaths of despair, the opioid crisis, the China shock doctrine. Many people do link that-

The China shock doctrine. Many people do link that academics with a lot of data papers, think about the China shock paper that now goes by the acronym of the first letter of the author’s last name’s, ADH. That sort of when China joins the WTO, you see numerous communities in America affected by a decline in manufacturing work, a decline in industrial work. And it has an outsize effect on particularly male earners who really aren’t able to move into these service jobs that involve, or struggle to. And then I can see that that involves a lot of human contact or personal social interactions the way service work does. How do you respond to that? Is the response that we see from Marco Rubio and now from Josh Hawley of moving towards an industrial policy that other nations adopted at prior times? Is that just sort of a thing we should do just to try and help compensate those disruptions in the market?

Michael Strain:
No, I don’t think so. I think industrial policy really isn’t the solution to any problem that America is facing. First of all, it doesn’t work. We’ve seen that President Trump’s trade war has actually reduced manufacturing employment rather than increase it. So, not only is it raising consumer prices for the rest, not only is it hurting export intensive industries like agriculture, it’s not even helping manufacturing. So it’s not going to work. And I think that we need to be more optimistic about the ability of American workers to thrive in other industries. We need to have good training programs and things of that nature to help people do that. But American workers are perfectly capable of working in many different industries and a government program trying to micromanage that is going to end up doing more harm for workers than good.

Richard Reinsch:
Yeah, as I’ve looked at the data, the China Shock Doctrine and you do see the decline of manufacturing jobs. Of course, manufacturing jobs have been declining, as you know, going back to the 1970s. But at the same time from the 1970s to 2016 we’ve had a rapid, massive increase in jobs. So it’s not the case that there are no jobs, there are different jobs, new jobs that have been created.

And I think that’s right. And this may be a question we can end with, a deeper question. Part of it is though, do Americans still see themselves as having primarily the opportunity to take charge of their own lives to care for themselves? Or is this some sort of acceptance in America that I’m not a free agent all of the time? That things have been done to me that I can’t make sense of.

Thinking about the title of your book. The question that I’ve thought about, I don’t know if you have, have enough Americans at this point, have they come to accept a different American dream? Egalitarianism, comfort for every hurt, government should be very active. And I think also I’ve wondered if there is just an aversion to risk, and one of the points here is the refusal of many Americans to move to where the jobs are, I think.

Michael Strain

I think part of it’s related to what we’ve been talking about. All Americans are hearing from their leaders that they can’t better their situation, the game is rigged against them. Upward mobility is a thing of the past and things used to be a whole lot better for them back decades ago than they are today. And I think one way to turn some of that around would be to stop talking like that.

I mean, first of all, it’s not true, it’s not accurate. The data tell a very different story. And secondly, it’s demoralizing and demotivating. It dims aspirations and it saps energy. The message we should be sending is that if you work hard, you can better your economic circumstances. If you work hard, you can provide for your family. If you work hard, you can create the conditions so your kids do better than you and the economy is changing constantly, of course. New opportunities are being created, those opportunities are opportunities you can capitalize on.

We’ll have good government policy to help you do that. But you are not a victim and you have agency and you have the ability to better your situation, and you have a responsibility to do so. That’s the message people need to hear. It’s true and it’s motivating. So I think if we could get back to talking like that that would go some way to solving the broader problem.

Richard Reinsch:
Even in the Republican party, you don’t see enough politicians, or it doesn’t seem to happen in the way it once did of just endorsing economic growth itself. You don’t seem to hear that anymore and I think that’s a bad sign.

Michael Strain:
Yeah, I think that’s right. I think that’s unfortunate. And it’s short sighted. If we really want our kids to have a better life than we do, to do better than we’re doing. Seemingly small changes in the rate of economic growth accumulate a lot over a 20 or 30 year period. And so we should be all in favor of growing the economy. I mean, growing the economy is not just some abstract thing. Growing the economy means more opportunities for people, a higher standard of living for people, faster wage growth, faster income growth and the ability to provide more for themselves and for their children. It sounds abstract but it’s not.

Richard Reinsch:
Yeah, I mean what’s the difference over 50 years or 25 years of 3% growth, versus 1.5 or 2% growth? It’s a massive difference. And I suppose also one problem, and you acknowledged this productivity growth itself has been flat or has not increased that much in the last few decades. Industrial policy does little to solve that problem.

Michael Strain:
Yeah, no. Industrial policy would make that problem worse. Industrial policies are predicated on a false notion. America has benefited from trade with China. American workers has benefited from trade with China. Certainly it’s the case that there’s been an upside and downside to it, and it’s hurt some communities quite badly.

But on the whole those communities have come back strong. Not all have, but certainly most have. And if you look at the other things that trade with China has done, export opportunities, employment in export intensive industries and the whole holistic set of effects, if anything, trade with China has increased the demand for workers not decreased it. And it’s helped make people’s paychecks go further by lowering prices. And on the whole it’s been a good thing and that part of the story isn’t told.

Richard Reinsch:
Let’s hope that doesn’t get lost amidst the current anti-free trade narrative that is only going to increase with the coronavirus crisis, I’m afraid. Michael Strain. Thank you so much for coming on to talk about your new book, The American Dream is Not Dead. I appreciate it.

Michael Strain:
Thanks for having me.

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