There’s a conundrum around the politics of “affordability.” The issue is that prices are rising while incomes are stagnating, a crushing combination for most people. But there’s little the government can do about either in time for the 2026 midterms, and even the 2028 presidential election. Exacerbating matters, the president and Congress insist on making it worse.  

President Donald Trump famously promised to lower prices “on Day One” in his 2024 campaign. That was bluster, of course, and to be charitable, he meant he would reduce the rate of inflation. Yet he’s dead set against the standard way to do it—keeping interest rates elevated to slow demand. The Federal Reserve hiked interest rates 11 times under Joe Biden, and it worked: inflation slowed from 9 percent to 2.9 percent. 

But cutting rates won’t satisfy voters, because recent inflation hasn’t disappeared from prices. From December 2019, just before the pandemic, to today, overall prices in America rose 25 percent, including 25 percent increases for eggs, pork, milk, cars and trucks; 30 or 31 percent increases for housing, rent, food overall, and bread; 37 percent increases for electricity; and 55 percent increases for beef. The relative bargains—items whose prices increased notably less—have been prescription drugs, up 6 percent; and medical care, gasoline, and potatoes, all up 15 to 17 percent.  

The government can make some purchases more affordable by subsidizing them, as it often does for health care, energy, and food. Yet Trump and Congressional Republicans have taken aim at those subsidies, making healthcare less affordable by cutting Medicaid and Obamacare supports, making food less affordable by cutting SNAP benefits, and making energy less affordable by cutting support for wind and solar energy.  

On top of that, Trump’s mindless tariff policies have increased prices on thousands of products. Inescapably, today’s MAGA government is really MALA, Make America Less Affordable.  

The other half of our affordability conundrum is income, because the median income of Americans, after inflation, has been stuck since 2019. In 2024 dollars, the median household income was $83,260 in 2019, and $83,730 in 2024—and prices for food, housing, rent, and electricity have risen faster than overall inflation.  

To more fully grasp the affordability story, consider that incomes have two major components: earnings from work (“labor income”) and income from assets (“capital income”).  

Typically, people earn more when they become more productive, and over the past five years, productivity has increased at a healthy rate. Those productivity gains depend on businesses investing in new technologies, equipment, and facilities, and workers making the best of those investments. The government does its part by subsidizing both business investment and people’s education and skills. The rise of the American middle class and decades of broad-based upward mobility have rested on wages and salaries rising with productivity.  

But here’s another affordability puzzle: Productivity increased 10.4 percent from 2019 to 2024, or about 2.1 percent per year, but incomes stalled. That’s stronger than the 1.7 percent average annual productivity gains in the 1980s, when incomes rose nicely, and nearly as strong as the 2.4 percent average gains in the 1990s, when incomes grew at the fastest rate in decades.  

In one respect, Americans’ earnings behave as expected—people with more education and skills continue to earn more. In 2024, real median earnings were 24 percent higher for people with advanced degrees than for college graduates, 66 percent higher for college graduates than for high school graduates, and 26 percent higher for high school graduates than for high school dropouts. 

But at every level of education, those real earnings increased from 2019 to 2024 not by 10.4 percent or even half that, but by a total of 0.7 percent for college graduates, 0.5 percent for those with some college but no bachelor’s degree, 1.5 percent for high school graduates and high school dropouts. And for those with advanced or professional degrees, real earnings declined 0.8 percent.  

Weekly Earnings by Education, 2019 to 2024, By Educational Attainment 

At the heart of the affordability problem: productivity gains didn’t translate into higher earnings.  

Why not? Incomes have two major parts: the earnings people receive from working and the interest, dividends, and capital gains they receive from their financial and other assets.  

While most Americans’ earnings after inflation virtually stagnated from 2019 to 2024, capital income after inflation increased nearly 30 percent over the same period. And while earnings in America are distributed unequally, capital income is in a class by itself. 

The Treasury reports that capital income in 2024 totaled $4.5 trillion, and that the bottom 50 percent of Americans received just 2.5 percent of it. But the top 10 percent pocketed 88 percent of that fast-rising capital income, including 52 percent ($2.3 trillion) for the top 1 percent and 32 percent ($1.4 trillion) for the top one-tenth of 1 percent.  

The uncomfortable irony is that most of the capital income came from businesses that increased their labor productivity by an average of 10.4 percent. Yet most of it did not go into people’s earnings but into capital payments to owners and shareholders.  

This is not new. Numerous economic studies have found that labor’s share of all national income—the earnings by working people—declined slowly and fairly steadily since the 1970s, while the shares received as capital income (or transfers, mainly Social Security) increased.  

It becomes the treacherous political problem it is today for the president and Congress when inflation keeps exceeding or matches income growth, and within incomes, gains in earnings slow or stop, while gains in capital income surge.  

And in this context, Trump has compounded his economic malpractice. His tariffs and subsidy cuts not only make America less affordable for most people; they also finance $1 trillion in tax cuts for the sliver of people who collect most of the fast-rising capital income.  

That’s today’s crisis of affordability in a nutshell. I was an architect of Bill Clinton’s economic program for ordinary people that produced the 1990s boom, which included market-based reforms and government investments. Yet when the economy shifts, new politics usually follow. Today’s affordability crisis is tailor-made for populism. Given the hollowness and failures of rightwing populism under Trump, the door is wide open for Democrats to champion populism from the left.  

The post Affordability: How Trump Has Made It Worse appeared first on Washington Monthly.

The biggest question facing democracies worldwide today is what has led voters to support authoritarian politicians and parties. Is it economic anxiety? Cultural factors, such as trans rights, immigration, or race? Failing institutions, including traditional political parties? Or the behavior of aggressively anti-democratic politicians themselves? Obviously, all these elements matter to some extent. But which, if any, is the driving force? Without an answer, it is hard for liberal parties and politicians to know precisely what to prioritize in their fight to defend democracy and the rules-based international order.  

In a recent book, The Backsliders, Susan Stokes, the University of Chicago political scientist, provides an answer. She and her colleagues analyzed the growth of illiberalism in 22 countries from the end of the 20th century through to 2020, ranging from Hungary, Serbia, and Poland to the Philippines, Turkey, and the United States. They tested against a range of possible drivers of democratic erosion. Ultimately, Stokes finds that economic inequality within a country is the key variable. “The statistical association between inequality and erosion was very robust,” Stokes writes. “Try as we might, we had difficulty getting rid of the statistical result.” 

Now, maybe you don’t trust the regression analyses of some academic you’ve never heard of to guide electoral strategy. But over the last year plus, we’ve had a real-world test of that hypothesis. In 2024, as inflation eroded the living standards of middle- and working-class families worldwide, every incumbent party in every developed country that held elections lost vote share, marking the first time this had ever happened.  

In the United States, Donald Trump beat Kamala Harris, promising to overthrow the old order with far-reaching policies—including steep tariffs and a crackdown on illegal immigration—billed as solutions to declining wages and manufacturing jobs. Just as he did in his successful 2016 presidential campaign, Trump won the sympathies of vast numbers of voters in the bottom 60 percent of the income bracket who for decades have seen their living standards stagnate or decline, even as the balance sheets and lifestyles of the top 20 percent have soared. Many of these vulnerable voters think God sent Trump to save them, and they would walk over a cliff for him, believing they are flying until the moment they hit the ground. Millions of others, however, don’t much like Trump, are fully aware that he is a crook and a wannabe dictator, but voted for him anyway, hoping he would shake things up and provide some economic relief. 

This first year of Trump 2.0 is not yet over, but there is already mounting evidence of buyer’s remorse. The president’s job approval ratings have been underwater since March. By even greater margins, voters now hate his tariffs, military deployments to blue cities, cuts to federal medical research, and, most of all, his handling of the economy.  

Sure enough, on Tuesday, November 4, Democratic Party candidates running against Trump’s policies and actions, and laser-focused on affordability, swept off-year elections across the country, in both blue and red states.  

The most celebrated of those outcomes, especially in the international press, was Zohran Mamdani’s election as mayor of New York City. An immigrant Muslim who proudly identifies as a democratic socialist, Mamdani ran on a bold platform to make the city more affordable, featuring free buses, publicly run grocery stores, and lower fees for small businesses. His victory has been widely interpreted as an indication that the Democratic Party is shifting, or at least should shift, strongly to the left.  

That is a misreading of the election results.  

More telling were the elections for the governorships of Virginia and New Jersey. In both cases, the winners were women with strong national security backgrounds—Abigail Spanberger, a former CIA analyst in Virginia, and Mikie Sherrill, a former Navy helicopter pilot in New Jersey. Both candidates are widely seen as and identify as political moderates. Both won by double-digit margins far beyond what most polls had anticipated.  

States, of course, have more politically diverse voter bases than cities, which tend to be far more liberal. But even at the city level, Mamdani’s victory seems more of an outlier than a trend. Consider Minneapolis, Minnesota, where George Floyd was killed in 2020 and where “defund the police” became a national rallying cry for young progressives. Voters in Minneapolis are at least as left-leaning as those in New York City. Yet this month, another Muslim socialist candidate, Omar Fateh, lost to the mainstream liberal incumbent Mayor Jacob Frey. Frey won a third term on a record of reducing crime by putting more police on the streets and orchestrating a home-building renaissance that has kept a check on rent in that city. 

This month’s elections, in other words, were more a victory for the moderate wing of the Democratic Party than for the left. But it is crucial to understand the policies these moderate Democrats are advancing. Yes, as a rule, they oppose defunding the police, loosening borders, and elevating identity politics and climate change above all other concerns. At the same time, however, they cut a different path on economic issues. Unlike centrist Democrats of the recent past, who openly sided with and represented the interests of large corporations and Wall Street financiers, today’s Democratic moderates are quick to side with hard-pressed citizens against corporations using excessive market power to exploit them.  

In her campaign, New Jersey Governor-Elect Sherrill promised to freeze electricity rates, which have skyrocketed; challenge grid operators controlled by investor-owned monopoly utilities; prosecute price gouging by food companies; and take on private equity firms that buy up housing and jack up rents. Virginia Governor-Elect Spanberger vowed to lower energy costs by making data centers “pay their own way” and to target pharmacy benefit managers, the middlemen who inflate prescription drug costs. 

Washington Monthly editor Nate Weisberg has given Democrats like these a label: “populist moderates”. They are in many ways invading Trump’s populist territory while framing him as an ally of the mega-rich whose policies are devastating average people. Sherrill, for instance, lashed out at Trump’s tariffs, especially on Canada, as “massive tax hikes on New Jersey families” and at his tax cuts for “billionaires like Elon Musk” coming at the expense of working families. 

This populist-moderate movement in the Democratic Party is just emerging. But I think it is the future.  

That doesn’t mean that the upwelling of support, especially among young people, for democratic socialists like New York City Mayor-Elect Mamdani, isn’t also real. It is. Mamdani is a gifted politician who communicated an ambitious affordability policy agenda that resonated with a majority of New York voters. He and like-minded democratic socialists will be formidable competitors for attention and votes within the party. If the U.S. had a parliamentary system, politicians like Mamdani, Senator Bernie Sanders, and Representative Alexandria Ocasio-Cortez would form their own party.  

But at present, there is an overlap between these two factions around populist economics. Each side will need the other to build a broad and durable majority that will put America on the path of democracy, the rule of law, and responsible leadership in international affairs.  

Alas, we have a long way to go between now and then. Barring unforeseen circumstances, Donald Trump will be in the White House until 2029. What can America’s traditional allies in Canada, Europe, and elsewhere expect from Trump in the next three years? And what hope should they have that American rivals will check his worst instincts and behaviors? Of course, no one knows the answer, but here are some facts to consider. 

For at least the next year, and possibly the next three, the place where the most effective challenge to Trump will happen will not be Washington, but states controlled by Democrats. We are already seeing that happen—for instance, with blue states matching red ones in congressional redistricting. States in our system exercise significant sovereign power. Political leaders in Canada and Europe would be wise to find creative ways to short-circuit Washington and partner directly with states in international fora that Trump has abandoned or denigrated. For instance, as my Washington Monthly colleague Markos Kounalakis has written, why not bring California into the G7 and other international bodies? 

Our democratic allies in other countries should also pay attention to which independent organizations in America have resisted the Trump administration’s aggressions and which have caved. The latter category includes large corporations, especially those that require something—such as merger permission or tariff relief—from the federal government. The higher education sector, by contrast, has been far more steadfast overall. In the face of massive cuts to federal research dollars and threats of further reductions to come, a few universities, such as Columbia, initially bowed to the administration’s demands that they adopt conservative priorities in hiring and curricula. But the vast majority have refused, and some, like Harvard and UCLA, have sued and won court rulings that the administration’s tactics are unconstitutional.  

Why have universities acted resolutely and corporations like quislings? The answer is that university leaders are under immense pressure from powerful constituencies — students, faculty, university senates, and alumni — to stand their ground. In contrast, corporate leaders answer to institutional shareholders who demand the opposite. Elected officials in Europe, Canada, and elsewhere are torn between the competing demands of their voters for defiance, their corporations for compromise, and their own fears of losing the American security umbrella. Their strategies for dealing with Trump have consequently been muddled. At some point, they are going to have to choose. 

If left to his own devices, we can expect Trump to continue using tariffs as an all-purpose Veg-O-Matic, the tool he thinks can solve all problems. Fortunately for our trading partners, the Supreme Court may ultimately do what submissive Republicans in Congress have failed to do: insist that only Congress, not the president, has the constitutional power to levy tariffs.  

On Ukraine, there is no reason to expect Trump to change course. He will always side with Vladimir Putin. Ignore his words, look at his deeds. His supposedly tough new sanctions on Russian oil have had little discernible effect so far, and he is already exempting countries like Hungary from them. Despite “plans” to allow NATO countries to buy and ship U.S. weapons to Ukraine, so far not one American bullet has flowed to Ukraine that wasn’t already approved by the Biden administration. 

On his new policy of sinking alleged drug boats in the Caribbean and eastern Pacific, understand it for what it is: Performative machismo meant to cover his steady, unwise, and cowardly disengagement from our allies across the Atlantic and the Pacific. 

Should Democrats retake the House of Representatives in the 2026 midterm elections (a high likelihood) or even the Senate (a low probability), they can throw sand in Trump’s gears. But on foreign policy matters like these, U.S. presidents traditionally have wide latitude. U.S. policy will change only when a different president sits in the Oval Office, one who believes in the small-d democratic tradition, in the vital importance of allies, and in a rule-of-law-based international order.  

But that will only happen if a broad majority of American voters can be convinced to support it. The only path to that majority, in my opinion, is for the Democratic Party to pursue policies that markedly improve the economic circumstances of the least-affluent 60 percent of the American public. Such policies will need to be far more thoroughgoing than the moderate wing of the Democratic Party has hitherto been comfortable with, and far more intelligent and pragmatic than the left wing of the party has hitherto chosen to support. But if both sides can come together around such a policy vision, and bring some disillusioned Republicans along with them, I think we have a good chance of getting out of this mess. 

This essay is adapted from a speech Glastris gave at the Transatlantic Legislators’ Liberty Dialog in Toronto, Canada, on November 14, 2025. 

The post What America’s Allies Can Learn From Our Recent Elections  appeared first on Washington Monthly.

The government spends the equivalent of about $90,000 per U.S. household per year—yet many Americans don’t see the benefits. Medicare and Medicaid, Social Security and tax subsidies (primarily for wealthy households) swallow up the lion’s share of the federal budget every year, along with interest on the national debt. 

All of this automatic spending means no room in the federal budget for investments in America’s future, argues budget expert Eugene Steuerle, while many Americans are losing out. In 2023, for instance, just nine percent of the federal budget went toward programs for children—while 11 percent was spent on interest on the debt. In 2024, the federal government spent $880 billion for interest on the debt, compared to $80 billion for the Department of Education.  

In his new book, Abandoned: How Republicans and Democrats Deserted the Working Class, the Young and the American Dream, Steuerle blames a broken budget process that rewards short-term fixes and a Congress too polarized to tackle entitlement reform. He also argues that Republicans’ fixation on tax cuts has vastly contributed to inequality, while Democrats’ focus on consumption over investment has meant insufficient attention to helping working class Americans build wealth. The net result, Steuerle says, is a collapse in “fiscal democracy.”  Increasingly, Americans are losing their stake in the federal spending as entitlements and debt consume the entirety—and then some—of the nation’s future budget. 

Steuerle is the Richard B. Fisher chair at the Urban Institute, codirector of the Brookings-Urban Tax Policy Center, and the author of the Substack newsletter The Government We Deserve, in addition to 18 books. 

This transcript has been edited for length and clarity. The full interview is available at Spotify, YouTube and iTunes. 

***

Anne Kim: In your book, you argue that both parties are responsible for destroying opportunity in America. What sins have they committed together and what are the unique sins of each party?

Eugene Steuerle: Essentially, there have been two major dominant policy thrusts for almost a half a century, one by the Democrats and one by the Republicans. For Republicans, it’s largely been centered upon tax cuts. For the Democrats, it’s largely been putting money into retirement and Social Security and healthcare. And as a result of those two thrusts, almost everything else is getting shoved aside. Almost anything that promotes upward mobility really has gotten the short shrift for some time. 

I’m not arguing that either one of those thrusts in and of itself is bad. It’s just that they’ve been so dominant they’ve squeezed out other important options we should be pursuing.

Anne Kim: If I understand your argument,  you’re saying that as a result of Republicans’ prioritization of tax cuts, what’s happened is a widening of inequality, and that has limited mobility. And then on the Democratic side, the emphasis has been largely on consumption versus investment, and that has further squeezed mobility for the groups you lay out in your book, including young people and the working class. Is that roughly correct? 

Eugene Steuerle: That’s exactly right. 

Education is an easy example. We’ve failed on a lot of fronts on education. Quite honestly, to get quality teachers, you have to pay for them. To get quality teachers in early childhood education, you have to pay for them. We pay very little for that. We’ve also neglected for a long time young people who don’t go on to college. We don’t have much of an apprenticeship program in this country. We have to figure out ways to put money into those of efforts. 

I also suggest very strongly that we should be doing a lot more in the way of wage subsidies. All these efforts at picking particular industries we’re going to favor or tariff do very little for the working class. So I argue that we ought to be beefing up a lot the work subsidies we have in this system. I even suggest perhaps something like a universal basic wage—not basic income, because I think that’s a mistake. 

The current earned income credit mainly goes to single mothers with children, whom we want to help, but it’s left out a lot of the people you’ve written about yourself, like young males, young people in general, who feel left out of the system because in fact they’re not eligible for those types of subsidies. And married couples who have two earners, they get phased out of a lot of systems. There’s a huge marriage penalty throughout our subsidies. 

And on the financial side, our pension subsidies mainly go to people who have good incomes because it’s proportional to the amount of money you can put in the system. And housing subsidies like the home mortgage interest deduction have done really nothing to expand home ownership for some time. We could do much more to help first time home buyers and not people like me who already own a home and don’t need the extra subsidies. 

All these things are the items that would promote upward mobility, and they’re the things that are getting squeezed and put aside.

Anne Kim: You’ve begun to answer this question about how current policies are betraying the people who most need the help. But could we talk a little bit more about the ways in which current budget policy and current domestic policy betray the young? You’ve begun to talk about that in terms of what we’re failing in far as education, but what are some other things you point out in your book about how we’re really betraying what we owe future generations because of the way the budget has been set up?

Eugene Steuerle: The young are among those groups who are being squeezed out by these programs. About 20 years ago, almost now, I started a series at the Urban Institute that you’re aware of called KidsShare that tries to track the budget for children. The budget for children is very, very small.

I want to be clear I’m making a relative argument. We spend huge amounts on people my age. A typical elderly couple retiring today gets about $1.3 million in Social Security and Medicare benefits. Millennials are scheduled to get about $2.5 million dollars because ofall the built-in growth in those programs. Well, that’s being done instead of putting money into education for children, or work subsidies for workers, or anything else along those lines. 

It’s this squeezing out of these programs more than an outright rejection of them that’s been happening. The programs for children and workers for the most part don’t really grow over time, whereas programs like healthcare and retirement have all this automatic growth built into them. 

Both political parties in the last election said they really care about the working class. And I’m saying, “Hey, guys and gals, get around to proving it.”

I’m not arguing we shouldn’t have social security. Social Security is probably the most successful program we’ve had in this country. I’m not arguing we shouldn’t have health care, in fact, we need more universal health care. I am arguing we shouldn’t automatically be spending ever larger portions of our economy on health care and on extra years of retirement in preference to other efforts.

Anne Kim: On the solution side, you talk about something you call “fiscal democracy.” What does that mean and how do you suggest going about achieving that?

Eugene Steuerle: One of the measures I’ve developed over time with Tim Roper is an index of “fiscal democracy.” We measure the share of revenues that are left after you take into account what’s called mandated spending—entitlement spending, or the spending that’s automatic.

Social security grows automatically through a variety of factors. Healthcare grows automatically because prices are often set by producers, such as drug companies.

The revenues that are left after you take into account that spending is actually to zero. All revenues are already committed to those items. So if you could think about it this way, everything else in the aggregate is paid for out of deficits, and the mandated spending is still growing faster than our revenues.

So that number, that index of fiscal democracy, is scheduled to go well below zero. Now mind you, in the ’60s, 60 percent or 70 percent of our spending was discretionary. It wasn’t mandated. Congress would go in and decide each year what to do. Even in the Clinton years, the number was closer to maybe 30 percent. 

This lack of fiscal democracy explains to a great extent why Congress over the last couple of decades has been unable to get a hold of the budget. If mandated spending is scheduled to grow faster than revenues, and that’s not sustainable, then the job of Congress is not to decide what to do with the new revenues but to renege on past promises. And reneging on past promises is a clear way to lose the next election. Both parties have been scared to death to lead or even unite to deal with these issues. 

The whole culture war, in my view, has been a replacement for the budget policy that is the main job of government. And by budget policy, I don’t mean just the dollars, I’m talking about administering programs and running programs. That’s the main job of government. We’re fighting over which kids can go to which bathrooms. That’s not a legitimate issue. 

We’re fighting over things where government has limited control as opposed to things they do have control over. We lack fiscal democracy, and I think it’s a threat not just to the economy, it’s a threat to democracy itself because it’s now very hard for each new generation of voters to feel they’ve got control over what happens. 

The Democrats don’t want the Republicans to come in and have another tax cut, but the Republicans don’t want the Democrats to come in and be able to spend more. So they go through this constant battle about trying to stop the other party from doing what it wants, but they are not willing to cut back on what they have done to excess.

Anne Kim: How do you suggest breaking through this short-term thinking? For better for worse, as long as our constitutional system is the way it is, we are trapped with two year cycles in the House and the six year cycles and the four year cycles for the presidency. But you’re talking about changes that require a Congress to think 20, 30, 40 years in the future. How do you reconcile the political realities with the fiscal realities that have to be grappled with at some point?

Eugene Steuerle: This is very difficult right now. I love Senator Daniel Patrick Moynihan’s statement about “defining deviancy down.” I think we’ve actually become more deviant in our policy and our policy discussions, so I don’t see any immediate end to that. I think at some point things crash.

Hopefully, they don’t crash economically. Hopefully, they crash because the public finally decides it really is tired of all this and demands something. So we voters are not totally innocent from what’s going on. We vote for people who often try to mislead us.

I think it’s going to take some real efforts at bipartisanship in Congress and maybe us voters voting for people who can work across the aisle. But I do not have an easy political answer. 

I do think that the way budget people like myself present the data to the public is often misleading. I’ll give you one example. When we do a tax cut, typically, we do a distributional table about the winners: Here’s who got a tax cut. Well, that’s misleading because somebody’s paying for it. 

The people who have to pay the bill down the road—we don’t know how to identify them. So we don’t show them. But the result of that presentation is that it makes it appear that a tax cut or a spending increase does good, and a tax increase and a spending cut does bad.

Anne Kim: We recently reached $38 trillion on the national debt, which is the highest it’s ever been. Both parties have been guilty of arguing that deficits don’t matter. For a brief, Modern Monetary Theory was taking center stage on the left, and the GOP has actually never considered deficits to be that big of a problem starting with Ronald Reagan. What’s your argument that deficits actually do matter and that we’re going to start seeing the impacts of this kind of debt fairly soon?

Eugene Steuerle: In fact, we are starting to see one impact in just the last two or three years, which is that interest costs have been rising as a share of GDP and rising fairly rapidly. 

From 1980 to about 2020, the debt to GDP ratio quadrupled from about 25 percent of GDP to 100 percent of GDP. The Social Security and Medicare Trust Fund imbalances that we’ve long predicted are now within a 10-year cycle. 

I think members of Congress are well aware of these things happening. They just don’t have the wherewithal, in some cases the courage and the processes in place to actually try to deal with it. And we’re having this cultural war that totally sidetracks us. 

Anne Kim: So do you have advice in the short term for politicians who are looking at all of this about anything small that they could do? Assuming that the House comes back into session at some point and Congress is functional—or let’s just say it’s 2026, and there is some balance of power restored to Congress. What’s the first thing that Congress should think about doing to restore the fiscal democracy index to a level that is more sustainable for the nation?

Eugene Steuerle: Well, they could certainly enact budgets that try to start tackling the problem. I fear that the issue is so widespread that the good or the right ways to do it can’t happen in the short run. 

But nonetheless, they could start doing something. Anything that moves a little bit in the right direction is better than something that moves in the wrong direction, like the recent budget bill. 

David Walker, Former Comptroller General and head of the Peterson Foundation always said, “When you’re in a hole, don’t dig deeper.” So that’s a one little thing. 

Something I think that Congress could do that I’ve been arguing for 40 years is to address a lot of the weaknesses of a lot of programs by simply making what I’ll call deficit neutral tradeoffs.

I’ll give you one little example. Congress recently adopted a new charitable deduction that for reasons I won’t fully get into is really fairly badly designed to promote charitable giving.

Well, let’s create a better charitable deduction. If we don’t want to have to fight over the size or the revenue or whether government’s bigger or smaller, let’s just make it more efficient. 

And then finally, if you really want to do something much bigger, you could do things like decide that in Social Security, you’re going to stop wage indexing of benefits as long as the system is out of balance. I would probably stop it only for higher income people, but it’s a part of every Social Security plan that’s out there. There’s no way that Social Security is going to continue to promise higher-income Millennials the benefit it now suggests. 

You could also put much better caps on healthcare spending. There’s almost no part of our federal subsidies for healthcare, which cover about two thirds of all healthcare spending, that’s adequately capped or limited.

Congress is always going to want to do more and more. But if you get the long run in control, it’s a lot easier to deal with the short run. If the long run is out of control, then you just make short-term fixes and you’re still always in the soup.

The post Congress Has Bankrupted America’s Future appeared first on Washington Monthly.

The infamous Project 2025 document contains 900-plus pages of ideas for strangling the federal government, many of which Donald Trump’s administration has already implemented. But one huge policy area, accounting for roughly one-quarter of all federal spending, is barely mentioned: Social Security. 

Perhaps that’s because its Heritage Foundation authors knew that Social Security is one of the waning policy points on which the right and left still agree. In 2024, 77 percent of Republicans and 83 percent of Democrats said Social Security benefits should not be reduced in any way. 

Yet how to avoid this is likely to be a major issue in the next presidential election. Already, Social Security’s mounting negative cash flow is adding significantly to the federal government’s overall deficits and need to borrow money from the public but worse is yet to come. In June, the Social Security Administration (SSA) projected that the system’s main trust fund, responsible for financing retirement benefits, will run out of money entirely in little more than seven years, which under current law will force steep, across-the-board benefit cuts. 

Since the SSA’s June forecast, Republican policies have worsened the fiscal outlook for Social Security. Contrary to Trump’s claim that immigrants threaten the program, his clampdown on immigration will cost the trust funds. In 2022, undocumented immigrants contributed an estimated $25.7 billion toward Social Security, according to the Center on Budget and Policy Priorities, while typically collecting no benefits. And then there’s the One Big Beautiful Bill Act, passed by the Republicans in Congress and signed by Trump in July. That bill drains an additional $168 billion in revenue from the main Social Security trust fund by reducing the amount of federal income taxes that affluent Social Security recipients pay on their benefits. Because of this loss of revenue, the nonpartisan Committee for a Responsible Federal Budget estimates, future benefits will have to be cut even more than was already in the cards—to a full 24 percent. This amounts to benefit cuts of about $18,100 for a typical dual-earning couple retiring at the start of 2033. Still deeper cuts will be needed in the future. “Policymakers pledging not to touch Social Security are implicitly endorsing these deep benefit cuts,” the committee concluded in its report.

Despite these Republican policy mistakes and the fiscal challenge created by the anomalously large Baby Boom generation, Social Security’s widening cash flow deficits could be closed, at least on paper, simply by increasing the regressive payroll taxes that currently fund the program. According to a 2024 estimate by the Congressional Budget Office, raising payroll taxes from 12.4 to 16.7 percent would be enough to restore the system to long-term solvency. But among the many other downsides to this option, a tax hike of that size on American workers is hardly likely to attract new voters to the Democratic column. 

Fortunately, there is a better way. The fiscal outlook for Social Security may be precarious but it also presents a huge opportunity. It’s possible to save Social Security without raising taxes on the working class, while also providing the system with the revenues it needs in ways that will make Americans healthier and more productive. Better yet, policy changes are available that would significantly improve benefits for middle- and low-income Americans of all generations without compromising the trust fund’s long-term solvency. Whichever party takes advantage of these opportunities first is likely to enjoy enduring political rewards. 

Debate over the future of Social Security should start by grappling with the huge growth of inequality among the elderly. Back when President Franklin D. Roosevelt signed the Social Security Act into law in 1935, older Americans were generally far worse off than their middle-aged children, but there was very little inequality among the elderly themselves: For nearly everyone, old age was synonymous with need. 

But today, while inequality has increased within all groups, it has done so especially among older Americans. Part of the explanation is the increasing size and relative wealth of America’s professional classes. For decades, college-educated, upwardly mobile Americans have typically enjoyed a widening income premium over other members of their own generation. And after they retire they also typically receive far larger Social Security benefits while also drawing on far greater assets in the form of tax-subsidized 401(k)s and other pension plans. Adding to the affluence of a substantial share of today’s retirees has been the great inflation in property values over the past generation, which leaves many with substantial windfalls in their home equity. Roughly a fifth of today’s older population belongs to this group. 

But for America’s low- and middle-income workers, the picture is far different. For them, stagnant income and downward mobility have too often been the norm since the 1970s—especially for those who lack a college education—and the older they get, the more financial insecurity they experience.

One measure of the financial precarity facing so many Americans as they age comes from the Federal Reserve. According to its last Survey of Consumer Finances, in 2022, 43 percent of households on the threshold of retirement (ages 55 to 64) had no retirement savings. Among those 65 and over, more than half had none. 

Who are these people? Many are downwardly mobile working-class Americans who lost their jobs and their pensions as America’s financial elites shuttered factories and busted unions during the past 40 years. Others saved up tidy nest eggs but lost them when medical debt forced them into bankruptcy, or when unchecked corporate monopolies snuffed out their family farms and small businesses. Still others borrowed heavily to go to college or to vocational school but could never break free of the compounding encumbrance of student debt. Still more were undone by the repeal of usury laws and the vast spread of credit card delinquency, exploding mortgages, payday lenders, and legalized gambling that wiped out the balance sheets of millions of American households following the deregulation of finance that began in the 1970s. 

According to surveys, almost half of all Americans now describe themselves as living “paycheck to paycheck.” According to a study by Bank of America of its own customers, the percentage living paycheck to paycheck tends to rise with age, peaking at nearly 30 percent among the bank’s Baby Boomer customers. 

And so we have come to a moment in which deep dependence on Social Security in old age is widespread and likely to become more so. People over 50 used to make up 11 percent of the homeless population in the early 1990s; now they account for almost 50 percent—making America’s elderly the fastest-growing segment of its unsheltered population. Today, 27 percent of current beneficiaries rely on their Social Security benefits for more than 90 percent of their monthly income. 

Even among those who are fortunate enough to have retirement savings, their nest eggs are often nowhere near sufficient to finance a secure retirement. In 2025, Vanguard, one of the most popular 401(k) plan providers, found that among its clients approaching retirement age fully half had account balances of less than $95,000. How long will a nest egg of that size last? Suppose you retire at age 65 and begin receiving this year’s average Social Security benefit of $1,800 a month. Suppose, too, that you hold your total annual spending—including rent or a mortgage with property taxes and rapidly rising premiums for Medicare coverage plus other routine costs—down to an inflation-adjusted $50,000 a year. Assuming a 3 percent rate of inflation and a 6 percent return on your investments, you will have no savings left by age 85. 

And this is assuming that you won’t be among the 70 percent of Americans who wind up needing some form of long-term nursing home care—a financial sword of Damocles not covered by Medicare. This is also assuming that Medicare itself will be there for you. On our current course, Medicare’s Hospital Insurance Fund will be running a deficit by 2027 and completely exhausted by 2033—thus forcing either an automatic 11 percent cut in Medicare spending or an infusion of new tax revenue. “The precarity of people that have plans is much greater than I think most people realize, and also isn’t really reflected in the expert debate,” says David John, a senior strategic policy adviser at AARP’s Public Policy Institute.

In debating the future of Social Security, it’s also important to learn from the failed reforms of the past. The last time the country faced a Social Security crisis was in 1983, when, thanks to a deep recession and a long history of paying out more in benefits than participants had contributed in taxes, the system was similarly faced with impending insolvency. The bailout deal struck between President Ronald Reagan and Democratic House Speaker Tip O’Neal was widely described at the time by Washington’s power elite as an “artful” compromise between raising taxes and cutting benefits. But while it was an impressive example of bipartisan cooperation by today’s standards, it turned out to be a cynical bargain that failed to ensure that the program would remain solvent beyond the retirement of the first-wave Baby Boomers.

The deal cut the benefits of Americans who were of working age at the time and subsequent generations primarily by raising their retirement age. And it raised taxes—mostly on the same people—by dramatically hiking regressive payroll tax rates and requiring an ever-rising percentage of future retirees to pay income taxes on their benefits. 

A first-order effect of this was to significantly reduce the “money worth” of the deal Social Security offered to successive generations. For example, according to the SSA, a typically one-income couple retiring in 1985 received back lifetime benefits worth 5.4 times more than the present value of the taxes they paid into the system. But thanks mostly to the tax increases and benefit cuts put in place by the 1983 deal, a similar couple retiring in 2014 was entitled to only about three times what they had paid in.

The architects of the 1983 deal insisted that this was the necessary price of saving the system. By cutting benefits and raising taxes, they said, the system would run cash surpluses for many years that would be used to build up the system’s trust fund. In that way, they promised, Social Security could “pre-fund” the cost of the Baby Boomers’ retirement as well as all younger cohorts in the pipeline. 

But this turned out to be a hollow promise. Social Security’s cash flow surpluses weren’t invested in ways that made the next generation more productive and thereby better able to sustain the cost of the system. Instead, they wound up effectively being used to underwrite other government operations, starting with things like the unfunded cost of the Reagan tax cuts and military buildup and the ever-rising cost of paying interest on the national debt. 

For a long time, Social Security’s positive cash flow helped mask the government’s overall increase in debt. Every dollar the Treasury collected from Social Security and used to fund ongoing government activities was supposed to be paid back. But per budget rules, this fact wasn’t accounted for in official measures of the deficit, so the deficits looked much smaller than they actually were, which arguably led to still more borrowing. 

There was a moment late in Bill Clinton’s administration when the country briefly debated whether to put a stop to this pretense. At the time, the government as a whole was running a cash flow surplus, and a debate broke out over what to do with the money. Clinton, in his 1999 State of the Union Address, proposed using roughly two-thirds of the future projected surpluses to shore up the finances of the Social Security trust fund. He also proposed allowing the trustees to earn higher returns by investing at least part of the new money in financial markets, much as state and local pension funds do, rather than just in Treasury notes. And he called for using 11 percent of the projected future surpluses to establish universal savings accounts that would have endowed every American with a vehicle for saving for retirement and other foreseeable needs. 

During the 2000 presidential election, Democratic candidate Al Gore took up these proposals and tried to explain them with an analogy to a “lockbox,” which he said could safely hold money set aside to pay for future benefits. But Gore struggled to get across the urgency and seriousness of the proposal, despite saying “lockbox” seven times in the first debate. A mocking Saturday Night Live skit depicted Gore (played by Darrell Hammond) as explaining, “Now one of the keys to the lockbox would be kept by the president, the other key would be sealed in a small magnetic container and placed under the bumper of the Senate majority leader’s car.”

Gore, of course, lost the election, and the incoming president, George W. Bush, used the projected surpluses as a pretext for enacting giant tax cuts and borrowing to fund the wars in Iraq and Afghanistan. In 2011, Obama, against the wishes of some in his own party, floated a “grand bargain” whereby Democrats would have gone along with a scaling back of Social Security cost-of-living adjustments in return for Republicans agreeing to raise taxes on high earners to reduce the deficit. But Republicans rejected the offer, and so both the national debt and the unfunded liabilities of Social Security’s main trust fund continued to mount. The federal government subsequently continued to borrow heavily to pay for Trump’s first round of massive tax cuts during his first term, and then for the massive stimulus spending enacted under Biden to overcome the economic effects of the COVID-19 crisis. 

Then, finally, the screw turned. The reckoning began in 2021 when a critical mass of Baby Boomers began drawing on the system. Social Security’s cash flow surplus turned into a deficit that year as the system started paying out far more money than it was taking in. By now, that deficit has grown so large that the last of the Treasury notes remaining in its main trust fund will be gone by 2033, rendering the fund insolvent and triggering massive automatic benefit cuts. 

Under that scenario, most middle-class Americans born in the mid-1950s can expect, according to estimates by the Urban Institute, to get back little more in retirement benefits than they paid in during their working years. Gen Xers and Millennials will also be affected, but it’s even worse for younger Americans. For those born between 2001 and 2010, median net lifetime taxes paid into the system will far exceed median net lifetime benefits, according to estimates by the Urban Institute. The median white member of Generation Z is projected to lose more than $200,000 on their investment. The median Black or Hispanic Gen-Zer can expect, under current law, to lose more than $86,000.

The lockbox is empty. 

What if, this time, voters were presented with an opportunity for a truly artful compromise, one that preserved the system’s long-term solvency while making both its taxes and benefits fairer and consistent with the common good? If Democrats want to put forth winning strategies in 2026 and 2028, they should be the ones championing such a course—all while keeping the go-broke date front and center and spotlighting the ways in which Republican policies have added to the crisis. 

A key challenge to any reform will be the tension built into the system between social adequacy and individual equity. From the beginning, Social Security has paid the least to those who need benefits most, and most to those who need benefits least. This pattern reflects the original political logic behind the program. FDR was keen for people to experience Social Security as a form of insurance rather than as a form of welfare. That entailed preserving the illusion that each participant paid for their own benefits, which in turn meant that people’s benefits had to at least partially reflect their previous tax contributions.

It’s a point that still needs to be weighed heavily. Certainly, it would be political folly to go straight up against today’s upper-middle-class retirees, especially when most are already receiving a far lower rate of return from Social Security than they could have earned through very safe, private investments. But there are still many measures that Democrats could take to make Social Security better serve the far greater numbers of middle-class and low-income Americans who face very real threats to their security in old age. 

Starting on the revenue side, one step would be to raise the cap on the amount of an individual’s wage income that can be taxed for Social Security. It’s currently capped at $176,100, and rises gradually under current law. But raising it more quickly could go a long way in closing Social Security’s long-term deficit. For example, just increasing the taxable maximum to $291,000 by 2029 could reduce roughly 19 percent of the trust funds’ shortfall over the next 75 years, while affecting only roughly 6 percent of earners. Such a measure would also help to redress the fact that as the rich have grown richer, more and more of their income has escaped Social Security taxes.

Another progressive reform would be to broaden Social Security’s revenue base to include financial returns, which is how most rich people make most of their money. This could be accomplished by requiring high-income filers to pay Social Security taxes on interest, dividends, royalties, capital gains, and rental income. Such taxes would force the well-to-do to bear a fairer share of the cost of financing an aging society. And, of course, there’s always the option of reversing the massive tax cuts Trump has passed for the wealthiest of the wealthy while preserving the more modest reductions his bills gave to lower- and middle-income groups. 

On the benefit side, Social Security could be made more progressive by modifying benefit formulas so that they offer higher returns to low- and middle-income workers. Cost-of-living adjustments, for example, could be recalculated to give more weight to the out-of-pocket medical and other expenses typically incurred by low- and middle-income elders. Another idea in this vein: Require fewer years of formal employment to qualify for Social Security’s minimum benefit and make the minimum higher. Senator Bernie Sanders and Democrats proposed a bill in 2023, the Social Security Expansion Act, that took up many of these tax and benefit measures. It was projected to balance the program’s budget over the next 75 years but died in committee. 

In short, there are a lot of measures Democrats could propose to save the program while also making both its financing and benefit structure fairer. But there’s also room to go beyond this by expanding the system’s tax base into new realms. These could include the use of carbon taxes, digital data taxes, or taxes on pollutants like the plastics we know are living rent-free in our brains (literally). Revenues raised from such sources could not only finance an equitable expansion of Social Security but also help build true abundance and wellness for the next generation. Wouldn’t it be swell if we saved Social Security by means that discourage socially destructive business practices while also preserving our health and that of the planet?

The idea of today’s Republican Party—aligned with leaders across both oil and tech—getting on board with any of the above may seem laughable. But if Trump plans to keep his “unbreakable commitment to protecting and strengthening” Social Security, he will have to do something credible to keep the trust funds solvent and assure his base that the checks will keep flowing. 

Lawmakers should also take aim at the policy failures around private “defined contribution” pensions and other retirement saving vehicles, which have enjoyed massive tax subsidies. Just between 2022 and 2026, they will cost the U.S. Treasury over $2.1 trillion in forgone revenue. But most of the benefits of these subsidies go to higher-income workers while millions of middle- and lower-income Americans received little or no benefit at all because they a) did not have access to a 401(k) through their employer, b) didn’t have enough income to put into one, or c) both. 

Going forward, we need universal pension plans that target their subsidies to those who most need help in building wealth rather than favoring those who already have wealth. We also need mandatory individual savings plans, like those originally proposed by Clinton, that will help less well-off members of the next generation to safely take advantage of the miracle that is compound interest. A provision of Trump’s “Big Beautiful Bill” endows newborn American children with a $1,000 “baby bond.” Though the provision is limited it derives from an idea originally championed by Democrats for providing ordinary Americans with wealth-producing assets. If properly implemented, it could evolve into a safe and universal savings vehicle that benefits all Americans throughout their lives, and that could serve as an important supplement to Social Security in old age. 

Ultimately, Democrats need an approach that goes beyond any set of purely programmatic fixes. They need to be able to tell voters that they are addressing the root causes behind why so many Americans now face insecurity in old age—many of them traceable directly to policy mistakes that both parties, but especially Republicans, made over the last 40-some years. These include a massive retreat from economic and financial regulation that wiped out the net worth of millions of Americans by enabling the spread of predatory lending in housing and education, and of predatory pricing in health care and pharmaceuticals. They include failed “free trade” policies that hollowed out the country’s industrial base and deeply eroded the bargaining power of most blue-collar workers. And they include the failure to make sufficient public investments in core industries and essential infrastructure that are the building blocks of the American Dream. Democrats can reclaim their party’s identity as a champion of the working class by taking up the cause of Social Security in its broadest and original New Deal meaning, which was to build a political economy by and for the people.

The post How Democrats Can Save Social Security—and Win Elections appeared first on Washington Monthly.

As one of President Joe Biden’s top economic advisers, I frequently made my way out to the White House North Lawn to give interviews to the media about the state of the U.S. economy. Especially as the pandemic-induced recession faded in the rearview mirror, I was out there hundreds of times touting how the unemployment rate was at 50-year lows on the back of remarkably strong job growth. Inflation was falling and inflation-adjusted pay was rising.

And yet in every single interview, I got the same question: So why aren’t people feeling it? Why so much good data amid so many bad vibes?

In fact, the question was not hard to answer. It comes down to one word, a word that defines the dominant economic challenge with which American families have been struggling for years: affordability. Whether it’s housing, child care, health care, groceries, utilities, insurance, or other costs, significant numbers of Americans have found that these and other critical goods and services are either out of reach or so pricey that, after they’ve paid for them, they don’t have enough money left to even think about getting ahead.

This duality between the data and how people experience the economy is the subject of The Mismeasurement of America, by Gene Ludwig, a former comptroller of the currency during the Clinton administration. Focusing on unemployment, wages, inflation, and the growing economic distance between Americans at the top and the bottom of the income scale, Ludwig argues that the problem is that the numbers I was touting were, if not quite wrong, then “profoundly misleading.” He then develops his own set of numbers, which he argues better explain why people have long felt a lot worse about the economy than you’d glean from the government’s top-line statistics. While Ludwig is right that top-line numbers, all of which are broad averages, fail to present a full picture of how the different income classes are faring, that’s not a “mismeasurement” problem. It instead reflects the impossibility of encompassing in just a few numbers something as complex and disparate as the U.S. economy. A better title for his book might have been “The Incomplete Measurement of America.”

Ludwig’s critique of inflation statistics is particularly germane to the affordability crisis. The Consumer Price Index is an overall metric that averages out the changes in prices faced by 90 percent of the population. (The CPI does not include prices in extremely rural areas, farm households, and religious communities, among other exceptions.) Ludwig reasonably worries, however, that the average obscures important differences in inflation between income groups.

The Bureau of Labor Statistics, which publishes the CPI, has itself been looking into this and they find that from 2005 to 2024, prices rose 66 percent for those in the bottom fifth of the income scale but just 57 percent for those at the top. This disparity is a double disadvantage: Such households face both lower incomes and higher prices. Ludwig’s adjusted CPI, which he calls the “True Living Cost,” or TLC, captures this dynamic by significantly up-weighting in the index the goods and services that dominate the consumption basket of less-well-off households, including housing, health care, food, and child care.

While this is the right way to drill down on the affordability challenges facing low- and middle-income families today, Ludwig misses one of the more important positive price developments of our time. For technology goods, like computers and smartphones, the TLC registers large price increases while the CPI registers the opposite. The CPI has it right, reflecting a rare cost decline that’s actively making us better off. The BLS statisticians adjust for the fact that computers and cell phones are remarkably more powerful than they used to be. Decades ago, it would have cost millions of dollars for a computer to do what a $700 laptop can do today. Adjusted for quality, the cost of such technology has fallen sharply over the years, and this decline has improved consumer welfare. Yet the TLC appears to ignore these quality improvements and somehow has technology costs soaring over time.

For another example of how Ludwig offers an overreaching solution to a real measurement challenge, consider unemployment. Ludwig argues that instead of the 4.3 percent unemployment rate for August reported by the BLS, what he calls the TRU—the “True Rate of Unemployment”—is 24.7 percent. Anyone with even a passing familiarity with the history of unemployment in America will realize that Ludwig has either made a mistake or is aggressively redefining unemployment. The last time unemployment was that high was during the Great Depression.

Ludwig’s “unemployment” rate, however, includes a lot of people who are, in fact, working, both part-timers and low earners. His terminology is thus off, as is his critique of the current measurement system, which is clearly, transparently, and consistently measuring what it says it’s measuring. If you looked for a job and you didn’t find one, you’re unemployed. That simple and intuitive definition has revealed important information about labor market conditions for many decades.

But as Ludwig’s adjustments reveal, there were a lot more underemployed and underpaid people in the American labor force in August than 4.3 percent. That doesn’t make the official unemployment rate wrong or misleading. Though Donald Trump, who recently fired the commissioner of the BLS, might claim otherwise, our statistical agencies continue to rigorously churn out valid, reliable numbers. (Trump doesn’t like that they show the tariffs raising prices and cracks forming in the job market, but that’s actually a testament to their accuracy.) But Ludwig’s metric helps to bridge the gap between what the official jobless numbers say and the struggle that many working Americans go through every day.

Extracting from these weedy details, and recognizing that the current system is not mismeasuring America, Ludwig’s book provides an important bridge between good data and bad vibes. As he shows, in an economy where inequality has been on the rise for decades, where millions are underemployed, where poor people’s inflation rises faster than that of the rich, averages increasingly fail to tell the full economic story.

Of course, many authors, most notably Thomas Piketty in Capital in the Twenty-First Century, have made this point before. But by looking at the problem through the lens of jobs, hours worked, wages paid, the costs of housing (and utilities, such as electricity), child care, health care, and so on, Ludwig’s measurements help to shine a light on a policy agenda to address the affordability crisis. His underemployment rate would come down, for example, if we helped involuntary part-timers move to full-time schedules. (Ludwig would correctly note that such a change would not show up in a lower unemployment rate.) An affordability agenda, which Neale Mahoney and I describe in a new brief from the Stanford Institute for Economic Policy Research, would help make it easier for economically stretched families to afford housing (by making it easier and cheaper to build), child care (through targeted subsidies), and health care (reversing coverage cuts, Medicare buy-in) in ways that would directly feed into Ludwig’s alternate cost-of-living measure.

What we should take from this book, then, is not that America is mismeasured. It’s that the gap between what the top-line numbers report and how folks feel about their economic situation is, in part, a function of the increase in economic inequality, of how far they’ve fallen relative to the average. Should we want to better understand how America is really doing, we must dig deeper into the numbers.

The post Measuring the Vibecession appeared first on Washington Monthly.

As the world soured on Big Tech platforms in the “techlash” of the late 2010s, the conversation centered on how technology was harming its users. An avalanche of best-selling books, magazine think pieces, and documentaries sounded alarms about the annihilation of privacy and attention spans, crises of loneliness and teen depression, and echo chambers and political polarization. This era of commentary connected broad societal problems back to the intimate relationship between tech platforms and the individual.

The Age of Extraction, by the Columbia Law professor Tim Wu, takes a different route to the conclusion that Big Tech is destabilizing society: one focused on the economic relationship between platforms and other businesses. Wu, a founding father of the “neo-Brandeisian” anti-monopoly movement that influenced antitrust policy under the Biden administration, contends that platforms such as Google and Amazon have become essential commercial infrastructure and use this power to extract ever-more value from smaller businesses in the form of exploitative fees and pricing. He calls artificially intelligent platform extraction “the emergent form of economic power in our time,” and suggests that it is a driver of inequality and ultimately the rise of authoritarianism.

This argument won’t be revelatory to those steeped in anti-monopoly debates. Nor does the book serve as an especially persuasive introduction to the topic for those encountering it for the first time. Still, Wu’s writing is lively and lucid and he provides some fresh insights, especially on where the power of platforms is headed in the age of AI, and the dangers this poses to the republic.

The Age of Extraction is divided into two parts. The first delivers a rendition of the familiar Big Tech hero-to-villain story, framed around the platforms’ evolution from “enablement” of economic activity to the “extraction” of value. The second, shorter section looks at the global trend toward political instability and democratic backsliding.

In the optimistic late 1990s and 2000s, Wu reminds us, there was never supposed to be a “big” tech. Pundits predicted that the internet, by lowering barriers to business entry and favoring nimbleness, would usher in a decentralized, egalitarian economy. The business writer Seth Godin declared that Small Is the New Big; the blogger Glenn Reynolds envisioned An Army of Davids replacing old corporate Goliaths. The tech thought leader Jeff Jarvis, in his 2009 book, What Would Google Do?, declared that “the Lilliputians have triumphed. The economies of scale must now compete with the economies of small.”

According to Wu, such predictions were based in part on the perception that new tech platforms like Google and Amazon were “public-spirited town squares that existed to help others, almost like corporate charities.” The platforms played into this perception—especially Google, with its famous “Don’t Be Evil” slogan. A letter the company’s founders Larry Page and Sergey Brin wrote to investors in 2004 explained that Google would do “good things for the world even if we forgo some short-term gains.” But in the early days, they also lived up to it. Amazon created Amazon Marketplace, which empowered countless Americans to start small businesses using its built-in customer base and logistics capabilities. In return, the company asked only for a reasonable fee: about 19 percent of a seller’s revenue as of 2014.

But as Amazon cemented itself as the dominant e-commerce platform—in large part by subsidizing shoppers and hoovering up potential rivals—it began to put the squeeze on sellers. It ratcheted up monthly fees and introduced a major implicit fee by placing rows of sponsored results at the top of search results pages. (By 2024, sellers were paying Amazon more than $56 billion per year to make their products visible.) By 2023, fees averaged more than 50 percent of sellers’ revenue. And yet, with Amazon commanding such a large market, sellers couldn’t walk away. Wu shares anecdotes of entrepreneurs who built thriving e-commerce businesses largely through Amazon, only to be put out of business as the fees mounted up.

If Wu wanted to persuade readers that we are truly living in an age of extraction, some additional case studies might have been helpful. Journalists such as the Washington Monthly’s Phillip Longman have compared Big Tech platforms to the railroad monopolies of the Gilded Age for the better part of a decade. There are plenty of other examples to choose from. Google’s dominance in “ad tech,” the stack of platforms connecting advertisers and web publishers, allows it to extract 30 percent of publisher ad revenue through various fees. Apple’s commission on iOS in-app purchases reached 30 percent before a recent court ruling forced the company to allow app developers to route purchases through their own websites. Uber’s “take rate” on ride fares is dynamic and opaque, but it increased dramatically in recent years and has been shown to range from 40 to 70 percent.

Puzzlingly, The Age of Extraction leaves these examples on the table, not even giving them a brief mention. Readers might be left wondering if platform extraction is a problem that extends beyond Amazon as Wu moves ahead to explore tangentially related topics. One chapter observes that the internet failed to translate into “the rise of a new creative class holding significant wealth,” and that even the influencers who have found financial success are “a laboring class” with stressful lives—although it does not tie this reality to any specific extractive practices by platforms. (Wu doesn’t mention, for example, content creators’ paltry share of YouTube and X ad revenue.) Another chapter describes how private equity roll-ups of specialist medical practices raise patient costs while degrading quality of care, and how the mega-landlord Invitation Homes has exploited renters by consolidating local housing markets and then systematically raising rents and piling on absurd “junk fees.” Wu argues that these phenomena represent “platform power beyond tech,” because private equity-backed medical groups bill themselves to doctors they hope to buy as convenient administrative intermediaries, and Invitation Homes uses technology to buy and manage thousands of homes.

The freshest material in The Age of Extraction comes in Wu’s analysis of how Big Tech is diversifying and augmenting its platform ecosystems to maintain their power. Wu describes Google, Apple, and Amazon’s splashy ventures into entertainment and sports broadcasting as an effort to become “fully spun cocoons of life and living.” And, of course, the platforms are now “investing heavily in owning or controlling the relevant talent, data, and technologies” of the AI race. OpenAI and Anthropic are backed by Microsoft and Amazon, respectively; Google, Meta, and Elon Musk’s X are developing popular models in-house and control key distribution channels. Thus while AI technology may disrupt certain Big Tech products, Wu points out that AI market structures appear “headed in the direction of reinforcing [Big Tech’s] advantage.”

Just a few decades ago, Francis Fukuyama was predicting The End of History, “the old dictators, cranky old men, were on their way out,” and “a kinder, gentler future was meant to be on its way in,” Wu writes. “What went wrong?” His answer is a bit slippery, particularly with respect to how much weight it assigns to the tech platforms that are the main subject of his book. At first he blames “the destabilizing effects of laissez-faire capitalism,” and concedes that “the tech platforms are not nearly the entirety of this story.” At another point, he blames “the emergence of platform capitalism and broader trends in the economy.” The theory he actually fleshes out centers on corporate consolidation generally, although the tech platforms certainly fit in.

Wu sketches the progression from consolidation to authoritarianism as a “sequence in five steps, each based on known and well-studied tendencies.” Monopolization is followed by extraction, which, “by its nature … creates a narrow class of winners” and a “broader class” of losers: “consumers who pay more, workers who are paid less, and local, regional, smaller, and medium-sized businesses that are acquired or driven out of business.” This inequality leads to the emergence of mass resentment, then democratic failure—“compounded if the state is understood or credibly portrayed as supporting and perpetuating the ongoing extraction”—and ultimately the rise of the strongman. In a play on the title of the libertarian economist Friedrich Hayek’s iconic book, Wu calls this progression “the real road to serfdom.”

He presents this as a sort of natural law, and doesn’t make much of an effort to support it empirically. That’s not much of an issue with respect to the latter part of the causal chain, as the link between inequality and resentment and political instability is fairly self-evident. But readers might need some evidence to be satisfied that monopolization is a significant driver of inequality to begin with. Wu could have mentioned the work of the economists Marshall Steinbaum, José Azar, and Ioana Marinescu, who have connected employer concentration in labor markets to lower wages. From the consumer perspective, he could have surveyed anti-monopoly research into how consolidation is making household cost centers like health care and groceries more expensive. Or he could have deployed a historical example, such as that of the Gilded Age, to illustrate his point. But as with his argument about platform extraction, Wu declines to elaborate.

Nevertheless, The Age of Extraction concludes—after a few short chapters taking down the ideas that markets are self-correcting and that crypto technology will solve inequality—by presenting policy solutions to the expansion and abuse of monopoly power as a broad “architecture of equality.” The solutions begin with antitrust. Wu mentions that antitrust enforcement “staged a comeback” under the Biden administration and lists major cases, although he doesn’t explain how specifically they could mitigate extraction. Other solutions could include utility-style regulation and price caps, which Wu points out have proved successful beyond the utility sector. For instance, “swipe fees” are capped in the European credit and debit payment processing markets. New “common carrier” rules, such as those historically used to govern railroads and telecommunications networks, could prevent dominant tech platforms from discriminating in favor of their own products or services. And quarantines and “line of business” restrictions could prevent platforms from leveraging their preexisting monopolies to dominate new markets, such as artificial intelligence.

At around 200 pages, The Age of Extraction is a fun and breezy read, and it will hold the attention of casual readers even if they do not end up convinced of its grandest claims. But for neo-Brandeisian true believers, the book is likely to frustrate. At a pivotal moment for the movement, with its Biden-era champions out of power and the Trump administration reversing much of their agenda, Wu is content to retread familiar intellectual territory rather than illuminating what comes next. And amid a contentious factional battle to shape the future of the Democratic Party, the thinness of the book’s argumentation makes it unlikely to win hearts and minds. For an advocate of Wu’s talents, The Age of Extraction represents a missed opportunity on multiple fronts.

The post Monopoly Men appeared first on Washington Monthly.

In Falls Church, Virginia, just outside Washington, D.C., 76 percent of residents have a bachelors’ degree or more, and the poverty rate is just 3 percent.

But in Galax, Virginia, at the other end of the state, the picture is starkly different: Poverty there is at 22 percent—nearly double the national rate. Median incomes are half the median statewide, and a quarter of adults don’t work. One in six has no high school diploma.  

Nationwide, according to the bipartisan Economic Innovation Group (EIG), about 83 million Americans live in prosperous places like Falls Church, while 51 million live in “distressed” communities like Galax. 

As the architect of EIG’s Distressed Communities Index, Senior Fellow Kenan Fikri has spent the better part of the last decade discovering who is prospering in America—and where. The maldistribution of American opportunity, he warns, has led to stark divides, economically, socially and politically. On the other hand, he argues, understanding the geography of opportunity could help to heal these rifts. 

This interview has been edited for length and clarity. Watch or listen to the full discussion on Spotify, YouTube or iTunes.  

***

Anne Kim: Kenan, for almost the past decade, you have been the mastermind of a really remarkable data set, the Distressed Communities Index (DCI). And the headline number from this year’s report is that 51 million Americans live in a “distressed community.” That’s 15 percent of the US population. Can you define what that means? 

Kenan Fikri: We define “distressed” in the DCI based on seven different complementary social and economic metrics. We look at the poverty rate, we look at income levels, we look at housing vacancy rates, educational attainment, job growth, the opening or closing of new business establishments, and business growth too. We put all that together to provide a summary statistic of economic well-being at the zip code level all across the United States. And then communities that rank in the bottom one-fifth of all zip codes nationally, we consider “distressed.”

Even though it’s a relative measure—20 percent of all zip codes will always be “distressed” by our definition—the gaps that it captures are absolute. Poverty rates in distressed communities are more than twice as high as they are nationwide. That means that

in a period of strong national economic growth, distressed communities are generally going to be losing jobs and suffering from net business closures. The condition of being economically distressed is one of being disconnected from the broader national story.

Anne Kim: One of the remarkable things about your work is how it shows just how unevenly opportunity is distributed in America. You have maps online that show where the distressed communities are, as well as maps that show where the communities that are prospering are located. Can you talk a little bit about the geographic distribution of the distressed communities?

Kenan Fikri: Economic opportunity is unevenly distributed across the country and it varies on all sorts of scales. It varies broadly regionally between the Northeast corridor or the West Coast and the Deep South or Appalachia. It varies within states, within counties, and then really neighborhood by neighborhood. That’s why we start at the zip code level to really see the scale at which most Americans live, work, go to school, consume.

And you do see the so-called “other side of the tracks” phenomenon where on really small geographic scales, you have wide divergences in economic well-being. Often these may follow municipal boundaries. We can look at cities in the Midwest and often sometimes all the zip codes that are part of the city will be economically distressed, but as soon as you leave that core municipality and enter more suburban jurisdictions, you’re at a totally different plane of national economic well-being. But that’s at the very local level. 

If you’re looking at the U.S. map, looking state by state, we see a concentration of distressed zip codes in the deep south, first and foremost, in states such as Louisiana and Mississippi, but then kind of stretching all the way up across the so-called “Eastern Heartland” into Ohio and Michigan where you’re still seeing above national percentages of state populations living in distressed communities. But really these pockets exist in really almost every major metropolitan area and then across numerous rural areas as well. 

Anne Kim: You talked a little bit about the disparity in the poverty rate between the bottom quintile and the top quintile. But can you give more of a sense of how stark these disparities are?

Kenan Fikri: Take Harris County, Texas, for example. It’s one of the most populous in the country, but 1.4 million residents live in a distressed zip code in the same county, while 1.1 million residents are living in a prosperous zip code. And here we’re talking about poverty rates that may be 30 percent or higher in the distressed portion of the community, compared to below 5 percent in some more outlying jurisdictions. You’re going to see huge gaps in educational attainment too. And even in something like vacancy rates where you have a lot of disinvested properties, you may have one in six, one in seven, one in five homes vacant in a distressed corner, even in a growth market such as Houston.

Anne Kim: One of the things that was really intriguing to me was the extent to which you found that in distressed communities, men are earning a lot less than women. And of course there’s stark racial inequality as well. Can you talk a little bit about the demographics?

Kenan Fikri: Place is really a vector in a frame to talk about people, zip codes and communities. I’m a geographer, and zip codes and counties are, you know, interesting units for a geographer because they it’s an organizing unit for social analysis as well as economic analysis. 

Starting first with race and ethnicity before turning to gender, we see that generally in the United States, minorities are overrepresented in distressed communities and underrepresented in prosperous communities. That differs a little bit by subtype of race and ethnicity. Asian Americans are relatively better represented in prosperous communities. Hispanic Americans are generally clustered  in the middle to lower tiers of communities on the DCI. And then African Americans and Native Americans are disproportionately concentrated in the distressed tier. 

African Americans are about twice the share of the population in distressed communities as they are nationally.  Place is a way to understand or reveal long running social conditions and afflictions in the United States today. And you can’t, when you’re looking at something like the DCI separate people from place from history. The economic conditions people experience are living history.

Anne Kim: On the gender piece, the disparity in men’s earning power versus women in some of these communities is really striking, especially when we have so many discussions politically about men and masculinity and Stolen Pride, to borrow the title of Arlie Russell Hochschild’s book.

Kenan Fikri: Absolutely. This was the first year we actually looked at gender through the lens of the DCI. We assumed, I guess naively, that there wouldn’t necessarily be that much variation across gender in the DCI, but we were really surprised to find that the earnings gap is wider in distressed communities.

In general, men’s economic conditions deteriorate much faster than women’s do as you go down the spectrum of community distress. Male educational attainment really lags behind, and there’s a sharp, sharp decline in college attainment rates as you move from the prosperous to the comfortable to mid-tier at risk and then to distressed quintiles.

Whereas women’s educational attainment is much more stable, regardless of community. There are still fewer women with college degrees in distressed communities than in prosperous ones, but it’s a much smoother gradient than it is for men. So I think it’s really an under-studied corner of social science right now—the vulnerability that men face with

limited economic conditions, and how that makes stabilizing a community harder as it filters through to family structures and things like that. It underscores the fact that this is a corner of discourse and understanding that we need to turn to as a country because whatever currents are underway in society today are running really deep, and they also run through space and communities.

Anne Kim: Does your research show any indication of why these gaps are happening? I’m assuming that in parts of the Rust Belt, for instance, it’s a story about the loss of manufacturing. But did you pick up any clues as to what was going on?

Kenan Fikri: It’s a great question and I wish we picked up greater clues. I think it does come down to economic opportunity in particular sectors. Men are likelier to find employment in traded sectors such as manufacturing and potentially white-collar work, versus traditionally non-traded or less traded sectors such as education, healthcare, social assistance and other professional services jobs that don’t vary as much by location and that women tend to be overrepresented in. So it’s either the elimination or loss of those traded sector jobs, or in some cases, like in rural areas, the fact that there never were that many strong jobs to begin with. 

Anne Kim: And just to clarify, by “traded” sector, you mean a sector that’s susceptible to outsourcing?

Kenan Fikri: That’s economic geographer-speak, a traded sector is something that you sell beyond the region. So manufacturing would be traded. Consulting services could be a traded sector activity, or information services too. It’s really anything  you’re selling to a wider market, be it nationally or globally, versus just the local community where people’s incomes circulate among things like doctors and grocery stores. 

Anne Kim: What is the connection between levels of education and levels of distress? Do low levels of education cause a community to become distressed or is it the other way around? Which way does the causal connection run?

Kenan Fikri: It is really difficult to find a good job today without a more than a high school education. A lot of people who have found a good job with limited education may now be nearing the end of their careers, in industries where credentials didn’t matter as much as they do today. 

It’s one of the first things that I point to to explain the geography of well-being today. Where college-educated Americans live is the well-off geography, whereas Americans with high school or less live in predominantly distressed geography. And then there are more mixed communities where folks with associates degrees or some college are interspersed with folks from both the high and low ends of the educational attainment spectrum living together. That’s where you’ll get mid-tier communities. 

I don’t want to run to the conclusion that more education for everyone is automatically better because there are a lot of problems with the higher education system today, but the fact remains that that college degree is still the ticket to opportunity in the United States today. 

Anne Kim: But the problem is, of course, that a lot of times when someone in a rural community, for instance, gets a college degree, they don’t necessarily stay in the community. That means they take their opportunities with them, or they chase the opportunity that exists elsewhere. 

Kenan Fikri: True. Folks who are most likely to leave a community are the ones who are most likely to get higher education and find opportunity elsewhere. Mobility is lowest for the people who most need to get out to find new opportunity, but they’re often the ones who are most reluctant to move.

Anne Kim: I appreciate how the DCI defines well-being beyond simply financial security. One of the things that you found is that living in a distressed community has real costs for individuals. You find that on average people living in distressed communities can actually expect to die five years sooner than the counterparts in prosperous areas, which was yet another stunning and depressing finding. What accounts for that difference?

Kenan Fikri: It’s a great question. And even that five-year statistic is summarizing across all counties in the top and bottom quintiles. If you zoom in on specific locations like Virginia, you’ll see almost a 20-year gap in life expectancy between Arlington, Virginia, and Petersburg, a predominantly African-American city in southern Virginia.

These are absolutely shocking statistics that show why place matters to understand life outcomes.  The DCI has become a way for researchers to study the social determinants of health because place corrals a whole bunch of unobservable factors into one unit. What do I mean by that? There are things like social connections, access to quality foods, access to quality healthcare, access to people and social groups and amenities and all sorts of wraparound services and culture that support good health that might be missing in a community. 

It speaks to the toll—psychological and physical—that living in such an unequal country where inequalities are experienced so viscerally and so starkly can take on individual lives and livelihoods. When you fall through the pretty porous floor that the US economy puts underneath people and places, things can start to get pretty grim.

Anne Kim: I have to ask a little bit more of a fraught question now. When you look at the map of distressed communities versus prosperous ones, there is a huge similarity to the maps that show you red versus blue. The deep South, as you mentioned, is more distressed and it’s more red, and the coasts are a little bit more blue and they tend to be a little more prosperous. What can you say about distress and prosperity and the state of political polarization that we’re all experiencing?

Kenan Fikri: I wish I had the key to solve that and dispel all the political polarization for us. Alas, I don’t. But one insight that’s helped my understanding of the polarization today is that if you look at the population in distressed communities, it’s about evenly divided between rural and urban are. 

So distress is one thing that unites some different American factions geographically. When you look at the national map, the larger physical units of rural zip codes make those pop more than the smaller physical units of urban zip codes, but when you zoom in, distress is an experience and a problem that affects both parties and both coalitions.

The optimist in me would hope that there may be common ground, with all of our elected representatives caring about the places they call home. They can disagree about a lot else, but I think we can agree that the economy is failing particular Americans extremely. And then we can start to see where there may be common ground for solutions. 

That sounds a little naively Pollyanna-ish, perhaps, but I think if we have to start somewhere, that’s a pretty decent place to start.

I’ll also say that  if you look at the states of the Midwest that might not be outright distressed yet, they’ve really fallen out of the prosperous tier, maybe into more middling conditions, and that also gets to some of the feelings of being left behind or just not really participating in the best the U.S. economy has to offer.

I think that that may help explain why some of the coalitions are fracturing so much. Places and communities might not have fallen into outright distress, but they do feel their relative standard of living declining. 

And interestingly, we’re seeing now that in a lot of corners of the Northeast, states like New York, Rhode Island are really starting to fall relative to when we first did the DCI in 2010, when the superstar cities and the really college-educated places were doing best. They had large swaths of their population in prosperous zip codes. Now that’s ebbing, such that New York and Alabama have equivalent shares of their populations living in prosperous zip codes. 

I don’t think New York is going to go necessarily red, but the DCI is an interesting lens to understand these relative flows and then conjecture how it plays into politics.

Anne Kim: Wow, that is fascinating. Well, that leads to my final question for you, which is how do we fix these extremes in regional inequality? We’re never going to eliminate distress altogether—let’s posit that—but how do we ensure that there’s better shared prosperity? You talked about common ground. Are there specific ideas you have about what we can do to bring some communities up and also to stop the slide of other communities that are facing distress?

Kenan Fikri: That’s the big question, the important question. I wish I had a better answer. But to me, I am a firm believer in the power of the American economy as history’s greatest engine of wealth and prosperity and opportunity for the vast majority of people. 

So I think part of the solution has to run through what I like to call a “reconnection agenda,” recognizing that folks need to have connections—be it physical, social, or economic—to the broader national economy in order to participate in it and seize opportunity in it. That means making sure that financial markets better serve low-income Americans and low-income communities. 

We have some tools in that toolkit from the [Community Reinvestment Act], but that’s ripe for reform. I do think that Opportunity Zones are a good step in the right direction to nudge financial markets to look at places that have systematically been deprived of capital by private markets left on their own. And I think there’s a lot more that can be done to advance social inclusion. 

We have to recognize how much opportunity is transmitted or not through the K-12 school system. School districts and where people tend to move isolate different groups. So that’s an area to look at and an area for innovation and reform.

And then there’s physical connectivity too. We have to be careful here because, say, in the urban renewal era of the mid-1900s, physical connectivity done wrong actually disconnected and severed places. But if you think of rural areas—rural Appalachia or southern West Virginia—these are extremely isolated locales, and it’s very hard to site labor intensive manufacturing in a place like that  where it’s difficult to get to market. 

The internet age allows us to think of connectivity in a digital sense too and how that may open up opportunity for people to access jobs outside their region or even for others to move in to more mixing in American communities that can foster mobility in the United States.

Anne Kim: Well, I hope some of this agenda comes to pass in coming years. Looks like we really need it. Kenan, thank you so much for sharing your research.

The post How Regional Inequality Explains Our Polarized Politics appeared first on Washington Monthly.

The first weeks of fall at Arlie Boggs Elementary School in rural Eolie, Kentucky, are usually filled with back-to-school routines. New names line the cubbies, and the hallways gleam with a fresh coat of wax. The sounds of a new school year fill the classrooms.

But not this year. Today, Arlie Boggs sits empty. The school, located deep in coal country, was facing enrollment declines, and, in April, its school board voted to shutter it.

Arlie Boggs is not alone. Before the pandemic, about two thousand U.S. public schools were closed yearly. Now, we’re likely to surpass that rate. This year, officials in communities large and small—Eolie, Denver, El Paso, Texas, and Fairbanks, Alaska—shuttered schools. And more closures are coming. School districts are facing unprecedented budget crises, exacerbated by threats to federal funding. Populations are dropping in many places, and policies that expand voucher programs are siphoning off public school students.

So, the St. Louis School Board is considering closing more than half of its 68 public schools in 2026-27. In Texas, the Austin Independent School District recommends closing 13 schools. Norfolk, Virginia, is considering nine closures. In West Virginia, where 53 schools have closed in the past five years, another seven are slated for closure in the coming years. Vermont just passed legislation that could close dozens of schools.

As a researcher studying school closures, I know they can be difficult to oppose. Amid declining enrollments and tight budgets, cutting costs and shuttering buildings seems logical—even responsible.

But not always—and perhaps not even usually.

There’s a wealth of faulty assumptions about what happens after schools close. Research suggests that closing schools doesn’t save much money. It typically doesn’t reduce personnel—a district’s largest line item—and many schools require renovation to accommodate students leaving shuttered facilities. Transportation costs increase, and selling the old school building can be hard. In fact, the president of a rural New England school board that recently decided to shut one of its schools—due to concerns about the cost of its operation—told me that, in the end, the closure would save the district nothing. But the assumed logic of closure was too powerful to counter.

Closing schools also negatively affects students. Many spend more time commuting—sometimes over four hours daily—reducing time for extracurricular activities or family dinners. This travel can be dangerous, especially through neighborhoods with higher crime rates or over risky mountain passes. Absenteeism and behavioral problems tend to rise. Studies indicate short-term declines in achievement test scores. In the long run, school closures can harm college completion, job prospects, and earnings.

Closures hurt communities, too. When a school closes, local jobs are lost, and businesses that depend on a nearby school—such as local diners, banks, and gas stations—may also close. Families move to be closer to their children’s school. Schools are also places where people gather, engage politically, and make memories. It’s no wonder that school closures often face fierce resistance—even hunger strikes.

And then there’s this: school closures can often be discriminatory. Researchers Rachel Greene-Bell and Francis Pearman found that, from 2000 to 2018, majority Black schools were more than three times as likely to close as majority non-Black schools. Other studies show that low-income students and communities are disproportionately affected by closures. The closures may be particularly damaging for rural communities, where losing a school requires parents to choose between long commutes and homeschooling. The burden of school closure, then, is not felt equally.

Despite officials’ rhetoric, school closures aren’t about enrollment, budgets, or academic quality. These closures are the so-called “solution” to problems that policymakers helped create, often over decades: white flight, the privatization of education, and the neglect of our public institutions. And this “solution” only perpetuates the injustice.

Now we find ourselves in a crisis, with budgets that can’t pass and enrollments that won’t recover. At this point, some districts may now have few options but closure. But we can take a fairer, more measured approach. First, we should question the assumptions about closure. Projections of savings need to be thorough, honest, and rigorously examined. All costs associated with closure, including those for the surrounding communities, must be included. Promises regarding academics or extracurriculars—such as improved test scores or expanded opportunities—must be supported by evidence, and have clear methods of accountability. Educational quality should be the goal, not arbitrary enrollment minimums.

School boards and other municipal authorities should engage students and families in complex discussions about the fate of their schools from the start, not after rendering a decision. They should acknowledge the critical economic and social roles that schools play in communities and keep them in the places that need them most. If closure must happen, the burden should be shared equally, regardless of race or income.

Closure isn’t a convenient solution—it’s a nuclear option. It should be the last resort.

Note: For research backing up most claims about closure’s effects, see: https://eric.ed.gov/?id=EJ1233167. Research supporting remaining claims is linked above.

The post Don’t Fall for the School Closure Temptation appeared first on Washington Monthly.

As one of President Joe Biden’s top economic advisers, I frequently made my way out to the White House North Lawn to give interviews to the media about the state of the U.S. economy. Especially as the pandemic-induced recession faded in the rearview mirror, I was out there hundreds of times touting how the unemployment rate was at 50-year lows on the back of remarkably strong job growth. Inflation was falling and inflation-adjusted pay was rising.

And yet in every single interview, I got the same question: So why aren’t people feeling it? Why so much good data amid so many bad vibes?

In fact, the question was not hard to answer. It comes down to one word, a word that defines the dominant economic challenge with which American families have been struggling for years: affordability. Whether it’s housing, child care, health care, groceries, utilities, insurance, or other costs, significant numbers of Americans have found that these and other critical goods and services are either out of reach or so pricey that, after they’ve paid for them, they don’t have enough money left to even think about getting ahead.

This duality between the data and how people experience the economy is the subject of The Mismeasurement of America, by Gene Ludwig, a former comptroller of the currency during the Clinton administration. Focusing on unemployment, wages, inflation, and the growing economic distance between Americans at the top and the bottom of the income scale, Ludwig argues that the problem is that the numbers I was touting were, if not quite wrong, then “profoundly misleading.” He then develops his own set of numbers, which he argues better explain why people have long felt a lot worse about the economy than you’d glean from the government’s top-line statistics. While Ludwig is right that top-line numbers, all of which are broad averages, fail to present a full picture of how the different income classes are faring, that’s not a “mismeasurement” problem. It instead reflects the impossibility of encompassing in just a few numbers something as complex and disparate as the U.S. economy. A better title for his book might have been “The Incomplete Measurement of America.”

Ludwig’s critique of inflation statistics is particularly germane to the affordability crisis. The Consumer Price Index is an overall metric that averages out the changes in prices faced by 90 percent of the population. (The CPI does not include prices in extremely rural areas, farm households, and religious communities, among other exceptions.) Ludwig reasonably worries, however, that the average obscures important differences in inflation between income groups.

The Bureau of Labor Statistics, which publishes the CPI, has itself been looking into this and they find that from 2005 to 2024, prices rose 66 percent for those in the bottom fifth of the income scale but just 57 percent for those at the top. This disparity is a double disadvantage: Such households face both lower incomes and higher prices. Ludwig’s adjusted CPI, which he calls the “True Living Cost,” or TLC, captures this dynamic by significantly up-weighting in the index the goods and services that dominate the consumption basket of less-well-off households, including housing, health care, food, and child care.

While this is the right way to drill down on the affordability challenges facing low- and middle-income families today, Ludwig misses one of the more important positive price developments of our time. For technology goods, like computers and smartphones, the TLC registers large price increases while the CPI registers the opposite. The CPI has it right, reflecting a rare cost decline that’s actively making us better off. The BLS statisticians adjust for the fact that computers and cell phones are remarkably more powerful than they used to be. Decades ago, it would have cost millions of dollars for a computer to do what a $700 laptop can do today. Adjusted for quality, the cost of such technology has fallen sharply over the years, and this decline has improved consumer welfare. Yet the TLC appears to ignore these quality improvements and somehow has technology costs soaring over time.

For another example of how Ludwig offers an overreaching solution to a real measurement challenge, consider unemployment. Ludwig argues that instead of the 4.3 percent unemployment rate for August reported by the BLS, what he calls the TRU—the “True Rate of Unemployment”—is 24.7 percent. Anyone with even a passing familiarity with the history of unemployment in America will realize that Ludwig has either made a mistake or is aggressively redefining unemployment. The last time unemployment was that high was during the Great Depression.

Ludwig’s “unemployment” rate, however, includes a lot of people who are, in fact, working, both part-timers and low earners. His terminology is thus off, as is his critique of the current measurement system, which is clearly, transparently, and consistently measuring what it says it’s measuring. If you looked for a job and you didn’t find one, you’re unemployed. That simple and intuitive definition has revealed important information about labor market conditions for many decades.

But as Ludwig’s adjustments reveal, there were a lot more underemployed and underpaid people in the American labor force in August than 4.3 percent. That doesn’t make the official unemployment rate wrong or misleading. Though Donald Trump, who recently fired the commissioner of the BLS, might claim otherwise, our statistical agencies continue to rigorously churn out valid, reliable numbers. (Trump doesn’t like that they show the tariffs raising prices and cracks forming in the job market, but that’s actually a testament to their accuracy.) But Ludwig’s metric helps to bridge the gap between what the official jobless numbers say and the struggle that many working Americans go through every day.

Extracting from these weedy details, and recognizing that the current system is not mismeasuring America, Ludwig’s book provides an important bridge between good data and bad vibes. As he shows, in an economy where inequality has been on the rise for decades, where millions are underemployed, where poor people’s inflation rises faster than that of the rich, averages increasingly fail to tell the full economic story.

Of course, many authors, most notably Thomas Piketty in Capital in the Twenty-First Century, have made this point before. But by looking at the problem through the lens of jobs, hours worked, wages paid, the costs of housing (and utilities, such as electricity), child care, health care, and so on, Ludwig’s measurements help to shine a light on a policy agenda to address the affordability crisis. His underemployment rate would come down, for example, if we helped involuntary part-timers move to full-time schedules. (Ludwig would correctly note that such a change would not show up in a lower unemployment rate.) An affordability agenda, which Neale Mahoney and I describe in a new brief from the Stanford Institute for Economic Policy Research, would help make it easier for economically stretched families to afford housing (by making it easier and cheaper to build), child care (through targeted subsidies), and health care (reversing coverage cuts, Medicare buy-in) in ways that would directly feed into Ludwig’s alternate cost-of-living measure.

What we should take from this book, then, is not that America is mismeasured. It’s that the gap between what the top-line numbers report and how folks feel about their economic situation is, in part, a function of the increase in economic inequality, of how far they’ve fallen relative to the average. Should we want to better understand how America is really doing, we must dig deeper into the numbers.

The post Measuring the Vibecession appeared first on Washington Monthly.

In 2018, Patrick Deneen, a professor of political science at Notre Dame, published a book entitled Why Liberalism Failed. Many liberals, most notably The American Prospect’s Robert Kuttner, wrote scathing condemnations. Gabby Birenbaum and I added to the criticism last year, observing in these pages how Deneen’s conflation of liberalism with libertinism had deeply influenced Tucker Carlson and his fellow travelers. (See “Inside Tucker Carlson’s Brain.”) 

But the book also received a respectful hearing in some surprising quarters. The back cover of the paperback edition included a blurb from the New York Times columnist David Brooks, as well as one from former President Barack Obama, who praised its “cogent insights into the loss of meaning and community.” The book came at a moment when people across the political spectrum were beginning to question the bundle of “neoliberal” policies embraced by both parties since the 1970s that have contributed to the hollowing out of America’s industrial base and to the downward mobility of the working class. 

Now Deneen is out with a sequel, entitled Regime Change. This time there are no endorsements from Brooks or Obama, but the third-party presidential candidate and Black political philosopher Cornel West lends his name, as does Republican Senator J. D. Vance. In this second take, Deneen seriously turns up the volume—to say the least. While disputing that America is structurally racist, he seeks a reckoning with America’s “structurally liberal” history. Our only salvation from this shameful legacy, he claims, is a regime change that repudiates progress and meritocracy and commits to a new order of “aristopopulism.”

Structural liberalism, Deneen tells us, is implicated in nearly all that has gone wrong with America since the Puritans lost control. That includes everything from laissez-faire capitalism to today’s mounting inequality, falling life expectancy, and low birth rates. Those Republicans who spent the past 40 years advocating for lower taxes and deregulation of large corporations are liberals, too, says Deneen, whether they have done the work to realize their implicit liberalism or not. 

In Deneen’s telling, structural liberalism dates to the 17th century, when figures like the English philosopher John Locke started casting around for an ideology that would entrench a new elite made up of their own kind. These early liberals were intent on overthrowing the inherited power of kings and nobles, but not if it meant giving power to the people. So they invented a political order under which democracy was limited to industrious, self-made white men of property who would rule unconstrained by popular will, religious authority, or a strong central state. If this take sounds familiar, it’s because Deneen is basically retelling Karl Marx’s account of the rise of bourgeois democratic capitalism without giving Marx credit. 

Deneen’s next move is to describe how the “classical” liberalism of Locke and the Founding Fathers combined in the 19th century with the “experimental social libertarianism of progressive liberalism” championed by John Stuart Mill. In his 1859 essay “On Liberty,” Mill famously argued that “the only purpose for which power can be rightfully exercised over any member of a civilized community, against his will, is to prevent harm to others.” This principle, says Deneen, committed liberalism to a relativist concept of truth and therefore to a moral order in which “individuals would be maximally free from the judgment of society altogether.” Consistent with his views on liberty, Mill was a bravely outspoken critic of slavery, yet Deneen uses out-of-context quotes to suggest the opposite and then goes on to lay Western imperialism on the door of structural liberalism as well. 

Next, Deneen tells a story about how early-20th-century progressives like Teddy Roosevelt and Woodrow Wilson were also part of the plot. “Like their classical liberal forebears, progressive liberals greatly feared and even loathed the people,” he writes. Only instead of fearing that the masses might be too revolutionary, progressive liberals feared that the people would frustrate progress by clinging to the old ways. And so liberals fought off populism by favoring rule by experts and an expansion of big imperial government. Curiously, Deneen doesn’t mention other great Progressive Era causes like the popular election of senators, government through referendum and initiative, and women’s suffrage. 

Which brings us to today. By now, says Deneen, all the different strains of structural liberalism have fused into “Woke Capitalism,” which he describes as “the perfect wedding of the ‘progressivist’ economic right and social left.” It’s a presumably same-sex marriage that, he concludes, “aims to produce a populace that is satisfied with diversion, consumption, and hedonism, and, above all, does not disturb the blessings of progress. And, if that doesn’t work, there remains the use of levers of political and corporate power to suppress populist threats.”

At this point you might expect Deneen to make a spirited defense of populism, and he does at one point praise the superior judgment of common folks. “The wisdom of the multitude arises,” he says, “… because they have the benefit of ‘common sense’ and
experience—everyday interaction with the objects or practices of the world that are so often lacking in the theoretical evaluations by experts.” 

But Deneen also believes that the “demos,” as he puts it, cannot handle much individual liberty. Without strong cultural and religious constraints on their behavior, ordinary people fall prey to all manner of degeneracy, he says, citing the breakdown in moral order he sees everywhere in America. “We have the freedom to marry, but fewer people wed,” he observes. “We have the freedom to have children, but birth rates plummet. We have the freedom to practice religion, but people abandon the faiths of their fathers and mothers.”

And so what’s needed, he concludes, is not populism or direct democracy, but “an elite cadre skilled at directing and elevating popular resentments” and at getting the people “to adopt a wider understanding of what constitutes their own good.” To restore the once pervasive human flourishing that structural liberalism has destroyed, we need to bring back, he says, “common good conservativism” led by a virtuous elite. As a model, Deneen evokes John Winthrop’s Puritanical vision of a shining city on a hill. 

What would Deneen have these new moral guardians do? He’s clear that he wants them to focus their energies on ensuring that the commoners don’t deviate from the wisdom of ancient customs, particularly those having to do with marriage, gender roles, child-rearing, and religious observance. He also hints at a few specific policy proposals that he thinks aristopopulists should insist on, like mandatory national service and a restoration of blue laws to honor “a day of rest on the Sabbath” (presumably meaning Sunday, not Saturday). 

But he evades the hard questions that would inevitable accompany any such regime change. Who gets to be among the new elect, and how is that decided? How do we ensure that the new power elites don’t abuse their power, and who is “we,” anyway? And if aristopopulists are to be responsible for guiding the masses back to the customs of the past, does that mean all the customs—primogeniture, arranged marriages, divine rights of kings? And how do the nobles get the hoi polloi to go along?

After centuries of religious wars in Europe, some people, like John Locke and the Founding Fathers, came up with at least partial answers to some of these kinds of questions. The answers broadly included a constitutional order that promised expanding equality of opportunity along with checks on concentrated political and economic power. 

And they included calls for religious freedom and tolerance, which became encoded in the First Amendment. Subsequently, though it has gone through periods of religious awakening and decline, America has remained a place marked by much higher rates of churchgoing and other forms of religious observance than any other modern nation, no doubt in large measure because no sect in America enjoys the kind of state-chartered dominion over civic life that Deneen seems to favor. 

If Deneen thinks he has answers to the hard, practical questions of statecraft needed to put America on the right course in these fraught times, he should say what they are out loud. Otherwise, it’s time to move on to more serious thinkers.

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