Comcast and Downcast
A Google search of Comcast is testament to the immense creativity engendered by rage, an emotion stoked by Comcast’s monopoly power in many markets. Comcast customers create webpages solely to rant about their disgruntlement. Comcast has consistently received lower customer satisfaction ratings than its top “competitors” (and almost all other providers) in television, internet, and telephone services. In 2007, it had the lowest customer satisfaction ratings of any US company or government agency, and in 2013, its approval rating was 28 percentage points lower than that of the Internal Revenue Service. Yet Comcast remains a top provider in the United States, with millions of customers, because it is often the only option. In France, comparable internet services (with better service) cost about a quarter of what Americans pay; in Zurich, that figure drops to a fifth, and in Seoul, a tenth.1 Comcast may not officially be recognized as a monopoly, but it sure acts like one.
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1. John Cassidy, “We Need Real Competition, Not a Cable-Internet Monopoly,” New Yorker, February 13, 2014.
Playing Monopoly with AT&T
As it turned 140 years old in 2017, AT&T had a lot to celebrate: enormous revenues ($160 billion), a number two spot in the United States’ wireless carrier market, a planned acquisition of entertainment juggernaut Time Warner, and the evasion of antitrust authorities. The United States government has closely monitored AT&T’s activities almost since its founding as the Bell Telephone Company, in 1877, by Scottish inventor Alexander Graham Bell. In 1913, AT&T settled the first regulator-led antitrust suit by permitting local phone providers to make use of its extensive network. A second suit in 1949 petered out by 1956, when the company agreed to exclude the computer business from its sphere of operations. The Justice Department sued AT&T for a third time in 1974, an action that led to its fragmentation into seven regionally-focused phone companies (the “Baby Bells”) in 1984. Like their human counterparts, however, the Baby Bells grew up—and they also grew together. Two (Bell Atlantic and Nynex) became Verizon, another (US West) is now CenturyLink, and the remaining four are today’s AT&T Inc., after Southwestern Bell purchased its previous parent (Ma Bell), in a move that would make Zeus jealous. AT&T is currently facing off against the US Justice Department, hoping to resolve lingering legal issues surrounding its deal with Time Warner. If the firm’s history is any indicator, such obstacles may ultimately prove weaker than the magnetism of monopoly power.
The Way Forward
This chapter, and the two previous chapters, propose an agenda for change. We need to respond to the challenges of global markets, and the speed of technological change, with bold and serious policies that address the downsides of the modern economy. We live at a time when astounding economic progress has been made, and where technology has transformed our lives, typically for the better. But there are also serious downsides. Foremost, the benefits of the global economy and technological change have reached too few in the United States.
Technological change and global markets do not lead to one uniform destiny; countries can respond to these challenges in a variety of ways. And, as Chapter 2 described, there is more than technology and trade at the root of our problems: market power, winner-take-all markets, tax policy, social norms, and reductions in labor bargaining power all play important roles. The suggestions of Chapters 9 to 11 respond to middle-class economic concerns in ways that go directly to the problems at hand, modernizing economic policy to make it compatible with a twenty-first century economy.
Foremost, we need to avoid damaging policies that hurt the very people we are trying to help. An agenda of trade barriers, immigration barriers, tax cuts for high-income Americans, greater insecurity in health care access, financial market deregulation, and weak anti-trust laws are the polar opposite of the best way forward. We can do better than that.
Twelve
A More Equitable Globalization
The previous three chapters have proposed bold policies to create a more equitable globalization: better policies to equip workers for the modern economy, better tax policies, and a better partnership with the business community. Yet these beneficial steps require politics, an area in which economists can be naive. In my policy recommendations, I’ve identified areas where agreements can be forged between reasonable people on both sides of the political spectrum, and I’ve focused on simple ideas that are pragmatic and easily understood. But that does not mean that these ideas are politically feasible, particularly in today’s polarized political climate.
Alas, I do not have a magic solution to the problem of political polarization. But I do offer several principles to move the conversation forward:
Positivity: It is important to offer an agenda that provides positive steps forward regarding jobs, growth, and opportunity. This agenda should be built around a common sense of purpose, without blaming villains. Demonizing others is not productive.
Boldness: We live in a time of great economic challenges. These challenges require bold, smart solutions. Timid incremental reforms are not sufficient given the magnitude of the challenges.
Openness: We share a common humanity on our planet. Ideal economic policies should not pit countries against each other in an imagined zero-sum battle. Instead, economic policies can promote common interests. An open world economy is the best path forward for humanity, both at home and abroad.
Pragmatism: Policies need to be efficient, easily understood, easy to administer, and simple.
Countering polarization is no simple task, and it is beyond the scope of this book to suggest precisely how to do that. But a few preliminary steps would be helpful. First, reform of Congressional districts is long overdue. Congressional districts should be drawn by a computer algorithm, not by statehouses with an interest in gerrymandering districts to their electoral advantage. Gerrymandered districts have less competitive elections, leading to more polarized members of congress, less voter engagement, and a less functional democracy.
Second, we need to take every step possible to engage the public with the policy-making process. This includes efforts to encourage voter participation as well as public debate. While voter fraud should always be guarded against, there is absolutely no reason for people to have to wait in long lines on a workday to participate in democracy. Elections should be held on weekends, and mail-in ballots and automatic voter registration would both be promising steps forward.
Third, we need to create a common foundation of facts on which to build a lively public debate, generating better policy decisions. Due to the Internet, our news and information systems have changed dramatically in recent years. This offers the advantage of easier access to a wealth of information from around the globe. Yet there are also serious downsides. The personal tailoring of news information and the spread of misinformation (also known as “fake news”) have caused large groups of the public to live in widely disparate realities.1
Protecting Democracy, One Oregonian at a Time
Oregon is at the forefront of a trend less frothy than artisanal coffee or microbrews. It was the first state in the nation to adopt a vote-by-mail system (in 1998), and the first to transition to automatic voter registration (in 2015). Washington and Colorado switched to mail-based systems in 2011 and 2014, respectively, and thirteen other states and the District of Columbia have passed automatic voter registration bills. Twenty-eight more statehouses are entertaining similar proposals this year.1 Oregon’s automatic voter registration requires eligible citizens to fill out a form to opt out of registration if they wish (rather than opt in). The change generates large administrative savings, and large increases in registered voters. In 2016, over 280,000 Oregonians were automatically registered, and voter expansion reached groups that were otherwise less likely to vote.2 The Brennan Center for Justice estimates that a nationwide enactment of this policy would swell the country’s voter rolls by fifty million.3
If Oregon’s turnout rates are anything to go by, t
hese changes will result in greater participation. Oregon turnout in the November 2016 general election beat the national average by over eight points. And there is no evidence of increased fraud. Oregon’s election authorities found only two potential cases of noncitizens voting in the state’s 2016 elections, a rate on par with the rest of the country. Following Oregon’s lead would make our national politics more inclusive.
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1. For data on state adaptation, see https://www.brennancenter.org/analysis/automatic-voter-registration.
2. See data from the Oregon Secretary of State’s office, http://sos.oregon.gov/elections/Documents/OMV/OMV_MonthlyReport_All_December2016.pdf; and Rob Griffen, Paul Gronke, Tova Wang, and Liz Kennedy, “Who Votes with Automatic Registration?” Center for American Progress, 2017.
3. See Brennan Center for Justice, The Case for Automatic Voter Registration, July 2016.
Back when I was a child, there were four news stations on our television (CBS, NBC, ABC, and PBS), and whichever one we turned the dial to, the same basic facts about the world spilled out. There was no way to get one’s television to report only news that was left-leaning or right-leaning, and it was far more difficult for rogue actors to reach large groups of people with “fake news” aimed at manipulating public sentiment.
We need a common set of facts, even if we disagree about the proper policy response to these facts. This will require more education about how to use the Internet and greater outreach to provide the public with information about reputable sources of information that are less prone to bias (or fiction). We need more public conversations about these issues so that people can respond by considering their media choices carefully.2
The tech industry, a key source of these troubles, can also play a role in addressing them.3 For example, Facebook is working to counter “fake news” through several initiatives, including efforts to expand its fact-checking program and to reduce the prominence of disputed content on newsfeeds. Wikipedia has developed Wikitribune, a service that pairs journalists with volunteers to cultivate a fact-checked, proofread, constantly updated article database. Nonprofits are also working to slow the spread of falsehoods across the Internet.
Fourth, campaign finance reform would help make our political process more responsive to people and less responsive to economic power. The populist sense that the system is rigged in favor of the interests of our richest citizens and businesses is fueled by the disproportionate political power of those at the top. Our economic policies and our social norms reflect this disproportionate political power. While campaign finance is one of the most difficult areas to reform, it is also one of the most important.
Finally, just as negative economic outcomes create polarizing political movements, economic successes can generate a virtuous circle. When jobs and opportunities are plentiful, there is a greater sense of common public interest. Moderate, incremental policies are then more attractive to move society forward. Good economic policies pay political dividends.
There are reasons for optimism about the American people. While polling data show that pockets of Americans have fearful attitudes toward foreigners and immigrants, most Americans support an open attitude toward international trade and believe that immigrants strengthen our economy. Most Americans also support the types of policy ideas that are in this book, agreeing that we should have a progressive tax system, that we should invest in education and infrastructure, and that we should expect businesses to do their fair share.
We need leaders that can appeal to the best instincts of Americans, showing a way forward that is positive, bold, open, and pragmatic.
More Equitable Globalization
This book has argued that global markets generate far more good than harm. Global trade makes countries richer, raises living standards, benefits consumers, and brings nations together. When countries borrow or lend, international capital markets can make them better off, and trade deficits are not a pressing problem for the United States. International business fosters efficiency and innovation. Immigration has been an enormous blessing for the United States historically, and immigrants bring essential benefits today. Immigrants boost economic growth, innovation, and entrepreneurship, and they help relieve the demographic pressures of an aging population.
American workers have large and important worries. After several decades of middle-class wage stagnation, economic insecurity is a large problem. Income inequality has divided society, and the role of labor in the economy has changed in unsettling ways. These trends have resulted in skepticism about a “rigged” system and unresponsive, ineffective politicians. Contemplating today’s modern economy, people are concerned that the benefits of globalization are not worth their costs.
Foreign trade, and foreign workers, provide quick and easy targets for frustrated Americans. Yet, closing borders and erecting walls is not the right answer to these pressing societal problems. Such restrictions are more likely to harm workers than help them. Such restrictive policies come with unintended consequences, large collateral damage, and disruption.
And, importantly, such policies only respond to a small fraction of the influences that have caused labor market disruption in recent decades. For example, one important factor is technological change—particularly the rise of automation, computerization, and the Internet. These changes in our economy make it impossible to go back to the labor market of the 1960s and 1970s. And many more factors are at work in shaping labor outcomes, including evolving social norms, changes in tax policy, a larger role of companies with market power, and the role of “superstars” in winner-take-all markets.
This book puts forward a positive policy agenda for responding to the economic stagnation of the middle class and the recent dramatic increases in income inequality. These are not small problems; they require big responses. The agenda outlined in Chapters 9, 10, and 11 is not Democratic or Republican, but brings together pragmatic ideas that are pro-growth, pro-jobs, and pro–middle class. These ideas acknowledge both what works about the global economy and what doesn’t.
This agenda for change is grouped into three big categories, all focused on moving toward a more equitable globalization. They can be broadly described as calling for better policies to equip workers for a modern global economy, better tax policy, and a better partnership with the business community.
Steps toward a More Equitable Globalization
Step One: Better Policies to Equip Workers for a Modern Economy
Make better use of trade agreements to counter policy competition, keeping an open world economy
Help workers meet the demands of the world economy through the earned income tax credit, wage insurance, free community college, and greater economic security
Support community adjustment to trade and technology shocks
Solidify economic fundamentals to compete in the world economy, especially education, research and development funding, and infrastructure
Step Two: Tax Policy Suited to Our Modern Global Economy
Strengthen the earned income tax credit for lower income workers, helping those at the bottom prosper
Retain and strengthen progressive tax system, to ensure that all benefit from the modern global economy
Tax all types of income earned by the same person or business at the same rate, regardless of form or location; close loopholes, including international tax avoidance
Address climate change and keep tax rates lower with a carbon tax
Bring together stakeholders in a grand bargain to reform the tax system
Step Three: A Better Partnership with Business
An embrace of the global economy
Simple, fair regulations
A simple, fair tax code; more transparency on taxes
More transparency on pay structure and labor inclusion
More robust antitrust laws
First, Do No Harm: Peace, Prosperity, and Openness
The above policy ideas go stra
ight to the problems of middle-class economic stagnation and income inequality. But even if these policies prove slow to implement, a starting point is simply to do no harm. We should avoid policies that move in the opposite direction, making workers less economically secure and making the tax system less fair. This may seem obvious, but after thirty-five years in which economic growth has benefited only the top parts of the income distribution, the ideal policy response is not more tax cuts for the top parts of the income distribution. Cutting social safety nets and making health care less accessible is similarly wrongheaded and will only exacerbate the economic insecurity of the middle class.
Moreover, the substantial challenges facing workers do not require a retreat from globalization. Such a retreat would be wrongheaded, simplistic, and dangerous. Blaming foreign trade and immigrants for our economic woes risks hurting the very workers that have suffered slow economic progress in recent decades.
If the United States erects trade barriers, workers in export industries will be harmed by a less open trading system and by the retaliation of trading partners. Higher costs of imported intermediate goods will make US manufacturing less productive, lowering the market share of US firms in the world economy. Consumers will find shopping trips more expensive, and real wages will fall due to the higher costs of imported consumption (and the higher prices of domestic products that compete with imports).
If the United States reduces immigration flows, we will have fewer engineers in Silicon Valley, fewer entrepreneurs opening their first small businesses in New York City, fewer workers to pick fruit and to do eldercare, fewer inventors, and fewer Nobel Prize–winning scientists. We will also have fewer patriotic, hardworking new Americans grateful for their improved living standards. And the demographic pressures of our aging population will weigh more heavily as birthrates and population growth slow.
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