As U.S. Economy Grows, Many Americans Struggle To Face Trade-Offs Many economists say stronger growth is a reliable path toward boosting opportunity. But they also agree that many Americans are not ready to face the trade-offs that come with a more dynamic economy.
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As U.S. Economy Grows, Many Americans Struggle To Face Trade-Offs

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As U.S. Economy Grows, Many Americans Struggle To Face Trade-Offs

As U.S. Economy Grows, Many Americans Struggle To Face Trade-Offs

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How can you create economic opportunity for more Americans? A lot of candidates say all you have to do is make the economy grow faster, and a rising tide will lift all boats. NPR's John Ydstie looks into that claim as part of A Nation Engaged. That's our election-year project with member stations.

JOHN YDSTIE, BYLINE: A rising tide lifts all boats has been a staple of U.S. political rhetoric since President John Kennedy used the phrase back in 1963. But does it make sense in 2016?

DEAN BAKER: Well, I actually think there is a lot to that. I mean it's not the whole story.

YDSTIE: Dean Baker of the Center for Economic and Policy Research says even in 2016, boosting the economy's growth rate would do a lot to create jobs and opportunity for most Americans. He says just look back at the late 1990s, a time when growth was strong.

BAKER: We've got 4 percent unemployment, and we saw a good wage growth up and down the income ladder.

YDSTIE: It's the only time in the past 40 years that growth was strong enough to reduce income inequality significantly. So how do we get the economy to grow faster? Well, in the 1990s, the Federal Reserve held off raising interest rates even as unemployment reached historic lows. Baker says today's Fed should heed that lesson.

Baker and other economists, including Susan Helper of Case Western Reserve University, say there's another pretty obvious way to boost growth. Spend a big chunk of government money on infrastructure.

SUSAN HELPER: We could do that almost no financing cost because interest rates are so low.

YDSTIE: Right now the government can borrow money for 10 years at interest rates well below 2 percent. Helper says private industry is held back when government fails to invest in roads, bridges and ports, and spending money that way would give more workers jobs and put upward pressure on wages.

HELPER: And in the long term, it would create infrastructure that allows business to be more efficient and to grow faster.

YDSTIE: Candidates Clinton and Trump both support boosting infrastructure spending. But while faster economic growth is necessary to create jobs and opportunity, Helper says it's not enough to lift everyone's boat. Just look at the booming growth in places like Boston and San Francisco while some Midwestern cities are struggling. This week we focused on Springfield, a small Ohio city that once thrived on manufacturing, but for decades, it's lost jobs and incomes, as factories closed.

As we've reported this week, Springfield is attempting a comeback. One strategy is downtown revitalization. Margaret Mattox is in the middle of that. Eight years ago she and her brother started an upscale restaurant here called Seasons. It was a big risk.

MARGARET MATTOX: Yeah, I was scared to death. The night before we opened I thought, (laughter) what if nobody comes, you know? What if nobody shows up?

YDSTIE: People did show up. The lawyers, bankers and medical professionals working downtown became regular customers. But Mattox worries there aren't enough of them.

MATTOX: It's a challenge. I think the market is somewhat limited in Springfield of the people who want to pay $12 for a sandwich and a side.

YDSTIE: Springfield is trying to boost local incomes with education. There's a new public technology and engineering school here. Education is important, says Tyler Cowen, an economics professor at George Mason University. But he says it's not a silver bullet.

TYLER COWEN: You can get a good education, but a lot of tech now changes so quickly that that's rapidly obsolete. So the question really is, can you retrain yourself very quickly all the time? And the percentage of people who can do that is actually relatively small.

YDSTIE: And Cowen says even getting a decent education in the first place is not a given.

COWEN: The bottom third of the American system of education is a complete wreck.

YDSTIE: Cowen says one way to remedy that is vouchers that give parents the option to move their kids to better-performing schools. Dean Baker promotes vouchers for another barrier that many Americans face - finding affordable housing in good communities.

BAKER: When children grow up in these pockets of severe poverty, they're seriously disadvantaged. So when we could allow people, lower-income people to move into middle-income neighborhoods. That's a really good thing to help people at the bottom.

YDSTIE: Baker says another reason for the widening income gap is that trade agreements have forced U.S. factory workers to compete with workers overseas. Meanwhile the incomes of U.S. professionals are protected.

BAKER: We've done little or nothing to make it easy for smart kids from Germany, Japan, Mexico, China to train to our standards and come to the United States and work as a doctor.

YDSTIE: Opening U.S. professions to the same international competition that U.S. factory workers face would lower the costs of services for all Americans, says Baker.

So there's no shortage of ideas for how to help Americans at the bottom of the income ladder. But Tyler Cowen says despite our political rhetoric, we haven't made it a priority.

COWEN: All of these changes - they would hurt someone. We have this myth that we can grow and be dynamic while no one has to lose anything, but some home values must decline. Some people have to live in more integrated neighborhoods. Some professions will earn less money as we open them up to more competition.

YDSTIE: But, Cowen says, Americans are not mentally prepared to face that yet. John Ydstie, NPR News.

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