Chelsea Follett: Joining me today is economist Michael Strain, who is the Director of Economic Policy Studies and the Arthur F. Burns Scholar in Political Economy at the American Enterprise Institute and a professor in Georgetown University’s McCourt School of Public Policy. He is also the author of the book ‘The American Dream Is Not Dead: But Populism Could Kill It’ and the co author of a related recent piece published in the Free Press that will be the main subject of our discussion today. In this piece is just a breath of fresh air and positivity. But before we get into that, Michael, how are you?
Michael Strain: I am well. Thank you. Thanks for having me.
Chelsea Follett: Thank you for joining me. So let’s walk through this piece. You start out by saying a quick look at some recent headlines shows that we have problems. And then you list a variety of those problems.
Michael Strain: Not controversial, I don’t think.
Chelsea Follett: Yes. And then you say, “Yes, we have real problems, but widen the aperture and you’ll see that there has never been a better time to be alive than the present day.” Tell me about that.
Michael Strain: Well, I think that that is self evidently true. And it’s true if you look at economic outcomes, which are obviously extremely important. It’s true if you look at broader measures of quality of life. But it’s a very controversial statement. And there’s a lot of agreement on the part of opinion leaders and commentators and politicians from both parties that things are very bad and that things were much better in the past. And so that’s part of what I’m trying to address in the work you mentioned.
Chelsea Follett: And it’s definitely needed, and you discuss some of the incentives that motivate various people in the press and among politicians to further a doomsday narrative. What incentives are you talking about there?
Michael Strain: Well, there are deep incentives. And the roots of the incentives are human nature. We have a bad news bias as a species where we pay more attention to bad news than good news. We care more about bad news than good news. We’re wired that way. And so if you’re a newspaper trying to sell copies or sell clicks you’re gonna emphasize the bad news. And the old adage is that you never see a headline, airplane land safely. You’re gonna emphasize the bad news. And politicians, I think they want people to vote for them. And every election is a change election. And if you’re a politician and your message is things are actually really good. Yes, we have some problems and challenges, and yes, we have to do some things differently, but we’re going to proceed from a base of strength, that’s just a less attractive message, especially in today’s media environment than things are really terrible but I’m going to fix it. All of this is amplified by the increasing importance of social media and of new media. And so people are just inundated with the view that things are going really poorly. And I don’t think that view is accurate, but I do think it’s pervasive for those deeper reasons.
Chelsea Follett: So those are some of the reasons behind the exaggerated negativity. But you also talk about some of the results of that negativity. You say all of this doom saying feeds into the populist moment we are living in, and it comes from both sides. So tell me about that. Are we living in the populist moment? And to what extent do you see this arising from extremes across the ideological spectrum?
Michael Strain: Well, the extremes arise out of the populism, and I do think we’re living in a populist moment. I trace the origins, really to the 2008 financial crisis, but it’s probably more accurate to say that there’s always a populist strain in American politics in both parties. And if you look at Pat Buchanan’s presidential campaigns in the 1990s, his message and Donald Trump’s message from 2016 are very similar. If you look at Bernie Sanders his message from the 1990s was very similar to his message in his 2016 campaign. And so I really think what happened was the financial crisis exacerbated this populist impulse or made it more common. The share of the GOP primary electorate that voted for Pat Buchanan in the run up to Super Tuesday, was around 25%. For President Trump in 2016, it was around a third. So the ’08 crisis moved that population. One way to think about this is the ‘O8 crisis moved the share of voters who were interested in a populist candidate from one quarter to one third or something roughly like that.
Michael Strain: And I think evidence that the 2008 crisis was the primary cause is that the financial crisis was global. And we’ve seen a rise of populist politics globally as well. All across Western Europe, in the United Kingdom we’ve seen things that look quite similar to what’s been happening in both the Republican and Democratic parties here at home. So that’s where the root of it was. My sense is that we were pulling out of this and that populist sentiment was reverting to its baseline level as we were moving through the last decade. And so 2018, especially 2019, things started to feel like they were getting back to normal. But then we had the pandemic. And the pandemic stirred up a lot of populist sentiment itself. A characteristic of populism is that it pits the people against the elites, and the elites made a lot of mistakes in the pandemic with respect to closing schools and keeping kids out of school, with respect to public health guidance. And so that exacerbated this populist sentiment. And so I think we are living in a populist moment, and we’ve been living in it for a long time now. That’s a long answer to your question. And I did it back again to the ’08 financial crisis.
Chelsea Follett: That’s very thorough. Tell me about horseshoe theory and the parallels that you see between a figure like Zohran Mamdani on the left and a figure like Josh Hawley on the right.
Michael Strain: Yes. So horseshoe theory is the idea that in a two party system like ours, the far left and the far right tend to more closely resemble each other the further you go. And so as you push further to the right and push further to the left, those wings are tending toward each other. And I do think that you see that. You see it in support for specific policies. The far right and the far left, for example, both are more supportive of organized labor than the center right and the center left are. The far left and the far right are more supportive of using the tax code to penalize certain corporations or certain industries than the center right or the center left are. But you also see a convergence on a deeper level where the the far left and the far right are both less supportive of the US Constitution and are and our Madisonian system than the center left and the center right are.
Chelsea Follett: I think now is a good time to ask you what exactly you mean by populism, because people use that word in different ways. What do you mean by populism and what is a zero sum grievance?
Michael Strain: Yeah, so that’s a good question. And I agree with you that people… The term is often used and seldom defined. I think of populism as being characterized by three big, big, big things. The first is a pitting of the people against the elite and a hostile pitting of those groups against each other. So dividing up society into those two groups and arguing that there is animosity between the groups or there should be animosity between the groups, that’s the first. The second characterizing feature is a turn inward. So the idea that economically the US should be self sufficient, the idea that the globalization is bad, that international trade is bad, the idea that the US should be very skeptical of immigration that we should build walls around the country and isolationism and foreign policy, the idea that we should be taking care of ourselves and not engaged militarily abroad. I think that’s a second important feature. And then a third characterizing feature is a deep pessimism about the current state of the country, the current state of economic life, the prospects for the future to be better, a diagnosis of how the recent past has been going, just a deep pessimism across the board.
Michael Strain: And I do think that populist mentality gives rise to zero sum grievance, as you say, where the idea is that in order for me to do better, you have to do worse. In order for the people to do better, the elites have to be made worse off. In order for native born workers to do better, there have to be fewer immigrant workers. This sort of mindset.
Chelsea Follett: So populism pits the people “against the elites”, but the left and the right define the elites somewhat differently, but with overlap. You write that the left blames rich people and corporations, while the right blames rich people they perceive as left wing and woke corporations and so on. So tell me a little bit about those distinctions. Who are the elites, the people being defined as the enemy by the populists on the right and the left.
Michael Strain: Well, it’s never super clearly defined. And I think that’s part of the issue. But a big feature of populism is that it is skeptical of bigness. And so big business is included in the elite definition by both left wing and right wing populists. Certainly rich people are… The wealthy, are billionaires, let’s say, or the top 1% or again there are kind of nuances. But rich people, broadly defined I think are included as part of the elites. The media is part of the elites for both. Both look very skeptically on international trade and on the businesses that working internationally. An important difference is that I think right wing populists really direct a lot of hostility toward immigrants in a way that left wing populists don’t. I don’t think right wing populists would say that immigrants are part of the elite, but I do think they would say that the elite are the ones who are encouraging and allowing large immigrant inflows and that immigrants are bad for native born Americans. There are some differences and there are a lot of similarities, I think.
Chelsea Follett: And you also cite how unfortunately on both the extreme left and the alt right, sometimes things veer off into anti Semitic territory and even outright scapegoating of Jews. You cite James Carville ranting about Jewish donors not giving money to the Democratic Party while he’s fundraising for them. And he says some pretty unhinged stuff that I’m not going to repeat. But however they define the elites, it seems like the populists on the left and the right agree to a large extent on the alleged problems. And in a way they also seem to agree on the alleged solutions which always involve state power. Tell me about that.
Michael Strain: Well, they always involve state power and this manifests itself a little differently. On the left there’s an emphasis on big government programs. On the right there’s more of an authoritarian impulse where what we need is the leader to fix everything. So the left you hear more about programs. The right you hear more about executive power. And the leader, of course both again share similarities. And so the left wants A stronger executive. And the right is very comfortable with lots of government intervention in the market through industrial policy and trade and these sorts of things. But to the extent there’s a distinction, I think that’s it.
Chelsea Follett: You write that the thing that unites them is their claim that the average American is living through a catastrophe that only they can fix. And you also write people will go to extremes only when they are convinced things are terrible and there is a cottage industry, again both press and politicians, working on selling that story. There are a lot of insights there. Tell me about this doomsday narrative that’s been created.
Michael Strain: The narrative is that we have a system and that we have an economic system. We have a political system that supports that economic system and that that system has been fundamentally broken for decades. That system exists to serve the interests of the elites because society is zero sum under this view. If the elites are getting better, that means that the people are getting… Or are doing worse. And in fact there’s reason to believe that the elites have rigged the system intentionally against the people and that that system was just deteriorating and deteriorating to the point that its failings just became manifestly evident to everyone. And that we need to replace that system with something. And here I think there’s disagreement among populists and disagreement among the right and the left, but there’s agreement that whatever replaces it should be much more intrusive into the market, that market outcomes should be altered much more substantially, that economic liberty should be much more curtailed than it has been, and that the things that the elites care about, like economic growth, are things that we’ve been caring too much about and we should care about other things, outcomes for typical workers or things of that nature. So that’s the message from populists and both parties.
Chelsea Follett: All right, so according to this narrative, life today in the United States is terrible. We need to burn down the system, replace it with something else. But you write, our politics today would look a lot different and a lot better if we started from the undeniable reality of today’s extreme broad based prosperity and human flourishing and then tried to make it even broader and even better. So this is where the piece starts to really become optimistic. Lay out the facts for me. Why do you say that from an economics perspective, there has never been a better time and a place to be alive than in the United States today?
Michael Strain: Well, that’s just self evident from the data, especially if you focus on economic outcomes. Over the last three decades, inflation adjusted wages for typical workers have increased by 44%. Incomes or inflation adjusted household incomes are way up as well. If you look at wealth, the wealth of the typical household after adjusting for inflation has more than doubled over the last three decades. What I think we should really care about is consumption, not income or wealth. What are the quantity and quality of goods and services that people are enjoying and using as part of their life? How good is your healthcare, how good is your education? Those sorts of things. And if you look at consumption that’s up at an all time high as well. We should care more about the poor than we care about the rich. But if you look at outcomes for low income Americans or the bottom 20% or the bottom third, you see that if anything, their outcomes over the past several decades have improved at a faster rate than outcomes at the median. And so the evidence is very strong that from an economic perspective, there’s really never been a better time to be alive.
Chelsea Follett: So real wages are up, consumption is up, living standards for low income Americans are up. But what about inequality? I know that’s sort of wrapped up with the living standards of low income Americans, but it is something you discuss in the piece that many people are concerned about.
Michael Strain: Yeah, inequality is a hard thing to measure because you have to define your measure of inequality and you have to define your measure of income. And these are challenging things. There’s no question but that inequality is a lot higher today than it was in the ’70s. But really inequality grew in the ’80s and ’90s. And my reading of the evidence is that over the last 15 years or so, inequality growth has either stagnated or that inequality has declined. And if you’re looking at more straightforward measures like wages, I think we can confidently say that wage inequality has been declining in recent years. If you look at income I’m comfortable asserting that income broadly defined and inequality broadly defined. We’ve actually seen a reduction in income inequality over the last decade or two.
Chelsea Follett: And now you’re… Sorry.
Michael Strain: I would just say that I think people overstate the importance of this. I think that inequality growth was really rapid in the ’80s and ’90s, but people didn’t really care about it. And the reason for that is that average wages were growing a lot in the ’90s. And it’s just that wages at the top are growing faster than wages at the bottom. Inequality was falling in the decade after the financial crisis. But people were concerned about it. Why? Because the 2008 financial crisis and the Great Recession were such traumatic events for most households. And so empirically we can argue that inequality has been on the decline or at most has been stagnant over the last decade or two. But I don’t think that’s really what people are reacting to.
Chelsea Follett: Now you’re an economist, but you also discuss non economic measures because there are other non economic things that we also need to take into account when we are trying to measure well being. You talk about crime, life expectancy, all sorts of things. Tell me about some of these different non economic measures of progress.
Michael Strain: Yeah, as you say, you want to take a holistic look and economic outcomes get the most attention and economic outcomes are arguably the most important outcomes that we should care about. But the story is the same when you look at some other outcomes. And so the rate of violent crime has fallen dramatically in the past three decades. Life expectancy looks pretty good to me. We had a drop in life expectancy in 2020 and 2021, but life expectancy is back to increasing. It still hasn’t recovered from the pandemic. It’s still a little bit lower than it was in 2019, but it’s at least trending in the right direction. And then go even broader. If you look at the access people have to information that’s obviously never been higher. If you look at leisure time that’s never been higher in terms of paid time away from work. If you look at the safety of daily life, how likely are you to die of an illness? How likely are you to die in a car attack, a car accident? How likely are you to die in an airplane accident. Those are all much lower than they were decades ago. And so it’s a pretty strong case that we’re doing really well right now.
Chelsea Follett: And that’s not all you discuss. Medical breakthroughs, artificial intelligence advances, global inequality. Thank you for citing my paper with Vincent on that, by the way. Tell me about some of those other ways in which things have arguably improved.
Michael Strain: Well as you say, I think now is a particularly strange time to be arguing that we want to… That the outlook is bleak and life was better off decades ago. When you look at advances in technology, when you think about what artificial intelligence is likely to do for drug discovery, for curing diseases, for diagnosing illnesses earlier so that survival rates are higher. When you think about what artificial intelligence is likely to do for educating kids, we are in an age of marvels, but we’re at the beginning of that age. And we’re likely to see astonishing innovations and improvements in quality of life in the next two decades. And it’s just very difficult for me to understand how you can look at the future and not conclude that we are… We can debate how transformative these technologies are going to be and we can debate how large the improvements are going to be, but whether we’re trending in a positive or negative direction I think is hard to debate.
Chelsea Follett: And yet some people do just that to the point where you have to actually state in the piece, material prosperity is good. That’s actually a sentence in there. You quote the current administration on the number of dolls that children ought to have. Can you tell me a little bit about this debate on whether prosperity is good or it’s negative and what this has to do with dolls?
Michael Strain: Well, President Trump was asked about whether or not his trade war was gonna reduce living standards. And he was arguing that it wouldn’t and that maybe little girls would have two dolls instead of 30 dolls. Or I think he said maybe kids will have five pencils instead of 250 pencils or something like that. And that’s astonishing to hear the president argue that reductions in material prosperity and in living standards are okay. That’s something that if presidents of either party prior to President Trump had done would have been like an earthquake in our political system. And I think that the President’s comments are situated in a broader effort on the part of populists to downplay the importance of material prosperity. And I agree with you. It’s pretty shocking that that Cliff and I had to write that sentence. It’s even more shocking that that sentence is newsworthy, that that argument is newsworthy because that would have just been taken for granted by everyone until the rise of this current populist moment.
Chelsea Follett: So let’s analyze more deeply this idea that maybe prosperity is not good since although it is counterintuitive, it seems to actually be a somewhat popular idea. You write that populist leaders actually look down on American workers and households by behaving as if everyday people don’t benefit from material prosperity, from low prices or relatively safe and comfortable jobs. So can you make this argument comprehensible? I’m not trying to straw man it, but the idea that poverty would be superior is very difficult for me to comprehend. Yet this argument does seem to politically be resonating with some people.
Michael Strain: Yeah, take the argument that people should, or that more people should make things with their hands. That that’s important. That people like me focus too much on economic statistics. And that life is about more than that. And that part of the good life for many people is making things with their hands. And maybe not everybody should be doing that, but more people should. Well that’s an argument that many people hear and think, “Okay I can kind of get that.” But if you think about the implications in an economy with a 4% unemployment rate, if we’re going to be moving more people into manufacturing, that means we’re going to be moving people out of services. And it’s just the case that services workers earn more on average than manufacturing workers. And so the argument is that people should be moving from a higher wage industry into a lower wage industry. And that may be inconvenient for the populists who are chasing this vision of what look like.
Michael Strain: But that is just a fact. And so there is an attitude here on the part of populists who are part of the elite, as far as I’m concerned. If you’re the president or the vice president or the secretary of commerce or somebody who writes articles in the New York Times, I think you count as being part of the elite. There’s this attitude that, “Oh it’ll be better for them to go work in an industry that they currently have not chosen to work in. It’ll be better for them to go work in an industry that pays lower wages than the industry they’re in. It will be better for them to go work in a job that’s less physically comfortable or less physically safe than their current job.” And that strikes me as patronizing and condescending and as antithetical to the way that Americans should expect their government to treat them and to behave.
Chelsea Follett: And yet in the piece, you also suggest that there are some people who will react to your argument as though it is the condescending one. You write, “We can already hear the chorus. Fat cat billionaire money manager and cloistered ivory tower egghead equals economist, think everything is just hunky dory. Elites like them always do.” And then you go on to give a very balanced view of things, and you conclude by saying, “Despite many very real problems that we should absolutely address, the truth is pretty good.” Can you elaborate on that?
Michael Strain: Yeah, I think that criticism has been certainly leveled against Cliff and me. And the argument is as we say that we’re just out of touch, we’re just part of the elite. What do we know? We don’t know what’s good for typical workers or typical households. And our lived experience disqualifies us from analyzing the situation, which obviously I think is ridiculous. What you kindly describe as balanced, I think is also the empirically correct way to look at things. We should not be satisfied with the current state of American life, including economic life, and we have more to do. We should be doing a better job of connecting workers to economic opportunity. We should be doing a better job of expanding economic opportunity. We should want even more prosperity than we currently have. We should want wages to be growing faster than they are and incomes to be growing faster than they are. We should be wanting to see even more aggressive reductions in poverty.
Michael Strain: We should be wanting to do more to encourage the kinds of innovation that new technologies are making possible. There’s no question about it. But we should be engaged in those efforts from a position of strength and from a position of some confidence that we know what we’re doing. And we don’t need to throw out the entire economic system. We don’t need to blow up the system of global commerce. We don’t need to dramatically reduce the immigrant share of the population. We don’t need to blow up all of our universities. We don’t need to create a brand new system of antitrust. We don’t need to break up big companies. We don’t need to do all these things in order to make life better for the American people. We have a good understanding of the system and we have a system that works pretty well and we need to build on it and we need to improve it, but we don’t need to blow it up. And in fact, blowing it up will be bad for typical workers and typical households.
Chelsea Follett: Tell me about how this piece relates to your book ‘The American Dream is Not Dead’.
Michael Strain: The message and arguments are quite similar. The view that the American dream is dead is quite common and again with a large focus on the economic components of the American dream. And I don’t see it that way.
Chelsea Follett: You do fear though, that if enough people do believe the dream is dead, they could kill it. That’s actually the subtitle of your book, ‘How Populism Could Kill It.’ How could populism kill the American Dream?
Michael Strain: Well, I think that the populist diagnosis of what ails the United States is fundamentally wrong. And the policies that flow from that incorrect diagnosis are going to be harmful and a big trade war or some of the other types of policies that the Republican party wants to pursue. On the left big new schemes for social programs and nationalizing the healthcare industry or whatever. These policies would be very bad for typical workers and typical households. You would see wage growth slow. You might even see real wages decline. You would see a reduction in the rate of innovation, a reduction in the pace of discovery and progress. You would see slower economic growth, slower productivity growth. And so these would all be a threat to the American dream. But more more fundamentally than that there’s a real threat to our system of democratic capitalism where government not respecting the role that markets play in advancing prosperity and governments feeling unconstrained about stepping in and doing things that would substantially reduce prosperity, I think is a broader and deeper threat than a threat that would come from any specific policy.
Michael Strain: And then finally, I think that this system is working. And one of the ways in which the system works is that it harnesses people’s aspirations and people’s work effort and rewards them. And so if you grab two people and one of them earns more money than the other, yeah, you can make a pretty good bet that the reason for that is because the higher income person has more skills, works harder, has a higher risk tolerance has made choices to prioritize earning income, et cetera, et cetera. And so if you introduce into that system the pervasive belief that the game is rigged, that hard work doesn’t pay off, that typical workers can’t get ahead because the elites are expropriating all of the economic gains for themselves, well, then you could dim aspirations, you could dim the desires and hopes of people for their careers and their lives. You could reduce the work effort people have, you can make people more intolerant of risk, and you can end up creating some of the very problems that the populists are incorrectly arguing currently exist.
Chelsea Follett: And that would be a great tragedy, especially given all of the different kinds of progress that we would be giving up. In this book, you back up your arguments with an overwhelming amount of data showing many different facts that favor this realistic, rational optimism that you’re promoting. Can you give some brief facts, a quick overview of some of these data points that we haven’t yet gone over because there are so many data points in this book?
Michael Strain: Oh, well, I discussed some of the information we have about economic mobility. I take a look at the middle of the labor market and try to make the argument that we haven’t seen a permanent hollowing out of the middle and that it’s still quite possible to have a middle class career and lead a middle class life, things like that.
Chelsea Follett: One thing that you do in this book, which I really like and I wish more books would do it, and which I think shows the strength of your confidence in your arguments is that you actually invite two ideological opponents, two people who disagree with you, to provide rebuttals that you lay out in the book so readers can see a response to your arguments, one from the populist left and one from the populist right and decide for themselves where they stand and within these rebuttals… Well, one of the arguments is that despite all of these data points that you provide, there still are real segments of the population who are economically struggling. And I’m curious how you would respond to this. These pockets of genuine struggle within American life, even if that’s not reflected in the broader American experience. Clearly this is something with great political resonance and there are some groups who do have lower employment and who are economically struggling.
Michael Strain: Yeah, there’s no question about that. And we should be concerned about that and we should be focusing our energy on those pockets of problems. If you’re a 50 year old man who did not graduate high school and who has recently been laid off you’re in a tough spot and public policy should be doing more to connect you with opportunities and to help you to lead a full and flourishing life. There have also been time periods of real struggle. I think 2008 to 2014 or so those were bad years. Yeah, they were bad years for lots and lots and lots of workers and households. And so my goal is not to be Panglossian. I think that there are periods where we’ve really as a country gone through some real struggle. And I think that even when times are good like they are right now there are groups of Americans or places in America where things are not going well and we should be again, focusing our energy there.
Michael Strain: I think part of the problem of populism is that it doesn’t want to focus our energy there. It wants to focus energy on these much larger projects of reordering the global trading system or reordering the American healthcare system or take your pick. And that’s actually to the detriment of the groups of Americans that are really struggling.
Chelsea Follett: CEI’s Richard Morrison actually provided a review of your book in the Cato Journal, and it’s a positive review. But he does note one thing that I think unfortunately may be true. He writes that despite all of these very convincing data points, you have this overwhelming amount of evidence to back up your view. He writes, “Hard data will likely have a disappointingly small impact on a movement that is ultimately more about values and emotions than numbers.” What do you think about that?
Michael Strain: Well, that’s certainly true, at least in the short term. I think ultimately over the medium term or certainly over the longer term, political success has to rest on a foundation of policy success and policy success has to rest on a foundation of accurate empirical analysis. And so sure, for any given election, emotions and personalities and those sorts of factors can overwhelm evidence based arguments. But when push comes to shove, politicians have to deliver results and voters know whether or not that’s happened. And if I’m right, then populist policies aren’t going to work and therefore they’re not going to be successful. Now an exceptional political leader and political talent like President Trump or even like Bernie Sanders on the left might be able to come along and…
Chelsea Follett: Or Mamdani.
Michael Strain: Or Mamdani. We’ll see how he does. Might be able to come along and overpower that. But that’s a one off and that’s not the new normal.
Chelsea Follett: Well, I hope that your piece and your book both get the attention that they deserve and that some more people look at the evidence and the data with an open mind. Thank you so much for speaking with me. This has been fascinating.
Michael Strain: Thanks for having me. It was a good conversation.