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Joining me today is economist Michael Strain, Director of Economic Policy Studies at the American Enterprise Institute and a professor at Georgetown University’s School of Public Policy. He is the author of The American Dream Is Not Dead: But Populism Could Kill It and co-author of “Have You Heard the Good News?” an essay in The Free Press that will be the main subject of our discussion. Michael, how are you?
I am well. Thanks for having me.
Let’s walk through this piece. You say that “yes, we have real problems, but widen the aperture, and you’ll see that there has never been a better time to be alive.” Tell me about that.
I think that is self-evidently true. It’s true whether you look at economic outcomes or broader measures of quality of life. But it’s a very controversial statement. Opinion leaders, commentators, and politicians from both parties seem to agree that things are very bad and were much better in the past.
You say all this doomsaying feeds into the populist moment we are living in, and it comes from both sides. Are we living in a populist moment?
I do think we’re living in a populist moment.
There’s always been a populist strain in American politics, but it was amplified by the 2008 crisis. Pat Buchanan’s message from his 1990s presidential campaigns and Donald Trump’s message from 2016 are very similar. Bernie Sanders’ message from the 1990s was very similar to his 2016 campaign. The financial crisis exacerbated this populist impulse: the share of the GOP primary electorate that voted for Buchanan in the run-up to Super Tuesday was around 25 percent; for Trump in 2016, it was around a third.
The financial crisis was global, and in fact we’ve seen a rise of populist politics globally—across Western Europe and the United Kingdom, for instance—that’s quite similar to what’s been happening here at home. My sense is that populist sentiment was reverting to its baseline by 2019, but then the pandemic stirred up a lot of populist sentiment. One characteristic of populism is that it pits the people against the elites, and the elites made a lot of mistakes during the pandemic, such as keeping kids out of school and faulty public health guidance. That exacerbated the populist sentiment.
Tell me about horseshoe theory and the parallels you see between a figure like Zohran Mamdani on the left and a figure like Josh Hawley on the right.
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 toward the extremes. You see it in support for specific policies: both the far left and the far right are more supportive of organized labor than the center left and center right. They are more supportive of using the tax code to penalize certain corporations or industries. But you also see convergence on a deeper level, where the far left and far right are both less supportive of the US Constitution and our Madisonian system than the center left and center right.
I think now is a good time to ask you what exactly you mean by populism, because people use that word in different ways.
I think of populism as characterized by three big things. The first is pitting the people against the elite. The second is a turn inward: the idea that the US should be economically self-sufficient, that globalization and international trade are bad, and that the US should be very skeptical of immigration and isolationist in foreign policy. The third is a deep pessimism about the current state of the country and prospects for the future.
That populist mentality gives rise to zero-sum grievance; the idea that for me to do better, you have to do worse. For the people to do better, the elites have to be made worse off. For native-born workers to do better, there have to be fewer immigrant workers.
The left and right define “elites” differently, with some overlap. Who are the elites being defined as the enemy by the populists on the right and the left?
Both left-wing and right-wing populists are skeptical of big business, rich people broadly defined, and the media. One important difference is that right-wing populists direct a lot of hostility toward immigrants in a way that left-wing populists don’t. They wouldn’t say immigrants are part of the elite, but they would say the elites are encouraging and allowing large immigrant inflows, which is bad for native-born Americans.
The narrative on both sides is that our economic system, and the political system that supports it, has been fundamentally broken for decades. That system exists to serve the interests of the elites, and, because society is zero-sum under their view, if the elites are doing better, the people are doing worse.
There’s disagreement among populists on the right and left about what needs to be done to fix the system, but they agree that whatever replaces it should be much more intrusive. They agree that market outcomes should be altered much more substantially and that economic liberty should be much more curtailed.
So according to this narrative, life in the United States today is terrible, and we need to burn down the system. But you write that there has never been a better time and place to be alive than in the United States today. Lay out the facts for me.
That’s 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 percent. Inflation-adjusted household incomes are way up as well. The wealth of the typical household, after adjusting for inflation, has more than doubled over the last three decades. Consumption is 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 low-income Americans, the bottom 20 percent or bottom third, their outcomes over the past several decades have improved faster than outcomes at the median. So, the evidence is very strong that from an economic perspective, there’s really never been a better time to be alive.
What about inequality?
There’s no question that inequality is a lot higher today than it was in the ‘70s, but most of that growth happened in the ‘80s and ‘90s. My reading of the evidence is that over the last 15 years or so, inequality has either stagnated or declined. Wage inequality has been declining in recent years, and I’m comfortable asserting that we’ve seen a reduction in income inequality over the last decade or two.
I would add that people overstate the importance of inequality. Inequality growth was really rapid in the ‘80s and ‘90s, but people didn’t care about it because average wages were growing quickly, just not as quickly as incomes at the top. Inequality was falling in the decade after the financial crisis, but people were much more concerned about it because the 2008 financial crisis and the Great Recession were such traumatic events. So, I don’t think inequality is really what people are reacting to.
You also discuss non-economic measures of well-being, such as crime and life expectancy. Tell me about some of those.
The story is much the same when you look at broader outcomes. The rate of violent crime has fallen dramatically in the past three decades. Life expectancy dropped in 2020 and 2021, but it’s now once again trending in the right direction. Access to information has obviously never been higher. Leisure time, in terms of paid time away from work, has never been higher. Life in general has also become much safer; you’re much less likely to die of an illness or in a car accident than in previous decades.
Now is actually a particularly strange time to be arguing that our outlook is bleak and life was better decades ago. Think about what artificial intelligence is likely to do for drug discovery, for curing diseases, and for educating kids. We are at the beginning of an age of marvels. We’re likely to see astonishing innovations and improvements in quality of life in the next two decades.
You write that populist leaders actually seem to look down on American workers and households by behaving as if everyday people don’t benefit from material prosperity, low prices, or relatively safe and comfortable jobs.
Can you make that argument comprehensible?
Take the argument that more people should make things with their hands. Many people hear that and think, “Okay, I can kind of get that.” But think about the implications in an economy with a 4 percent unemployment rate. If we’re moving more people into manufacturing, we’re moving people out of services, and service workers earn more on average than manufacturing workers. So, the argument is really that people should move from a higher-wage industry into a lower-wage industry. That may be inconvenient for the populists chasing this vision, but it is just a fact.
There’s an attitude here on the part of populists that it’ll be better for people to work in an industry they have not chosen, that pays lower wages, in a job that’s less physically comfortable or safe than their current job. That strikes me as patronizing and condescending, and antithetical to the way Americans should expect their government to treat them.
How does this piece relate to your book The American Dream Is Not Dead?
The message and arguments are quite similar. The view that the American dream is dead is quite common, with a large focus on the economic components of the American dream, and I don’t see it that way.
You do fear that if enough people believe the dream is dead, they could kill it — that’s the subtitle of your book. How could populism kill the American Dream?
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. A big trade war or big new social programs or nationalization would be very bad for typical workers and households: wage growth would slow, real wages might even decline, and you’d see a reduction in the rate of innovation and productivity growth. More fundamentally, there’s a real threat to our system of democratic capitalism if the government stops respecting the role that markets play in advancing prosperity and feels generally less constrained about stepping in.
Finally, if you introduce 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 the economic gains, you dim people’s aspirations, reduce work effort, and make people less tolerant of risk. You end up creating some of the very problems the populists are incorrectly arguing currently exist.
One thing you do in this book is invite two ideological opponents to provide rebuttals, one from the populist left and one from the populist right, so readers can decide for themselves. One of those arguments is that despite all your data points, there are still real segments of the population who are economically struggling. How would you respond?
There’s no question 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 has recently been laid off, you’re in a tough spot, and public policy should be doing more to connect you with opportunities.
There have also been time periods of real struggle. 2008 to 2014 or so were bad years for lots of households. My goal is not to be Panglossian. Even when times are good, like they are right now, there are groups of Americans and places in America where things are not going well. But part of the problem of populism is that it doesn’t want to focus our energy on those groups or places. It wants to focus on much larger projects like reordering the global trading system or the American healthcare system, and that’s actually to the detriment of the Americans who are really struggling.
