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U.S. economy grows as election issue

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BOB MOON: It seems a lot of us are growing more concerned about a recession. A Reuters/Zogby survey out today indicates voter malaise is beginning to color views on the presidential election, much the way it did back in 1992 when the Clinton campaign’s focus was “It’s the economy, stupid.” New York Times economics columnist David Leonhardt writes today that candidates would be well-advised to pay attention to that advice this time around, especially if they want to connect with the American middle class. Mr. Leonhardt, thanks for being with us.


MOON: You argue in your column today that the middle class is struggling more than ever before. How so?

LEONHARDT: It’s a little bit tricky because some of this has to do with expectations. In many ways the middle class is better off than it has ever been, but we used to have, pretty consistently, increases in living standards year to year. People in the middle class could expect that they would be able to buy more this year than they could last year, and those gains have really slowed to a crawl. And the current expansion, which began in 2001, they’ve essentially slowed to nothing at all, and that’s very frustrating for a lot of obvious reasons. It’s people feel like they want to be moving ahead, and yet they often feel like they’re staying in one place.

MOON: Deja vu here. Why does this sound so much to me like 1992?

LEONHARDT: Because in many ways it is like 1992. When I look at the polls, when they ask people “how do you feel about the state of the economy?” we’re really very similar. If anything the mood is a little bit worse going into this time. So I think the parallels to 1992, while not quite exact, because the timing’s a little different with the election, because there isn’t an incumbent president, I think the parallels are really quite strong.

MOON: We heard today that Democrats and Republicans on Capitol Hill have agreed to come up with a bipartisan stimulus package to deal with the recession. Is that going to be enough to satisfy the middle class when it comes to this problem.

LEONHARDT: Well there’s a short-term problem and a long-term problem here. Short-term I think a stimulus is really a good idea, but no short-term stimulus package is going to solve these longer-term issues. These issues with middle class pay gains that we’re talking about don’t involve any one president. They don’t even involve any one decade. They stretch way back to the mid-1970s. I think the most important thing to do is get this stimulus package passed, get beyond it and then hopefully return the discussion to some of the more serious longer-term issues.

MOON: And so what do you see as the possible long-term fixes here?

LEONHARDT: Well I think the first long-term fix is education, and I think the Republicans tend to be more right on this than the Democrats. The Democrats are very closely aligned with the teachers’ unions which means they tend to see education much more as a jobs program for a very large number of middle class people — teachers and their families. In some ways that’s understandable. The Republicans are much more willing to buck the unions, and so their much more open to ideas like school choice, so what I’d love to see is some sort of solution in which we have the Democrats’ desire to bring the amount of resources they want to bring to education, combined with the Republicans’ desire to make it more flexible.

Beyond that I think you have to look at healthcare, which is a huge source of anxiety because people worry that if they lose their jobs they’ll lose their healthcare, and they’re often right. And then finally there’s the tax code. There’s no getting around the fact that not only have the rich gotten much bigger pay increases than the middle class, but their tax rates have also fallen a lot more over the last couple decades. So middle class people not only haven’t gotten big tax cuts, they’ve gotten small tax cuts. They’ve gotten very small pay increases, so I think if you’re looking at this from a long-term perspective, making the tax code more progressive than it is today probably needs to be part of the solution.

MOON: David Leonhardt is economics columnist for the New York Times, appreciate your insights.

LEONHARDT: Thanks for having me on the show.

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