Democracy in America | The Clinton economic plan

The kitchen sink

The Democratic front-runner adopts the populist policies of her rivals on the left

By H.C. | LONDON

HILLARY CLINTON had probably hoped to avoid the usual rollercoaster of American presidential campaigns, in which candidates must first swing towards the party base in primary elections only to veer back towards the centre for the general election. Yet the Democratic frontrunner has had no such luck, owing in part to a tenacious challenge from Bernie Sanders, a self-described socialist senator from Vermont. Judging by her speech on the economy on July 13th, Ms Clinton is feeling the pressure to lean leftward.

Ms Clinton says her economic priority is to raise wages. That is welcome. The real median household income is lower than in 1996 (see chart). Wage growth, says Ms Clinton, is the best barometer of economic success. In a dig at Jeb Bush, a Republican frontrunner who wants to raise the country’s growth rate to 4% per year, Ms Clinton said boosting wages is better than an “arbitrary” growth target­­—especially when the link between GDP and wages has been weak since the recession.

The first part of Ms Clinton’s plan for wages is, nonetheless, continued growth. More growth, she explained, will create jobs and force firms to compete more aggressively for workers, which should bid up wages. Yet she omitted to mention that the kind of demand management necessary to tighten the labour market is usually the domain of the Federal Reserve. The Fed must steer the labour market back to equilibrium—and no further, lest inflation surge. A presidential plan to boost wages cannot rest on a tight labour market.

Much better to grease the wheels of the economy’s supply-side. Ms Clinton promises to do as much by improving America’s woeful infrastructure. Like President Barack Obama, she wants to establish a government-backed infrastructure bank to finance investment (such banks already exist at the state level). She also promises more training for workers of all ages; one of the only definitive policy announcements in the speech was a $1,500 tax credit for every apprentice a firm hires. Finally, Ms Clinton wants to increase labour-market participation among women—which has mostly fallen since 1999—by providing more affordable child care.

Where Ms Clinton had most to say, though, was on how to divide the spoils of growth more fairly. For instance, she lamented the decline in union power, which she partly blames for rising inequality. She emphasised that trade deals should be scrutinised to ensure that they benefit American workers. And she promised to crack down on firms who “wrongly” classify their employees as contractors rather than employees—rhetoric which is sure to worry Uber and other techno-middlemen. The digital revolution, Ms Clinton said, is sparking innovations and bringing flexibility but also threatens to undermine labour regulations.

Ms Clinton’s ideas are not confined to boosting pay; she also wants workers to have more capital. In the most eye-catching part of the speech, she promised tax breaks for firms which promote employee ownership. Details will be revealed later.

Taken as a whole, Ms Clinton’s plan is an eclectic grab-bag. It is as if her advisors brainstormed every possible policy to boost wages, and then kept them all. Some—such as greater investment in skills and infrastructure—are welcome. Wages, ultimately, reflect workers' productivity. Ms Clinton is also right that the impact of technology on the labour market presents a huge and perplexing challenge for policymakers. But greater union power and more protectionism are comfort-blanket polices for which the economy—and most Americans—would pay a price in the long-run. Ms Clinton’s speech contained plenty of ideas. Perhaps when Mr Sanders exits the stage, some of the duds will be dropped.

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