Alice Rivlin: My final thoughts on how to heal divisions in America

Note: Alice Rivlin, the founding director of the Congressional Budget Office and former vice chair of the Federal Reserve, passed away earlier this year as she was writing this article with her son Allan and his wife Sheri. They are now completing her final manuscript, “Divided We Fall: Why Consensus Matters,” planned for publication by Brookings Institution Press next year.

The United States was once defined by the confident perception that we sometimes called American exceptionalism. Our “can do” attitude and spirit helped us win two world wars, land on the moon, invent much of the global economy, and create a working class that was the envy of the world. Now we wonder whether we are coming apart at the seams.

Our country is divided in ways that bring to mind the social upheavals of the 1960s, or worse, our great Civil War of the 1860s. The rise of “red state” versus “blue state” hyperpartisanship has now metastasized into increased racism, nationalism, xenophobia, and homophobia that are far too often expressed through violent attacks. A truly great country worthy of a modern exceptionalism would rise to the challenge to heal the wounds of hate and division by giving all Americans opportunities to participate in a growing economy that offers them shared prosperity.

When we look deeply at the political and cultural divisions cleaving the United States, we consistently find extremes of inequality adding fuel to these fires. Stark differences in current economic security and future prospects bring fear, distrust, and resentment. High earners in booming cities are able to separate themselves and their families by participating in the global knowledge economy. There is economic insecurity on the city streets below and in suburban areas, small towns, and rural counties in the parts of the country that have still not seen a recovery, where people struggle to pay monthly bills, pay down debt, and cover the costs of education, health care, and housing, while hoping for a better future.

Economic inequality has two important dimensions. A plan to tackle both vertical and horizontal inequality could go a long way toward uniting our red state and blue state nation, and breaking the hyperpartisan gridlock in Washington. Democrats understand vertical inequality, which is most visible in big cities where extremes of wealth and poverty live in close proximity. Republicans pay more attention to horizontal inequality, which are differences in wealth and growth between the big cities generally on the coasts and the rest of the country in the deindustrializing heartland where agriculture and manufacturing have been in a long term decline.

Political progressives have been drawing attention to vertical inequality for years and have developed a solid list of proposals designed to shrink the gap between the small number that earn the most and the large number that earn the least. There are many proposals to increase taxes on the richest Americans, starting with calls to reverse the Republican tax cuts for corporations and wealthy individuals, through ideas to close tax loopholes and proposals to tax the families with the greatest assets.

At the other end of the income scale, there could be bipartisan agreement to strengthen the social safety net and “make work pay” by expanding the earned income tax credit. Rather than just giving people money, policies to help people afford more education and technical skills training could lead to better jobs, and transportation assistance would help them get to jobs. Programs that strengthen child care, preschool, health care, and home health assistance would help to raise pay and standards for some of the most important but least well compensated workers in our society, which are those that take care of the youngest and oldest Americans.

Republicans have been more consistent in highlighting the pain and resentment in the heartland and rural areas where there has been no recovery. Their principal policy, including opportunity zones in the tax reform legislation, if well administered to encourage projects that benefit struggling families in economically challenged communities, rather than just lowering taxes for developers gentrifying those areas, is a small positive step but it is simply not enough. A new national economic strategy to bring better paying jobs to the parts of the country that are falling behind is needed and could gain widespread voter support.

This does not have to mean greater power in Washington. Instead, it needs to respect and support the success that state and local leaders have had in writing their own turnaround stories. While Washington has been incapacitated by hyperpartisan warfare, cities like Cleveland, Pittsburgh, Nashville, and Atlanta have been bringing together local leaders, Republicans and Democrats, businesses and labor groups, and educators and law enforcement, to come together and identify relative strengths, develop regional economic strategies, and set priorities for investments to grow local businesses and create better paying jobs.

Many next level towns like Akron, Louisville, Knoxville, Dubuque, and Huntington have been following the same playbook and gaining traction. Although every story is different, the patterns of success are emerging. Regional economic strategies generally involve investment in education, innovation, infrastructure, and healthy communities. We have to train people to prepare for the jobs of today and tomorrow, starting with early childhood education through high school, job training academies and community colleges, and on to advanced degrees and technical skills.

We need apprenticeships and a culture of lifelong learning, so every American has access to the skills needed for better jobs in the modern economy. We must support innovation by building bridges between businesses and researchers at local colleges and universities. Many towns are having success with business startup incubators and with identifying some future growth areas such as regenerative agriculture, advanced manufacturing, sustainable energy, and knowledge based industries. 

There are many reasons for a major national investment in infrastructure, starting with public safety concerns and annoying traffic jams caused by aging roads and bridges, but there is also a very strong economic case to be made for a broader discussion of necessary investments to improve local productivity and international competitiveness. Different areas will have different priorities, but we must connect wind farms and server farms with a smart energy grid. Upgrading freight rails, waterways, and seaports will help get manufactured goods to customers. With some areas of the country still not served by mobile and broadband networks, we should make it a priority to ensure that 5G does not become a new digital divide between urban growth centers and areas with lower populations.

Economic growth depends on attracting and retaining young workers. This requires a healthy vibrant community where people want to live and raise a family. Young people want movie theaters, restaurants, and bars so most midsize cities and small towns that are successfully reversing their declining populations have been rebuilding downtown areas and river walks with better lighting and community policing so people feel safe and businesses can grow. Regional hospitals, which are often the largest employers, are also to healthy communities and should be kept open.

Healthy communities also take care of their poor and elderly. This is where tackling vertical and horizontal inequality comes together. Economists call the efforts to address vertical inequality “people based” policies and the efforts to address horizontal inequality “place based” policies. A new national economic strategy combining both approaches would have broad support, and would bring greater inclusiveness and opportunity to the people and places across our country that have been falling behind.