States Lead in Initiatives to Advance Economic Opportunity

While efforts at the federal level to advance economic opportunity are often bogged down by partisan bickering, innovations in policies to protect the economic security of Americans can increasingly be found at the state level.

As part of their agenda for a “New National Economic Security Plan for the 21st Century,” the National Employment Law Project focuses on state initiatives that protect the economic security of workers and their families during recessions or periods of joblessness through unemployment insurance, family and medical leave insurance, health insurance for jobless families, mortgage insurance and worker retraining funds.

With federal reforms lagging, states have increasingly been filling gaps in assistance to their communities. According to the report, California’s new program of paid family and medical leave has been a model for other states looking to implement similar initiatives, while North Carolina has been at the forefront of a new zero-interest loan program to cover the mortgages of families who are at risk of losing their home when facing temporary financial setbacks.

State-level campaigns to raise the minimum wage are another example of where states are leap-frogging over the government to implement reforms more swiftly. As the New York Times reported today, 29 states currently have minimum wages higher than the federal one.

Many of these initiatives–and others like them—are inspiring examples of successful bipartisan efforts to improve the social trampoline for Americans in the face of economic uncertainty.

Still, partisan differences persist, especially in the policy-idea world. While NELP propose federal-level reforms to augment these state policies, others, such as the Heritage Foundation argue for a model that would rely on privatizing social security and unemployment insurance, providing individuals with their own accounts to contribute to and draw on in the event of economic hardship.

Nonetheless, the larger question is whether states should continue to fill the vacuum created by slow government progress on these fronts, or whether the government should step in and create federal policies that will reach all Americans?

Amanda Levinson | Director of Policy Programs

The Trade Debate

By Matt Rose, HSG Trade Team Leader

The prevailing wisdom on the subject of free trade over the past decade has been that free trade is good, and any short-term challenges brought about by free trade are necessary bumps along the road to economic nirvana, we only needed to be patient. In the most recent election cycle, however, a decidedly different view helped a number of Democrats win seats in Congress. This stance, largely protectionist in nature, states that it’s time to close our border so that domestic workers are protected from the economic dangers inherent in free trade. After all, the argument goes, open trade means jobs transferred from the U.S. to foreign lands, and the only real winners in the free trade game are corporations and their rich executives.

Hope Street Group believes both positions ignore important realities, and that wise public policies must help the U.S. economy realize the economic benefits of free trade, while enhancing workers’ ability to mitigate the all-too-real risks posed by short term disruptions brought by more open trade.

Few would disagree that the economic benefits of free trade are considerable. Trade creates new markets for U.S. exporters, which creates jobs both with exporting firms as well as companies along the exporter’s supply chain and distribution channels. Trade also generally leads to lower prices (or at least lower rates of inflation), as lower tariffs reduce the cost to import to the U.S., which in turn makes various economic ‘inputs’ less expensive. This allows managers to find suppliers providing higher quality goods at lower prices, which are frequently passed along to the consumer. Lastly, more open trade is good for less developed nations—for example, lower barriers to entry for African farmers may literally be a matter of life or death for themselves and their families, and almost certainly would dramatically improve the quality of lives.

Nevertheless, the protectionist argument raises some legitimate concerns that are rooted in reality. Without restrictions, companies can, (and many have), moved jobs overseas to countries with highly educated and skilled workers who demand lower wages than their American counterparts. Such outsourcing can be considerably disruptive to local economies, not to mention the lives of individual workers, because regardless of the economy’s overall unemployment rate, if you are the one out of work, it feels like 100% unemployment. And the phenomenon is not just individual jobs; whole companies struggle (e.g. Ford) and at times entire industries have succumbed to the forces of free trade (textiles in the Southeast). And this phenomenon is relevant for an ever-widening group of U.S. workers – manufacturing has already been impacted, but technology allows an increasing range of white-collar jobs to be done anywhere in the world. Telecommuting may not only be working from home, but may eventually mean working from another continent.

So, what to do? First, policy makers need to acknowledge both the good of free trade and the risks inherent in its practice. Congress and the President should embrace free trade and pursue broad agreements preferably across regions, but if necessary, with individual nations. In order to restart momentum in discussions, U.S. policy makers should offer far greater access to our agricultural markets in exchange for support in IP enforcement and other policies reflecting the high-tech and service economy that exists in the U.S.

Simultaneously, policy makers should enhance workers’ abilities to navigate the challenges that flow from free trade. Policies which encourage personal but flexible retirement savings, medical savings, and other investment will have deep benefits for workers and the economy. Benefits should be easily portable from one job to another, and these benefits should be assets for workers in times of unemployment of underemployment. Further, the U.S. government should enrich their data reporting, providing more detailed data in a form usable by workers to make wise decisions; regional employment trends, for example, would allow workers to make appropriate decisions which would enhance the probability of finding appropriate work in a shorter time period. Lastly, the U.S. education system needs to be revitalized to ensure that today’s students are capable of acquiring tomorrow’s skills. In a high-tech, high-skill economy today’s high school education is insufficient.

By clearly identifying the benefits of free trade and the risks to workers, our leaders can craft wise policies that enhance the economic benefits of free trade, while helping workers mitigate the risks they face, and by doing so, will support a growing economy with wider opportunity for all.

The Ideas Race

The race is on for new ideas. Since the election, Democrats and Republicans alike have been searching for new, innovative ideas that break with the perceived polarized ideologies on both Right and Left. Both parties seem to have accepted that the results of last month’s elections were less of a mandate for Democrats to govern as a ruling party than a challenge by voters to both sides of the aisle to do what President Bush said he would do when he ran for office in 2000: to be uniters, not dividers, and find solutions that put practicality above ideology. Wary voters, Democrat and Republican alike, are tired of the status quo, and are looking to be courted by the party with the best ideas for America’s future.

The old ideas will not work anymore—the calls by some Democrats to end free trade agreements and outsourcing will not stop globalization, protect American workers, or make our nation more competitive in the long run. The old conservative rallying cry to keep government small at all costs is counterproductive in an era when strategic government intervention could help Americans accumulate assets and be prepared to excel in a fiercely competitive global market.

The past few weeks have seen a flurry of soul-searching in the media, particularly on the Republican side, as analysts urge leaders of their party to refocus from divisive social “wedge” issues to finding real solutions to education achievement, encouraging asset accumulation, strengthening the social safety net through incentives, and offsetting the negative impacts of globalization on American workers. As Michael Barone of realclearpolitics.com notes, Republicans would do well to look for examples of innovative and successful policies at the state level, and across party lines.

Ideas from the moderate Democratic center sound surprisingly similar in tone and content. Despite predictions that our Congress will remain as divided as ever, could these be signals that seeds of a new consensus are emerging?

At stake is more than the 2008 election. It is also the confidence in our policymakers to govern in the best interest of the American people. At the same time, the media and the American public must understand that trading ideology–which is often the most efficient way of getting things done–for pragmatism and true bipartisan collaboration will take time. Hopefully, the end results will be worth the wait.

Amanda Levinson | Director of Policy Programs