Advancing a People-First Economy

The Problems Facing the American Political Economy

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Commission on Reimagining Our Economy

Drawing on our listening sessions and our deliberations, this section offers a brief account of what the Commission believes are the most pressing problems facing the American political economy. We formulated our recommendations in the hope that, if implemented, they would help alleviate these problems. Not every Commission member agrees with every element of the problem descriptions that follow. Our members did, however, come to consensus around the general scope of the challenges that Americans face.

Large societal transformations strongly affect people’s economic well-being in the short run, and reshape the political economy in the long run. While it is impossible to predict all such transformations, two are clearly underway: climate change and artificial intelligence. Both are massive in scale, and both are only beginning to reveal their economic and political effects. The Commission chose not to offer specific recommendations on either of these topics. Another Academy report—Forging Climate Solutions: How to Accelerate Action Across America—offers policy recommendations to 1) effectively and equitably remove barriers to climate action and 2) create a whole-of-society approach to accelerating climate mitigation and adaptation.21

Flaws in Our Democracy and Flaws in Our Economy Reinforce Each Other

The health of the nation’s economy and the health of its democracy are inextricable. The Academy’s Our Common Purpose report argues that it is impossible to understand the challenges facing American political institutions, political culture, and civil society without the economic context of the last fifty years.22 The uneven distribution of economic gains is both the cause and the result of unresponsive political institutions. The extent of the unevenness is difficult to ignore. Growth and productivity gains have not been broadly shared. Since 1980, the rise in GDP per capita has outpaced the rise in median household incomes in all member countries of the Organisation for Economic Co-operation and Development, with the United States having the fourth greatest divergence, trailing only the Slovak Republic, Hungary, and Poland.23 Although a tight labor market has recently fueled wage growth for low-income Americans, wages in the top 10 percent of the national distribution have risen much faster than in the bottom 90 percent since 1979, and wages in the top 1 percent and top 0.1 percent have skyrocketed.24 Such uneven distribution of wealth and income has a cascading effect, and many of our Commission members believe it increases levels of economic insecurity and makes opportunity harder to achieve. Many members of the Commission also believe that economic inequality puts our democracy under strain. In the current structure of our democratic system, economic power translates into political power. The notion that our democracy is more responsive to the interests of the rich and powerful has caused many ordinary Americans to lose faith in the ability of the political or economic system to address their needs. This has resulted in less representative institutions, disillusionment, or, more dangerous, a turn to extremism.

A person with brown skin staring at the viewer. They are sitting on two milk crates in front of a power station under an overpass. The power station has “3rd World” written on it.
Photo by Cindy Elizabeth.

“There’s a lot of poor [people] in this area and there are some areas where there is no support. What can we do? We don’t have advocates to help us or stand up for us. And if we do, we can’t find them. We can’t get in touch with them because we don’t have phones. And when you do finally get back in touch with them, they can’t follow through. . . . We’re so far down on the economic chain that we don’t have nothing. It seems like our voices don’t matter.”

— Reuben, Former Welder, Texas (pictured)

The economy shapes democratic life in more tangible ways as well. Multiple listening session participants noted that they want to be involved in their communities but are not able to do so. Many people who work more than one job do not have the time or resources to attend a town hall meeting, volunteer with a local nonprofit, or get involved in politics. And in a democratic society, workers should be able to participate directly in helping shape the conditions of their work. In national surveys, many American workers report having less influence over decisions at work than they believe they should have.25 Many of our participants were appreciative of the chance to take part in the listening sessions, simply because it felt like a rare opportunity for them to make their voices heard. They should have many other opportunities to do so.

There are other challenges in the functioning of the nation’s democracy that exacerbate economic problems. Gridlock in polarized institutions can stymie hopes for legislation that would enable broadly popular economic reforms. The high cost of campaigning can make it hard for the voices of regular voters to be heard and can make it difficult for lower- or even middle-income Americans to pursue elected office. Finally, a divisive political culture makes it difficult for Americans to believe that “everyone is in this together.” People’s fear that the political system will not address their economic concerns ultimately threatens the nation’s political and economic systems.

Reforming the economy without addressing these challenges would be inadequate, as would reforming our democracy while ignoring the nation’s economic problems. One of our recommendations focuses on changing the socio­economic makeup of representative institutions. Other recommendations call for strengthening institutions that can help bring communities and individuals together across lines of difference. Still others address the nuts and bolts of connectedness and address the unfair ways political institutions have been used to serve the interests of a select few.

Economic Insecurity Is Too High

Too many American families live with economic precarity. Despite progress in recent years, the percentage of families relying on food pantries has risen: nearly one-quarter of American adults reported food insecurity in 2022.26 More than nineteen million renters are burdened by housing costs (meaning that these costs make up at least 30 percent of their income), and the number of homeless children in public schools has reached unprecedented levels.27 Economic instability has left many Americans incapable of building a strong enough financial foundation to weather life’s unpredictable events.

These statistics only show the hard facts of financial precarity. They do not account for the mental toll that the stress of insecurity causes for American families and individuals. Throughout our listening sessions, we heard from Americans across a wide range of the socio­economic spectrum who are unable to save enough to account for unexpected emergencies like car accidents, health issues, or natural disasters. The feeling of precarity permeates every part of their life, affecting their work, their civic life, their family, and their outlook on the future. Those who rely on social welfare programs feel that these programs are poorly designed or inaccessible, and do not meet the intended goal of providing American households with a real safety net.

The federal, state, and local responses to the COVID-19 pandemic demonstrated that government assistance, when deployed effectively, can lead to real progress in reducing insecurity. The expanded Child Tax Credit alone sharply reduced child poverty, which fell to a historic low of 5.2 percent of children below the Supplemental Poverty Measure in 2021. While children of all racial backgrounds benefited from the expansion of the Child Tax Credit, poverty rates fell most dramatically among Black children and Hispanic children.28 These successes are proof that the right programs, administered in the right way and under the right circumstances, can make major differences in people’s lives—a lesson that should not be forgotten.

All Americans should be able to expect a basic level of security. Our recommendations are meant to help ensure that all Americans are able not only to cover basic necessities but also to endure life’s ups and downs without fear of financial ruin. We identify strategies to remove barriers preventing security, particularly in health care, housing, and poorly designed social safety net programs. We also offer suggestions for constructing springboards to stability.

A child standing on a gravel driveway outside a house looking at the viewer expressing a sense of confusion while another person wheels away jugs of empty water containers with a dolly. A young child is visible through one of the house’s windows.
A prolonged drought and the detection of hexavalent chromium in the water supply have forced the residents of Tooleville, California, to rely on bottled water since 2014. The nearby town of Exeter has blocked proposals to share its water supply with Tooleville. Photo by Adam Perez.

Working Forty Hours a Week Does Not Always Allow People to Support Themselves and Have a Decent Life

Work is a crucial component of American life and is vital for the pursuit of dignity. People spend much of their time and energy at work. Many Americans achieve a sense of self-worth and agency through their efforts to support themselves and their families. In the Commission’s listening sessions, almost no participants yearned for a life without work—including those who are unable to hold a steady job. While some acknowledged that they need help to get back into the workforce or need better pay or working conditions, they hoped to earn self-sufficiency through an honest day’s work.

The Commission seeks to help restore the social contract in which someone working full time, forty hours a week, can support themselves and their family and achieve a decent life. The Commission defines work capaciously. We take it to include work that is publicly valued and compensated, and also the essential labor of care and of meaning- and community-making that often exists outside our standard assessment of the economy and work life.

The Commission believes that all work has dignity. We also believe that all work deserves dignified compensation. It is unsurprising that Americans who feel they are fulfilling their side of the bargain by working lose faith when they are not sufficiently rewarded for their efforts.

During the height of the COVID-19 pandemic, a wide swath of workers were labeled “essential,” particularly people employed in grocery stores; child, elder, and health care facilities; food processing plants; and the agricultural sector. It was not lost on many Americans that some of the jobs considered essential were among the lowest paid, without robust benefits, and lacking in worker protections. Americans like having packages delivered on time and grocery shelves well stocked, but these things do not just happen. The nation owes more to the workers who are essential to keeping its economy afloat and maintaining its standard of living.

Any affirmation of the inherent dignity of labor needs to be accompanied by practices and policies that ensure workers receive the respect and compensation they are due. These should enhance workers’ bargaining power with employers, increase their take-home pay and benefits, and improve their prospects for better jobs. Some of the recommendations in our report would have this effect, including investments in worker training and upskilling, more flexible childcare and health care arrangements, the deconcentration of economic power where a single employer dominates the labor market, an expanded Earned Income Tax Credit, and the removal of unnecessary regulations keeping workers out of good jobs for which they are qualified.