Hillary and Jeb Agree, But Are Both Mostly Wrong
What do Hillary Clinton and Jeb Bush have in common? Not that much, you might think, but on the stump, both have sounded one similar note: They're both worried about Americans who want to work more, but can't.
Jeb Bush has taken a lot of chaffing for his suggestion that Americans need to work longer hours to get the economy's growth rate up, with people outraged that he thinks we should all go back to 16-hour days in order to boost our GDP. As Kevin Drum has pointed out, this is partisanship at its silliest; Bush was pretty clearly referring to people who want to get full-time jobs but can't find them, and are therefore stuck working part-time instead. Now, that group of people is not really large enough to pull the GDP up to anything like 4 percent growth, even if we could get them the jobs they want, but it would go some small way to boost growth. More to the point, it would be a much better thing for workers if our economy was strong enough to provide full-time work to everyone who wants it.
On the left, Hillary Clinton made a similar suggestion in the economic speech she gave this week, promising to boost growth through a slew of measures, including recognizing that "fair pay and fair scheduling, paid family leave and earned sick days, child care are essential to our competitiveness and growth." Funnily enough, this basically similar promise -- that we could somehow get a major boost to growth by getting more people into full-time jobs and keeping them there -- did not come in for similar scorn from the people who leaped upon Bush's somewhat infelicitously phrased remark.
The truth is that both of these promises are right and wrong. It is of course good if people can work more when they want to, and getting more people into more work would boost growth somewhat. But the implication that these things would be a big step toward 4 percent growth, up from around 2 percent lately, is a false hope. Certainly they won't create the torrid growth rates of the late 1990s, as Clinton strongly suggests.
Meanwhile, Clinton's suggestions are mostly an exercise of what Robert Nozick once called "normative sociology": the study of what the causes of things ought to be, rather than what they actually are. The gender pay gap is largely driven by the career decisions that women make, not a corporate decision to pay women less, and government has no meaningful solution to fix it. Paid family leave is not going to increase economic growth, and may in fact cause parents to earn less, by enabling them to take career breaks that hurt their ultimate earning power.
And assiduously as I have searched for better-than-anecdotal evidence that a very large number of women are stuck at home because child care is just too darn expensive, the best I could come up with was a poll that shows a third of mothers citing the cost of child care as a reason (but not necessarily the only one) that they stayed home, and a chart that's sort of vaguely suggestive if you stare really hard at it. However, even if we assume that cheap child care would cause a full third of stay-at-home moms to leap happily back into the workforce, that's about 3.5 million people -- not all that much larger than the number of people who are working part-time jobs because they can't find full-time work. At best you'd give growth a pretty decent one-year boost before it returned to trend. And against any growth effect you have to offset the work hours that would be lost because of all that time off.
That's not to say that these aren't good policies for other reasons; we can leave that debate for a different day. The point is that these things are not, by themselves, going to get us very far towards the levels of economic growth we'd like to have. (Neither are the other policies that Clinton suggests. Also a debate for another day. Many other days.) And that's because both Clinton and Bush get the equation somewhat backwards.
Unless there's some sort of very strong and unnatural constraint that government can remove, like Southern European labor market regulations, or historical social and legal rules about women working outside the home, no change in government policy will drive growth much higher by pushing more people into the labor market. More people will work more hours when growth is high enough to provide the wages and jobs they want.
Of course, that's not something that goes well in a stump speech, because the sad fact is that we know very little about making economies grow. Oh, we know things that can make them shrink, really terrible economic policies like hyperinflation and price controls and draconian labor market restrictions. If you have those problems, you can fix them, and get rapid growth. But if you don't have those problems (and America doesn't), well, here is a complete list of the policies which are known to substantially increase trend growth in a developed economy:
Presidents can't make the economy grow. Millions of Americans, and billions of others, are what drive economic growth, by inventing new and better ways of doing everything from making a sandwich to building an airliner. The government has no control over their ingenuity, and for that, we should really be humbly thankful, because imagine what would happen if we got a less than stellar government?
But the unfortunate corollary is that really, the best a president can usually hope to do is not actively screw things up. If you like lower taxes and less regulation, vote for the Republican. If you want more paid family leave and child care, vote for the Democrat. But don't expect miracles from either of them.
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
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