Union members at a Hillary Clinton campaign event in January.

Photographer: Brendan Hoffman/Getty Images

Q&A: Clinton and the Politics of 'Predistribution'

Paula Dwyer writes editorials on economics, finance and politics for Bloomberg View. She was London bureau chief for Businessweek and Washington economics editor for the New York Times, and is a co-author of “Take on the Street: How to Fight for Your Financial Future.”
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Hillary Clinton’s website lists 31 alphabetized policies on everything from Alzheimer’s disease to workforce skills, each with its own 10-point plan. It’s wonky, to be sure. But does it add up to a governing philosophy?

Republicans say no, that Clinton is only offering a bunch of free stuff to Hispanics, blacks, women, gays and other special interests to buy votes. Bernie Sanders says she doesn’t do nearly enough to redistribute income.

Political scientist Jacob Hacker sees the question differently. Known for having coined the "public option" idea as part of the Obamacare debate, the Yale professor more recently came up with the concept of “predistribution, which aims to design government programs to spread economic power and rewards more widely. To Hacker, when Clinton talks about paying for family leave, improving skills, lifting wages, helping parents with college tuition and regulating shadow banks, she’s being more holistic than she gets credit for.

In a May 26 phone interview, I asked Hacker how his ideas have evolved and been received, and whether Clinton believes in predistribution. Here is a lightly edited transcript:

Dwyer: Give me the elevator pitch on predistribution -- what is it, how does it differ from what we do now?

Hacker: The basic idea is that we shouldn’t focus simply on redistributing income and wealth after the fact. It’s the opposite of redistribution, in which the government lets markets be markets, then mops up afterward by taxing the winners to help the losers. We need to fix markets so they are less likely to produce unequal outcomes in the first place.

Most of the really big things that have made societies richer and more equal didn’t involve redistribution anyway. The best example is public education. Policies on labor unions also affected income distribution. And then there are basic macroeconomic policies that assure we get close to full employment, which tends to compress wages and reduce inequality.

Dwyer: What’s wrong with redistributing income?

Hacker: Politicians find it attractive to move away from a reliance on redistribution, which builds resentment and makes tax-cutting more salient with some voters. Redistribution criticism, though, is at odds with reality. Conservatives tend to think of government as helping other people, not themselves. And they focus on benefits that are allegedly unearned, like cash assistance, when our biggest redistribution programs are Social Security and Medicare. Neither is focused solely on the poor.

There also are limits to what the government can do about income inequality after the fact. We can’t close that gap with the earned-income tax credit alone. It’s a successful program, yet everyone who studies it agrees it can’t do all the work.

Dwyer: Have you discussed your ideas with any of the presidential candidates?

Hacker: Yes, I have consulted with the Clinton campaign. I haven’t spoken to Sanders since he started running for president. Her agenda is less reliant on tax increases than his is. She wants to use the public sector to solve problems, and she’s not that interested in wrenching, turn-everything-upside-down reforms of the kind Sanders is running on.

Dwyer: Do you think Clinton likes the idea of predistribution?

Hacker: She is certainly an advocate of making markets work better. There were a lot of people like that in American politics not too long ago. They weren’t anti-capitalist. They believed you needed strong rules and effective government for capitalism to work. It was half of the Republican Party at one point, including President Eisenhower and to a significant extent President Nixon.

Dwyer: What’s happening in labor markets that makes predistribution necessary?

Hacker: Employers are providing such low wages that consumer demand is affected. That gap can’t easily be made up by the government. We need stronger support for what John Kenneth Galbraith called the “countervailing power.” Labor is in decline because of a failure to update labor laws, so income inequality has risen. We have to figure out how to get workers more bargaining clout. The traditional union model no longer suits the economy and is on the verge of collapse. Unions have been trying new methods, such as the fight for a $15 minimum wage, that differ from the traditional collective-bargaining model.

Dwyer: How did the financial crisis affect your thinking?

Hacker: The financial markets are a great example of where government policy made possible above-market returns for a lucky few. It didn’t come about because of too much regulation but because the government stopped effectively regulating. It created an enormous problem for ordinary workers and families, who are bearing the brunt of the long-term income stagnation that has occurred since the crisis.

Dwyer: How has the predistribution concept fared since 2011, when you introduced it?

Hacker: Some policies I’ve called for are in force and having positive effects. Obamacare and the Dodd-Frank financial reforms are two examples of market-oriented changes that aren’t explicitly redistributionist. I discussed the need for the overtime-pay rules with the White House. The public option didn’t make it into Obamacare but it continues to poll well. 

Dwyer: Wasn’t predistribution derided when British politicians debated it?

Hacker: The Labour Party adopted the theme, and it was mocked by Prime Minister David Cameron. He made some jokes, which I thought were pretty funny, about predistribution and me on the floor of Parliament. But the U.K.’s Conservatives aren’t as conservative as the Republican Party in the U.S. Cameron picked up on some of the theme, especially on housing, jobs and the need to encourage greater investment in skills.

Dwyer: Have you changed your mind at all on aspects of this approach?

Hacker: Yes, in a couple areas. We have so much poverty in the U.S. because we have an anemic package of cash and support. I’ve come to appreciate the work of people like Tony Atkinson [a British economist] on the need for wage supplements. I also don’t think I focused enough on macroeconomic policy. I’m struck by Larry Summers’s work on secular stagnation and how hard it now is to get to full employment, which is crucial to creating wage growth to increase demand.

Dwyer: What tools can we use to create demand?

Hacker: I think Summers diagnosed it: We need sustained investment in job creation. We need to talk about a Works Progress Administration for the 21st century, for example, by putting people to work mitigating climate change. The austerity mindset has been really powerful, but at a time when interest rates are so low, borrowing to finance real investments is not a big risk.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

To contact the author of this story:
Paula Dwyer at pdwyer11@bloomberg.net

To contact the editor responsible for this story:
Katy Roberts at kroberts29@bloomberg.net