John Edwards' exit from the presidential race puts his supporters up for grabs. Both Sens. Clinton and Obama want those votes. Here's how to win them.
The central plank of the Edwards' campaign was restoring a prosperous and secure middle class, which requires ending wage stagnation and having wages again grow with productivity. This must be the central economic-policy goal of any candidate wanting the Edwards vote.
The generation-long rupture of the wage-productivity link reflects deep structural failings in the economy that must be corrected. Helping-hand social policies, such as trade-adjustment assistance and the earned income tax credit, are welcome, but they are not adequate to the scale of the problem.
Having government try to remedy wage stagnation through after-tax income redistribution does not address the core problem of unfair before-tax incomes. Though a progressive tax system is critical for fairness, it cannot ensure a prosperous middle class. That requires decent wages paid in return for a decent day's work.
The starting point for shared prosperity must be full employment, since only then do workers everywhere have the power to bargain increased wages that equal productivity growth. Monetary, fiscal, and exchange-rate policy must work in coordinated fashion to this end. The best measure of full employment is when wages steadily rise with productivity.
Restoring the balance of power in labor markets is critical for wage bargaining. This requires labor law reform that ends employer intimidation preventing workers from joining unions and bargaining fair contracts, and government must vigorously enforce the law. The minimum wage must be reformed and tied to average wages so that it provides a true floor that rises as the economy grows. Unemployment insurance must also be reformed so that its duration is extended and coverage broadened.
Modernizing financial regulation is another needed measure. The housing bubble and sub-prime mortgage crisis show the financial system is broken. Today, the only instrument of control is the blunderbuss of Federal Reserve interest rate changes that inflict unemployment or inflation. New ideas exist and should be given space through a national financial-markets reform commission that airs all views, not just those of Wall Street.
The debate over fiscal responsibility must be redefined. That debate should be about containing health-care inflation that threatens to bust the budget, and funding needed public investment. It is time to break with conservatives' definition of fiscal responsibility that attacks government and seeks to cut essential programs like Social Security.
Public investment is critical. The economy sits on the edge of a recession and fiscal stimulus is needed to combat that danger. But beyond that, the country must invest in its future and fill the enormous investment gap resulting from a generation of neglect of public infrastructure. Public investment in schools, hospitals, roads, bridges, and public transportation is enormously productive. It creates jobs and raises private-sector productivity, the key to future growth and an essential condition for a prosperous middle class.
Global warming presents new challenges that also call for public-sector investment. Those challenges are an opportunity to create a 21st-century green economy. To that end there is need for an Apollo-scale commitment promoting energy efficiency through new technologies, incentives for energy-saving investments, and improved and subsidized public transportation.
Globalization means international economic policy is more important than ever. The trade deficit has hollowed manufacturing and must be reduced. Policy must put a stop to unfair international competition based on undervalued exchange rates, export subsidies, and unfair trade restrictions. America must also lead in the creation of a new international financial architecture that promotes fair and balanced trade, and only countries that truly join in this endeavor can be allowed full access to the America's markets.
Finally, there is need to tackle the problem of corporate governance and regulation. Corporations have been the major force rupturing the link between wages and productivity growth, and they have also been the major force driving globalization. That calls for a corporate reform agenda that addresses excessive CEO pay, restores shareholder control, and realigns business incentives so that corporations again serve the national interest as well their private interests.
John Edwards' campaign recognized the imminent challenge of recession and advocated fiscal stimulus. Both the Obama and Clinton campaigns have done likewise. However, it is not enough to just change the economic-policy dial settings. The Edwards campaign also spoke to the need to change the long-term direction of the economy by restoring full employment, leveling the playing field between workers and corporations, and fixing unfair competition unleashed by globalization. That's the message that will win the Edwards vote.