The NYT told readers today that "ever since Mr. Clinton’s election as president in 1992, the Democratic Party has been divided over how to balance economic policy between initiatives intended to promote economic growth and those intended to help workers." This one should have brought a big "huh" from careful readers. While it is possible to design policies that might increase growth but hurt most workers, for example trade agreements that put them into direct competition with low paid workers in the developing world, it is possible to design policies that both increase growth and help workers. The most obvious example of such a policy was the decision by Alan Greenspan in 1995 to allow the unemployment rate to fall below the conventional estimates of the non-accelerating inflation of unemployment (NAIRU). The NAIRU has been estimated to be in the range of 5.6 percent to 6.4 percent. Allowing the unemployment rate to fall below this level both gave millions of workers jobs, and also allowed wages to grow for the first time since the sixties. It is also possible to help workers and increase growth by reducing barriers to trade in highly paid professional services, like physicians and lawyers services. In addition, developing more efficient mechanisms to finance pharmaceutical drug research would also hasten growth and aid workers. In short, there is no necessary trade-off between policies that benefit typical workers and policies that promote growth as the NYT article implied.
--Dean Baker