In Switzerland last week, U.S. Representative Eric Cantor (R-Va.) told Bloomberg TV that the Republican delegation to Davos had among other things been “trying to learn from others to see the best way forward with education, with opportunity, and the rest.” At home, he was disappointed to find President Obama failing to act on areas of agreement. “All of us want to grow the economy … that means more jobs, upward mobility,” he said.
Cantor circled back around to upward mobility a couple minutes later into the interview, answering a question about possible concessions House GOP leaders might demand in return for agreeing to raise the debt limit. “Keystone,” he said, referring to TransCanada’s oil pipeline, “regulatory reform—anything that is holding back our economic growth, which tamps down upward mobility, would be something I’d be very favorable to.”
The White House has signaled that Tuesday night’s State of the Union will focus on economic mobility, a measure of how easy it is for a kid born in poverty to make it to the middle class. President Obama favors universal pre-K, stronger unions, and a higher minimum wage. Cantor’s statements in Davos amounted to a preemptive response: Mobility is a function of economic growth. If the president cares about mobility, he shouldn’t do anything that will hinder growth. Cantor is partly right. In the past, economic growth has helped increase economic mobility. But the kind of growth it takes isn’t right remotely within the grasp of anyone in Washington.
Thomas Piketty, the French economist most responsible for the idea of the 1 Percent, has a new book coming out in English this spring, audaciously titled Capital in the Twenty-First Century, in which he points out that rapid economic growth, like what the U.S. saw from the 19th to mid-20th century, or like what China has been experiencing for the last two decades, is good for economic mobility. That kind of growth creates new fortunes and makes old ones less important.
The problem for Cantor is that it’s not at all apparent how to re-create that growth in the U.S. Lawrence Summers at Harvard believes we’re caught in what he calls a “secular stagnation,” a long-term lack of economic growth that has nothing to do with business cycles. Tyler Cowen at George Mason University in Virginia believes that developed economies have already picked what he calls the “low-hanging fruit” of rapid growth—educating children and putting a washing machine in every house. To get to the kind of growth that shatters the old economic order and creates new Vanderbilts, Cantor and his colleagues are going to have to come up with more creative answers than deregulation and an oil pipeline.
A paper last week (pdf) from Raj Chetty, an economist at Harvard, argues that economic mobility has not declined in America over the last 30 years. This is encouraging news, but it does not change the U.S.’s comparative position among developed economies. We do have slightly better economic mobility than the U.K. or Spain, two countries that still have a hereditary nobility.
By picking rapid economic growth over other potential policies to encourage mobility, Cantor is ignoring all the countries that have higher mobility than we do, and who pulled it off without outperforming us on economic growth. Denmark, Sweden, and Finland enjoy much, much higher economic mobility than the U.S. Canada, New Zealand, Australia, Germany, Japan, and France have somewhat higher economic mobility than we do. None of these countries are known for a light touch on regulation. Must have been something else.