Inclusive Prosperity Without the Prosperity: Why the Democrats’ “Middle-Out” Economic Formula Is a Bad Recipe for 2016

To grow or to redistribute, that is a question up for debate as we head into the 2016 presidential campaign. Many are urging the next Democratic standard bearer to embrace the latter—redistribution and fairness framed as a “middle-out” strategy—as not only the right political strategy but the right economic strategy. Emblematic of this is the recent “Report of the Commission on Inclusive Prosperity,” issued by the Center for American Progress. The report lays out a narrative that has become the basic economic wisdom for many Democrats: that the central challenges of our time are inequality and dwindling opportunity; that economic policy must focus on more equitable distribution of output; and that doing so will result in superior rates of economic growth. But the “middle-out” policy agenda skews heavily toward redistributing America’s current $17.7 trillion GDP and will do little to “grow the pie,” because it will not boost the most important drivers of economic prosperity: productivity, innovation, and competitiveness. What Democrats (and Republicans) need is a growth strategy grounded neither in conservative, supply-side economics nor in liberal, demand-side economics, but rather in an innovation economics, which helps enterprises increase their demand for the real drivers of growth: research and development, skilled workers, and new capital equipment.

Please join ITIF for a discussion of the limits of the “middle-out” strategy and what kind of growth agenda America needs so that all Americans can prosper going forward.