The Three Economic Stories That Could Dominate 2024

The Pitch: Economic Update for December 21st, 2023

Friends,

Next week, we’ll be sharing our annual year-in-review, in which we look back on the most overrated and underrated economic stories of 2023. But this week, I wanted to offer a little look forward to what could be the top economics stories of 2024. Bear in mind that these aren’t predictions — in economics and politics, anyone who says they know exactly what’s going to happen next is volunteering to be humiliated in the style of our old friend Larry Summers — but rather suggestions for the topics people will likely be (or at least should be) talking about in the economics space next year.

We Need to Talk About Taxes

Many of the tax cuts that President Trump and Congress passed in 2017 are set to expire in 2025, and the fate of those cuts could be all but decided if one party dominates the 2024 election. In lots of ways, the Trump tax cuts were the last hurrah of trickle-down economics. At the time, then-House Speaker Paul Ryan promised the American people that if corporations and the wealthy received the tax cuts, those savings would trickle down to the average American worker in the form of $4000 more per year in higher wages. And the tax cuts passed, but that money didn’t trickle down.

In fact, there’s a very good case to be made that the Trump tax cuts laid the groundwork for many of the price increases that we saw during the pandemic. Corporations kept billions of dollars that used to go to taxes, and that money didn’t wind up in your paychecks. Instead, corporations simply puffed up their profit margins, which they then handed off to the elite shareholder class with no strings attached in the form of roughly $1 trillion per year in stock buybacks.

When corporations that were still flying high on the sugar rush of the Trump tax cuts saw prices rising due to supply chain disruptions in 2021 and 2022, many CEOs took the opportunity to raise prices even higher to pad out their profit margins even more. Trump and his campaign have promised to fight to renew, and possibly even expand, the corporate tax cuts if he wins reelection.

And the Trump tax cuts also brought estate tax revenue to a new record low. A new report from the Institute on Taxation and Economic Policy finds that the number of Americans whose inheritance was subject to the estate tax reached an all-time low last year.The report notes that “only 8 of every 10,000 people who died left an estate large enough to trigger the tax” in 2019. That means only families with more than $20,000,000 in wealth have to pay any estate tax at all.

The estate tax is important not just because it provides much-needed revenue for a nation that has been starved of revenue due to trickle-down economics, but also because it helps to regulate the generational transfer of wealth from one generation to the next. For HuffPost, Molly Redden explains why this is such a huge issue right now: “In the coming decades, baby boomers, the richest generation in history, are expected to pass on an estimated $70 trillion in wealth to Gen X and millennials. Because much of that money will stay within families, the Great Wealth Transfer is likely to reinforce existing inequality, with the largest fortunes creating new wealth dynasties.”

Estate tax cuts are a primary reason why more people became billionaires through inherited wealth last year than actively earning the money. Every billion dollars that some second-or-third generation billionaire inherits free and clear is a billion dollars that could instead be circulating through the economy, helping working families to build a little wealth of their own and ensure that future generations have a chance to do better.

Progressive opponents up and down the ballot next year should obviously oppose the renewal of the Trump tax cuts. But it’s a political truism that it’s not enough to simply run against something — you have to also offer a compelling alternative.

I’d like to see a meaningful middle-out campaign to rebalance the tax code so that billionaires pay at least as much of their income as janitors, teachers, and baristas do, and so that corporations stop stockpiling outsized profits and instead actually invest that money back into growing sustainable, profitable businesses again. The revenue raised from those taxes should be immediately redirected into investments in working Americans in a meaningful way — the return of Child Tax Credits, for instance, or an affordable child care program, or both. By actually growing the incomes of American workers, these investments would create jobs, improve communities, and lower costs.

Putting two diametrically opposed tax plans against each other like that — one middle-out and progressive, one trickle-down and regressive — is a debate I’d love to have in the public sphere next year.

We Need to Change Our Policies to Prioritize Housing Affordability

Over the whole of 2023, housing prices remained stubbornly high for most Americans, and last week we saw that housing is one of the biggest sectors keeping inflation above the Fed’s 2% target. Even with their wages rising higher than other costs, Americans are highly unlikely to feel like the economy is working for them until housing becomes more affordable.

Of course, the Federal Reserve can and should help to bring housing prices down by lowering interest rates and making mortgages cheaper for working Americans. They’ve already announced that we’ll see as many as three rate cuts next year, which is welcome news. But we can do more to help rein in spiking housing costs — and a lot of those fixes tie in with the above conversation about building a truly progressive tax code.

One big problem is that American tax policy doesn’t provide the right incentives for a housing market that prioritizes workers over the super-rich. For the Sightline Institute, Alan Durning makes the great case that our tax code favors owning real estate over securing housing, which means that the speculation market has driven up real estate prices as though it’s a commodity.

The Great Recession was caused in large part by financial firms packaging lousy mortgages and trading them as though they were stocks or other financial commodities. But even though that high-risk behavior was regulated after the housing collapse, the fact remains that firms are still treating housing like a high-return investment, which is driving costs up. Durning argues that by making it harder for firms to package and profit off of mortgages, we would be returning to the “cautious” mortgage markets of the mid-20th century “that generated modest profits and stable housing.”

Another huge issue is that our tax code prioritizes home ownership over renting. The Urban Institute makes the great case that offering tax credits to renters would close racial housing gaps and offer families many more options for stable, secure housing than the current financialized housing market.

“A refundable renter’s tax credit would help people with lower incomes more than tax deductions and could reduce economic inequality. Low-income people are able to receive the full value of a credit that is refundable, rather than having their credit limited by taxes owed,” the Urban Institute notes. “As such, these credits are proportionally more helpful to people with lower incomes than tax deductions, which can only reduce taxes owed. And unlike deductions, the value of a credit does not scale up with income. Because many low-income households have no tax liability, a renter’s credit would need to be refundable to reach households who need it the most.”

There’s no single magic bullet when it comes to making housing affordable for all, but by shifting the outcomes that our system prioritizes, we can change the conversation around housing from a volatile game of economic winners and losers to a more stable system in which everyone can participate.

We Need to Make Sure Workers Have More Money

Last year was a historic one for American workers. Empowered by rising wages, plenty of available jobs, and a near-record low unemployment rate, we saw workers stand up and demand a new contract with their employers. Of course we saw a number of tremendous union victories — the United Auto Workers taking back the kind of wages and benefits that they used to enjoy before the Great Recession, Hollywood screenwriters and actors establishing meaningful new artificial intelligence regulations with studios, UPS workers’ demands being met before they even had to strike, and worker wages continued to climb — especially at the bottom end of the wage scale.

A vast array of conditions led to this moment in time: The pandemic changed the way we think about jobs in the service economy, for instance, and the Great Recession’s lackluster economic recovery left workers in a decade-long wage slump that pushed them to demand bigger raises now that the economy is recovering from the pandemic But credit must also go to the Biden Administration for its historic support of the striking UAW workers, its support for the creation of American semiconductor factories and its demands that those factories offer good-paying jobs and affordable childcare for the workers’ kids, and other policies that prioritized workers over the super-rich.

The trick, now, is to sustain that momentum. The Biden Administration has a unique opportunity to center the 2024 presidential campaign around workers in a way that no modern presidency has. Biden should run on values that benefit American workers, beginning by raising the federal minimum wage from its current pitiful rate of $7.25 an hour to at least $15 an hour, which studies show would grow the paychecks of 32 million workers around the country by an average of $3300 per year.

But that’s just a start. Progressives up and down the ballot should run on popular issues that appeal to the vast majority of American workers including affordable child care, making it easier to unionize workplaces, eliminating anti-competitive policies like NDAs and noncompete agreements, and fighting against corporate consolidation that always results in lower wages and less choice for workers.

By coming out swinging as the most pro-worker American president in modern history, President Biden will force voters to consider a stark choice between himself and the alternative: The Republican candidates for president are anti-union, against raising the minimum wage, and otherwise against anything that would grow the paychecks of American workers.

When it was cloaked in the ubiquitous story of trickle-down economics, Republicans had the luxury of pretending that prioritizing the wealthy and corporations would eventually result in that money trickling down to everyone else in the form of higher wages. But the American people have lived through the sluggish recovery from the Great Recession, and they have actually seen their wages increase over the last two years, and they understand that those wages never trickle down from the top. Bigger paychecks come when employers have to compete to hire the best staff, and workers have the freedom to leave for better-paying jobs or to unionize to demand better pay, .

I’m happy to report that millions of Americans are starting to intuitively understand this middle-out framework of how the job market really functions, but 2024 offers an important opportunity to explain how and why the worker, not the CEO, is the true hero of the economy.

You may have noticed a theme running through these three topics: Improving the economy is not just about policy, it’s about communicating an understanding of the true order of economic cause and effect. Presidential elections are about more than just polls and speeches. They guide and shape the national conversation, and they provide a real opportunity to change the way we understand ourselves.

President Biden has changed the scope of what is possible in politics over the last three years. He fended off calls for austerity, passed bipartisan legislation to bring manufacturing back to America after the elites swore for two decades that that would never happen again, and consistently prioritized workers over the super-rich. This election offers a chance to braid all those policies together into a single coherent narrative — one in which the economy grows from the middle out, not the top down.

This opportunity doesn’t come along every day, and so we can’t waste it. We can’t entrust the future of the economy to one person — even a president. It’s incumbent on all of us to be better middle-out messengers — to encourage our leaders at the state and local level to reject trickle-down thinking and embrace policies that benefit the majority of people. In the end, it’s up to all of us to make sure that 2024 is the year of middle-out economics.

Be kind. Be brave. Take good care of yourself and your loved ones.

Zach