Thomas Edsall's NYT piece is ostensibly bad news for Democrats since it argues that the working-class populism among non-college educated Trump voters is anti-government. He argues this means that they are suspicious of government programs Democrats favor that redistribute from the wealthy to poor and working class.

While Edsall presents this as insoluble problem for Democrats looking to rebuild majority support, that is not really the case. The upward redistribution of the last four decades has been driven by government policies. It can be reversed by different government policies, which does not necessarily mean more government.

The first and most obvious item on this list of policies is Federal Reserve Board monetary policy. Right now the Federal Reserve Board is in the process of raising interest rates. The point of this policy is to slow the economy and reduce the pace of job growth. This is ostensibly because the Fed is concerned about inflation getting too high, but the immediate effect of the policy is to keep people from getting jobs and reducing the bargaining power of those who do have jobs.

A Fed that doesn't raise interest rates doesn't imply any bigger government than a Fed that does raise interest rates. In the decades immediately following World War II, when most workers shared in the gains from economic growth, The Fed was more committed to full employment and less concerned about inflation. There is no reason that Democrats could not champion a more worker-friendly Fed.

There is a similar story with trade policy. While it will not be possible to get back or even most of the millions of jobs lost to trade in the last decade, the United States could pursue policies that get the trade deficit closer to balance. A trade deficit in the range of 1.0 percent of GDP ($190 billion), instead of the current trade deficit of around 3 percent of GDP (around $550 billion) would imply another 1–2 million manufacturing jobs. This would provide a substantial boost to the labor market for workers without college degrees.


This also does not require bigger government. First and foremost it requires a focus on getting the value of the dollar down against the currencies of our trading partners. This would make U.S. goods and services more competitive internationally, thereby reducing our trade deficit. 

We could have pursued a policy focused on getting the dollar down and more balanced trade, but as Eswar Prasad, the International Monetary Fund's chief China officer in the last decade, recently said in reference to China's policy of deliberately propping up the value of the dollar:

"There were other dimensions of China's economic policies that were seen as more important to US economic and business interests ….. [such as] greater market access, better intellectual property rights protection, easier access to investment opportunities, etc."

In other words, the U.S. government made a conscious choice to ignore China's efforts to push up the value of the dollar, and thereby hurt U.S. manufacturing workers, in order to focus on stronger copyright enforcement for Microsoft, drug patents for Pfizer and increased access to Chinese financial markets for Goldman Sachs. This focus of U.S. trade policy had the support of both the Bush administration and the leadership of the Democratic Party.

There is a similar issue with patent and copyright policy domestically. These forms of protection have been made stronger and longer over the last four decades, redistributing upward hundreds of billions of dollars in annual income. It doesn't take more government to weaken these forms of protectionism.

The financial sector has also benefitted from special assistance like the exemption from the same sort of taxes applied to other sectors, free access to rip off government pension funds, and of course too big to fail insurance. It doesn't take bigger government to treat the financial sector like other sectors of the economy or to prosecute crimes in this sector.

In these and other areas it is possible for the government to reverse the policies that have led to the upward redistribution of the last four decades without being "bigger." Government just has to be different. It is convenient for those who have benefited from this upward redistribution to believe that it was just the result of the natural workings of the market, but it is not true. The Democrats, insofar as they care more about winning elections than preserving the status quo, will benefit enormously if they focus on reversing the policies that were the cause of the upward redistribution.

(Yes, this is the whole point of my book, Rigged: How Globalization and the Rules of the Modern Economy Were Structured to Make the Rich Richer [it's free].)