Editor’s Note: Throughout the 2016 presidential campaign, The Observer will sit down with Notre Dame experts to break down the election and its importance to students. In this tenth installment, Associate News Editor Rachel O’Grady asks associate professor of economics and former Senior Economist to the White House Council of Economic Advisers, Abigail Wozniak, about the economic implications of the 2016 election.
Rachel O’Grady: As an economics professor, particularly in relation to your focus on labor economics, how will the results of this election effect the economy?
Abigail Wozniak: The candidates — even within parties — have fairly different visions for the major changes they would advocate, both in terms of how the government raises funds (fiscal policy) and how it spends them. Given these differences, the ultimate outcome of this election will matter for the economy, but it is difficult to say how it will matter without knowing the winner. Because their plans are so different, it will matter for the economy who the ultimate winner is, but as of right now there is no single answer to the question of how the results will affect the economy.
That said, I see at least three areas where the next president will face critical tests. These are: [first], income inequality and shared economic opportunity; [second] trade; and [third] guidance through the next phase of the business cycle. In all three areas, long-run trends will continue to play out but will require leadership to deal with their consequences over the next four to eight years. Income inequality and, more broadly, equality of opportunity, are key issues of concern to primary voters across the political spectrum. This is a four-decade long trend that has reached a point where large numbers of voters are asking for policy to directly address this. Any winner will need to take steps in this area. Rising trade is another multi-decade trend that is unlikely to reverse in a major way. The next president will need to work with Congress to keep the U.S. competitive and involved in the global marketplace while also putting in place protections for U.S. workers affected by trade. And finally, we have reached a record business cycle expansion. Were the business cycle to turn, executive branch leadership would be key to minimizing the negative effects of this. What we learned from the Great Recession is that appropriately timing relief — in adequate amounts — for workers and states affected by downturns can prevent longer, deeper slumps and is key to making sure families have the safety net they need when the business cycle turns negative.
ROG: You served as Senior Economist to the White House Council of Economic Advisors (CEA) last year. What did you learn in the White House, and more importantly, what areas did you see for the improvement in the coming years? Are these candidates forgetting to address anything?
AW: I had a great experience on the CEA staff, and I take every chance to say that people in Washington are working incredibly hard, with the best of intentions, on very difficult problems. This actually became more clear from working with them for fourteen months. On issues that are being forgotten: Immigration has been addressed, but useful specifics are missing. The economic case for immigration — which is a complicated one — also often gets inadequate attention. The reality is that many natives benefit from admitting immigrants, but some do not benefit, and we rarely have a conversation about how those two groups need to be brought together to reach a solution that helps both. It’s also not as simple as saying that we should imitate other national systems that prioritize skilled migrants. That’s a policy that should be on the table, but the U.S. has a long and I think admirable history of admitting individuals who are seeking a better life, and we should not ignore either that history or the fact that it has brought us certain benefits that other countries lack, like a diverse workforce and a population of entry-level workers with a strong work ethic.
ROG: The minimum wage debate is gaining traction nationwide, but has seen little play in the recent presidential debates. Do you think this will be a key issue in the election and beyond?
AW: Yes, this absolutely will be a key issue in the national election and beyond, and for space I’d say see my response to the first question.
ROG: Both parties propose pretty radical economic ideas. Do any of them hold water, i.e. could Sanders or Cruz’s plans actually work?
AW: Economists are often cautious of plans that say they are going to fix complicated problems in a simple way. Many economists agree that the tax code could be simplified. Many also agree that college financial aid could be simplified. But radically simplifying such policies is often difficult. This is because things that sound simple, like “income,” have to be defined and monitored, and that is harder than it sounds. Such policies also create incentives for individuals and businesses to try to avoid being in the category that has to pay for a program, not because they are bad people necessarily but because this is a fairly natural response to a situation where you’re asked to share a lot with strangers. So what seemed simple then requires monitoring and exceptions, and these make the reality likely to be more complicated than expected.
ROG: Taking it back to college campuses, particularly here at Notre Dame, what is something we, as college students, should be paying particular attention to?
AW: I think college students have a responsibility to pay attention to the election and get out and vote. The issues are many, but the worst outcome would be a divisive election in which the turnout was low. And, as I already noted, I think the outcome of this election matters a great deal. Don’t believe those who say all the candidates are the same — just a quick look at their websites will tell you otherwise.
