Ro Khanna Wants to Give Working-Class Households $1 Trillion

Silicon Valley’s new member of Congress has some big ideas for combatting wage stagnation.

Zach Gibson / AP

Ro Khanna has a $1 trillion plan to fatten Americans’ wallets.

The newly elected member of Congress, who represents Silicon Valley, has become a loud progressive voice on the Hill during his brief tenure there. The way he sees it, Democrats have failed by not offering families a radical plan to end wage stagnation and bring prosperity to the middle class once again. He is working on a bill he believes will do just that, by boosting the Earned Income Tax Credit to provide as much as $6,000 a year for individuals and $12,000 for families. (That would roughly double the maximum payout for families, and increase it tenfold for childless workers.) The plan is being heralded as a move towards a universal basic income in the United States, and Khanna hopes to pair it with efforts to move federal jobs out of Washington, expand universities and colleges, and encourage investment in depressed communities. Such a moonshot effort is not going anywhere soon, he concedes. But it would at the very least demonstrate to voters that Democrats had something new and bold to offer them.

We spoke about what Obama did wrong, what Trump has done right, whether tech companies like Facebook should be broken up, whether deficits matter, and how to help coal miners in Kentucky, along with his tax proposal. The conversation has been edited for length and clarity.

Annie Lowrey: Let’s start with this trillion-dollar modest proposal.

Ro Khanna: There is this huge income disparity in my own district. It’s a district where rent in some places, like Sunnyvale, is $3,000 a month. If you’re not working at Apple, if you’re not working at Google, if you’re not at a tech startup… if you’re a teacher, if you’re a nurse, if you’re a firefighter, it’s very hard to live there, very hard to afford any sort of higher education for your kids. Forget it if you want to go to Stanford. If you want to go to San Jose State.

There’s this extraordinary wealth that’s being generated, and yet so many people struggling and feeling like they can’t keep up and be part of the middle class. We have an economy that’s really geared toward rewarding the investor class. What are we doing to make sure that people who want to have a middle-class life are able to keep up? This is not just a problem in my own district. In some sense, the country is divided.

Lowrey: Right. So the idea is to tackle income inequality and stagnation.

Khanna: In part. The country has these—to use [the Berkeley economist] Enrico Moretti’s work—these 300 economic innovation zones. Areas that are creating wealth and jobs. Then, there are these other places where we don’t see this economic opportunity, and people feeling like their middle-class life is slipping away. This is part of Trump saying, “Make America Great Again.” Because for a large number of people in this country, life seemed simpler, easier, and the middle-class dream seemed more accessible years back than it does today. That is surely not the case for Indian Americans or African Americans or women, but for many people it seems that way.

How do we address this? You could provide an incentive to move. But then again, when I was in Appalachia, people don’t want to move. Just like my family and I don’t want to go to live in eastern Kentucky. That’s not because it’s not a beautiful area. It’s because I like my Indian food within two miles of my condo in Fremont. And people in Paintsville, Kentucky, probably have no interest in going and living in Silicon Valley.

Lowrey: It’s funny.You could no more get a senator or member of congress from Kentucky to say, “What we need are credits to get everybody get out of here.” But you hear all the time, “Let’s revitalize this place.” And yet, we don’t really have great place-based revitalization policy.

Khanna: Exactly. It’s politically impossible [to get people to move], and not what people want.

I do think there are things you can do for these areas. One is to create new job opportunities and industries in parts of the country that don’t have them. That is the hardest challenge. Part of it is expanding universities, because we know that there’s a correlation between university location and job creation. Should Michigan create more satellite campuses to create more jobs?

Then, how do we start creating new apprenticeship programs and new capital infusions to take some of the hard-working ethic of people in places like Paintsville and create jobs? And how do we use technology to allow people to stay where they are and still work?

This is the good case for technology. People often make the bad case of robots and automation taking everybody’s jobs. But what if virtual reality actually allowed you to stay in Paintsville and work for a company in Michigan? Then, you think, okay, if that’s how people are making a living, those might not be 9-to-5 jobs. Maybe they’ll have to do multiple jobs. Maybe it won’t be a union job. How are we going to have economic security then?

Lowrey: Right, how do you protect against the fissured workplace, people making poverty wages at jobs without benefits.

Khanna: That’s where the expansion of the Earned Income Tax Credit comes in. We’re not divorcing it from work, but we’re realizing two things. One that people are working hard and they’re not earning a middle-class wage. They’re not earning what they think they deserve for that work. And the nature of work has changed because unions have lost bargaining power.

The fruits of the economy and all the advantages of technology and globalization have gone far more to the investor class and the professional class and not as much to the working class. Partly because of the loss of labor unions, partly because of things like a lack of antitrust enforcement, policies that have privileged shareholder returns.

How do we make up for that? That’s where this idea came of a trillion-dollar proposal came from. We would give a 20 percent raise to the bottom 20 percent of households in the income distribution, to compensate them for the stagnancy of wages since 1979.

Lowrey: Why tie it to the Earned Income Tax Credit? This is not necessarily an argument I agree with, but if you think that automation is going to start eliminating these jobs, you’re not just going to have wage stagnation. You’re going to have a lower employment-to-population ratio, and higher unemployment.

Khanna: It’s a mixed case. I think automation will eliminate certain types of jobs—lower income, lower-skilled jobs in manufacturing. But nobody knows whether it’s going to change the job basket of the 21st century, or be net positive, or net negative.

Lowrey: So you don’t think robots are coming for everyone’s job.

Khanna: No, the statistics don’t show that.

Lowrey: It’s a common belief out there in Silicon Valley.

Khanna: The jobs of the 21st century aren’t just going to be programming robotics and advanced manufacturing. It’s going to be elder care—we have an aging population—and childcare. The 21st-century mix of jobs is probably going to be different than the 20th-century mix. If you talk to manufacturers out in Michigan, rarely do you hear, “Oh, we’ve got this problem. We’re hiring all these robots and we can’t hire people.” I’ve never heard someone tell me that. They say, “Oh, we have all these jobs but we don’t have people of the right skill set for these jobs.”

Lowrey: Right.

Khanna: Maybe the four-year degrees aren’t as necessary. Maybe we need to have a more German-style apprenticeship model for some of these jobs—credentialing, ongoing technical training. We probably have to expand our thinking of what type of service jobs there will be. Yes, robots will eliminate certain jobs and there probably should be a particular empathy and concern for those jobs that will be eliminated. But it’s not that in the aggregate they’re going to shrink employment.

People want to be useful. I think it would be very patronizing to go to folks who are coal miners and say, “Look, here’s your check because all the productive work is going to be done on the coasts.” These are hard-working people who believe they’ve contributed to the country, whose dignity and sense of self-esteem is linked to work and productive work. I think a better argument is to say, “Look, we’re going to help prepare these areas for diversification, so they can succeed economically.” Then boost wages through the EITC.

Lowrey: How do you think about cost? The obvious critique of this from a lot of your more centrist colleagues, as well as colleagues on the right, would be that a trillion dollars is a lot of dollars. What are you going to disincentivize with this kind of aggressive redistribution? Is this too expensive for a country that is still running a deficit despite having 5 percent unemployment?

Khanna: First of all, I think we have to look at what deficits are. [The University of Missouri-Kansas City economist] Stephanie Kelton’s work is very informative on this. If the government gives someone $100 and takes back $90, you’re at a deficit of $10. But that is $10 in the economy. It’s $10 of productive economic activity. It’s not like that $10 just disappeared.

If you have inflation, then obviously you need to control spending. You don’t want hyperinflation. You can’t just have the government printing money and having prices go up. But then when we look at our economy and you look at the Congressional Budget Office projections, they project an inflation rate that’s at 2 or 3 percent, including with full employment, 10 years, eight years out. We constantly hear about Greece. Well, Japan has had a 240 percent debt-to-GDP ratio, and they haven’t had hyperinflation. In fact, they have deflation. The problem with Greece was not that it was a situation of debt-to-GDP ratio. The problem with Greece was a transition to the euro and losing confidence in the economy.

I would start to care far more about the long-term impact of deficits versus empowering the middle class if inflation rates or the projection of inflation rates were higher.

Lowrey: The idea is not to pay for it?

Khanna: There are obviously ways to raise revenue—the financial transaction tax, getting rid of corporate deductions, taxing corporate deferrals. No one is saying that we [should] run massive structural deficits. We have to raise more revenue. But the red herring that somehow we’re going down the road of Greece or we’re engaged in fiscally irresponsible behavior… it is just not true given where inflation is projected to be.

Lowrey: Earlier, you had mentioned antitrust. There’s a growing belief on the left that a lack of antitrust enforcement by both Republican and Democratic administrations is at least partially responsible for the slowdown in dynamism and the decline in wages. Do you think that that monopoly power is leading to lower wages? If so, do you think that there needs to be more aggressive antitrust enforcement in certain industries or all across the economy?

Khanna: I do. Look at the costs of broadband. The fact that there are only four [internet service providers] that really provide most of the service. That’s a direct consequence of our lack of antitrust enforcement. We need stronger Federal Trade Commission antitrust enforcement and protection, to make sure that companies don't have market power that provides an advantaged incumbency and does not allow new companies to come up.

Lowrey: Does that apply to Google, Apple, Facebook, and Amazon?

Khanna: Sure. It applies across the board. I think the FTC should be aggressive in antitrust enforcement regardless of industry, whether it's the tech industry, whether it’s ISPs, whether it’s airlines, whether it’s Wall Street banks. I don’t think just because something is technology that it’s exempt from strong antitrust protection. So we should beef up the FTC. We should beef up antitrust enforcement.

We should do so with three things in mind. Is it providing higher prices to consumers? Is it discouraging competition by not allowing new entrants to come in? What is it doing in terms of the concentration of economic power with a few companies that may not be creating jobs?

Lowrey: The Trump administration has been blanket anti-immigrant, regardless of skill level, which is a break from most Republican orthodoxy.

Khanna: That’s probably the rhetoric that’s been received the most negatively in my district, because my district is so diverse, with both high-skilled immigrants and people who are not in these higher-paid professions. I think most people love that about living there. They like it because of the cultural diversity. They like it because of the innovation that that creates. They think that’s sort of the vision of America at its best. Trump has really challenged that sense. I think that this kind of parochial, inward-looking, exclusive vision of America is what offends people the most in my district, more than his economic policy. That and his rush to militaristic solutions, I think.

Lowrey: What do you think was the biggest mistake that the Obama administration made?

Khanna: Obviously, I supported the president. I think he did a very very good job, on balance. But there are areas where I disagreed or where he could have done more.

First, on foreign policy. I think the escalation in Afghanistan was a mistake. I think the interference in Ukraine in 2014—we shouldn’t have gotten as involved in the overthrow of the democratically elected leader there. I don’t think we should have gone into Libya. I think calling for regime change in Syria was a mistake. Not because Assad isn’t a terrible actor. But because American intervention has made things worse in many cases, and not made us more safe. I wish that there was a more non-interventionist foreign policy. I think we could have saved both a lot of money and had a safer world.

On economic policy, I think we could have done more to focus on the jobs and economic opportunities in parts of the country that didn't have them. The president tried doing certain things. He created these manufacturing institutes around the country. But why not have a massive expansion of universities? Why not try to put more federal agencies and federal jobs in states outside the beltway? I don’t think there was as much of an understanding of the dislocation in certain places, and disconnect from government.

Lowrey: How does expanding the EITC revitalize those places?

Khanna: We know that this will do more to put money in the pockets of people to spend it, to create jobs. It’s going to increase consumer demand. When you have more consumer demand, you’re going to have more people shopping, you’re going to create more jobs. Maybe they’ll be at Walmart. That’s a separate issue of how we could get Walmart to pay more, how we get to a $15 minimum wage. But there’ll be more jobs. We know that it will probably lead to more GDP growth.

Lowrey: Have you reached out to the White House on this?

Khanna: I haven’t reached out to them. Look, if Trump said, “I’m coming out for an apprenticeship program,” or, “I like what you’re talking about in Appalachia, let’s fund it and get tech jobs,” or if he said, “I want to help expand broadband,” I wouldn’t be opposed to working on something that was concrete and that was going to help people. I’m on a bill with Kevin McCarthy to help veterans get tech training.

But there’s nothing that I’ve seen come out of his administration so far that would help a lot of the people who feel left behind. It feels like he’s appealing to their cultural values and that’s fine, that’s legitimate. I philosophically disagree with some of them. I’m pro-choice, and for LGBT equality and immigration. It may be that they have a different worldview and that’s what he’s appealing to and we just will agree to disagree and there’s not going to be common ground.

I was on the board of Planned Parenthood. I’m not going to go and say, “Okay, Donald Trump, let’s find a compromise. Let’s find a compromise on the border wall.” If he moves away from the anti-immigration stance, moves away from these contentious social issues, and starts to propose economic policy, then I think he may find people in Congress who are willing to work with him.

Lowrey: How do you think about the scope of what’s possible in terms of actually passing major legislation? Obviously, Congress has been hamstrung for however-many years now. It’s not even clear that with unified control on the Republican side that they’re going to get much more than continuing resolutions. Is this about expanding the Overton window? Having solutions ready in the event of some downturn? Strategically, where are you positioning yourself?

Khanna: My hope is that we build the consensus for this. That when we hopefully have a Democratic President in 2020, by then that we’re able to have a coherent progressive agenda, with these pieces part of that. Are there parts of the proposal—expanding universities and college campuses, making federal jobs available in the states—where we can make incremental progress before that? I do think so.

Am I that optimistic that we’re going to get a trillion dollar expansion of the earned-income tax credit before we have a different president? I doubt it. But there are things that were introduced 30 years ago that are now becoming mainstream. The progressive wing of the party should not be afraid to lay out their vision of where do they want to take the country and what would an ideal society look like. Then we can negotiate the details. Right now we don’t even have a basic sense of what would we want if we had every branch of government.

Lowrey: Does Donald Trump’s victory imply that people on the left should have moved or should be moving to the center?

Khanna: No. Donald Trump’s victory implies that people need to be more bold. People yawned at the smallness of American politics, at the stagnation of American politics, at the same faces, the same ideas, the same talking points. Trump came along and offered these radically new—in my judgment, radically wrong—ideas. Suddenly, you have someone talking about $3 trillion in tax cuts. Wow! Maybe $3 trillion in spending is fine, right? That’s what Donald Trump is saying! Okay, well, what would the progressives do with $3 trillion?

The only silver lining to Trump’s election—they’re very very few—is that he’s blown up the status quo. That was a reflection on the people on both sides. The problem with it is the cure is so much worse than the disease. He’s blown it up and now he wants to take away Meals On Wheels and weatherization programs and throw out immigrants.

Lowrey: Populist radicalism.

Khanna: America tends to be conservative, in the sense of it being hard to move things. We, by purpose and design, wanted the system to be slow, exactly to prevent against demagoguery. At the very least, Trump said, there’s something wrong. There are big issues. We’ve blown things up. Now, let’s get an opportunity to have a thoughtful bold vision and maybe people will be receptive to it.

My bet is that the next time, or at least over the next 10 years, people are going to be wanting solutions that are truthful. At some point, people in Ohio, Michigan, Pennsylvania, they’re going to say: “Where are the jobs? How is my life better?