Hillary Clinton's Trickle-Down America

While they may be thriving economically, coastal cities thrive on income inequality and a politically powerless underclass.

In this Monday, March 12, 2018 photo, former U.S. Secretary of State Hillary Clinton, waves to media as she visits the Jahaz Mahal monument in Mandu, Madhya Pradesh state, India. (AP)

After a long, bruising career in public life, Hillary Clinton deserves a respite. Yet the erstwhile Democratic presidential nominee finds herself in the news again, having recently observed to an audience in Mumbai, India, that while she may have lost the 2016 election, she won, decisively, “the places that represent two-thirds of America’s gross domestic product.” In itself, this is hardly cause for offense. Clinton is, so far, merely stating a fact. But she went on to offer a moral distinction between her supporters and Donald Trump’s, which has proven more polarizing: “I won the places that are optimistic, diverse, dynamic, moving forward, and his whole campaign, Make America Great Again, was looking backwards.”

What’s striking about Clinton’s remarks is that she seems to be connecting the wealth of the places she won to the character of the people living in them. Granted, this is hardly the first time someone has posited that America’s richer regions are more virtuous or praiseworthy than its poorer regions. Such attitudes have long been commonplace among the residents of richer regions. Most of the time, though, politicians have eschewed expressing such sentiments publicly, presumably out of a desire to build broader coalitions. Clinton’s remarks could be a sign that she’s done with politics, and that she’s eager to tell the truth as she sees it. Which is fair enough.

But is she right to suggest that wealthy blue metros are more virtuous than the rest of the country, where local economies have been, until recently, stagnant by comparison? Consider a different framing, equally reductive in its own way, but which may illuminate some of the flaws in this moral logic.

Over the past 40 or so years, the U.S. has been fragmenting into two parallel societies, which I’ll call Trickle-Down America and Stagnant America. Each one looks upon the other with suspicion and hostility. Trickle-Down America is the America of our biggest metropolitan areas, and it is defined by comparatively high levels of density, diversity, and economic inequality. Importantly, the richest people in Trickle-Down America are typically white, while the service-sector workers who enable them to work longer hours are disproportionately brown and black. Stagnant America can be found in rural regions, small cities and towns, and outer suburbs across the country. This America is largely white and relatively equal, though it too is scarred by poverty, particularly among Hispanics and blacks. America’s most and least educated workers are concentrated in Trickle-Down America, while Stagnant America is home to most of America’s working- and middle-class white voters.

Is Trickle-Down America morally superior to Stagnant America? A good starting point is to reflect on the sources of Trickle-Down America’s wealth. In New York City, my hometown, the local economy has long been dominated by the financial-services sector, which has grown mightily in recent decades. Has the financialization of the U.S. economy been an unadulterated good for the country as a whole? There are many thoughtful people who’d argue otherwise. Indeed, some argue that rents flowing to the financial sector have badly distorted the U.S. economy, and have contributed to the devastation of tradeable sector employment in Stagnant America. Corporations headquartered in America’s cosmopolitan cities have profited immensely from the emergence of a globalized division of labor. Yet many of these same multinationals have pioneered tax-avoidance strategies that have made it harder for the federal government to compensate those who’ve lost out with globalization, all while deploying their considerable influence to get the U.S. government to pressure other countries to adopt intellectual-property protections that serve their interests. And then there is the federal government itself, and its vast, growing army of private administrative proxies—contractors, non-profits dependent on public subsidies, and the like—that has helped make Washington, D.C., and its environs one of the country’s most affluent and educated regions. It’s hard to disentangle exactly how much of Trickle-Down America’s success relative to Stagnant America is a product of straightforward rent-seeking. I certainly doubt that it accounts for all of it, or even most. But surely it accounts for some, and that should give Trickle-Down America’s champions pause.

One important thing to keep in mind is that Trickle-Down America is, overall, characterized by more stringent land-use limits than Stagnant America. These limits have raised housing costs in affluent coastal regions, which has redounded to the benefit of incumbent homeowners. Yet high housing costs have deterred inward domestic migration while driving out large numbers of working-and middle-class residents.

At the same time, these regions have been a magnet for international migrants, many of whom find themselves living in dangerously crowded conditions. In effect, one could say that Trickle-Down America has been swapping out one working class, consisting of established Americans with voting rights, who’ve come to expect a rising standard of living, with another, increasingly dominated by newcomers. Openness to immigration is Exhibit A in the case for Trickle-Down America’s moral superiority, so it’s worth a careful examination.

The great appeal of newcomers as workers is that they often have somewhat lower expectations when it comes to their living conditions and terms of employment. This is especially true of low-skill immigrants, who greatly increase their incomes by moving to the U.S., even when they find themselves at the bottom of the U.S. household income distribution. Yet the political influence of the newcomer working class is muted as compared to the established working class, as low-income immigrants tend to naturalize at low levels, in part because many are so poor that the cost of naturalization is daunting, and naturalized citizens vote at lower rates than the native-born. Needless to say, unauthorized immigrants have even less influence. The relative powerlessness of Trickle-Down America’s foreign-born workers is a big part of what’s made its cosmopolitan cities so attractive to high-skill professionals. Because low-skill immigrant workers are willing to work for such low wages, they lower the cost to skilled professionals of outsourcing various household tasks, and so they make it easier for these skilled professionals to work longer hours.

So there’s no small irony in the fact that Clinton campaigned on granting legal status to the unauthorized-immigrant population and raising the minimum wage. Both policies would surely yield benefits. However, under a higher wage floor, many employers will choose to rely on a smaller number of more skilled workers augmented by machines rather than a larger number of low-skill workers, and the disemployment effect of higher minimum wages would be particularly pronounced for low-skill immigrants. In a similar vein, Clinton called for higher taxes on capital income, which would have hit affluent professionals hardest; protectionist measures that might have cut against the interests of U.S. multinationals; and policies that would have had the effect of increasing transfers from Trickle-Down America to Stagnant America. It’s not unreasonable to surmise that her agenda would have undermined the sources of Trickle-Down America’s dynamism. Indeed, it’s easy to imagine that a Clinton presidency would have seen a deepening of Trickle-Down America’s divides as the interests of its high-income and low-income residents diverged.

For now, though, Trickle-Down America’s affluent professionals find themselves in a sweet spot, which surely accounts for some of Clinton’s triumphalism. The food is better. Beautiful old houses are being renovated everywhere you turn. An abundance of low-wage immigrant labor adds diversity and dynamism to cosmopolitan cities, yet the noncitizen working class isn’t in a position to press for a more egalitarian social order—one that could prove discomfiting for local elites. Best of all, opposition to Trump is helping to obscure simmering discontent over Trickle-Down America’s business model.

What might the future hold? Recently, Andrew Romano and Garance Franke-Ruta of Yahoo News offered a vivid portrait of anti-gentrification radicalism. They point to anger and disaffection among “poorer, nonwhite millennials who tend to live in major cities,” and the soaring poverty rate among those with no more than a high school education. “Ultimately,” Romano and Franke-Ruta warn, “the fight over gentrification is what the fight over income inequality in America looks like up close today: a clash between the economic forces transforming our cities and a young, diverse, debt-saddled generation that is losing faith in capitalism itself.”

It’s not at all clear that working-class young people in Trickle-Down America feel as though they’re moving forward, nor do they sound terribly optimistic. And as someone born and raised in neighborhoods transformed by low-skill immigration, I can attest to the fact that the children of low-skill immigrants are not quite as quiescent as their parents: “Well, gosh. You’re better off than you would have been had you been born in the Third World!” “Gee, thanks. I also can’t afford my rent.” That’s part of why Clinton’s self-congratulatory tendency doesn’t seem to mesh all that well with the more hard-edged politics of the millennial left, which is emerging from the very same cities that she calls out for their productivity and prosperity, and for their virtue.

Nevertheless, Clinton’s paean to Trickle-Down America is a sign of the times. Just as the rising industrialists of the 1900s produced the Social Darwinist intellectuals, we now have a new class of thinkers keen to explain why the rich and the good are one and the same, though they’re now more likely—shrewdly—to categorize themselves as a species of progressive. History doesn’t exactly repeat itself, but it rhymes.