Middle-Out Wins

Episode Summary

Executive Summary: The episode argues that 2023 was a strong year for the U.S. economy and a validation of “middle-out” economics: workers did well, wages outpaced inflation, unemployment stayed historically low, and policy under Biden helped attract private investment, empower labor, and curb anti-competitive behavior. The hosts contrast this with failed recession predictions and decades of trickle-down thinking.

Main Topics: 2023 as a surprisingly strong economic year (Priority: 5/5): The hosts frame 2023 as one of the most remarkable recoveries in recent U.S. history, emphasizing low unemployment, wage growth, and inflation easing without a recession. Bidenomics as middle-out economics (Priority: 5/5): They distinguish Bidenomics from the broader economic philosophy behind it, arguing that it is built on middle-out economics rather than trickle-down logic. Policy-driven investment in America (Priority: 4/5): Discussion of the CHIPS Act and Inflation Reduction Act as examples of government investment crowding in private capital, especially in semiconductor manufacturing and green technology. Workers, wages, and labor power (Priority: 5/5): The episode highlights wage gains, labor strikes, and Biden’s visible support for unions as evidence that empowering workers improves outcomes across the economy. Inflation, bank stability, and price gouging (Priority: 4/5): They revisit 2023’s bank collapses and grocery price spikes, arguing that some inflation fears were overstated and that high egg/chicken prices were driven by collusion and greed. Antitrust and competition policy (Priority: 4/5): The hosts praise the administration’s tougher antitrust stance as a break from Reagan-era assumptions that market concentration is inherently efficient. Evidence that middle-out economics works (Priority: 5/5): They cite research and real-world outcomes suggesting that higher wages and worker empowerment can create jobs and expand demand rather than destroy employment.

Key Arguments: The economy in 2023 was broadly strong despite persistent affordability problems, especially because employment stayed high and wages rose faster than inflation. Recession predictions from figures like Larry Summers were wrong; the feared downturn never materialized. Bidenomics is best understood as a policy expression of middle-out economics, not simply a branding exercise. Government investment through the CHIPS Act and Inflation Reduction Act can attract private investment instead of crowding it out. The Federal Reserve’s rate hikes were meant to weaken worker bargaining power, but unemployment remained low, so inflation fell without mass job losses. Labor actions in 2023 showed that workers can win meaningful wage and workplace gains when they organize and when political leaders support them. Price spikes in eggs and chicken reflected price gouging and collusion more than unavoidable supply pressures. Research on minimum wage increases supports the claim that raising pay can increase jobs by boosting consumer demand. Competition policy matters because monopoly power can distort prices, suppress wages, and concentrate economic gains at the top.

Data Points: Unemployment rate: 3.7% - November jobs report mentioned as evidence of a historically strong labor market. Probability of recession predicted by Bloomberg quote of Larry Summers: 100% - Referenced as a failed doom prediction from one year earlier. Alternative recession probability cited for Larry Summers: 50%–75% - Described as the range of his recession warnings throughout the year. Unemployment target Summers reportedly wanted: 2 years of 7.5% unemployment - Presented as the cost he implied was necessary to tame inflation. Private-sector unionization rate: 8% - Used to emphasize how rare union coverage is, making spillover effects from union wins significant. UAW raise: 40% - Cited as a major outcome of the auto workers’ strike. Time horizon since pandemic era: 3 years - Used to compare current recovery with the pandemic recession period. Time horizon since last year’s recession fears: 1 year - Used to contrast dire predictions with actual outcomes. Inflation/grocery context: Egg prices doubled and in some metro areas tripled - Example of early-2023 inflation anxiety and alleged price gouging. Minimum wage study: $15/hour - Cited research finding that raising the minimum wage to this level did not kill jobs and may have created them. GDP share from consumer spending: 70% - Used to argue that higher wages boost demand because consumer spending drives most of the economy.

Pivotal Quotes: "the economy grows best from the bottom up and the middle out" — David Goldstein: Core explanation of the economic philosophy underlying Bidenomics. "we are in the middle of one of the most remarkable economic recoveries that this nation has ever had" — Paul Constant: Opening framing of 2023’s economic performance. "when workers have more money, businesses have more customers and hire more workers" — Nick Hanauer (quoted by hosts): Used to summarize the logic of middle-out economics and demand-driven growth.

Implications: The episode suggests 2023 strengthens the case for policies that raise wages, support unions, invest publicly, and police market power. For listeners and policymakers, the message is that broad-based prosperity is achievable without recessionary pain or trickle-down assumptions.