Bernie Sanders, the 74-year-old self-described democratic socialist, is surprising even himself with his primary-season success against Hillary Clinton, fueled by a staggering 83% majority of the under-30 vote in New Hampshire and 84% in the Iowa caucuses.
As this newspaper (Wall St Journal) reported on Tuesday, voters in the millennial bracket, 18- to 34-year-olds, will for the first time equal the baby-boomer share of the electorate, at 31%. These young voters appear to be falling headlong for the Vermont senator’s plaintive narrative of economic “unfairness.” His throwaway prescriptions for redistributing income and wealth are being echoed by an increasingly nervous Mrs. Clinton—despite such policies’ having been jettisoned during her husband’s administration in the 1990s.
Then again, Republican front-runner Donald Trump’s vague promises that he will “make America great again” aren’t much more comforting—except to the masses of Americans responding to his populist diatribes against free trade and immigrants. He too scored well with the young in New Hampshire, though, winning 38% of the 18-29 support, more than double his closest competitor for that group, Ted Cruz, at 17%.
These young voters seem not to realize that the economic policies they find so resonant are the least likely to promote the growth and the social mobility they desire. They deserve to be lead from the discredited backwater of equalizing outcomes, forward with policies that instead help eliminate barriers frustrating their access to opportunities.
The millennials can’t be faulted for being anxious about their economic prospects. They are coming of age in the weakest economy in generations. The underemployment rate (measuring those working a job for which they’re overqualified and underpaid) for young adults below age 30 is 60%. The overall employment-to-population ratio of 77.4% for those in the prime-of-working-life 25-54 age bracket translates into 1.5 million jobs below the 20-year average.
The college graduate living in his parents’ basement and working a marginal job to service a student loan is by now an archetype of the Obama era. And while the headline unemployment numbers are down, and the administration congratulates itself on a tepid “recovery” that was almost exclusively dependent on Fed-engineered financial-asset inflation, there is every reason to be skeptical about the health of the labor market. The labor-participation rate languishes at its lowest level in 40 years, and credit creation, government and private investment aren’t faring much better.
Both Democrats and some Republicans keep blaming it all on “Wall Street” (Bernie Sanders’s all-purpose boogeyman) for “getting away with murder” (Donald Trump on hedge funds). Don’t they realize that the financial markets are the lubricant of the entire economy—that Wall Street’s capacity to provide liquidity and to broker capital is the lifeblood of American companies? History will probably judge the misguided post-crisis regulations like Dodd-Frank and retribution against Wall Street to have sown the seeds of the next financial crisis. For now, the vilification of Wall Street in the presidential campaign is irresponsible.
The sluggish growth of jobs and the economy has a lot more to do with the transitioning from American manufacturing and services to information technology than with the 2008 financial crisis and its supposed perpetrators. And the Fed alone can’t do much more to promote its employment-and-inflation mandates.
Why? Because the economy is facing complex structural headwinds for both: Artificial intelligence and self-learning algorithms are efficiency-creating and cost-reducing, and soon they will be displacing service professionals and Ph.Ds just as they have factory workers. The Bank of England projects that 45% of jobs done by people in the U.K. will eventually be performed by robots. ArkInvest expects the U.S. to shed 75 million jobs in the next two decades.
And yes, the new tech-economy wealth is increasingly concentrating in the hands of relatively few innovators and financiers, leaving the middle class and its consumer demand lagging behind. What is the appropriate role of government in redressing this?
Why wouldn’t young voters want “free stuff” paid for by the rich, as the Bernie Sanders and Hillary Clinton narrative promises? Because the no-free-lunch axiom is still true: Mr. Sanders’s socialized education, health care and other policies would cost up to $20 trillion, according to analysts, requiring tax collections to increase up to 47%. And have we not at least learned from the collapse and dismantling of socialism over the past quarter century that governments lack the incentives and resources to effectively allocate and manage capital in the microeconomy? The eldest of the millennials were in elementary school when the Soviet Union collapsed, so they might be forgiven for their unfamiliarity with the failure of socialist economics. But Bernie Sanders was the mayor of Burlington, Vt., and Hillary Clinton the first lady of Arkansas—what’s their excuse for revanchist economics?
The economic culture of the U.S. is different than that of any country in the world. Americans have always admired each other’s economic success and striven for the chance to achieve it for themselves—by building, not taking the wealth from their neighbors’ pockets. Donald Trump is unabashedly proud of his success—no wonder he’s so popular. As a political leader, though, he needs to up his economic game quickly from “There’s going to be a bubble popping” and “Nobody can solve it like me.”
Real solutions demand real leadership, not polarizing Twitter TWTR -0.65 % -length rhetoric. An America-appropriate policy response to the inequality challenge needs to be focused on equalizing opportunities, not outcomes. At the very least, removing barriers to social mobility will require tax, regulatory and educational reforms to give people the qualifications and liberty to improve their lives in the new economy.
At this point in the presidential campaign, all the ideas for stimulating growth are coming from the Republican side: Marco Rubio has discussed the transformational challenges of the tech economy, and he has proposed alternatives to traditional campus-based higher education (online college and flexible vocational training); innovative student-loan programs; and corporate tax and regulatory reforms. Jeb Bush and John Kasich are also reform-minded, including promoting initiatives to ease the burden on small businesses that power job growth.
Yet millennials, who would most benefit from a real economic recovery, replacing the false one of the past several years, so far seem intent on voting against their interests. There is still hope. We’re moving past the peak of the “authenticity” phase of the campaign cycle, when voters unfamiliar with the field of candidates are initially drawn simply to candidates who seem willing to bluntly speak their minds. John Kasich’s strong performance in New Hampshire might herald the transition to a more constructive phase, when voters—including millennials—are readier to listen to a more nuanced, realistic economic message. If not, today’s young voters may not like the world they inherit, and members of the aging generation risk eventually finding themselves short of the Social Security benefits they thought they had coming.
Mr. Arbess, the founder of Xerion Investments, is a member of the Council on Foreign Relations and co-founder of No Labels, promoting political bipartisanship.