Another monthly jobs report, another growing chorus worried that we might be employing too many people and we should hold back the economy lest it overheats. It was announced Friday that 164,000 new jobs were added in April, and the unemployment rate reached 3.9 percent.

It has been 18 years since unemployment was under 4 percent. As unemployment continues to fall, people wonder, how low could it go?

And what if it gets below the dreaded “natural rate of unemployment” that economists like to talk about?

The idea that there is a rate of unemployment, somewhere in the range of 5 to 6 percent, that’s essential in order for the economy to function smoothly — without rapidly overheating — has been broadly accepted by economists and economic commentators since the 1960s.

Yet there have always been dissenters, and more and more people are looking at this argument with a critical eye. One turning point may be a recent paper by Olivier Blanchard, the respected former chief economist of the International Monetary Fund. He argues that there’s enough evidence the economy can function well with much lower unemployment without inflation spiraling that the Federal Reserve should “keep an open mind” about whether the natural rate even exists.

Where did the idea of a “natural” rate of unemployment come from? The more technical term is “non-accelerating inflation rate of unemployment,” often rendered in shorthand as NAIRU. It’s described to undergraduates —  in Blanchard’s popular macroeconomics textbook, for instance — as “the rate of unemployment required to keep the inflation rate constant.” The term was coined in Milton Friedman’s famous 1968 presidential address to the American Economics Association, “The Role of Monetary Policy.”

Increasing dissent on an issue once thought settled

Some economists have long grumbled about the idea of a natural rate of unemployment. Yet after Great Recession, these sub rosa rumblings are starting to go public. The first problem with this rate is that nobody can determine it with any accuracy. When economists say it’s 5 or 6 percent, they are basically guessing. Actual data from the real-world economy keeps demonstrating that employment of lower than 5 percent, and now even lower than 4 percent, can persist without harm.

Worse, when economists try to pick a “natural rate,” they err in the same direction every time — the direction that hurts workers. Look, below, at the estimates of the natural rate of unemployment as predicted by Federal Reserve economists. Every quarter, Fed economists predict unemployment over the next three years as well as the “long run” rate, the natural rate that unemployment would need to stay at in order to for inflation to be stable.

Here’s a chart of their guesses of the natural rate four years out and the actual unemployment rate that occurred.

The Y axis is the unemployment rate. The red line is the guess made four years earlier by the Fed as to what the long-run, natural rate of unemployment would be. The blue line is the actual unemployment rate. As we can see, the Fed failed to predict that unemployment could go as low as it did.

As unemployment drops, it is easy to infer that inflation would follow. When there are fewer available workers, they can demand higher wages to take new jobs. And all kinds of economists incorporate this argument into their work. This is what many people generally think the “natural rate” debate is about.

But the actual natural rate thesis is more complicated, and makes some claims about how economic growth should behave. As Blanchard notes, the natural rate hypothesis actually consists of two interlocking propositions.

The first is the idea that there is a natural rate of unemployment that a well-functioning economy gravitates toward. Policy can’t get us below a certain level without inflation taking off. The best we can do for unemployment, therefore, is to ease fluctuations around this natural path.

And it follows that this is true more broadly about growth: There is a built-in rate of growth, given certain inputs like technology and educational levels, that policymakers can’t push beyond without generating increasing inflation, and that a well-functioning economy will settle on.

Yet our economy since the Great Recession does not appear to shifted back toward any kind of “natural” path of steady growth. Indeed, we never really recovered from the Great Recession. Once the recession started growth downshifted, and we continue to follow a low growth path. There was a massive break in the path of our economy —and the problem was even worse for Europe.

Milton Friedman was debunking the idea of a stable trade-off between unemployment and inflation

The second hypothesis of the natural rate argues that deviations from full employment lead to shifts in the rate of inflation — it will accelerate. “A rising rate of inflation may reduce unemployment, a high rate will not” is how Friedman put it in his address. This was a response to the idea that there was a stable trade-off between the rate of inflation and the rate of unemployment.

Friedman argued that this relationship was temporary, and would break down as expectations of inflation were absorbed into the inflation rates. Economists responded by absorbing this potential for inflation to accelerate because of expectations into their models.

But even as it became conventional wisdom, the supposed relationship between unemployment and increasing or decreasing rates of inflation was breaking down — notably in the 1990s. Unemployment got below 4 percent in 2000 without inflation taking off. Since the onset of Great Recession, the gap between theory and reality has only grown.

As unemployment rose, as the recession kicked in, the natural-rate theory would predict inflation to collapse, possibly to the point of deflation. Then during the slow recovery, we’d also expect inflation to pick up again. Yet neither happened; today, inflation appears to be well anchored at just below 2 percent. Economist Christian Friedrich, of the Bank of Canada, describes these two events as the “twin puzzles” of inflation in the Great Recession.

A range of possible “natural” rates so broad as to be useless

In the final year of President Obama’s term, the Council of Economic Advisers sought to quantify the degree to which the relationship between inflation and employment broke down. The ability of unemployment to predict changes in inflation is essentially zero over the past 20 years, they found. As a result, there’s no ability to predict a range, much less a rate, of natural unemployment. They conclude that the “50-percent confidence band in 2014 ranges from 4.3 to 6.1” for the natural rate of unemployment.

That estimate range is so vast it simply can’t guide policy.

What caused this breakdown is open to debate. Blanchard presents evidence that when inflation is very low and predictable, it doesn’t impact consumers’ decision-making. Consumers appear to “now ignore inflation unless some large change, such as a change in gas or food prices, takes place,” he writes. If that’s true, there’s more room for unemployment to go lower.

Once we see how weak the foundations for the natural rate of unemployment are, other arguments for pursuing rates of unemployment economists once thought impossible become more clear. Wages can increase at the expense of corporate profits without causing inflation. Indeed, since 2014 we are seeing an increase in the share of the economy that goes to labor.

Even better, lower unemployment doesn’t just help workers: It can spur overall growth. As the economist J.W. Mason argues, as we approach full employment incentives emerge for greater investment in labor-saving productivity, as companies seek to keep labor costs in check as workers demand more. This productivity increase stimulates yet more growth.

The harder we push on improving output and employment, the more we learn how much we can achieve on those two fronts. That hopeful idea is the polar opposite of a natural, unalterable rate of unemployment. And it’s an idea and attitude that we need to embrace if we’re to have a shot at fully recovering from the wreckage of the Great Recession.

Mike Konczal, a Vox columnist, is a fellow with the Roosevelt Institute, where he works on financial reform, unemployment, inequality, and a progressive vision of the economy. He blogs at Rortybomb and is on Twitter @rortybomb.

The Big Idea is Vox’s home for smart discussion of the most important issues and ideas in politics, science, and culture — typically by outside contributors. If you have an idea for a piece, pitch us at thebigidea@vox.com.

On a recent Saturday afternoon, 11 aspiring socialists joined together in a public library in Northeast Washington, DC, to try to clog up the city’s eviction machine. The meeting room was yellow, with a clock set at the wrong time and streamers on the wall left over from somebody’s birthday party.

Gathered around me are members of the DC chapter of the Democratic Socialists of America. DSA membership has skyrocketed from 7,000 to 30,000 members nationwide since Trump’s election, and this meeting was yet more evidence of the new energy in the organization. It was one of the two weekly canvassing meetings for the new Stomp Out Slumlords campaign (SOS), which encourages people facing eviction to get their day in court.

It’s a worthy campaign in its own right. But it also typifies the wide variety of experiments with bottom-up organizing happening spontaneously across the country, often under the radar of the media. Such organizing is changing the nature of the left in the Trump era. Rather than just navel-gazing on social media — something the DSA has an unfair reputation for — these activists are building on past political movements while working through the thorny issues facing progressives in their “out” years. Democrats and the broader liberal movement that’s looking to rebuild, and reinvent itself, should pay heed.

Empowering tenants and identifying “choke points” in a biased system

Landlords count on tenants not showing up for their eviction court dates; for them it means an automatic victory. Landlords also count on tenants’ ignorance about other options open to them, like reasonable repayment programs, free legal counsel, or potential legal counterattacks. (If the properties are neglected, as is often the case, tables can be turned on landlords.) The main purpose of SOS is to raise the cost of eviction by persuading tenants to show up and fight back.

Before the volunteers hit the streets to canvass, they get 30 minutes of training. There are some basic rules: Don’t give legal advice yourself — but advise people to seek legal counsel from a list of contacts. Get phone numbers for follow-up. Ask concrete questions about tenants’ plans for their court date (“Can you take the day off work?”), to be sure they’re thinking about the logistics. If someone’s not home, leave a pamphlet in the door, folding it so the word “eviction” isn’t visible to other neighbors. Finally, make sure you use the email and website for dsadc.org, as dcdsa.org is a “Cops for Kids” website run by the Dane County Deputy Sheriff’s Association.

Stomp Out Slumlords was born this way: At a DSA party earlier this spring, two people who had recently joined the organization, and who work around housing issues, were introduced to each other by Marge McLaughlin, the chair of DSA DC. (They’d prefer not to be named so their employers don’t learn about their political activities.) They decided they should do a project together, and took their idea to the broader District of Columbia DSA community.

Informing tenants of their rights, and pointing them toward helpful organizations — like the DC Bar and the Landlord-Tenant Resource Center — is the first of three SOS goals.

A more systemic ambition is to do enough of this to flood the courts with people seeking to exercise their rights. SOS views the courts as a choke point in a system heavily tilted against tenants; like landlords, the courts assume most people won’t show. When they do show, the courts get overloaded and evictions slow. (The tactic Is partly inspired by Poor People’s Movements by Frances Fox Piven and Richard Cloward.) The ultimate goal is to motivate tenants themselves to become activists — to create “cadres” devoted to the anti-eviction cause.

At first, organizers would go to the courthouse to pull public records of eviction court dates. Then they became available online, and a team of volunteers used their off-hours to keep a database up-to-date.

SOS plugs a very specific gap in DC housing activism. Most tenants’ rights organizing here is centered on creating groups in specific buildings to pressure landlords on subjects ranging from maintenance to preventing displacement. Groups like Empower DC and ONE DC lead these campaigns, which require long-term relationship building. SOS, in contrast, gives people who want to work on tenant issues in their spare time a way to do so — simultaneously strengthening ties within the DSA and the broader community.

From coding to designing fliers to knocking on doors

There’s something magical in watching a bunch of talented people contributing their wide-ranging specific skill set to a problem like eviction. A professional graphic designer made the Anti-Eviction Operations Manual, which outlines goals and best practices for the campaign, as well as the pamphlets all canvassers carry.

Professional coders work at scraping the eviction court data from the website, freeing up more time for canvassing. DSA members with professional data expertise use court records to study the effectiveness of the campaign. They’ve found that contact with a canvasser indeed increases the odds of a court appearance, and decreases the chance of eviction.

While data is great, the project hinges on people knocking on doors. I go out with Ajmal Alami and Emmett Parks, both 22 years old. Ajmal, visiting DC from Virginia Tech, joined DSA last August, and also serves as co-chair of YDSA, the national student wing of DSA. He joined casually, he says, but quickly “[your] life becomes consumed by socialism. That’s how DSA happens to people.” This was Ajmal’s fourth tenant-canvassing trip, and he was training Emmett, who was on his first.

Emmett, from just outside DC in Silver Spring, was working on Montgomery County’s successful $15 minimum wage campaign when he got interested in DSA, which was also active in the campaign.

The pair were knocking on doors in Deanwood, a neighborhood in Ward 7 in the far Northeast part of DC — an older, majority-black area that’s one of the poorest in Washington. The unemployment rate is some two-thirds higher than in DC as a whole. The area is clearly on track for rapid gentrification: You see signs for new luxury condos destined to arise in empty lots.

A lot of their time is spent just figuring out how to get to people’s doors. The front doors of some buildings are missing a working lock, itself a housing-code violation they note on their clipboard. One woman invites the two in to talk about the back-payment arrangement she was able to work out with her landlord. (Under DC law, if you’re invited into a building by a tenant, you can’t be kicked out.)  Even with such payment agreements, landlords often push for eviction.

Mainstream Democrats dismiss the DSA as being more interested in flaunting a lefter-than-thou attitude than doing hard political work. But this project belies that.

As do many other DSA campaigns. In New Orleans, members are hosting brake-light replacement clinics — broken tail lights being one of the most common reasons people are pulled over by the police. In North Texas, DSA is sponsoring free flu vaccine clinics. There are multiple DSA campaigns testing out Medicare for All canvassing strategies.

SOS was designed to reflect what worked and didn’t in Occupy Our Homes, which grew out of the 2011 Occupy movement. Taking over spaces to prevent evictions is extremely time-intensive (obviously), and a tactic rarely requested by the tenants themselves. Some participants in that movement also detected too much of a “client” mentality among activists: People were serving individuals instead of empowering them.

The straightforwardness of what SOS does helps defuse potential class and racial tension: Canvassers don’t present themselves as saviors but as providers of tools and resources. The Democratic Party leadership, worried as it is about how to simultaneously negotiate the terrain of race and class, might learn quite a bit from the project.

As Ajmal and Emmett come to the last names on their clipboard, they have one of those moments that make a hard day’s work worthwhile. The last building is a poorly maintained one close to the neighborhood train stop. Three out of the 12 residents facing an eviction summons on the same day.

An older black female resident notices the two canvassers as they’re trying to figure out how to get into her building. She says she’s lived there for almost 50 years and is facing eviction; organizers from a different group bought her some time. The landlord was forced to make overdue repairs to her apartment, and now she was now on a back-rent repayment plan.

She volunteered to help Ajmal and Emmett connect with other residents. She let them know problems each had had with their landlord, and offered tips on how to approach each person. The woman took some pamphlets and promised to spread the word.

Thousands of words have been spilled on opinion pages about how the left ought to remake itself. But the first step of any new political movement begins with small groups of people finding each other and going out into the world.

Mike Konczal, a Vox columnist, is a fellow with the Roosevelt Institute, where he works on financial reform, unemployment, inequality, and a progressive vision of the economy. He also blogs at Rortybomb, and his Twitter handle is @rortybomb.

The Big Idea is Vox’s home for smart discussion of the most important issues and ideas in politics, science, and culture — typically by outside contributors. If you have an idea for a piece, pitch us at thebigidea@vox.com.

Professor Cornel West’s attacks on the author Ta-Nehisi Coates has reawakened interest in the term “neoliberal.” (West dismissed Coates as representing the “neoliberal wing” of black activism.) For some leftists, the term can be an all-purpose insult directed at anyone they perceive as being to their right. But it’s not only a contentless insult, Mike Konczal explained in July:

It’s hard to think of a term that causes more confusion, yet is more frequently used in political debate, than “neoliberalism.” It’s one thing to argue that the term should be discouraged or retired from public discussions, because it generates heat instead of light, but it is another to say that it doesn’t have any meaning or use. Jonathan Chait makes the second case in New York magazine.

Whenever I find myself reaching for “neoliberalism,” I look for a different phrase, simply because it will better communicate what I’m trying to convey. But if we throw away the term entirely, or ignore what it’s describing, we lose out on an important way of understanding where we are right now, economically speaking.

Neoliberalism, at its core, describes the stage of capitalism that has existed over the past 30 years, one that evolved out of the economic crises of the 1970s. The underpinnings of this stage are buckling under the weight of our own crises, perhaps even collapsing, all of it in ways we don’t yet understand. A careful consideration of the term can help us grasp a lot of what is going on in the world, especially as the Democratic Party looks to change.

Jonathan Chait’s sweeping condemnation of the word “neoliberal”

For Chait, the term neoliberal “now refers to liberals generally” and indiscriminately, regardless of what views they hold. The “basic claim is that, from the New Deal through the Great Society, the Democratic Party espoused a set of values defined by, or at the very least consistent with, social democracy,” but then, starting in the 1970s, “neoliberal elites hijacked the party.” However, the efforts at hijacking that the critics identify “never really took off,” in Chait’s view. As such, to use the term is simply to try “to win [an argument] with an epithet.”

Chait correctly points out that the left has historically been disappointed with the New Deal and Great Society, viewing them as lost opportunities. But he oversteps when he goes further to say that “neoliberal” is not only devoid of meaning, but that there was no essential shift in Democratic identity toward the end of the last century.

The difficulty of the term is that it’s used to described three overlapping but very distinct intellectual developments. In political circles, it’s most commonly used to refer to a successful attempt to move the Democratic Party to the center in the aftermath of conservative victories in the 1980s. Once can look to Bill Galston and Elaine Kamarck’s influential 1989 The Politics of Evasion, in which the authors argued that Democratic “programs must be shaped and defended within an inhospitable ideological climate, and they cannot by themselves remedy the electorate’s broader antipathy to contemporary liberalism.”

Galston and Kamarck were calling for a New Deal liberalism that was updated to be made more palatable to a right-leaning public, after Reagan and the ascendancy of conservatism. You might also say that they were calling for “triangulation” between Reaganism and New Deal liberalism — or, at worst, abandoning the FDR-style approach.

In economic circles, however, “neoliberalism” is most identified with an elite response to the economic crises of the 1970s: stagflation, the energy crisis, the near bankruptcy of New York. The response to these crises was conservative in nature, pushing back against the economic management of the midcentury period. It is sometimes known as the “Washington Consensus,” a set of 10 policies that became the new economic common sense.

These policies included reduction of top marginal tax rates, the liberalization of trade, privatization of government services, and deregulation. These became the sensible things for generic people in Washington and other global headquarters to embrace and promote, and the policies were pushed on other countries via global institutions like the International Monetary Fund. This had significant consequences for the power of capital, as the geographer David Harvey writes in his useful Brief Introduction to Neoliberalism. The upshot of such policies, as the historical sociologist Greta Krippner notes, was to shift many aspects of managing the economy from government to Wall Street, and to financiers generally.

Chait summarizes this sense of the term in the following way: It simply “means capitalist, as distinguished from socialist.” But what kind of capitalism? The Washington Consensus represents a particularly laissez-faire approach that changed life in many countries profoundly: To sample its effects, just check out a book like Joseph Stiglitz’s Globalization and its Discontents. The shock therapy of mass privatization applied to Russia after the Soviet collapsed, for example, reduced life expectancy in that country by five years and ensured that Russia was taken over by strongmen and oligarchs.

International pressure forced East Asian countries to liberalize their capital flows, which led to a financial crisis that the IMF subsequently made use of to demand even more painful austerity. The European Union was created to facilitate the austerity that is destroying a generation in such countries as Greece, Portugal, and Spain. (The IMF itself is reexamining its actions over the past several decades; titles it has published, including Neoliberalism, Oversold?, demonstrate the broad usefulness of the term.)

Markets are defining more and more aspects of our lives

The third meaning of “neoliberalism,” most often used in academic circles, encompasses market supremacy — or the extension of markets or market-like logic to more and more spheres of life. This, in turn, has a significant influence on our subjectivity: how we view ourselves, our society, and our roles in it. One insight here is that markets don’t occur naturally but are instead constructed through law and practices, and those practices can be extended into realms well beyond traditional markets.

Another insight is that market exchanges can create an ethos that ends up shaping more and more human behavior; we can increasingly view ourselves as little more than human capital maximizing our market values.

This is a little abstract, but it really does matter for our everyday lives. As the political theorist Wendy Brown notes in her book Undoing the Demos: Neoliberalism’s Stealth Revolution, the Supreme Court case overturning a century of campaign finance law, Citizens United, wasn’t just about viewing corporations as political citizens. Kennedy’s opinion was also about viewing all politics as a form of market activity. The question, as he saw it, was is how to preserve a “political marketplace.” In this market-centric view, democracy, access, voice, and other democratic values are flattened, replaced with a thin veneer of political activity as a type of capital right.

You may not believe in neoliberalism, but neoliberalism believes in you

Why does this matter if you couldn’t care less about either the IMF or subjectivity? The 2016 election brought forward real disagreements in the Democratic Party, disagreements that aren’t reducible to empirical arguments, or arguments about what an achievable political agenda might be. These disagreements will become more important as we move forward, and they can only be answered with an understanding of what the Democratic Party stands for.

One highly salient conflict was the fight over free college during the Democratic primary. It wasn’t about the price tag; it was about the role the government should play in helping to educate the citizenry. Clinton originally argued that a universal program would help people who didn’t need help — why pay for Donald Trump’s kids? This reflects the focus on means-tested programs that dominated Democratic policymaking over the past several decades. (Some of the original people who wanted to reinvent the Democratic Party, such as Charles Peters in his 1983 article “A Neoliberal’s Manifesto,” called for means-testing Social Security so it served only the very poor.)

Bernie Sanders argued instead that education was a right, and it should be guaranteed to all Americans regardless of wealth or income. The two rivals came to a smart compromise after the campaign, concluding that public tuition should be free for all families with income of less than $125,000 — a proposal that is already serving as a base from which activists can build.

This points to a disagreement as we move forward. Should the Democratic Party focus on the most vulnerable, in the language of access and need? Or should it focus on everyone, in the language of rights?

We’ll see a similar fight in health care. The horror movie villain of Republican health care reform has been killed and thrown into the summer camp lake, and we’re all sitting on the beach terrified that the undead body will simply walk right back out. In the meantime, Democrats have to think about whether their health care goals will build on the ACA framework or whether they should more aggressively extend Medicare for more people.

Chait argues that “[t]he Democratic Party has evolved over the last half-century, as any party does over a long period of time. But the basic ideological cast of its economic policy has not changed dramatically since the New Deal.” Whether you believe that’s true hinges on what you think of the relative merits of public and private provisioning of goods. For there was clearly some change in Democratic policymaking — and, arguably, in its “ideological cast” — sometime between 1976 and 1992. It became much more acceptable to let the private market drive outcomes, with government helping through tax credits and various nudges. One influential 1992 book, Reinventing Government, by David Osborne and Ted Gaebler, described a government that should “steer, not row.” (FDR believed government could and should row.)

Another place we can see a break in the Democratic Party is in its view of full employment. Between 1944 and 1988, the phrase “full employment” was found in every Democratic Party platform and was commonly mentioned in Democratic State of the Union addresses. As an excellent new report by the Center for Economic and Policy Research, a group called Fed Up, and the Center for Popular Democracy underscores, full employment was also a core demand of the civil rights movement. Then it disappeared, and was only put back in the platform for the 2016 election.

This reflects different views of how the economy works. If it generally works for everyday people, then the most important thing is focusing on education and access. There’s generally no role for government action, outside technocratic tweaks, in making sure we are at full employment. The side that views the economy as underperforming for everyone, no matter what their skill set looks like, would emphasize macroeconomic structural factors more, as Democrats did before 1989.

Or take the general stance toward the business community. Another policy concern that has entered, and departed, the Democratic platform over time is the antitrust agenda — worries about the concentration of big business. The 2016 Democratic platform said: “Large corporations have concentrated their control over markets to a greater degree than Americans have seen in decades” and that Democrats “will make competition policy and antitrust stronger and more responsive.” Again, that marked a return of language that was prevalent in the mid-century period but that disappeared after 1988.

Another change that “neoliberal” Democrats brought to the party was a less skeptical attitude toward the financial industry. Once in favor of keeping financiers in check, Democrats became much more deferential to the industry. An influential 1997 book by Bob Litan and Jonathan Rauch, American Finance for the 21st Century, argued that the New Deal approach was dated and that Congress should place “a greater reliance on more targeted interventions to achieve policy goals rather than broad measures, such as flat prohibitions on certain activities.” We still live with this battle.

We can leave it to the historians to piece together why and how Democrats made the decision to shift course in the 1980s, emphasizing means testing, privatization of key government services, education as a cure-all, and a trusting attitude toward large business. But they did, and we have to figure out what comes next. We need a full break with what happened before, both because the times are different and because the recent solutions — whatever word you use to describe them — aren’t cutting it anymore.

Mike Konczal, a Vox columnist, is a fellow with the Roosevelt Institute, where he works on financial reform, unemployment, inequality, and a progressive vision of the economy. He also blogs at Rortybomb, and his Twitter handle is @rortybomb.

The Big Idea is Vox’s home for smart discussion of the most important issues and ideas in politics, science, and culture — typically by outside contributors. If you have an idea for a piece, pitch us at thebigidea@vox.com.

The Republican overhaul of the tax system is moving even faster than their quicksilver attempt to repeal Obamacare. Tax experts are still trying to wrap their heads around the intricate details of the House bill, while Republicans are hoping it passes before they lose momentum — aiming for a vote Thursday. Meanwhile, it’s tough for ordinary people to understand what is happening.

The crucial thing to realize is that this tax reform effort reflects more than the normal conservative allergic reaction to progressive taxation — going far beyond undoing the modest progressive grains achieved by Presidents Obama and Clinton. Three major changes stand out: These taxes are far more focused on owners than on workers, even by Republican standards. They take advantage of the ambiguity of what counts as income, weaponizing that vagueness to help their friends and hurt their enemies.

And after years of pushing for a safety net that works through the tax code, in order to keep more social democratic reforms at bay, Republicans now reveal their willingness to demolish even those modest protections. Their actions make clear that a welfare state based on tax credits and refunds, rather than universal commitments, is all too vulnerable.

Capital is eating the economy

The “reform” bill shows that the right understands how the rules of the economic game are shifting — toward capital and away from labor (even away from the labor of the wealthy). Economists studying inequality in the United States over the past several decades have tended to focus on the growing spread between the wages of workers at the top and those in the middle. The data shows that in the 1980s and 1990s, the beneficiaries of growing inequality were CEOs and other executives — who, though they exist in a whole different universe from blue-collar laborers, do receive labor income in the sense that they show up to work and get paid contractually for doing so.

“The working rich have replaced the rentiers at the top of the income distribution,” wrote Thomas Piketty of the Paris School of Economics and Emmanuel Saez of UC Berkeley, two scholars who have helped to popularize the concept of the “1 percent” in the United States, in an influential 2003 paper. (Their data covered 1913 to 1998.)

Lately, however, there’s been a switch, as Piketty and Saez, along with Berkeley’s Gabriel Zucman, recently concluded. “The upsurge of top incomes was first a labor income phenomenon but has mostly been a capital income phenomenon since 2000,” they noted in a paper updating the data through 2014. Since then, income growth within the top 1 percent has accrued to people who make their money from owning money, stock, and other financial instruments, rather than to people who make their money via skills and labor.

We’ve seen a large increase in corporate profits since 2000, increasing faster during the Great Recession, yet this hasn’t trickled down to regular people. Wages are nearly flat since 2000, and the recovery from the recession featured the weakest business investment of the postwar period. This is a genuine shift in the organization of the economy, one economists are still struggling to understand.

The Republican tax plan supercharges these changes. To a striking degree, the changes are about benefiting not just the well-off but those who are well-off because they own capital, as the Institute on Taxation and Economic Policy notes in its analysis of the Senate bill.

That’s because the plans are tilted toward corporate income tax reductions, which will largely benefit concentrated owners of stock; passive owners of pass-through businesses who don’t actively work for the firm; and people who inherit their money. (Notably, because around a third of stocks are foreign-held, a significant amount of the benefit won’t even go to US citizens. The Institute on Taxation and Economic Policy estimates that “foreign investors would receive [benefits roughly equal to the] benefits that would go to the bottom three-fifths of Americans.”)

That the Republican tax plan is regressive is reason enough to oppose it. If the United States is going to run a deficit, it shouldn’t do so in order to reduce the taxes paid by those at the top. Yet it is extra irresponsible given recent economic developments. Corporations are flush with cash from large profits and aggressively low interest rates, yet they aren’t investing. This is a big hint that large tax cuts for corporations will have very little effect on the economy. They’ll only amplify the deleterious trends we’re still struggling to understand.

Defining what counts as “income” is a deeply political act

Much of the plan involves changing the definition of “income,” in various ways. A central part of the reform plan involves reducing the taxes on “pass-through” entities like sole proprietorships, S corporations, and partnerships. This creates a huge incentive for people to take whatever it is they do for a living and redefine it as a pass-through company.

In 2012, Kansas went down this road: It entirely eliminated state taxes on pass-through companies. A team of economists looking at taxpayer data has found that the main effect has been for people to simply reclassify their income to dodge taxes, while not actually starting any new businesses. Though Republicans have made some attempts to prevent a rush toward income reclassification with their bill, tax experts are raising alarms that plenty of room for shenanigans will remain.

Ordinary people usually think of income as whatever their salary is. It’s more complicated than that. Republicans are redefining different kinds of income in order to benefit their friends and harm their enemies. Passive owners of pass-through entities get their income redefined in a way that minimizes taxation. People who inherit money get their inheritance redefined in a way to hide it from taxation. Those who want to stuff money away to pay for private K-12 education get that savings defined as non-income too. These are all payouts to key Republican constituencies.

And Republicans are redefining income in other ways to punish their opponents. The state and local tax deduction that Republicans want to repeal primarily benefits people in blue states, where those taxes are higher. Republicans also want to treat graduate education tuition reimbursements as income, hitting higher education institutions — home to both climate scientists and the “politically correct” anti-right — hard. Union dues would suddenly become taxable income. The fees extracted by tax preparers, who stand between low-income people and the earned income tax credit, aren’t deductible under their plan.

The safety net created by the tax code, inadequate to begin with, is being undone

There’s a lot of focus on the exemptions the Republicans are removing, but not enough on how they interact with — or undermine — social insurance. On May 4, House Republicans passed the American Health Care Act (AHCA), their replacement for Obamacare, which later died in the Senate. A key part of the AHCA expanded the scope of the medical deduction exemption, which allows people with high medical costs to subtract those costs from their taxable income.

The Republicans lowered the income threshold for such deductions in order “to provide additional tax relief for persons, and in particular older persons with lower-incomes, who have high medical expenses,” as Washington and Lee University law professor Timothy Jost described it. This is at least an intellectually consistent, if flawed, conservative vision for how to handle health care costs: treat the sick as consumers who need to have more skin in the game by incurring more costs upfront. As people pay more upfront, the market gets to work its magic; then the tax code can help people with high medical bills both through this exemption and from health savings accounts, which the AHCA also expanded.

A mere six months after these ideas were put forward in the AHCA, House Republicans now propose entirely eliminating all of the medical deduction exemption. This would be devastating for middle-class households with an illness.

Meanwhile, the attempts to scuttle Obamacare continue: The latest Senate tax bill proposes eliminating the individual mandate. In short, Republicans are attacking both the ACA and their own tools for making medical expenses more bearable.

In the past, conservatives have explicitly stated that they hope the growing use of tax-deferred 401(k) savings plans will weaken support for, and perhaps ultimately replace, Social Security. Yet today’s GOP almost reduced the cap of 401(k) contributions — before President Trump stopped them. The adoption tax credit was part of the Republican 1994 Contract With America. It’s gone, too, in this bill. Many people in the political center don’t see the need for free college — as proposed by Bernie Sanders and others — because they believe students should invest in their own educations. And they note that student loans help them make this smart investment. Yet tax exemption for student loans is also on the chopping block.

For decades there’s been a push away from publicly provided, universal programs toward what the political scientist Suzanne Mettler describes as the “submerged state” of tax benefits and exemptions. These exemptions tend to be regressive, poorly targeted, and too reliant on the market. But they do form a coherent social insurance system for middle- and upper-middle-class families.

This safety net via the tax code is exactly what conservatives have declared war on in their new bill. They might have crafted these various deductions into a more coherent system; instead, they’re axing them to cut taxes on the rich.

Many liberals are also opposed to the submerged state. But they want to replace it with public, universal programs with broader risk sharing. That Republicans are so indebted to capital owners that they’d destroy their system in order to appease them presents the perfect opening for the left to show why we need a broader public, universal system of social insurance.

Republicans are proposing a tax plan whose benefits are permanent for owners yet expire for everyone else. They’ve taken the worst trends in the American economy — and hit the accelerator.

Mike Konczal, a Vox columnist, is a fellow with the Roosevelt Institute, where he works on financial reform, unemployment, inequality, and a progressive vision of the economy. He blogs at Rortybomb and is on Twitter @rortybomb.

The Big Idea is Vox’s home for smart discussion of the most important issues and ideas in politics, science, and culture — typically by outside contributors. If you have an idea for a piece, pitch us at thebigidea@vox.com.

It’s fun to pick on the professional class. Obsessed with their credentials and careers, helicopter-parenting their children until they’re admitted into the “best” colleges, professionals make easy targets. Even the professional class likes to eye-roll at its own pretensions.

But does the professional class constitute a distinct economic and political problem?

Richard Reeves, the co-director of the Center on Children and Families at the Brookings Institution, gives a strong affirmative answer in his new book Dream Hoarders. Indeed, he argues professionals are the central drivers of inequality within our economy.

“There is one good reason why many Americans may feel as if the upper middle class is leaving everyone else behind: They are,” he writes. Reeves defines the upper middle class as those in the top 20 percent of households, or those whose incomes start at around $115,000 a year. Reeves believes “it is about time those of us in the favored fifth recognized our privileged position.”

Yet the book is based on three arguments, each of which is flawed. His first contention is that inequality isn’t a problem primarily of the top 1 percent but of the top 20 percent. “This obsession with the upper class [the top 1 percent] allows the upper middle class to convince ourselves we are in the same boat as the rest of America; but it is not true.”

His second argument is that professionals are “hoarding” opportunity for themselves. Opportunity hoarding happens “when the upper middle class does not win by being better but by rigging the competition in our favor.” Examples he emphasizes are legacy admissions (when children of elite colleges get admissions preferences), unpaid internships (which only well-off young people can afford), and exclusive zoning in highly desirable urban areas.

Reeves’s third argument is that we should have a politics of changing the hearts of professionals through moral suasion. Professionals should learn to live with just a little less stuff and a little more risk. This is not only a better way to live, he suggests; it would also lower barriers between the top 20 percent and the rest.

Yet individually and collectively, these arguments point us in the wrong direction if we’re truly interested in attacking inequality.

There’s a big difference between people at the 80th percentile of income and the 99th

At the book’s core is the claim that the left gets the inequality arguments wrong. From Occupy Wall Street to economists like Thomas Piketty and Paul Krugman, many left-leaning activists and commentators have indeed focused primarily on the top 1 percent — and often on inequality within that top 1 percent. But Reeves insists that the real action is in the broader top 20 percent.

Reeves states: “[T]he top fifth has seen the biggest income gains in recent decades, even without the extra lift provided by the top 1 percent.” For evidence, he notes that “the top 1 percent saw a jump of $1.4 trillion in pretax income, while those between the eighty-first and ninety-ninth percentile saw a gain of $2.7 trillion.” Real wage rises have been “sickly for those outside the top quintile” since 1979, Reeves says (which is true enough). Over the same period, average wage and salary income in the top quintile, excluding the top 1 percent, “has grown by a robust 44 percent.” In sum: He places more blame for inequality on professionals than on the 1 percent.

To arrive at that 44 percent figure, however, Reeves focuses only on the raw numbers of income growth. But the economy itself also grew significantly during this 38-year period. How should we judge whether this group is increasing its size of the economic pie or not? One way is to compare income at different levels over time as a proportion of GDP. If Reeves’s theory is right, from 1980 to 2014 we ought to see the entire top 20 percent gaining a larger share of economic earnings. Yet that’s not what we find at all:

It’s only as you get to the top 5 percent — once you get into the class of owners, managers and executives — that you can see the difference begin to break, and it explodes as you get further up the top. This graphic comes from the latest analysis by Piketty, Emmanuel Saez, and Gabriel Zucman of the distribution of incomes in the United States, which Vox’s Dylan Matthews describes here. (The pattern holds for incomes both before and after taxes.)

This is one of the ways increasing inequality at the extreme top end distorts our perceptions. The people in the 80-to-99-percent tier may well be supporting bad social policies, but economically they are mainly accomplishing the feat of not falling behind the top 1 percent as rapidly as everyone else. As the economy grows, they are just growing with it.

What about “opportunity hoarding”?

Yet perhaps the top 20 percent — even it if is not gaining faster than other groups — is denying opportunities to other people. The idea that the lower and middle classes are being actively blocked is important for Reeves, because one of his key assumption is that the economy as a whole is working well — at least once you get past the choke points guarded by professionals. “The labor market is largely meritocratic and competitive,” Reeves writes, all too complacently.

So the real challenge is ensuring that disadvantaged kids get enough access and opportunity: “The chances to prepare for the competition are so unequal” because of rampant “anticompetitive opportunity hoarding.”

Yet the focus on professionals prepping their kids for college, and the best jobs, distorts Reeves’s analysis and pushes our attention away from fundamental changes in the economy in the past 20 to 40 years. For starters, the income premium for those with a four-year college degree hasn’t grown since 2000.

Graduates of even elite colleges are entering a strange new economy. There’s increasing inequality among people with similar skills and within specific industries; wages are being determined less by market-wide skills and more by whether one has the luck to wind up at a company with some level of market power. The sharp rise in incomes at the very top is so narrow that it simply can’t be the result of having the right name-brand college on one’s CV. As Piketty, Saez and Zucman note, “The upsurge of top incomes was first a labor income phenomenon but has mostly been a capital income phenomenon since 2000.”

Something has broken at the heart of the economy, and more education can’t solve it alone. Indeed, as the People’s Policy Project’s Matt Bruenig has argued, we’ve been running a version of the experiment of giving more people college degrees. From 1991 to 2014, “The share of adults with an associate degree went up 3.9 points, the share with a bachelor’s degree went up 8.3 points, and the share with a post-bachelor’s degree went up 4.8 points,” Bruenig writes. The result was just a more educated group of people in poverty. In the context of inequality, it’s done nothing to bend the share of income taken at the very top or increase economic mobility rates.

Focusing on who gets into a few dozen elite colleges, which educate less than 5 percent of college students, also mistakes cause for effect. The clamor for prestigious degrees is an epiphenomenon of more important structural economic issues. The top schools are indeed one pathway into elite finance and consulting. But surely the larger issue is that we’ve deregulated and empowered those industries over the past four decades. Why not tackle that power frontally?

Reeves would like to see more “downward mobility” — when people end up less well-off than their parents — to help encourage the upward kind. Here he touches on the central problem, without realizing the full implications of the observation: Downward mobility would be easier “if society were more equal, since the fall would not be so great.” He expands on the point, observing: “As the consequences of falling out of the upper middle class have worsened, so the incentives of the upper middle class to keep themselves, and their children, up at the top have strengthened.”

But instead of proposing to build a cross-class movement to ensure more security for workers who don’t catapult to the top, he perplexingly focuses his energy on changing the mindset of the upper middle class: “A change of heart is needed,” he writes, “a recognition of privilege among the upper middle class.” The book is ultimately about the moral suasion of elites.

Here are more practical ideas: We know how to start draining the rents from the upper middle class. An aggressive public option and governmental price-setting in health care would deflate medical sector rents. Free college would force private schools to compete on price rather than continue to feed off people’s desperation to climb illusory status ladders. Deeper transparency in financial markets, more comprehensive prudential regulations, and enforcement of financial crimes would make it harder for financiers to profit off the systemic risk they create. Enforcing antitrust and public utility rules more aggressively would open up bottlenecks in economic activity. Higher progressive taxation reduces the incentives to rent seek in the first place.

Any of these reforms would be more productive than getting a slightly different group into the most elite colleges and jobs.

There’s a reason the upper middle class clings to its tax-free savings plans

Reeves spends a lot of time criticizing “529” college savings plans and other tax expenditures that benefit the well-off while doing little for the working class. He is correct that these programs are unfair. However, he doesn’t seem to grasp that these tax-subsidized benefits constitute a coherent welfare system that people won’t give up without something to replace it.

If you want to go after the upper-middle-class’s 401(k) deductions, you’re going to have to strengthen Social Security. If you want to go after employer provided health care, it matters greatly whether or not there will be Medicare for All or a serious “public option” as an alternative. And if you want to go after college savings accounts, you need to have broadly accessible free public colleges.

People hold onto their 529s because the public system is being dismantled before their eyes. Such tax-shielded accounts are unfair, but they’re the only social insurance system people think they have.

Again, Reeves’s acceptance of the current economic system blinds him to possible solutions. He scornfully dismisses liberals who “wish America were more like Europe — and often specifically Scandinavia.” But if you aren’t replacing the welfare system we have with something else, there’s simply no way to get any traction on fighting inequality. 

Reeves also twists himself into knots arbitrating which practices of the upper middle class are fair, and which are unfair. As Rachel Cohen notes in her own review of the book in the New Republic, this gets complicated fast. (Cello lessons: fair. Writing a check to your alma mater: probably unfair.)

Reeves believes in the human capital the upper middle class has created for itself and its progeny. At one point he suggests it has helped him and his peers across a wide range of fronts, improving “our working life; the quality of our neighborhoods; ability to plan confidently for the future; our health, diet, and life spans; the stability of our families.” I believe he sees these things as a legitimate bounty to meritocrats for having good human capital; I see them as rights that should be extended to all working people, regardless of their college’s ranking.

A political party arguing that these belong to everyone, not just a handful of people with extreme credentials, might start winning elections.

Fredric Jameson once wrote that “it is easier to imagine the end of the world than to imagine the end of capitalism.” The same is true of meritocracy. At this point we’ve had enough diagnoses how meritocracy reinforces itself, creates an elite detached from and even hostile towards the rest of society, and how it pervades society with a notion of merit that leaves many people behind. Yet, as the conservative writer Helen Andrews has observed, almost all of the attacks end by prescribing small tweaks to make meritocracy work ever more efficiently.

We see a system’s flaws at its core, and we recommend more SAT tutoring classes to paper over it. We need something different this time.

Mike Konczal, a Vox columnist, is a fellow with the Roosevelt Institute, where he works on financial reform, unemployment, inequality, and a progressive vision of the economy. He also blogs at Rortybomb, and his Twitter handle is @rortybomb.

The Big Idea is Vox’s home for smart discussion of the most important issues and ideas in politics, science, and culture — typically by outside contributors. If you have an idea for a piece, pitch us at thebigidea@vox.com.

In June 2010 I made a very bad tweet that I came to regret. (Hard to imagine, I know.) I yelled at the disability rights group Adapt.

I’d come to DC to attend a conference of progressive leaders, “America’s Future Now.” And while I knew a lot about financial reform, I didn’t know enough about politics, activism, or the Democratic Party.

During a big speech by Nancy Pelosi, a group of disability rights activists began shouting down the then-speaker of the House, with cries of “Our homes, not nursing homes!” I thought these organizers were counterproductively attacking a potential ally, or disrupting a meeting of like-minded allies — or something — and I tweeted out my irritation. (I’d prefer to skip the specifics.)

Soon, members of Adapt explained to me these people were fighting to stay in their homes. They wanted Pelosi to support the Community Choice Act, which would have allowed funds for nursing homes to be directed for people to stay in their own communities. Embarrassed, I deleted my ill-tempered post and resolved to learn more about activists’ goals before speaking up.

This cringeworthy episode comes to mind because Adapt is again on the front lines of activism — fighting for everyone’s right to health care during the Republican’s efforts to repeal the Affordable Care Act. While insurance companies were missing in action in the Hill fight, the same people who were pointing out how the ACA didn’t address funding for community-assisted living in 2010 were there fighting for its survival in 2017.

Adapt organized a “die-in” at Mitch McConnell’s office, and got arrested fighting to prevent cuts to Medicaid. Their efforts produced powerful news photographs and TV footage that shaped the political battle. Like “resistance” organizers in town halls and community centers across the country, the protesters made it clear that lives would be hurt — and lost — if Medicaid and the ACA were cut, and they drove home the scandal of politicians cutting it in the middle of the night. They put their bodies on the line to highlight the stakes of the debate.

There’s been a lot of debate lately about what the Democrats stand for, and what they should stand for in the years ahead. As pundits and policymakers engage in that debate, we should be taking cues from activists.

Since at least the second half of Obama’s term, activists have been articulating a powerful vision of the world as it should be. They’ve been fighting for health care, a living wage, free education, and full employment, all in creative and diverse ways. Action on the ground has not only moved the policy goalposts but changed the center of gravity in the Democratic Party.

To be sure, Obama began his presidency with considerable support from activists, on such issues as health care, financial reform, stimulus, immigration, and climate change. But the fresh wave of activism can help us figure out what should come next.

It’s impossible, of course, to cover all the organizing and activism going on, from Black Lives Matter to Standing Rock, but there are four campaigns that bear special watching:

Health care

The most important and striking activism has been centered on health care. This didn’t start with the repeal fight. After the ACA was passed, religiously motivated Moral Monday protesters made the case, most notably in North Carolina, that their states should expand Medicaid, as the law permitted. When Republican shifted their focus to ending the ACA, the movement became supercharged, with resistance activists coordinating across the country to bring pressure against repeal.

Ordinary citizens were drawn into these protests, and as they questioned politicians they often spontaneously articulated a moral vision for health care. They were not excited about the “freedom” of being able to go without insurance or the “liberty” to buy coverage that didn’t cover anything. They stood up and said they wanted social insurance to be broader, more inclusive, and with risk more equitably shared. These ideas spread thanks to their actions.

A living wage

The most successful activist campaign since 2013 has arguably been the Fight for $15. Activists pushed both local cities and states to take the lead on raising their minimum wages, over industry opposition and in the face of intellectual gatekeepers who ruled the idea out of bounds. As they demonstrated against the injustice of asking people to get by on $7.25 an hour, they called attention to the broader ways low-wage work with unstable hours degrades those forced to do it.

Note the clarity of the call for action here: “Nobody who works full time should live in poverty.” Activists draw a line and demand that people commit — or explain why they reject the idea. Scholars will rightly continue to analyze and debate the economic effects of the first wave of these minimum wage hikes, but the activism has struck a blow for dignity for workers.

Free college

Activists have also moved the goalposts in the battle over making college more affordable. It was 2015 when President Obama first proposed that the first two years of community college should be free. By 2016 Hillary Clinton came out in favor of debt-free college. Today that’s a nonnegotiable position for any Democrat serious about running in 2020. Better, governors from New York to Tennessee are putting the idea into action.

There are lots of reasons this position took hold, but activists’ speaking out for indebted students — along with growing recognition of the predations of the for-profit sector — played a central role. Members of this movement have articulated a sensible (and popular) role for public goods, one in which access to the core drivers of opportunity and a full life aren’t dictated by how much money your parents have, or by the private market alone. Children shouldn’t have to indenture themselves in order to fully develop their skills, those activists are saying. This is a powerful vision for Democrats to align themselves with, and they’re doing so.

Full employment

When Ben Bernanke held his first press conference in 2011, nine out of 11 questions from reporters were predicated on the idea he was doing too much — intervening too actively in the economy. This was when unemployment was 8.9 percent and inflation was well under-target, clear signs that they were doing too little. Now, in 2017, the idea that the Federal Reserve undershot its efforts to help workers carries more weight.

Though they have many allies, the activists at Fed Up, who have demonstrated at the annual Federal Reserve meeting at Jackson Hole, have stressed to a broad public the very real costs of unemployment and underemployment — and the link to monetary policy. Activism also directs reporters’ attention to research that suggests that there’s more room for economic expansion — and why the risks of undershooting growth targets outweighs the risks of overshooting.

Many Democrats are terrified that they won’t be able to bridge the gap between the need to fight sustained racial discrimination and to deliver populist economist messages. Yet looking at these movements on the ground, you are struck by how diverse they are. People of color dominate the activism around Moral Mondays and the Fight for $15, which makes perfect sense, given that women and people of color disproportionately work in minimum wage service jobs and suffer under the lack of health-care in states that did not expand Medicaid.

Forty-two percent of African-Americans between 25 and 55 have student loans, significantly higher than the 28 percent of whites in that age group that have them. Their loan balances, too, are 28 percent higher. Fed Up has made a point of emphasizing how central full employment was to the civil rights movement. Activists are bridging the gap between racial inclusion and populism because their lives are on the line

Activism doesn’t just reflect ideology. It can create it.

One of the most interesting books about activism I’ve read is Ziad Munson’s The Making of Pro-Life Activists, which documents how many people in the pro-life movement didn’t have particularly strong pro-life beliefs before joining. Like many people, their ideas are a mix of conflicting thoughts and impulses. It’s the political activity of doing pro-life activism that creates the coherent ideological structure that makes them pro-life.

This is the opposite of how we normally think of things. In the rationalist world, why would you perform the actions unless you already had the beliefs? But actions create beliefs just as much as the other way around. That is what is happening in the Democratic Party now, under the radar of most discussions.

Sometimes you have to watch the activism to understand the ideology — or better yet, take part in the activism.

Mike Konczal, a Vox columnist, is a fellow with the Roosevelt Institute, where he works on financial reform, unemployment, inequality, and a progressive vision of the economy. He also blogs at Rortybomb, and his Twitter handle is @rortybomb.

The Big Idea is Vox’s home for smart discussion of the most important issues and ideas in politics, science, and culture — typically by outside contributors. If you have an idea for a piece, pitch us at thebigidea@vox.com.

A lot of predictions were upended when Donald Trump won the presidency. But one of the most interesting was the idea that a President Trump would cause a stock market collapse — or at least a sharp decline. As the liberal economist Justin Wolfers argued at the end of September, after analyzing market movements during a presidential debate, “Wall Street fears a Trump presidency. Stocks may lose 10 to 12 percent of their value if he wins the November election.”

“The market,” Wolfers concluded, “prefers the Democrat and believes that Mr. Trump is a unique threat to prosperity.”

From Wolfers to Mark Cuban to Bill Maher, this looming stock-market dive was yet one more reason Trump would be bad for the country — or so Democrats told themselves.

The opposite happened. The stock market soared, driven by Wall Street firms in particular.

The stock market is not a barometer of economic health or growth, of course. It’s an amoral calculator of short-term corporate profits and dividends over the next few years, nothing more or less. Stocks were right to rally, as corporate profits would be seeing a windfall with a wave of deregulation and elite tax cuts. Though it was lost in the endless debates about what went wrong for the Democrats, that the stock market so welcomed Trump was yet another source of troubling pain for the Democrats’ self-conception.

This pain is worth dwelling on. Since the election, numerous articles have argued that the Democrats need to become more populist. But they generally don’t get into the specific questions that Democrats need to answer in the wake of 2016. The stock market issue is useful here, as it touches on several issues that Democrats need to reckon with while they are in the political wilderness.

First, Democrats need to reevaluate their idea of themselves as disinterested stewards of the economy — as a party that accepts the current economic arrangements largely as a given. Second, they need to understand what their coalition looks like if they can’t peel off moderate Republicans, as they predicted they would throughout 2016. Third, they also need to decide if the economy requires structural changes, or merely some tinkering around the edges. And finally, they must decide whether social programs should target narrow populations or lean towards universalism.

A Democratic Party that believes that it is the party that is truly good for the stock market would answer these questions one way; a party that looks beyond the stock market answers it another way.

Decrying Trump’s outlandishness is (still) not enough

Of course, the Democrats could spend the political wilderness not changing anything. Trump is a mess of a president, with his approval numbers steadily falling. Republicans are trying to take health care from millions while cutting taxes for the rich, toxic positions within the electorate across parties. Grassroots Democrats are swarming town halls and running for office in massive numbers. Maybe the funk will take care of itself.

Yet the Democrats face an uphill battle to gaining power again. Trump is unpopular, but he’s more popular than the Democrats. (Sound familiar?) A recent poll has a 40 percent favorable rating for Trump, but only 35 percent for the Democratic Party. An April 2017 poll surprisingly found that Trump would win in a rematch against Clinton. Democrats haven’t gained in popularity or gained in party identification. The Republican Party as a whole hasn’t been this powerful since the 1920s. The Democrats have collapsed in state governments, now controlling only 31 of 98 state legislative chambers. Some rethinking is necessary.

One idea to reexamine is how the Democratic Party views itself in relationship to the economy. That the Democrats are the best stewards of the economy is central to how the Democratic elite view themselves.

I choose the word steward carefully, especially given how the left and right loathe the course Democrats have taken on economic matters over the past several decades. The left considers Democrats corporate-friendly sellouts, “history’s second-most enthusiastic capitalist party,” as Kevin Phillips once called it. The right believes Democrats want to control business and bend it to their power-hoarding ideological ends of social engineering. Each side scores its points, but neither captures how elite Democrats view their approach.

Democrats have come to view themselves as neutral caretakers of the existing economic system

Stewardship conveys ideas of looking after and keeping order. Democrats now see their role as serving as a fair broker among the competing parts of the economy. They insist they can come up with an arrangement in which capital and labor are simultaneously better off, and that they are the ones who will make the hard decisions, in contrast with the feckless Republicans.

Think of the number of times Democrats have emphasized that they balance the budget while Republicans run giant deficits. Think of the balancing acts required to promote reform without naming business as an enemy — as we saw in both the financial and health care arenas. Think of how President Obama tried to achieve a Grand Bargain with Republicans in 2011 that would have cut Social Security under the mantra of responsibility, only to be stopped by the fact that conservatives wouldn’t budge an inch in raising taxes.

This approach hit two serious walls in 2016. The first was that people weren’t happy with the economy. Nearly three-fourths of people said the country was on the wrong track, with similar numbers describing the economy as rigged. Median household incomes in 2016 had finally inched back to 2007 levels. This lead to a year of awkward juxtapositions, with “America is Already Great” headlines running next to reports on how much life expectancy is falling for white workers. Democrats attacked Trump as a poor steward, someone too unstable and chaotic to run the economy as it was. But that message doesn’t motivate voters when they believe the economy isn’t working for them.

The second wall Democrats hit was the inclination of the business community, with its eye on deregulation and tax cuts, to side with the Republicans regardless of how responsible the Democrats are or whether someone like Trump is at the helm of the GOP. The stock market rally shows concretely how happy the capital markets are to have anyone who will boost corporate profits, even Trump.

But there were also strategic miscalculations. There was a sense, for example, that the insurance companies would help defend the ACA from reckless repeal efforts like the ones we’re seeing. Yet, as Vox’s Dylan Scott reports, the insurance companies are on the sidelines: “Health industry groups generally don’t love Obamacare enough to jeopardize their ability to shape the rest of the Republican agenda — including big corporate tax cuts,” he writes.

The Obama administration avoided calling out the predations of Wall Street after the financial crisis and didn’t take strong actions to prevent foreclosures that would upset the capital markets. Yet finance still hates the Democrats and is waging war on the sensible, necessary reforms Dodd-Frank put in place to prevent Wall Street from creating another crisis. There’s no middle ground to be had there. (Fittingly, the current Treasury secretary, busily rolling back financial reform and soon to lead an assault on progressive taxation, ran a foreclosure mill that the Democrats refused to investigate or prosecute aggressively.)

One key question for Democrats is the old labor one: “Which side are you on?” The Democratic Party used to give the answer, as Harry Truman did in 1948, that it “is pledged to work for labor.” In recent decades they’ve given an answer that was essentially “all sides, for the common good.” After 2016, Democrats should pick a side again.

Democrats should end the romancing of the Republican professional class

The appeal of the stock market also shows who the ideal marginal voter is for today’s Democratic Party: a well-educated, moderate-Republican professional. Though tough to get in normal times, certainly these professionals would never vote for Trump. Professionals would more than make up for the white-working class voters Trump would win over. Authors like Thomas Frank have documented the transition of the vision of the Democratic Party base from workers to professionals. Democrats had a slightly different vision: 2016 would be the year that yoked those two groups together to create a dominant new political coalition, rivaling the one Democrats maintained through the New Deal and afterward.

It worked in some places, like affluent Republican suburbs of Dallas, Kansas City, and Atlanta, as well as old-money GOP areas like Greenwich and Winnetka. But overall, well-educated professionals joined the Democrats in nowhere near enough numbers to offset declines in working-class voters of all races, and they were not in the right places to help. Faced with Trump, Republicans stayed Republican.

This theory missed that in our polarized world, elections are increasingly about mobilizing the base rather than convincing independent voters. The upscale moderate defectors the Democrats keep expecting to show up still haven’t appeared. So another important question is: Can Democrats fix their woes by continuing to try to appeal to moderate voters?

A predominant Democratic view is that the economy is mostly fine; it’s just a matter of adjusting and correcting it to ensure everyone has access. Deeper, structural, changes are put to the side in favor of taxes, transfers, and behavioral nudges to help people out.

On trade, for example, the consistent Democratic narrative in 2016 was that we need to “compensate the losers” of trade. The phrasing alone tells us everything we need to know. Which voters want to be identified as losers? Democrats may mean something more abstract when they speak of “losers” in a globalized economy, but the language carries the connotation of personal blame.

But what role does individual agency play when global capital flows upend communities? And why are we treating the economy as a natural phenomenon — one whose consequences we simply must accept — when voters know it’s a series of laws, trade agreements, and businesses making decisions? If this is the best Democrats can offer, it’s not surprising workers aren’t interested.

Worse, small-scale redistribution creates inter-group competition that Trump has all-too-easily exploited. Whereas Democrats say that they’ll ensure that the worst off get taken care of, Trump turns this logic upside down: He says that he’ll take care of his white, middle-class voters (and not the “undeserving” poor, implicitly black and Latino). Universal programs are the way to defuse the zero-sum competition created by narrowly targeted programs.

It is telling, on this score, that a choke point Republicans are hitting in their efforts to overhaul health care is state resistance to killing the Medicaid expansion. The Medicaid expansion helped bring in more people and turned a program for people in poverty into a broader program for working-class people. If the current health care arrangement survives, this will be one reason why.

The questions I’m raising here frame a clear choice. How the Democrats decide to answer them will determine much of what they’ll do later. Democrats should redouble their commitment to labor, abandon the obsessive focus on the preferences of American professionals, rein in the most predatory parts of the economy, and throw their weight behind simple, universal programs that would improve citizens’ economic and social lives.

The Democratic Party had started to move in this direction during the election, but it was never the central pitch. Now, however, every time the Democrats are tempted to deviate from this agenda, they should remember that the stock market loves Trump and could not care less about his antics. That’s because the business class has already decided what side it is on.

Mike Konczal is a fellow with the Roosevelt Institute, where he works on financial reform, unemployment, inequality, and a progressive vision of the economy. He blogs at Rortybomb, and his Twitter handle is @rortybomb.

The Big Idea is Vox’s home for smart discussion of the most important issues and ideas in politics, science, and culture — typically by outside contributors. If you have an idea for a piece, pitch us at thebigidea@vox.com.