Hollowed Out: Why the Economy Doesn't Work Without a Strong Middle Class

“When will we learn that an economy that works just for the wealthy just doesn't work? David Madland, one of the nations wisest young scholars, explains with clarity and eloquence why trickle-down economics cant keep its promise of rapid growth—and why a more just economy will provide better results for everyone. This is a truly important book that should shape our debate for many years to come.”—E. J. Dionne Jr., Senior Fellow, Brookings Institution, Professor, McCourt School of Public Policy, Georgetown University, and author of Our Divided Political Heart: The Battle for the American Idea in an Age of Discontent

“David Madland marshals reams of data, economic analysis, and social science to make a deeply persuasive case for middle-class economics—not only as a means of achieving sustainable, equitable economic growth, but as the absolutely crucial foundation of American society. Hollowed Out patiently walks through the factors leading to the recent decline in middle-class income and stability—and, crucially, shows how to get the economy back on the right track.”—John Podesta, former Counselor to President Obama and former Chief of Staff to President Clinton

“Trickle-down economics is the biggest economic lie ever told, and David Madland expertly and authoritatively shows us why. Meticulously researched and thoughtfully argued, Hollowed Out explains in plain language why growth and prosperity are always built from the middle out, not the top down. This should be required reading for economic policymakers.”—Nick Hanauer, Seattle-based entrepreneur who has helped launch more than twenty companies, including aQuantive Inc. and Amazon.com

“The dose is the difference between medicine and poison in economics as in healthcare. Hollowed Out makes the case that US inequality has gone beyond supply-siders medicine for growth to poisoning our economy via loss of trust, political polarization, debt-driven consumer demand, and self-perpetuating aristocracy of wealth. Every member of Congress should read this before voting on the next tax cut for the wealthy.”—Richard Freeman, Professor of Economics, Harvard University

“Ideas are a powerful force in politics, and David Madland develops a very big and important one. Madland shows that the hollowing out of the American middle class has deeply damaged our economy, and in order to get back on track we need to make the economy work for everyone, not just the rich. Hollowed Out provides an important road map for anyone who wants to understand what is wrong with our economy and what needs to be done to fix it.”—Neera Tanden, President, Center for American Progress

"The director of economic policy at the Center for American Progress argues that it is time to mount a political challenge to the economic theories—namely, supply-side, or trickle-down economics—that have provided cover for the unparalleled growth in inequality over the past three decades. . . . A dramatic and clearly delineated outline of 'how the stage has been set for transformative political conflict.'"

"A provocative and thoughtful analysis. . . . . at the core of his position are important ideas worthy of nuanced debate and further research by all sides."

“Madland doesn’t pull his punches. . . . This is perfect late-summer reading—if you’ve spent the summer somewhere where there’s still a functioning middle class. Come back to the UK, or the more inequitable of US states, and you can read about how it could be summertime all the time. If only we stopped hollowing out.”

For the past several decades, politicians and economists thought that high levels of inequality were good for the economy. But because America's middle class is now so weak, the US economy suffers from the kinds of problems that plague less-developed countries. As Hollowed Out explains, to have strong, sustainable growth, the economy needs to work for everyone and expand from the middle out. This new thinking has the potential to supplant trickle-down economics--the theory that was so wrong about inequality and our economy--and shape economic policymaking for generations.

For the past several decades, politicians and economists have thought that high levels of inequality were good for the economy. But an economy that works only for the rich simply doesnt work. Because the middle class is so weak, Americas economy now suffers from the kinds of problems that plague less-developed countries. Privileged elites more frequently secure special treatment from a government that wastes money and stifles competition. Childrens opportunities are excessively determined by the wealth of their parents. Societal distrust has increased, making business transactions needlessly difficult. Consumer demand has weakened and become unstable, which has helped fuel the Great Recession and has made the recovery painfully slow. As Hollowed Out explains, to have strong and sustainable growth, the economy needs to work for everyone and grow from the middle out. This new middle-out theory aims to supplant trickle-down economics—the theory that was so wrong about inequality and our economy and did so much damage to our nation. This new thinking has the potential to shape economic policymaking for generations.

David Madland, Ph.D., is Managing Director for Economic Policy at the Center for American Progress.

Illustrations

1. Middle Out vs. Trickle Down

2. Trust

3. Good Governance

4. Stable Consumer Demand

5. Human Capital

6. Creating a Middle-Class Society

Acknowledgments

Notes

Index