Q&A: An expert on economic insecurity

Name: Alan Auerbach
Age: 65
City: Berkeley
Position: Professor of economics and law, U.C. Berkeley
J.:

Economic anxiety has been a major theme this election season. How has that translated to political discontent?

Alan Auerbach: In the Midwest and other parts of the country, the discontent has more to do with jobs and wages. There are people being left behind. It really has to do with the changing nature of the economy. You can’t just turn a factory worker into a Silicon Valley software designer. People want a meaningful, high-paying job, and that’s not going to happen for those whose skills don’t match the current economy. You can’t replicate a bygone era. This is a real challenge, and it’s too bad our society hasn’t addressed it in a truly intelligent way. The problems in the Bay Area are somewhat different than in the rest of the country; here people complain about the high cost of housing, a problem that can only be fixed by allowing more new construction, a policy decision to which there is political opposition.

Alan Auerbach


You’ve written and spoken widely about the future of the American dream. Do you see this election as a referendum on that notion? Hillary Clinton is partial to policy-based solutions to address the nation’s problems, but what about the others?

I think the 2016 campaign reflected the unhappiness a large portion of the population is feeling with the state of affairs — the inequalities, the decline of economic opportunities. [It was evident] not only in supporters of Trump but also those of Bernie Sanders; the main difference is in how they see solutions. Those who feel the government is somehow causing it supported Trump and those who think the government should do more of whatever it does supported Bernie Sanders.

Why are taxes such a critical issue to American voters?

People often have very uninformed perspectives on taxes. They think that the benefits of government are just coming to them somehow, and don’t have to be paid for. There is a disconnect between the cost of running a government and the benefits a government provides. And the U.S. isn’t a particularly highly taxed country, compared to most of the leading economies of the world. Yet there’s a pretty strong anti-tax mood.

In your view, what affects quality of life more: lower tax rates, or how the government spends the money it collects?

About half of what the federal government spends now is going to three programs: Social Security, Medicare and Medicaid, and a big chunk goes to national defense. There isn’t much left. People have this idea that there is all this money going to things like foreign aid, the arts or government payrolls in D.C., but it’s mostly going to the programs that cost a lot and that people really value.

How do people respond when you tell them what line of work you’re in?

Being an economist doesn’t lead to much unusual interaction. One exception for me was during the financial crisis in the fall of 2008. All of a sudden I became the center of attention at dinner parties. It didn’t last long. But for a few months there, everybody wanted to know what I was thinking.

In what ways did your family upbringing shape you?

I was raised in New Rochelle, New York, where there was a large Jewish community, as well as many other religions and ethnicities. I went through the whole Reform Jewish upbringing, as did my two sons. I always felt it gave me a strong sense of identity, I might even say security, in terms of gaining an appreciation of what it was to be Jewish and our role in the larger society. That role is changing; my parents were part of a generation that still faced discrimination, and there were parallels to the civil rights movement that was going on when I was growing up. Jewish life, at least here in the Bay Area, feels much more secular to me now.

Have you been successful in teaching your children how to manage money?

Well, one of my sons works in the hedge fund industry, and the other works for Oracle, so I suppose so! We didn’t do any particularly weird stuff around money just because I was an economist. Except that on the day after Halloween, we used to buy their candy back. The secret, I think, was not my expertise, but their mother. I give her a lot of credit.

“Talking with …” focuses on local Jews who are doing things we find interesting. Send suggestions to sueb@jweekly.com.

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Dan Pine

Dan Pine is J.'s news editor. He can be reached at dan@jweekly.com.