Redistributing wealth through things like taxpayer-funded welfare programs gets a lot of pushback in the U.S. But what if income inequality could be fixed, not after the fact, but before it happened?

Guests

Jacob Hacker, professor of Political Science at Yale University and Co-Director of the Ludwig Program in Public Sector Leadership at Yale Law School. He coined the term “predistribution.”

The version of our broadcast available at the top of this page and via podcast apps is a condensed version of the full show. You can listen to the full, unedited broadcast here:

Part I

MEGHNA CHAKRABARTI: I want to go back for a second to something that happened in a show we did last month. I was talking with On Point’s money ladies, Michelle Singletary and Rana Foroohar, and Rana said something that really caught my attention. She was talking about the new Trump accounts.

These are the new IRA-like accounts for U.S. citizen children born between 2025 and 2028.

FOROOHAR: That ain’t gonna close the wealth gap. That’s not, you know, these kind of tweaks are not, they’re admirable, but not helping fundamentally, and that’s because we need a wholesale shift in how the economy works.

We’ve got to go back to a better balance between labor and capital. I can talk more about how that could happen. One of the things I’ll just say very quickly that I find is bubbling up now, it sounds wonky, but it’s gonna be important. You’ll hear more about it. Redistribution and predistribution.

CHAKRABARTI: Predistribution.

Frankly, I’d never heard of that. Rana is a CNN global economic analyst and associate editor at the Financial Times, so I said, “Rana, tell me more.”

FOROOHAR: Predistribution is when we look at the wealth in our society in areas like, for example, the digital economy, artificial intelligence, which is, by the way, going to put inequality on steroids, already is, and we say, “You know what?

We can either allow 1% of the population to take all the gains, or we can say this is almost like a, it’s sovereign wealth.” It’s like a natural resource. We’re gonna redivide that pie.

CHAKRABARTI: I think I said right then and there, “Oh, that is so interesting. We’re gonna steal this idea and do a show on that.”

So here we are, and by the way, Rana, thank you so much for pointing my attention to predistribution. Now, taxation is the most recognizable form of redistributing wealth in an economy, particularly in a capitalist economy, but that redistribution happens after the money is earned, which makes taxes politically unpopular.

So what exactly then is predistribution? How would it work, and could it work realistically in the U.S.? We found the person who first coined the term. He’s Jacob Hacker, professor of political science and co-director of the Ludwig Program in Public Sector Leadership at Yale Law School, and he joins us now.

Professor Hacker, welcome to On Point.

JACOB HACKER: Hi, Meghna. Thanks so much for having me on.

CHAKRABARTI: Okay. So can you tell me the genesis of, or the origin story of how you coined this phrase predistribution?

HACKER: Sure, and let me just start by giving you the very succinct definition, right? If redistribution is about redistributing the rewards of growth after the fact, predistribution is about making sure the rewards of growth are well-distributed before government taxes and provides benefits.

Predistribution is about making sure the rewards of growth are well-distributed before government taxes and provides benefits.

So it’s about making markets work for the broad middle class rather than letting the market rip, produce massive inequality, and then trying to clean up afterward. And so the genesis of the idea goes back to a book I wrote with my longtime co-author, Paul Pierson, the first version of it came out in 2010 called Winner-Take-All Politics: How Washington Made the Rich Richer and Turned Its Back on the Middle Class.

And at the time, this is more than 15 years ago, inequality was getting a lot worse though we had no idea it would get as bad as it has gotten. And most people who were talking about it, particularly in economics, were thinking of it as a result of kind of growing gaps between people with a college degree and people without a college degree.

And they would do these calculations that showed that tax cuts for the rich and spending on the poor and middle didn’t do that much to affect the distribution of income, that most of this was occurring because people at the top were earning a lot more or getting a lot more from their capital income.

And they concluded basically government has nothing to do with this. This is just about the market distributing its rewards, and if we want to respond, we’ve gotta figure out how to do more redistribution in a politically sustainable way. And we just thought that was just wrong as a matter of fact, and pretty bad as a political and policy prescription too.

And so as a matter of fact, every market is man-made. Every market is shaped by government. And if you look at what happened in the period where inequality rose, it was really about public policies shifting in ways that hurt the working class and helped those at the top. And just one obvious example, just to give you a sense of what we were thinking about, is what about the collapse of unions, right?

Which wasn’t getting discussed very much at all. This clearly was a huge part of what had happened. Or what about changes in the way corporations were governed? What about the deregulation of finance? I could go on. But, so we just, we concluded basically that a lot of this had to do with what we then called market-shaping policies.

But later I thought, “We need something a little bit better than market-shaping.” And so I was giving a talk in Oslo in 2011, and I used the term predistribution. And somehow it worked. People really found it evocative, and it ended up getting picked up by not just U.S. thinkers, but also by many in Europe as well.

CHAKRABARTI: Yeah. Professor Hacker, I cannot help but to be sidetracked here a little bit because you, I think, offered a very accurate description of kind of the belief we have had in this sort of the perfection of the idea of markets, right? Even though the evidence has been there from the start, that markets are never these perfectly independent, sort of self-sentient organizations of people that naturally come to the best decisions or prices.

I actually think this is one of the greatest sins of both the media and, forgive me for saying this, but economics professors.

HACKER: I’m not an economics professor. But I want to, in defense of economics professors, this was a particular view of markets that became dominant in the 1980s, and you can associate it with people like Milton Friedman.

CHAKRABARTI: Friedman, yeah.

HACKER: Yeah. Friedman famously said that you should do nothing to interfere with the market because the market was going to be efficient. Of course, he believed in a few things, like central banks especially if they were holding up asset prices for those at the top.

And what you should do is use something like a negative income tax, right? Some kind of mechanism to then redistribute income if you were worried about that. And that, I think, actually got picked up really broadly as the right way to do economics, the right way to do policy, and the right way to think about markets.

But it was never a dominant, I don’t think it was ever a dominant view within the economics profession. As in political science, like most people were doing pretty narrow stuff that was pretty specialized and weren’t really thinking about those big questions. And I’m happy to say that there’s been a lot of rethinking of this.

A lot of the best research, which I can talk about later, that shows that the way the market operates is extremely distorted and basically rigging the game in favor of the rich.

CHAKRABARTI: Oh, yeah, for sure.

HACKER: Has been done by economics.

CHAKRABARTI: I have to say, I did not see this coming that Jacob Hacker would run to the defense of Milton Friedman.

HACKER: Not Milton Friedman, to be clear. I’m running to the defense of contemporary economists who recognize that this was a blinkered view.

CHAKRABARTI: But to your point, though, about the centrality of the role of the government here, even if, and we can debate this, which we won’t. I won’t waste time on it.

But even if the sort of perfect efficiency of the market view wasn’t the dominant view in economics, it became the dominant view in the 1980s of the government, right? And therefore, it had a vastly over-weighted importance. And I can’t help it. I just feel like for one second, I want to also say that whenever people talk about sort of free market economics, they love to quote the granddaddy of them all, Adam Smith.

And I just pulled up some of my favorite Adam Smith quotes. One of them is that we hear frequently about the sort of rational self-interest of people that make up a market, and Smith says, “It’s not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest.”

Okay. But I think people don’t read Smith deeply enough, because this is where it gets to actually maybe the beginnings of the ideas of predistribution. Because he also wrote that, “No society can be flourishing and happy of which the far greater part of the members of that society are poor and miserable.”

And I think that’s where we find ourselves now.

HACKER: Absolutely. And that’s a really astute commentary on Smith because I think he’s really profoundly misread. No, he said a lot, so you can find a lot of different, you can find support for almost anything you believe in Adam Smith’s voluminous writings.

But if you read Smith carefully, he believed really strongly that government had to play a very strong role. For example, he was hugely admiring of the British economy relative to some other economies, because wages were high because they had good public services and goods, because they had reasonable tax rates and so on.

And there’s a great quote from Smith that I think sums up where we are today, where he says, I’m going to paraphrase. “Men of the same trade seldom gather together for merriment or diversion, but when they do, the talk turns towards conspiracy against the public or some contrivance to raise prices.”

And so you just think of our broligarchs hanging out right now. They don’t get together very often but there is a lot of ways in which those at the top have rigged the market in their favor. And so talking about the sort of wonders of the free market is often just a way of cloaking the power of those at the top to shape the market.

And that’s, I think, the fundamental thing, where to the extent economics has made an error, it’s that it often doesn’t pay that much attention to power. Political science pays a lot of attention to power. Paul Pierson and I, when we wrote this book, were paying a lot of attention to power. It’s the balance of power that really affects a lot, including the balance of labor and capital that was talked about at the at the outset.

The balance of power … really affects a lot, including the balance of labor and capital.

Capital is winning and labor is losing, not because there’s some natural reason that markets have to reward capital to the degree they have, but because the market has shifted in favor of capital.

CHAKRABARTI: Because there’s no such thing as a perfectly free market, that what governments decide to do or not do.

That is truly the invisible hand.

HACKER: Exactly.

CHAKRABARTI: Or the visible hand.

HACKER: The visible hand. This point about it being invisible, I think this was a really important part of why predistribution was appealing, is that it put on the table something that I think people were just not grasping, that there was a lot happening before people received their earnings or their capital income that really mattered and wasn’t being seen.

And so those at the top were resentful that they had to pay taxes, as you said, and those who were getting public benefits didn’t always feel like that was a great thing. Would I rather have a good job or trade adjustment assistance, I know the answer that most working-class people would offer.

And so it was creating this kind of distorted politics where we were debating tiny programs of public assistance while letting unions decline and cutting taxes for the rich.

Part II

CHAKRABARTI: Give me one of your favorite examples of a program of predistribution that is in place right now. Where is it, and how does it work?

HACKER: Great.

So let me just start by saying you can think of the sort of process that produces distributional outcomes as involving either the production education and skills the market structures, so labor law, corporate governance, antitrust, and then after production, right? So this is the redistribution, taxes and benefits.

And so I wanna give an example in both, in each of those two areas. So what are, like, big examples of investments that shape the market outcomes? We already started to hear about one which was this idea of a sovereign AI wealth fund. But there’s a real-world example out here.

It’s the Alaska Permanent Fund, which was created back in the 1950s as a way of ensuring that if oil was found on public lands, that the rewards would be broadly distributed. So it looks a little bit like redistribution because every person in Alaska gets a check. But in fact, it’s based on this idea that this is a commonly owned asset, right?

All of us own the public lands or all of us in Alaska, and therefore we deserve some of the benefits. And that’s the idea that’s getting thrown about for an AI sovereign wealth fund. This is a huge potential source of national wealth, a huge also quite obvious source of massive dislocation and inequality.

And so the question is if you’re gonna have the positive benefits for society this has to be shared in common, right? You cannot have this be essentially privatized gains and socialized losses. And that’s where we’re heading. And then there’s just obvious examples, like other forms of public investment, right?

We should spend a lot more on infrastructure. We should spend more to make sure that we have a really good education, especially pre-K education, right? And that spending isn’t redistribution. It should be understood as contributing to the productive capacity of our society.

Spend a lot more on infrastructure. We should spend more to make sure that we have a really good education. … That spending isn’t redistribution. It should be understood as contributing to the productive capacity of our society.

CHAKRABARTI: Okay.

HACKER: So the other example, just one more.

CHAKRABARTI: … Go ahead. Go ahead.

HACKER: No, so I was just gonna say, a really, the really simple example with regard to shaping the market is minimum wages, right? And so the U.S. has had a very low minimum wage, one that has been not pegged to inflation or wages, so it’s been declining, and basically it now affects a very small part of the market, right?

And these massive living wage campaigns of 15 years ago were really about this idea that people who work shouldn’t be poor, right? People who work should get a living wage, and a living wage is going to be a lot higher, a lot higher than the current minimum wage, and this changes the whole structure of the market.

There’s a huge amount of employer power in the market. There’s a lot of research on this by economists showing that wages are much lower because employers have consolidated bargaining power. And so if you put a minimum standard out there or do other things, like encouraging unions, right? You’re increasing the capacity of workers to get something close to what their productivity is, right?

It’s close to what they deserve in the market.

CHAKRABARTI: Okay, so you’ve mentioned a couple of times here this idea of perhaps, say, an AI base, or an AI sovereign wealth fund. Let’s listen to some other voices who’ve been saying similar things. This is Michael Shepard. He’s senior editor of technology and strategic industries at Bloomberg News, and this is what he said on a Bloomberg podcast just last month.

MICHAEL SHEPARD: The AI companies, especially OpenAI, have floated this idea of giving the government a piece of their business giving them shares to seed what would be a public benefit fund to redistribute some of the gains from the AI boom and maybe address some of the concerns that all of this newfound wealth and economic dislocation brought by the technology, that could somehow be softened.

The blow from the AI rollout could be minimized by sharing the gains a little bit through this vehicle.

CHAKRABARTI: Okay, so Professor Hacker in the case of an AI wealth fund, it would require some kind of public/government ownership of a portion of these companies. The Alaska oil revenue-sharing model is very much well-known, and that’s because that oil sits underneath public land.

And in fact, I would say even sovereign wealth funds from other oil-rich nations are very similar, if not identical. But public ownership here seems central to at least this part of the theory of predistribution, so how is it not neo-Marxism?

HACKER: (LAUGHS) No. It’s a very basic idea, right? We don’t think of these sovereign wealth funds as neo-Marxism.

The basic idea is that there is a huge amount of public value in these companies, right? Where does the data come from that they’re training on? I just got paid, or I’m in a lawsuit to get paid a little bit because all of my books were sucked up by AI. And that’s just a tiny example.

Essentially, everything we do on the web, right, is turned into data that is turned into money. There’s that old joke if you’re not paying for a product, you are the product. And it’s not just that. If you think of AI and all of the sort of elements of our high-tech society, they were built on foundations of public investments, research and development, science investment, schooling.

And so I think it’s really important to understand that this isn’t about “Oh, you guys have a lot of money. We want some of your money.” It’s that the money that is being made in these fields is being made on the backs of our work of public dollars.

CHAKRABARTI: You remember how when Senator Elizabeth Warren first ran for her Senate seat, she had that infamous phrase of saying, “You didn’t build that,” right? And she talked about that people had made money. Because they were able to transport their goods on roads that were built with public investment, and she got absolutely hammered in the media, hammered by her conservative opponents for the “you didn’t build that” claim, and yet here you are saying that’s exactly right.

HACKER: Yeah. … It’s really telling, the political response. No I think partly part of that was the sense that there was she was somehow angry, right? That this wasn’t —

(CROSSTALK)

CHAKRABARTI: But she was.

Yeah, I know. I’m angry. … But the point is that she was absolutely correct. And it’s interesting because when Mitt Romney ran, he said something that was the exact opposite that got no attention, right? At one point, someone said, “Look, I’m drowning in student loans.

How can you help me?” And he said you shouldn’t take out all that money.” This is a guy who had a huge amount of family wealth and didn’t have to worry about paying for college. But that’s what we’ve done. We basically said, look, you should pay for your college through loans, and lots of working-class people and poor people just can’t get access to a good college degree, and that’s the prerequisite for success in the contemporary economy.

And then we say that’s your fault.” But in fact it’s a huge boon to our economy to have more people get a college degree. It should be something that we’re investing in, because we’re investing in the productive capacity of our economy. So we need to turn around this assumption that everything that’s happening in the market is independent of government.

And it’s not just about rules, because that’s, I think, what most people are thinking about. Oh yeah, we should have some rules against predatory pricing or antitrust. But it’s more broadly that all of this wealth is built on massive public investments and on our shared common skills, knowledge, and data now.

So that’s the idea for this sovereign wealth fund. Now, I think we should always be skeptical of those who are massively benefiting from inequalities as the source of ideas for fixing the problem. But I think this is actually one where it’s just a lot better than the idea that is clearly untenable, right?

Which is that everyone should get some massive UBI, you know, universal basic income check, right? Which really runs against, fundamentally against the grain of human psychology, and would be so vulnerable, right? Think about a world in which lots of people aren’t working and collecting public checks and you’ve got a small bunch of people who are doing extremely well, and some other folks who are doing relatively well, how the politics of that would change our society and how our society would change in terrible ways.

CHAKRABARTI: It’s the not working part that’s key to that sort of scary future scenario. But in terms of receiving checks, that’s exactly what happens physically in Alaska, right? So the receiving checks, it’s not UBI, it’s the distribution of the wealth generated by oil that comes out of the ground there. But I wanna get back to just specifically the public/government ownership part of the pre-distribution vision here. Because oddly, also just a little over a month ago, President Trump was asked about whether he might meet with the heads of some of these big AI companies.

And President Trump talked about his intention to discuss how those AI companies might better support the public.

DONALD TRUMP: I’m going to have meetings with the top 12 or 15 executives very shortly, and we’re talking about giving back something to the public. And if we do that, the public will become very rich, the people in our country, because that’s the kind of money we’re talking about.

And I think they’ll do that, and I think it’ll make it very popular.

CHAKRABARTI: Now, I want to be clear, he didn’t have any specific details or any policy proposals, and who knows what might happen with President Trump’s very mercurial take on governing. But Professor Hacker, what I wanted to ask you about is how different is this moment now versus 15 years ago?

I’m looking at a publication called The Predistribution Agenda that the primer, I should say. There’s a primer you wrote from December of 2014, and in it you wrote that the concept of predistribution at that time not only met with the expected resistance from the American right. But at that time you were also meeting resistance from the American left that was still holding onto this idea that market-based capitalism was the most effective and efficient way to run an economy and a government.

It feels like, my, how times have changed.

HACKER: Yeah, dramatically, and I think with Trump, I think you have to understand he is a political weathervane in a lot of ways. And so he understands just how unpopular the way in which things are changing in the tech industry is right now with the public.

And I think that the sort of Altman proposal and whatever Trump is gesturing at there is about let’s give a little bit of what we’ve voluntarily give a bit, or if it’s Trump it’s let’s have the government like seize equity stakes in whatever companies we want, right?

And that’s not, I think there’s a much clearer and cleaner way to do this, which has to, which, you know, Senator Sanders, for example, has proposed a kind of mandatory tax on AI profits that would generate this wealth. But to come back, I would just say two quick things.

So first, the change is remarkable. So when the one politician who picked up on predistribution when I talked about it in Oslo was now forgotten Labour Party leader Ed Miliband, who got excoriated and ridiculed as, and I was ridiculed, on the floor of the House of Commons by then Prime Minister David Cameron, who had a great line.

He said, predistribution is, I think, spending the money before we get it. And that’s why we’re in the mess we’re in. But it just signaled the extent to which both sides of the political spectrum, the center left and what remained of the center were still committed to this idea that what you really should do is let the market do its thing and then figure out how to fix things afterward.

And that, I think, we can talk more about it, but I think it was a huge reason why the Democrats lost ground. Now, center-left parties across the rich world have been clobbered and I think it’s partly because they moved to the right on a lot of these fundamental economic issues where it’s not a question of big spending programs.

It’s a question of do you fight for workers in making sure markets are constructed in a way that ensures that they get a fair share of the economic rewards of growth?

CHAKRABARTI: Okay. Can I just jump in here? Because I wanna stick for a second with what David Cameron said. And by the way, I personally think David Cameron will be remembered, like his epitaph should be, “Here lies the man that brought Brexit to the UK for sheer political expediency.”

But his phrase of predistribution being spending the money before we get it, let’s move out of the realm of political theory and into political reality. That is still going to be one of the major points of pushback to any kind of, like when the rubber meets the road pre-distributive program here in the United States, don’t you think?

We constantly hear that even now, before trying to effectively create a sovereign wealth fund or government ownership, permanent government ownership of particular industries.

HACKER: There are two objections, and I think one is quite valid, which is the United States does not have great state capacity right now or great capacity to carry out complex programs.

It was already struggling before Donald Trump’s second term began and it’s been crushed. The federal government’s capacity has been crushed since. And so there’s going to have to be significant reconstruction of government’s ability to do things. But I think that actually the things that government could do in this space are things that would be quite consistent with what is a worsening fiscal situation, right?

So it’s worth noting that better antitrust policy, higher minimum wages and even a wealth fund that is funded by the profits of AI, that all those things are not going to be a big cost to the federal government. And so I think we have, we make a mistake in thinking about this in terms of, we need to figure out how to spend money at a different point, right?

And really it’s mostly about we need to figure out how to shape the market so that we don’t have to spend as much fixing these problems. Now, I would definitely argue that we should also be spending, investing a lot in the productive capacity of our economy, and that may well be one of the things that you would use a sovereign wealth fund of any type for.

And I do think it’s a mistake to think that the only thing that you can do with these wealth funds is just rebate the money back to Americans, which I would do some of. But I think it’s also worth thinking if we can get our government to work better, we could also do things like invest in high-quality infrastructure decarbonization that creates jobs and so on, right?

So that is to me the kind of promise of this is that we move away from this idea that it’s all about big spending or big taxes.

The … promise of [predistribution] is that we move away from this idea that it’s all about big spending or big taxes. 

Part III

CHAKRABARTI: Let’s listen to Jared Abbott. He’s the director of the Center for Working Class Politics. He was on The Ezra Klein Show in October of last year, and he talked about the appeal of pre-distributive policies for working class Americans.

JARED ABBOTT: Working class people tend to like those pre-distributive policies a lot because they tap into values of respect and dignity and status, right?

It’s like I actually care about having a job. You can say that I’m gonna get, I lose my job to AI or to automation or whatever, and then I’m gonna get a universal basic income, even a high one. And then most people would say, many people would say, That’s okay, but what am I gonna do?

I’ve lost my status in society. I don’t have a job. That’s where I found my respect, and that’s where I found my sense of meaning, or at least an important part of meaning in my life. And predistribution sort of taps into that, of maintaining your social status, maintaining your means of providing for your family, whereas redistribution is often perceived as something that is like a handout.

CHAKRABARTI: So Professor Hacker, here’s what I want to ask you, because I think the big thing that pre-distributive policies would have to prove is that it creates concrete change in the lives of working Americans. I know in the past you’ve said ideally something like, say something as controversial right now even as tariffs could be seen as predistribution if the money generated by those tariffs was actually returned in some meaningful way to the lives of working Americans, if the distribution part actually happened, which did not in the case of the Trump tariffs.

They weren’t even legal as found by a court. But so tell me, what would need to be done specifically for that concrete return to be experienced by American workers?

HACKER: Yeah, so first let me just clarify on tariffs. I think that tariffs could be legitimately used to affect the market, right?

I think that the idea of them as a source of revenue that could be spent is a mistake because it’s just revenue coming out of the pockets of consumers, and especially low-wage consumers. So for example, if you had an industry that was under severe pressure from unfair trading practices, you might want to step in with tariffs, and that’s the kind of strategic use of tariffs that became more accepted … in the Biden administration. But that quote from Jared I think is golden, and it really captures, It’s actually supported by a really nice research paper by Suresh Naidu and his colleagues where it’s in the Quarterly Journal of Economics, so I wanna, my economics friends know that I actually like them.

I was reading this and it shows that working class folks really support pre-distributive policies like encouraging unions or investing in industries much more than they support tax and spend redistribution. And that they show that the Democratic Party has stopped emphasizing pre-distributive policies as much as it once did, and that helps explain why it’s lost ground especially, in the years leading up to the 2016 earthquake election.

Working class folks really support pre-distributive policies like encouraging unions or investing in industries much more than they support tax and spend redistribution.

So I think this is captured in the idea that like it was like literally in the 2010s and as manufacturing jobs were hemorrhaging and whole rural areas were being destroyed, that people were actively debating in the Democratic Party whether it was legit to use place-based policies to try to help out people in these areas.

It’s like we’ve come a long way from that. So what would be essential here? I think the first thing to understand is that if it’s about power in the market, then this is really a political project as much as it is an economic policy project. It’s about empowering workers so that they can get their fair share of the economic pie.

And I think the most concrete and understandable way in which that’s happened historically is unions, right? The U.S. had coverage of roughly a quarter of American workers after World War II in unions. And today, unions are more popular than they’ve ever been since we’ve been polling on unions.

But of course, the system that we have today makes it impossible for unions to form. So I think we should really be seriously considering why that is.

Unions are more popular than they’ve ever been since we’ve been polling on unions. But of course, the system that we have today makes it impossible for unions to form.

CHAKRABARTI: Technically not impossible, right? Because as you say, not only are they as popular, they’re more popular than they have been recently.

We’ve seen unions form, especially amongst jobs that are in the professional class. So I just want, I’m going to be a little nitpicky here. It’s not impossible.

HACKER: Yeah. I thought I said almost impossible. But in any case, fair enough. And actually changing those policies makes a lot of sense, and it’s interesting how little effort there was until the Biden administration to try to do something on that front, how little creative thinking there’s been.

The existing structure of unions has been around for a long time. It doesn’t work very well in our current economy, and so on. But let me talk about another example that I think that you’ll know that I like a lot, which is the public option. Probably the one other policy idea that I’m associated with is the public option in health insurance.

And you might say, “Oh the public option in health insurance, that’s like a Medicare plan, so it’s just a government spending program.” But in fact, the whole idea of the public option is that this idea that we can regulate private health insurance in this completely broken market and hold down prices without having the public sector be a bargaining agent is just wrong, right?

We need to have a public heavy in the mix, and the public option would have the leverage to be able to negotiate for lower prescription drug prices, for reasonable costs in hospitals. And those, that bargaining leverage is what private insurers lack, and it’s what really characterizes the successful systems of other rich democracies.

So what is the benefit of a public option? It’s mostly about changing the market. By the way, the public option’s really popular. Price regulation is really popular among less affluent Americans. It’s really interesting how those with a college degree are much more skeptical of these ideas that are actually pretty much the norm in other successful rich democracies.

So the public option is another one.

CHAKRABARTI: Okay. So let’s go back to unions for a second, because we have a thought here from Columbia Law School Professor Alex Raskolnikov. And he thinks there’s some tensions, there’s some fundamental tensions that would have to be resolved with pre-distributive programs.

And he said if you’re going to support worker-friendly policies like making it easier to unionize, you would have to balance that with the needs of industry and business to continue to operate smoothly.

RASKOLNIKOV: So if you’re going to say more unionization is a benefit to predistribution, and therefore we ought to support it, you’ll have to address the question of whether the damage to efficiency will be in excess of the benefits that you will get through supporting broad increases in unionization.

CHAKRABARTI: Jacob Hacker, what do you think?

HACKER: I think it’s mostly about the distribution of the rewards of growth. I do think there are problems that unions create, but I don’t think they have, they’re mostly about reducing the efficiency. One thing to say is that the narrower unions are, the less of the market they cover, the more distortionary they likely are, right?

What you want is, and what I would advocate, is broad sectoral bargaining, where wages are set for larger sectors of the economy, so you’re not creating a lot of intra-firm competition between unionized and non-unionized employers, which could really hurt the unionized employers who are doing the right thing.

And then the other thing I would say is that we are a service economy now. So this image, most of the manufacturing economy historically has been unionized, but the image that somehow we’re talking about, I don’t know, hotels or hair salons, that somehow having them, the workers there, get paid a bit more, get better benefits, is somehow gonna destroy the competitiveness of the American economy is just, I think it’s ridiculous, right?

It’s about basically ensuring that people who are working in those places have a little more power and have a living wages, especially given that the employers are so consolidated in many of these fields. I think people just don’t understand this. Naidu, who wrote that other study I talked about, has also done calculations showing that just using a simple model that says, employers are consolidated and workers have some friction moving from job to job, like maybe they want to live in a particular place or stay with their family.

If there’s that friction and employers are consolidated, it can lead to massive ability of employers to pay wages that are well below the productivity of workers. So workers are actually getting, having their money taken away. That’s why it’s about fairness in the market, not so much about efficiency.

And I think, look, I think there’s a lot of ways in which the big kinds of pre-distributive initiatives are about efficiency. The one I wanted to talk about is a big one from the Biden administration, is antitrust, right? We need some pretty sensible antitrust policies. I would also add that we need to really think about how we do intellectual property in the United States in ways that ensure, again, that these big public investments are broadly shared and that these employers or these big companies that are in consolidated industries aren’t able to basically earn these massive supernational, supernormal profits because they have so much power.

CHAKRABARTI: Okay. So I have to admit, Professor Hacker, I have this habit which I think is quite annoying to theoreticians who come on the show, because I am compulsively propelled to drag the world of theory into practice. So bear with me for a second here, because I want to kind of create a constellation between many of the points that you’ve made.

Because you’ve said repeatedly, and I agree 100%, that this fundamentally is about a distribution of power, a more just and fair distribution of power in this country. But this is where I run into an intellectual roadblock, because you’ve talked many times about how that in order for pre-distribution, whether it’s a sovereign wealth fund or, like you said, minimum wage or support for unionization any of these things to really work, it would change, it would require a significant reconstruction of government’s ability to do things.

And then I think to myself, true. But in the United States, the problem is that some of the very same people, the broligarchs in Silicon Valley who are like, maybe we need to share some of this wealth, that top .01% of Americans also have complete capture of our political system. They have the power right now within the government by virtue of campaign finance, et cetera, to then determine what government does with any of these new and even pre-distributed policies if they were to be put into place.

So I guess what I’m saying is I don’t necessarily have the faith that even if we had a sovereign wealth fund or partial government ownership of OpenAI, that the money that the federal government would get from that would be appropriately and effectively distributed back to workers in any of the ways that you said would better the lives of all Americans.

I just don’t have that faith for as long as political power is still so radically concentrated by virtue of wealth amongst so few.

HACKER: First, Meghna, I totally share that skepticism. You’re preaching to the converted here. And as a theoretician, as by day, but a practical policy advocate much of the rest of the time, I completely get where you’re coming from.

So couple things. The first is just to say that I think a lot of the structural market fixes, while hard to achieve, are not that hard to administer, right? So if you can re- reduce the formation of monopolies in the first place through good antitrust policies, you’re not having to fight those fights all the time.

A lot of the structural market fixes, while hard to achieve, are not that hard to administer.

If you encourage unions, those unions become political heavies, right? If you give people a higher minimum wage, those folks are likely to become better off, more supportive of government. But there is this, like, huge problem. It’s like the lift yourself up by your own bootstraps problem.

Like, how do you do that, right? Because you’re standing in those boots. And so I would say that we should recognize that what predistribution requires is a rebalancing of power, and that is ultimately going to require political reform. And political reform is not a kind of nice addition to these policy shifts, it’s a precondition for them.

A precondition for pre-distribution. And so Paul Pierson and I are actually writing a book right now on how to deal with our democratic crisis. And our sort of mantra is that democracy reform comes first. Like you cannot have a system as skewed as ours is towards the right and towards the rich and get some of the fundamental reforms that are needed.

You cannot have a system as skewed as ours is towards the right and towards the rich and get some of the fundamental reforms that are needed.

And so I do think that this is again something where you fight the fight for these reforms that are popular, particularly with the working-class folks that Democrats, both, of all races, the Democrats need to win back. You fight the fight for these kinds of reforms, then you actually are more likely to have power.

You use that power to both pursue political reforms and to deliver the goods in ways that are concrete and meaningful to people in ways that don’t involve abstruse and complex spending. And then you hopefully reap those rewards in a system that’s more responsive by getting reelected.

That’s to me the sort of basic rinse, rinse, repeat formula for pursuing progressive economic and political reform.

CHAKRABARTI: Fight the fight means you have to win elections. And right now the sort of the surging socialist wing of the Democratic I won’t call it the Democratic Party, but of the left, do you think the way in which they’re fighting that fight is going to win elections?

I just don’t think it’s all that popular for candidates to come up and say I don’t wanna celebrate Thanksgiving because I think it celebrates a genocide. Like that was going on in was Michigan or Wisconsin, one of the gubernatorial races there. And so like, again, the chicken and egg issue.

HACKER: … Yeah to me, I think that this problem cuts across the ideological divide within the Democratic Party, and it’s not, the divide is basically not between left and center-left, as much as it is between bold and cautious when it comes to reform.

And so I think there are a lot of progressives that have not really challenged, they adopt the sort of familiar litany of things including these kind of cultural appeals that don’t resonate at all with non-college educated workers. So I think that you will win elections by focusing on a kind of bread-and-butter, pocketbook economic agenda that is highly populist, that is about rebalancing power, and that you need to use that power to not just deliver those promised policies, but also to restructure our political institutions in ways that encourage a more responsive democracy.

The first draft of this transcript was created by Descript, an AI transcription tool. An On Point producer then thoroughly reviewed, corrected, and reformatted the transcript before publication. The use of this AI tool creates the capacity to provide these transcripts.