Oren Cass continues to err on both the facts and the economics.
Editor, The Harvard Gazette
Editor:
About the recent presentation on your campus by Oren Cass of American Compass, you write (“How free-market policymakers got it all wrong for decades,” November 19):
As evidence that the free-market era has failed to deliver for the average American household, Cass showed a series of charts detailing everything from the growing U.S. trade deficit to 50 years of stagnant wage growth even amid rising per-capita GDP.
I wonder if any audience member challenged the data Mr. Cass used to show 50 years of wage stagnation. I hope so, because such data are evidence only of his ineptness at empirical research; they’re not evidence of economic reality. Credible evidence is abundant that there’s been no such stagnation. For example, Phil Gramm, Robert Ekelund, and John Early estimate that the real hourly earnings of Americans with only a high-school diploma rose by more than 50 percent between 1967 and 2017, with real wages of better-educated Americans rising even more. (Even high-school dropouts enjoyed real-wage gains of almost 32 percent.)* Another researcher, Michael Strain, found that from 1990 to 2020, the real hourly earnings of production and nonsupervisory workers rose by 34 percent.**
And Scott Winship, after carefully reviewing research by American Compass, came to this well-documented conclusion:
Let’s begin with some basic facts. It is not anywhere near true that the wages of American workers have risen by only 1 percent over 50 years. The best data we have on hourly pay come from the Bureau of Labor Statistics’ Current Population Survey, which provides trends from 1973 to 2022. Between these years, the hourly wage of the median paid employee—the one ranked right in the middle of worker pay—rose by 33 percent after accounting for the increase in the cost of living. That is 33 times more than American Compass claims.***
I also wonder if anyone asked Mr. Cass why he believes that rising U.S. trade deficits are bad for America. Because U.S. trade deficits rise when foreigners reduce their purchases of U.S. exports in order to have more dollars to invest in America – that is, when foreigners bring more capital to our shores, thus causing America to run capital-account surpluses – these “trade deficits” should give us delight rather than distress.
It would have been interesting to hear Mr. Cass’s reasons for believing that foreigners’ greater willingness to invest in America both signals and contributes to economic decline in the U.S. After all, if he’s correct that willingness to invest in a place both signals and contributes to that place’s decline, then Mr. Cass should not only be distraught at the willingness of his many donors to invest in American Compass, but actively trying to dissuade them from doing so.
Sincerely,
Donald J. Boudreaux
Professor of Economics and Martha and Nelson Getchell Chair for the Study of Free Market Capitalism at the Mercatus Center
George Mason University
Fairfax, VA 22030* Phil Gramm, Robert Ekelund, and John Early, The Myth of American Inequality (Lanham, MD: Rowman & Littlefield, 2022), page 71.
** Michael Strain, The American Dream Is Not Dead (But Populism Could Kill It) (Conshohocken, PA: Templeton Press, 2020), page 33.
*** Scott Winship, “Understanding Trends in Worker Pay over the Past 50 Years” (Washington, DC: American Enterprise Institute, May 2024), page 2.
