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Summary

The American middle class is already taking center stage in the 2020 presidential electoral campaign, even in relation to debates about foreign policy. While the U.S. economy has been growing and unemployment rates have fallen, too many Americans still struggle to sustain a middle-class lifestyle. Meanwhile, major multinational corporations, China, and other foreign competitors reap enormous benefits from a global economy that U.S. leadership and security has helped underwrite. Therefore, candidates on both sides of the aisle have ample cause for debating whether changes to U.S. foreign policy are required to better advance the economic well-being of America’s middle class, even if middle-class fortunes largely depend on domestic factors and policies.

This debate will be relevant long after the electoral cycle is over, however, and will influence the trajectory of U.S. global leadership and international affairs for decades to come. National security and foreign policy professionals in government need to be fully involved in this discussion, yet many are understandably consumed by geopolitical and security developments abroad and are, therefore, often distant or disconnected from economic realities at home. They rarely get to hear what Americans beyond Washington, DC, think about how U.S. foreign policy–related efforts may or may not intersect with these realities. Thus, the Carnegie Endowment for International Peace initiated a new line of research on “foreign policy for the middle class” to help address this gap and bridge an important divide.

In 2017, Carnegie convened a bipartisan task force of former senior policymakers to provide strategic direction to this research and ultimately make concrete recommendations. To inform these recommendations, the task force and a research team—including Carnegie scholars and university researchers—are gathering data on both the perceived and measurable economic effects of U.S. foreign policy on the middle class in three U.S. states in the nation’s heartland (Ohio, Colorado, and Nebraska). This report on Colorado, prepared with economists at the University of Colorado Boulder, is the second of the three case studies. The first study on Ohio, undertaken with The Ohio State University, was published in December 2018.¹

Across multiple locales in Colorado, the research team conducted interviews and focus groups with state and local officials, economic developers, small business owners, employees, community leaders, teachers, nurses, tradesmen, and others who comprise, employ, and/or advance the interests of middle-class households. The conversation focused on how those interviewed assessed the economic well-being of Colorado’s middle class and whether they believed any significant changes in U.S. foreign policy could yield a better outcome. The interviews and focus groups took place between February and May of 2019, reflecting the events and policies up to that time. Overall, they conveyed the following main points, which often reflected the quantitative data gathered:

• Even in states with thriving economies, like Colorado’s, there are still deep concerns about the viability of the middle-class dream. All of those interviewed acknowledged the state’s sustained economic growth. New jobs have been created across the state faster than they can be filled. But interviewees also made clear that the economic benefits are not being shared evenly. Not nearly enough jobs pay salaries at the level needed to attain or sustain a middle-class lifestyle, largely because of the high costs of healthcare, housing, childcare, and education. While income inequality is generally lower in Colorado than most states, disparities in income and wealth persist, including along educational, geographic, racial, and ethnic lines.² These issues consume the majority of time and attention of those interviewed.
• Coloradans have largely benefited from globalization, and that, in turn, has favorably disposed them toward international trade, as well as foreign aid and immigration. While Colorado is not a major trading state compared to Ohio or many other states, those interviewed were nonetheless strong advocates of international trade. Perhaps that is because Colorado has suffered relatively few trade-related job losses, especially compared to the industrial Midwest. Meanwhile, its ranchers, farmers, manufacturers, professional business service providers, and tourism industries have benefited from the opening up of new markets through past trade agreements and increased trade with China. In other words, the net positive benefits of international trade for Colorado are clear. As such, those interviewed were concerned about the imposition of new tariffs, movement toward protectionism, jeopardizing of relations with U.S. trading partners, particularly Canada and Mexico, and escalation and prolonging of the trade war with China.
  
  Yet, at the same time, some ranchers, farmers, and business leaders said they were willing to absorb some near-term pain as a result of tariffs if it was necessary to combat China’s unfair trading practices and level the playing field for U.S. businesses and workers in the long run. They criticized past administrations for not having done enough on this front. But this does not mean that they favored ceding their market share in China to other foreign competitors or decoupling the U.S. and Chinese economies. They also were not in favor of cutting foreign aid and humanitarian relief that, when delivered effectively, has helped to grow markets for U.S. products and services and been consistent with U.S. values. Nor were they comfortable with the rhetoric and policies on immigration that portray the United States as unwelcoming of foreigners and that deny access to much-needed labor for jobs that Americans do not want or cannot perform.
• Colorado benefits from defense spending more than most U.S. states. Few interviewed expressed enthusiasm for decades-long military interventions or the start of a new war in the Middle East. Yet, at the same time, many cautioned against making drastic cuts to defense spending that could weaken the U.S. military or adversely affect Colorado, which hosts the U.S. Air Force Academy, the North American Aerospace Command (NORAD), the Air Force Space Command, and the Army’s 4th Infantry Division, among several other important commands and units based primarily in and around Colorado Springs. The wider defense sector accounts for a substantial number of middle-class jobs, anchors the economy of El Paso County (the state’s second-most populous county and home to Colorado Springs), and helps grow civilian industries in areas such as aerospace and cybersecurity. However, economic developers in El Paso were nonetheless among the most vocal proponents of diversifying their economy, because they had lived through the pain associated with past downturns in defense spending. And a number of those interviewed outside of El Paso, though cautious about the economic ramifications for their state, supported defense cuts that, among other things, would eliminate wasteful spending and make U.S. foreign policy less militarily oriented.
• Debates about the implications of new approaches to energy and climate change were divisive and heated. Colorado is one of the nation’s leading oil, gas, and coal-producing states. It is also home to cutting-edge research on renewable energy and preeminent advocates on the environment. Those interviewed in major oil and gas-producing counties, such as Weld, supported the rollback of the previous U.S. administration’s approaches to climate change, the relaxation of regulations on fossil fuel extraction, and the promise of increased exports of liquefied natural gas (LNG). They believed these moves had thrown an economic lifeline to Colorado’s middle class and diminished U.S. dependence on foreign oil.

Others interviewed outside of these counties, such as in Boulder and Denver, opposed this view. They saw climate change as a significant security threat in terms of the long-term effects on the planet. They also noted the near-term environmental risks of fracking close to their homes and schools. They advocated increased investment in the renewable energy sector, in which their state is well-positioned to leverage and create good new jobs. They considered the foreign and domestic climate approaches of President Donald Trump’s administration to be fundamentally at odds with middle-class interests.

Based on these and other findings from the Colorado and Ohio case studies, recommendations for foreign policy professionals are beginning to take shape:

• Take a much wider view about what it means to make trade policy work for the middle class—to include but go well beyond the impact on manufacturing employment.
• Employ a multifaceted strategy for pushing back against unfair trading practices and enhancing U.S. competitiveness with China, rather than overrelying on the blunt instrument of tariffs; protect certain technologies and subsectors on national security grounds, but do not pursue widespread decoupling of the U.S. and Chinese economies.
• Recognize how reducing or increasing the defense budget can adversely impact the middle class, and consider ways of spending the defense budget differently to simultaneously advance national security interests and the economic well-being of the American middle class.
• Stop proposing cuts to foreign aid as a substitute for the domestic policy solutions required to address the economic challenges confronting the middle class.
• Increase investments in the workers and communities likely to suffer most as a result of measures to combat climate change, and in the process, explore the desirability and feasibility of a comprehensive approach to economic adjustment assistance for communities most vulnerable to energy-, trade-, and defense-related transitions.

In addition to recounting opinions based on personal experience, this report sheds light on what most interviewees did not or could not comment on. Because of a gap in knowledge, Americans need to be able to trust that foreign policy and national security professionals will prioritize and act on behalf of their interests. Thus, changes in attitudes, processes, and communications will be required to demonstrate that these professionals are aware of and understand those interests.

Carnegie task force members look forward to assessing how the observations and preliminary recommendations they have drawn from the Ohio and Colorado case studies align with the findings of the third and final study on Nebraska. The study is being conducted in partnership with a multidisciplinary team of researchers at the University of Nebraska-Lincoln and is expected to be published in early 2020. The task force will offer detailed recommendations in a final report in mid-2020.

Acknowledgments

The Geoeconomics and Strategy Program at the Carnegie Endowment for International Peace could not have produced this report without the contributions of many individuals. In particular, it wishes to thank its task force members and university partners. Members of the Carnegie task force (see About the Authors) provided strategic direction to the exercise and shaped the preliminary implications for U.S. foreign policymakers. Partners at the University of Colorado Boulder, Richard Wobbekind and Brian Lewandowski, led and organized the interviews and focus groups in Colorado, provided expertise on the state’s economy and policy challenges, and contributed to the data for and drafting of the report.

The program would like to thank everyone in Colorado who agreed to be interviewed for the study (see the Appendix A for a partial list). Their insights contributed substantially to the study’s framing and findings. Colorado’s regional and local economic development offices were instrumental in facilitating interviews and focus groups across Colorado. The offices included the Denver South Economic Development Partnership, Grand Junction Chamber of Commerce, Metro Denver Economic Development Corporation, Otero County Economic Development Council, Pueblo Economic Development Corporation, Region 9 Economic Development District of Southwest Colorado, and Upstate Colorado Economic Development.

Appreciation is extended to current and former state and local officials in Colorado, who were generous with their time and advice. Key staff of Governor Jared Polis’s and former governor John Hickenlooper’s administrations and those at the Colorado Office of Economic Development and International Trade provided critical data and insights into Colorado’s economy.

Deep gratitude also goes to the state directors for senators Michael Bennet and Cory Gardner, who offered helpful, informal feedback on the emerging findings; and to staff at the offices of representatives Ken Buck, Scott Tipton, and Diana DeGette, who made time to learn about the study and share relevant information on their respective districts. However, members of Colorado’s congressional delegation were not formally interviewed or asked to endorse the report.

The authors benefited from, and much appreciated, the insightful feedback provided by Will Inboden, Bruce Stokes, and Scott Wasserman on earlier drafts.

The program is also grateful to Carnegie’s leadership and colleagues in the communications and development teams for their support of this effort,  particularly Jen Psaki for participating in task force meetings, Lori Merritt for editing the report, and Jocelyn Soly for designing the cover and graphics.

Finally, the program wishes to thank the Bill & Melinda Gates Foundation and the Suzanne & Walter Scott Foundation for making this project possible.

Many people helped to inform and prepare this report, but the report’s authors alone bear responsibility for its content. The program is grateful to all of them for their flexibility and contributions. As a group effort, the report cannot represent every author’s views in all chapters; some authors preferred different language and emphasis in places.

Notes

¹ Salman Ahmed, Karan Bhatia, Wendy Cutler, David Gordon, Jennifer Harris, Edward Hill, Douglas Lute, Daniel M. Price, William Shkurti, Christopher Smart, Fran Stewart, Jake Sullivan, Ashley J. Tellis, and Tom Wyler, “U.S. Foreign Policy for the Middle Class: Perspectives from Ohio,” December 10, 2018, https://carnegieendowment.org/2018/12/10/u.s.-foreign-policy-for-middle-class-perspectives-from-ohio-pub-77779.

² United Health Foundation, “National Income Inequality – Gini Index,” 2018, accessed October 4, 2019, https://www.americashealthrankings.org/explore/annual/measure/gini/state/ALL?edition-year=2018.

Table of Contents

1. Research Approach and Methodology

2. Top Middle-Class Concerns

3. Trade, Aid, and Immigration

4. Defense

5. Energy and Climate

6. Implications for U.S. Foreign Policymakers

7. About the Authors

8. Appendix A. List of Individuals Engaged, March–June 2019