Moving Forward: How do we make the case for a progressive vision of economics?

An excellent think piece for the weekend. - promoted by david

Like many of you, I am very pleased with the election results on Tuesday.  Obviously, President Obama was re-elected with a large Electoral College margin and a popular vote margin of some three million votes.  The President won 11 of the 12 “swing” states (I count NH, PA, VA, NC, FL OH, MI, WI, MN, IA, CO and NV) and all of the real “tossup” states.  The Democrats, counting Angus King as one, went 25-8 in Senate elections, which are Justin Verlander numbers.  By my count, 12 of the 33 races were genuinely in play and Democrats won 11 of those 12, all except Nevada (which was a one-point loss to an incumbent).  Of course, Elizabeth Warren sent Scott Brown packing by almost 8 points.

But the elections are over and it’s back to crafting policy, so there’s something that’s bothering me. Much has been said in the past couple of days about the Republicans’ demographic problem.  Their party has been under the control of its right wing, nominating candidates whose positions alienate many women and non-white voters (or forcing its candidates to embrace those positions even if their own preferences are more moderate).  It’s true the Republicans may have a hard time changing this pattern, if recent GOP primaries are any indication, since their hardcore Rush-listening and evangelical base may not moderate its views any time soon.

But what if they do change the pattern?  I don’t think we can count on Republican candidates to keep saying stupid things about rape and contraception, and making Latinos feel hated, forever.  Their strategists know they have to expand their appeal somehow, and will fight within the party to do so.  And that brings me to my big concern: the story this week is about Republican positions on social issues alienated women and non-white voters.  It is not about how the Republican positions on economic issues are profoundly destructive of middle class prosperity.  It is not about Republican hypocrisy on deficit spending (remember Dick “deficits don’t matter” Cheney?).  It is not about how we need to focus on growing our economy back to health rather than more and more “deficit reduction,” which right now will be counterproductive.

In fact, the polling average right before the election showed Romney AHEAD by several points on the economy. To me, that’s nuts and it’s scary. Because the guy wouldn’t even speak openly about his proposals, but more because what he did reveal should have been enough to prove his ideas were wrong for America. For too many Americans, which party is “better” on the economy boils down to (1) which party holds the White House and (2) is the economy doing well or not right now.  If it is, incumbent party’s better.  If it’s not, the other guys are better.  I just had a conversation to that effect with an infuriating “independent” friend who supported Romney because Obama hasn’t fixed the whole mess he inherited yet.  This is a smart person but not particularly interested in politics or economics.  Thus she knows nothing about Keynes or our shortfall in demand since 2007-2008.  She doesn’t know what the filibuster is, and didn’t even know which party controlled the House.  To her, Obama “hasn’t been all that great on the economy.”  End of story.

By all rights, the 2008 election should have been the absolute end of Reaganomics.  Eight years of Bush’s lower tax rates for the wealthiest had led to sluggish job growth and no real wage growth.   Three decades of Wall Street deregulation had led to a huge explosion of wealth on Wall Street (while at least half the country struggled to make ends meet) and then to the largest popping of a speculative bubble since the Great Depression.  For thirty years or more, the economy’s gains had gone almost exclusively to the top 1 or 2 percent, and now the results were not merely inequitable but disastrous. Barack Obama rode the public’s disgust with this state of affairs to the White House. I hoped, and actually believed at the time, that the great realignment was at hand, and more because of economic issues than because of social issues.  After 40 years, it was time.

In my view, Obama lost all chance of “fixing” the economic mess he inherited in time to avoid GOP gains when he asked for a stimulus that was far too small.  I emphatically reject the argument that he got the best deal he could in Congress, and I’d be happy to argue it.  (He also didn’t sell it well; the “Recovery Act” and the “rescue plan for the rest of America” would have been infinitely better than the technocratic term “stimulus.”  It’s just poor politics when large numbers of Americans don’t know it’s different from the Wall Street bailout.)

It seems Obama sincerely thought his proposed stimulus actually would get unemployment down to 5.8% pretty quickly, as Romney and his surrogates repeatedly reminded us this year.  But he shouldn’t have.  There were plenty of people like Paul Krugman and Joe Stiglitz, who have been right about basically everything, saying at the time it needed to be much bigger.  And once you ask for a stimulus that’s too small, it’s hard to go back and ask for more any time soon.  It just seems to “prove” that the first one didn’t work.  The truth is that it DID work, but wasn’t big enough to restore us to full strength.  Look at Europe for the version without a stimulus.

Had a sufficient stimulus been enacted, in 2010 Obama and the Democrats would have been the conquering heroes who cleaned up the GOP mess.  As it was, demoralized Democrats watched the GOP argue that the economy was still broken, and death panels, and so on.  And the GOP surged to control of the House and many state governments, just in time to thwart further economic recovery and gerrymander the House for a decade.

The ink was barely dry on the stimulus when Obama acceded to the wrongheaded assertion that “deficit reduction” is more important than promoting employment and growth.  He might as well have said, “Let’s undo some of the good from my too-small stimulus plan.”  Since then it’s been non-stop capitulation to the GOP hostage-takers.  He extended the Bush tax cuts for top earners.  He has agreed to spending reductions several times, which, as BMGers have pointed out, has led to reduced public sector employment and dragged down the overall employment numbers.  He was all set for a “Grand Bargain” in 2011 that would reduce spending more than the GOP asked for and put Social Security and Medicare on the chopping block.  All this when our real problem is inadequate demand, and we can borrow at record low rates around 1%.  This is, if ever there was, a GREAT time to run deficits. We need to fix the economy first and THEN think about balancing the budget.

Thanks to Obama’s failings and GOP intransigence, the economy was (as Mr-Lynne mentioned) a liability for Democrats to overcome this year, rather than a strength.  Let’s not forget, without some screw-ups by Romney, Obama could have lost this election.  As it was over 58 million people voted for Mitt Romney to be the next President, and public opinion favored him on the most critical issue in most voters’ minds.  It’s for that reason a lot of those swing states Obama won were close.  Here’s just a small list of things without which we might be discussing President-elect Mitt Romney today:

  • The 47% remark caught on tape
  • The tendency of GOP candidates around the country to look like Neanderthals on women’s issues, reinforced by Romney’s “binders full of women” remark
  • A four-year old editorial entitled “Let Detroit Go Bankrupt” that might well have tipped Ohio all by itself
  • Mitt’s screw-up on Benghazi at the second debate (“Please proceed, governor”)
  • Romney’s refusal to reveal policy details or submit to interviews
  • The national GOP’s stance, largely reiterated by Romney, against sensible immigration reform that folks like John McCain and even George W. Bush supported just six years ago
  • Hurricane Sandy and Chris Christie (though Obama had the momentum before that)

I am an economic liberal as much as I am a social liberal.   For that reason I am troubled by suggestions, such as the one made by a nice visiting troll, that Republicans such as Richard Tisei would be OK because not as insane as their fellow Republicans on social issues.  In a word, no.  I think Richard Tisei would be a disaster on economic issues, and I care about those issues deeply.

This year’s elections raise the question: How will we win when the day comes that Republicans nominate people who don’t repel Latinos with demonization tactics and don’t repel women with opposition to equal pay and regressive views on contraception, abortion and rape?  How will we effect real progressive change in our economic structure?  How do we go about convincing Americans our economic vision is better, as it’s been proven to be over the last century?  How do we win widespread support for progressive taxation?  Maintaining our hard-won safety net?  Real regulation of financial markets?  The desirability of a strong labor movement?  Keynsianism when needed?

Your thoughts?


26 Comments . Leave a comment below.
  1. We gotta start talking right

    about the economy and our inequality. There’s a lot of information out there (I was just at my local independent bookstore and came across 5 books on the subject without even looking). On my way home from work, I listened to Bill Moyers interview Jacob Hacker. He was good. The story is out there, but we need to start telling it.

    We need to organize more workers, but to do so, we have to make them aware of themselves as workers. Owners and managers know what they are. They band together and spend money to create laws that benefit them, but workers don’t have much solidarity.

    We need to attack capitalism. That’s hard because it’s a system, but we need to somehow attack the large corporations that are ruining our country. But how? If I were a hacker, I’d hack. But I don’t know how to hack anything. Do old-fashioned, 1960s tactics work? Does it make sense to Occupy Mass Mutual or Fidelity?

    I have ideas on how to message, but I don’t know organize.

  2. Wall Street and the current culture of America needs to change

    The whole idea that as long as Wall Street is up then all is well has to change. A positive stock market is great but not if it’s up because it pillaged Main St. Increased profits due to laying off workers and raising prices should not be applauded as success. There needs to be reasonable gains on Wall Street earned by expanding economic success for everyone. I think that can be accomplished with tax policy.

  3. Liveandletlive's comment...

    …reminds me of something I’ve seen making the rounds on the internet, which goes something like this: If someone complains that Obama has done nothing for the economy tell them that corporate profits and the stock market have gone up during his presidency. If the person then complains that such things haven’t helped him any point out that he has just admitted the trickle-down economics doesn’t work!

  4. Winning on the issues

    After the Coakley defeat, I complained bitterly about the Democratic Party’s reluctance to win the issues. Scott Brown (“Senator Brown” now means Sherrod Brown) ran against the ACA; Coakley said she was for it — and not much more.

    It seems to me everyone should be repeating the phrase “Job creators are called customers” until the supply side silliness slinks away in embarrassment. That means an election campaign ends November 6 and an issue campaign begins November 7.

    • Great quote

      job creators are called customers

      This is entirely true. Luckily my new employer is a small consulting firm that understands this, some companies like Southwest, Apple, and Costco get this. Some like Costco realize making great work environments also creates jobs. We are not the party against capitalism, our movement is about restructuring out economy to avoid another crash, more too big to fail and more bailouts. We are for a sustainable economy, capitalism that works for families and creates good jobs at living wages while enabling people to invest in themselves and their communities. I’d love to go back to the capitalism of the 50s and the broad middle class progressive Democrats and Republicans built. Our Senator-elect is off to a great start promoting this new vision.

      • The odd, odd Republican narrative

        Like some kind of Disney movie, the GOP narrative has been all about a Brilliant and Hard-working Striver with an Idea who creates a new market, new wealth, and jobs for his community. It’s as if the work were crawling with Thomas Edisons and if only tax policy were different, they’d be out inventing light bulbs.

        The economy, though, is more likely to grow because there’s a market for more light bulbs not because someone has just invented them.

        • Don't totally agree

          We want to be an innovation economy. Innovation is vitally important for the US economy to grow, especially given that we don’t have certain other advantages like low labor costs (by global standard)s.

          However, I do agree that current U.S. tax policy is not stifling people who want to innovate, as the huge number of tech startups demonstrates. Scott Brown was making a ludicrous argument that the main reason businesses aren’t expanding is because of uncertain tax conditions. You could say the same thing about start-ups.

          I also agree that if there aren’t consumers with money to buy these innovations, we’re not going to see much growth.

          But our economy does need innovators.

          • That's true

            Generally, innovation reaps large rewards. The size of those rewards are hardly dented by taxation. Further, it is quite unlikely that the excess of taxes rather than the lack of customers is what dampens risk taking. IIRC, there are deductions to be had for R&D.

            Innovation is important but it’s uncommon too. There’s a whole lot of incremental improvement in our economy and even more just-doing-more when demand swells.

            What’s ludicrous about the GOP point of view is that it overstates the immediate effect innovation could have in digging us out of recession and it misunderstands the disincentive. For example, it would be easier for innovators to take risk if they weren’t gambling on their health care coverage. It is for that reason that our small business sector is smaller than that in a number of advanced European countries.

            • Agreed

              I’ve mentioned this elsewhere, but Germany really is a model on this front and it is partly because of social insurance and also because they have a real, cabinet level, industrial policy. Such a policy here could encourage our tax dollars not to go to corporate welfare, such as lowering rates or giving breaks for outsourcing, but to go to actual tangible R&D and job creation. Instead of only cutting taxes and hoping jobs sprout like Jacks beanstock it makes sense to do as the Germans do, reimburse R&D costs for a small to middle size firm and when it reaches a certain level of profitability and marketshare cut the incentive. In the good ole US of A we subsidize big dinosaurs like coal, like oil, like agribusiness and actually stifle innovation. Had the government not taken ownership of big auto, they would still be making gas guzzlers due to generous protectionist tax subsidies. We actually rewarded our businesses for being less competitive and innovative.

              We also need to radically reform the stock market so that IPOs aren’t just a cash cow like they were for Facebook but a tangible investment in a company that will be a long term player. Incentivizing better earnings reporting, shareholder ethics, reinstating Glass Steagall, giving the SEC teeth, and fining board members instead of companies would make a big difference in putting rationality back into the market. And I would argue all of these proposals are what a good, conservative minded government would do, one that wishes to conserve prosperity and protect it in our nation-state and encourage ethical behaviour. This is not nationalization or redistribution but simply making our corporations produce the outcomes society wants-mainly that they serve society, their customers, and their employers and not just their shareholders.

  5. Neanderthals, hurricanes, editorials, foreign policy, and structural stupidity

    You could say that your bulleted list of pratfalls was just luck and Democrats shouldn’t count on such luck.

    But look, please, at the Republican nominating process. Gingrich, Santorum, Perry, Bachmann, and Cain would each have produced more not fewer pratfalls. And they’ll never ever nominate Pawlenty or Jindal or Christie, but McCain would nominate Palin, a veritable fountain of wrong.

    Epistemic closure on the Right just makes them stupider and more likely to say stupid stuff: they really think that if the absurd Hannity doesn’t find something absurd, no one will.

    My favorite example is the boats exchange in the foreign policy debate. If someone in the right wing echo chamber had thought about the “fewer boats than 1916″ critique, she or he would have made the same retort Obama did. No one did. The Obama debate preparation team must have been ready for this line.

    Likewise, Mr Romney’s ideologically pure and purely idiotic idea to turn FEMA over to the states. In the right wing echo chamber, that sounds brilliant. In the real world, where people actually think about consequences of their actions, it’s stupid. But that won’t stop the Right.

    Their stupidity is now structural.

  6. Two words: Elizabeth Warren

    OK she alone is not going to fix the issues you raise. But there’s a good reason wealthy financiers dislike her so much: She is a huge threat to the cushy setup they have now. She knows what she’s talking about, she knows how to get things done, she knows how to explain things to people, and she’s not beholden to big money.

    These are the kinds of people we need to elect, and then things will improve. Get someone who can move the public discourse a bit (“I didn’t build that! You did!”) and a critical mass of progressives in Congress and you’ll finally start to see some movement.

    The Tea Party sure managed to drag our discourse to the right. Obviously it’s possible to move it back again, but you need good people to make it happen.

  7. The awful truth

    Neither party has the intellectual policy vision to truly transform our broken economy. Parties, like many institutions, are bound by the status quo and the limitations it plants on itself.

    Our mixed economy worked back when we had Fordism and economic patriots willing to parlay their profits into their communities-education, health care and good pension for employees, and science and technology so they could innovate. They made products they did not sell services. Now our most profitable companies don’t make anything, as one businesswoman I talked to said the other day, health care companies acl because they are in the finance business. So is every other company and they hold more loyalty to their faceless and nameless shareholders than to their employees or customers who, in a rational market, should be the primary stakeholders.

    Look at Bain and KB Toys, a profitable company rooted in its community making money was intentionally run poorly to manipulate stocks and allow everyone to cash out. Gingrich was right to call that culture capitalism. You don’t need to be a socialist, he’ll you can be a 1950s Republican and be appalled since this defies the purpose of the free market which is to increase happiness and spread prosperity. The Republicans fall into two camps the delusionals who do not believe the reality that this system no longer spreads prosperity and fails at its purpose and those that know this all too well and profit from it. The Democrats as an alternative only offe to regulate the bad system and help the losers by crafting a more generous safety net. We wouldn’t need a safety net if every American had a good job with a living wage and that should be the goal of our economic policy. We don’t need to be protectionist we just have to incentivize that outcome and punish the Bain outcome. Germany already does this to some extent. We need cooperatives and mutualist management and labor relations, we need a credit system that rewards thrift instead of debt, and we need an industrial policy again so we can have a balanced trade deficit and become an exporter. Imagine if we oils wed 1950s economics with 21st century social values? That’s an America that truly works again. Otherwise we are back on a boom and bust cycle like we were at the dawn of the last century. We don’t need to demonize or replace capitalism we just need to make it work.

    • Both parties are beholden to big money in

      Varying degrees, a major reason why I am not a party member. Fix the problem of elected officials being owned by big money and you will repair countless other problems in this country. Which is why grassroots-funded candidates are so important.

      • Exactly. If Dems would only Act Like Real Dems

        they would be crushing the Repubs. But too many people see little difference between the two parties and just shrug and stay home on election day. And acting like Dems does not mean compromising with the Insane. If the upcoming Grand Bargain includes gutting Social Security and Medicare, Dems might as well concede the 2016 election. And there were vague words in Obama’s presser on Friday to indicate Catfood Commission dogma is on its way.

      • This and kbusch's comment above

        are why I’m more concerned with us – activists, etc. – making the economic case than the party. Like FDR said, “Make me do it.” I think the Democrats in office by and large will be beholden to large donors as long as they care about the policy outcomes and the vast majority of voters aren’t putting any countervailing pressure on.

        I would like to change the conversation the way Reagan managed to change the conversation so “the government is inefficient” and “the private sector’s better” became automatic reflexes for so many Americans. It seems the elected pols who aren’t on board already will follow, not lead. Right now Barack Obama is not out there fighting for more stimulus, he’s offering up S.S. to cut a budget slashing deal.

    • Exactly

      “We wouldn’t need a safety net if every American had a good job with a living wage and that should be the goal of our economic policy”. We would still need safety nets, but far less costly ones.

    • And other forms of utopianism

      Capitalist economies, by their very nature, cannot guarantee zero unemployment: They always require a social safety net.

      Certainly, socialism does hold such a promise but it comes at the cost of massive inefficiency.

  8. I'm not totally convinced that

    republicans lost solely on social issues. They may have made winning impossible for themselves by venturing into topics they know nothing about, like social issues, but that never stopped them before. After all, Romney’s “plan” quickly became a disjointed defense of the already wealthy, and I think most people who were paying attention saw through the politics of Ryan and his budget. I think most people also saw the obstructionist republican congress for what it is and took note of McConnell’s primary goal and the number of jobs bills they stopped.
    The republicans argument, I believe, became obvious to most folks: we can’t create jobs or stimulate the economy if it means raising taxes on the wealthy or increasing deficit spending – in essence, do nothing and allow things to get worse.
    We should put the tax issue to bed right away (the sequester will hopefully provide the forum.) Tax policy have ironically become both the panacea to our economic woes and the bet tool for wealth redistribution in the toolbox. Everyone should read the now infamous CRS report buried by republicans a couple of weeks ago which shows how taxing the wealthy will not – will not – will not slow economic growth:

    Maybe I’m putting too much faith in thinking that most people actually get it – they know what’s going on, but then the shellacking taken by republicans is evidence of that, is it not?

    • Agreed to some extent

      but the polls showed Obama leading the race and trailing on the economy. That suggests to me three things (1) the social issues tipped enough people for him to win; (2) people are really uninformed about economics; (3) Obama hasn’t articulated any kind of forceful economic view. His argument was, well, I have been cutting the deficit kinda sorta.

  9. Republican is the Party of the Whackos

    How will we win when the day comes that Republicans nominate people who don’t repel Latinos with demonization tactics and don’t repel women with opposition to equal pay and regressive views on contraception, abortion and rape?

    Another way to put that question is to ask “What will happen if the Republicans abandon an important chunk of their base, the whackos: Racists, Homophobes, Misogynists and Religious Extremists”. IMO, If they did that this time, this race would not have been even close.

  10. It's not progressive economics

    Its economics.

    Similarly, climate science or evolution is not progressive science. It’s science.

    Sorry to split hairs, but I think this distinction leads us to a different question.

    It’s not just about finding the right frames or sound bites to sell our personal viewpoints. Rather, How do we make sure policy is informed by reality and not ideology?

    I’ve been around long enough to understand that being right is rarely enough.

    But I also think that the truth, even when messy, nuanced, and complex, is a powerful ally.

    How can we use, or serve, it better?

    • It's a good point

      especially these days. At one time things might have been arguable but right now there’s a startling consensus among economists that the only thing not on the table is the one thing we really need – more stimulative spending.

      It’s not like we haven’t gone through this before. In the 20s and 30s we didn’t know better, now we do. It’s just the DC bubble (and the European bubble) that doesn’t get it.

    • Agree 100%

      The media, particularly the business media, is partly to blame. I love how birtherism, climate denial, creationism, or neoconservative foreign adventures get ‘equal treatment/both sides could be right’ treatment but the failed ideology of neoclassical economics and the laffer curve is treated as the only correct way to articulate the dismal science. Keynes was also an economic genius like Friedmen, and where Keynes was right is that states have a role to play in ensuring fair play within the markets and distributing societal goods and mitigating externalities the market cannot account for. Even Adam Smith would concede that infrastructure, education, and health care are goods best entrusted to the state which looks out for the commons and not self interest. Its time we get economists onto business media platforms so they can espouse empiricism and not malarky.

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Thu 27 Apr 10:58 AM