One side of the Democratic Party wants the nation’s billionaires to pay a slightly higher tax rate on their income. Through an unprecedented wealth tax, the other side would target the stock holdings, real estate and other property of the nation’s billionaires to raise trillions of dollars of new revenue.
With Democrats set to debate again this week, the presidential primary has revealed a sharp split in the party over core tenets of American capitalism, as the months-long campaign has exposed disagreements about fundamental aspects of the nation’s economic system.
The leading Democratic presidential candidates have split into two camps, with Sens. Bernie Sanders (Vt.) and Elizabeth Warren (Mass.) leading a liberal flank in the polling and former vice president Joe Biden and Pete Buttigieg, the mayor of South Bend, Ind., leading the moderate side.
The eventual nominee will determine the party’s position on the taxes paid by the richest Americans; the size of the federal welfare state; the makeup of the health-care industry; and the relationship between workers and corporations, among other vital economic questions.
The gap is so large that Warren and Sanders would spend up to 10 times as much as Biden over the next 10 years, and about eight times as much as Buttigieg.
“At the heart of this primary is a debate over the future of American capitalism,” said Timothy Naftali, an associate professor of history at New York University.
“The Democratic Party is trying to come to terms with where it stands on the kinds of issues Warren and Sanders raise — on the tax system; on debt and education; on the nature of how we deliver health care,” he said. “These are big issues, and Sanders and Warren are on one side and most of the other Democrats appear to be on the other."
The jostling comes as President Trump and White House officials have seized on recent economic news to argue that their agenda of low taxes, reduced regulations and a shake-up in trade policy has helped push the stock market and labor market to record levels. The White House has tried to seize on the more liberal proposals emanating from the Democratic primary and accuse Trump’s eventual rival of running on a platform of socialism.
“Sanders and Warren have aggressively pushed this pretty far-left agenda on the economy, and Biden has tried to run up the middle,” said Stephen Moore, a conservative at the Heritage Foundation who advises Trump. “But at the end of the day if you have a President Biden or a President Buttigieg with a Democratic Congress, you could get much higher taxes, a Green New Deal and a pretty aggressive step toward socialized medicine.”
Democrats say the recent spate of strong economic data overlooks the deeper economic suffering confronting broad swaths of the working class. But their solutions to that suffering are markedly different.
Adding up his various policy proposals, Sanders is calling for new federal spending that would amount to more than $50 trillion over the next decade — a number about equal to one-fifth of the entire U.S. economy over that time. Warren, who has called herself a “capitalist to my bones” but agrees with many of Sanders’s policies, is proposing upward of $30 trillion in new spending. (Part of the difference between Warren and Sanders is she has a less costly estimate of what it would take to pay for expanding Medicare to all Americans. His climate, housing and student debt plans are also significantly bigger than hers.)
By contrast, Buttigieg is proposing about $6 trillion in new federal spending over the next decade, while Biden has laid out how he would pay for about $3 trillion in spending over that time.
Warren and Sanders have also pushed a wealth tax that could raise more than $4 trillion, taxing accumulated wealth and assets rather than the traditional Democratic policy of taxing income. Biden released a significantly less aggressive tax plan earlier this month that would raise taxes on investors and firms, a plan much closer to the position of the Obama administration toward the end of his second term.
Some academics said the current division on economic policy between the Democratic Party’s leading presidential candidates may be wider than that between Republican and Democratic presidential candidates in recent general elections.
Judging by their tax policies, for instance, Sanders and Biden are about 10 times further apart today than John McCain and Barack Obama were in the 2008 presidential campaign.
The last time a party faced such divergent paths may have been the 2016 GOP primary, when most Republican candidates pledged a conventional approach to fiscal conservatism — including entitlement cuts and free trade — while Trump promised to leave Medicare and Social Security untouched and criticized trade agreements.
The Democratic campaigns will continue to announce new economic policies. Biden’s campaign, for example, is working on a trade policy aimed at seeking a contrast with Trump by highlighting the former vice president’s experience working with countries worldwide, according to two people familiar with the campaign’s internal planning.
And Buttigieg aides are crafting a tax plan — he is the only candidate in the top tier without one — that would probably aim to tax the rich but not go as far as Sanders and Warren, two other people said.
These diverging approaches reflect not only differences in the value of specific policies, some experts say, but also philosophical questions about the degree to which American capitalism requires massive federal intervention.
A central part of the divide includes divergent paths over how to reform the nation’s welfare state, with Sanders and Warren pushing for universal programs such as a Medicare-for-all health-care system and tuition-free colleges and universities and Sanders also calling for eliminating all student debt.
Sanders has long pitched universal programs as generating greater political support and reducing administrative inefficiencies, while Buttigieg has critiqued the liberals’ plan for universal free college as benefiting “the children of millionaires and billionaires.” Sanders responded earlier this month by telling MSNBC: “I’m very glad that Mr. Buttigieg is worried that I have been too easy on upper-income people and the millionaires and billionaires."
The camps also split over the extent to which they target certain powerful financial interests, with Warren and Sanders calling for significantly curbing the influence of actors such as Wall Street banks; the fossil fuel industry; private health insurance companies; and the nation’s approximately 750 billionaires.
Part of the split with the moderates emerges from a belief among those on the left that the harm created by these special interests cannot be mitigated if their clout, and influence over the political system, is not significantly reduced.
“Both Warren and Sanders would make the Democratic Party a social-democratic one. It would really change the fundamental basis of the party,” said Dean Baker, a left-leaning economist who is supporting Warren and called the primary “without a doubt” the starkest policy choice in Democrats’ modern history.
“If they get the nomination, Democrats would be proposing to make us look a lot like France, or Germany, or even closer to some of the Nordic countries.”
But whereas there were vast differences between Sanders and Hillary Clinton in the 2016 Democratic primary, that campaign turned more on questions of whether the party wanted to break with its establishment. Sanders and Warren have in 2020 expanded the policy fight into additional spheres, producing sweeping plans on antitrust regulation, government production in key areas, and worker control over corporate America.
Warren, for instance, has called for breaking up Silicon Valley tech firms, including Amazon and Google, while Sanders has released a broad antitrust policy that would establish new rules for breaking up monopolies.
Warren began her campaign with a proposal that would create a government-run drug producer to bring down pharmaceutical prices. Sanders last week announced a plan to create publicly owned Internet providers and universal broadband access. Both liberals have called for giving workers some voting power over large corporations, although Sanders’s would apply to many more companies and also give them a percentage of their stock holdings.
“Public ownership ideas have suddenly become core parts of the [Democratic] economic agenda,” said Peter Gowan, an economic expert at the Democracy Collaborative, a left-leaning think tank. “We’re not just talking about the welfare state now — it’s the welfare state, plus plans to democratize the economy.”
To some of the moderates’ defenders, their approach represents a more pragmatic attempt to address some of the economy’s bigger challenges, quickly providing help to those who need it most rather than pursuing sweeping programs with little likelihood of being enacted in a divided political system.
Some also view the Sanders and Warren plans as inadvisable, either because they aim to raise taxes too steeply or would force Americans to give up their private insurance.
“It’s not just about being realistic; he just doesn’t like the idea,” said one adviser to Biden, who spoke on the condition of anonymity to discuss the campaign’s thinking, about the single-payer plan. “We don’t think you can raise $3 trillion a year in taxes. It’s absurd.”
Biden and Buttigieg have also ridiculed the math of their opponents as overly optimistic and said the middle class would be hurt by the tax increases required in their large government expansions.
But they have also dismissed the idea that they are less concerned about the social crises in American life.
“The distinction is between the economic issues on the minds of most Americans, and big transformative ideas that capture a primary voters’ attention but aren’t great general-election issues,” said Andy Slavitt, a former health administrator who served in the Obama administration.
Or as Sen. Amy Klobuchar (Minn.) put it at the last debate: “I have bold ideas … just because they’re different than Elizabeth’s doesn’t mean they’re [not] bold.”
Still, there are signs that candidates are under pressure to make adjustments. Biden told CNBC earlier this month that he would support a new financial transaction tax on Wall Street. His comments came one day after his campaign released tax proposals that rejected the idea.
“If one side wins, it’s economic disruption in advantage of the people, with the losers being billionaires and defense contractors,” said Alex Lawson, the executive director of Social Security Works, a liberal group. “And if the other side wins, it’s less clear, but it probably looks basically similar to how it looks now — but without Trump.”