President Trump is floundering around disastrously on multiple fronts, including on his signature issue of immigration, but let’s face the facts: He still retains a potential advantage on the economy.
A progressive think tank is set to release a major new report — which was provided exclusively to this blog — that offers an economic approach that progressives and Democrats can use as a foundation for such an answer to Trump.
The report, by the Roosevelt Institute, represents an ambitious effort to pull together much of the current intellectual ferment among progressive economists into one big coherent diagnosis of what has happened to the economy, and what can be done about it.
In Democratic politics there’s been a major rethinking about economic fundamentals that is now culminating in the jockeying among the Democratic presidential candidates. Sen. Elizabeth Warren (Mass.) has rolled out policies to tax extreme wealth, reconfigure corporate power and weaken big money’s grip on politics.
The party has gravitated toward much of Sen. Bernie Sanders’s (I-Vt.) social democratic agenda. Many of the candidates, including the more moderate ones, are embracing varieties of aggressive antitrust to combat corporate concentration.
In some ways, all this energy resembles the progressive rethinking of fundamentals about political economy — about markets and economic power and liberty — that took place amid the rise of industrialization and through the turn of the 20th century, culminating in the New Deal.
Many progressives hope the current rethinking of our political economy proves similarly transformative. The Roosevelt report aspires to put that into one blueprint.
‘Our economy rewards those who have power’
At the core of this blueprint is a fundamental idea: “Our economy rewards those who have power.” Wages and the pretax distribution of income — as well as the distribution of wealth — largely reflect the real-world distribution of market and bargaining power. Those, in turn, are determined by market structures and rules.
In short, the report argues, in our economy, the distribution of income and wealth, more than being a reflection of individual merit, initiative and hard work that is rewarded in some fair manner by free markets, is inevitably a social product — one that has in reality been shaped by those with political power.
That shaping is ideally done in part by robust public power — the ability to spend to extend societal goods to everybody, to combat market failure, to check concentrated private economic power and so on. But in recent years, public power has been shouldered aside via capture of the market rules by corporations and the wealthy. This has created a vicious circle in which public power continually erodes, and markets are increasingly structured via rent-seeking and other market manipulation to channel income and wealth upward.
This is of course not a new idea — it is a familiar critique of the “neoliberal” turn, with its faith in the ability of markets to operate fairly and effectively with little to no interference from government. But as the report notes, that idea continues to be a “counterintuitive” one, and the report’s core premise is that recognition of this deep reality is the first crucial step toward undoing it.
Thus, the report traces many of our current ills — the explosion of inequality; the top 1 percent’s capture of most of the recovery’s gains; the stagnating of mobility and wages; the withering of the public sector — back to this diagnosis.
Trump and the ‘rigged economy’
Trump campaigned against the “rigged economy,” vowing to “drain the swamp” of elite corruption and take on plutocrats who structure the economic rules and tax code to enrich themselves. But as president, he has starved various oversight functions in their favor, and his massive corporate tax cuts did not shift corporate behavior to the benefit of workers, instead exploding corporate income and showering buybacks on shareholders.
What Trump has done is very much in keeping with GOP economic orthodoxy, and it’s often described as “getting government out of the way” through deregulation and lower taxes. But, crucially, the Roosevelt vision maintains this is a misnomer: All of that actually constituted an active further rigging of the economy in favor of wealthy and corporate interests.
The answer to this — enshrined in the Roosevelt blueprint, and increasingly voiced by Democrats — is a progressive rewiring of our political economy. This requires two separate steps: rewriting market rules so they are no longer skewed to concentrate wealth, income and economic and political power upward; and reinvigorating government power and spending on behalf of the public good.
Thus, Roosevelt proposes higher taxes on the wealthy and corporations — not just for revenue purposes but also to discourage “extractive” executive hoarding of corporate profits to the detriment of workers. Taxing investment income can discourage “short-termism” and encourage more societally productive long-term investment. Corporate governance and labor-law reform can boost worker bargaining power.
And in Roosevelt’s telling, government intervention in the economy can promote real liberty. Antitrust policies can combat corporate concentration that skews market power against workers. The expanded provision of fundamental social goods (such as health care and education) can loosen the grip of private markets over those goods and, thus, over people’s prospects and lives.
The Democratic economic answer to Trump
In a new memo, Democratic pollster Celinda Lake outlines a paradox: Democrats have major advantages on individual issues such as health care and education, but Trump still retains it on the overall economy. The challenge is to integrate those issue advantages into a broader economic vision that overtakes Trump’s generalized economic approval and gets voters to opt for a fundamentally new course.
Obviously, the Democratic candidates fiercely disagree over many specifics, such as how far to go toward single-payer health care and in taking on concentrated economic power. But the principles articulated by Roosevelt at least provide a framework within which to carry out those arguments — and to make that broader economic argument against Trump.
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