To state the obvious, the policy agenda of the Democratic Party has moved to the left. Ideas that used to be on the fringe — Medicare-for-all, guaranteed jobs and the Green New Deal, all financed by very progressive taxation — are now much more widely accepted by Democrats.
Two possible theories explain this evolution: the old one from the center-left and the new one from the “leftier” left. The center left was/is essentially friendly, and largely deferential, to markets. Left to their own devices, financial markets will efficiently allocate excess savings to their most productive uses — so over-regulation is dangerous. Same with globalization. Taxes should be progressive, but not too much so or you’ll dampen private investment. Public borrowing crowds out private borrowing, so deficit reduction is an oft-stated goal.
That sounds pretty Republican (or it did before Republicans went nuts). But there are two salient differences. One is that under center-left Democrats, you let the market rip, but you shave some gains off the top and redistribute them to those left behind, say through a robust Earned Income Tax Credit, the highly successful pro-work, anti-poverty wage subsidy that was expanded under President Bill Clinton. The second is that, in rare cases, it is kosher to tweak incentives to achieve a policy goal. A carbon tax to push back on climate change is a good example. Better yet, a cap-and-trade approach, in which the government sets up a market — there’s that word again — wherein firms can trade pollution credits.
The guiding principle is that the center-left policymaker has the technocratic skills to administer exactly the right tweaks and redistributions to ensure that markets continue to deliver optimal results.
Though this position still describes some Democrats, it is no longer the dominant view, as economist Brad DeLong recently showed in a Vox interview. DeLong, who calls himself a “Rubin Democrat” (a reference to Clinton’s centrist treasury secretary, Bob Rubin), argues that the moment is such that “The baton rightly passes to our colleagues on our left. We are still here, but it is not our time to lead.” “DeLong believes,” according to the piece, that “the time of people like him running the Democratic Party has passed.”
What changed to usher in this twilight of the technocrats? The limits of “unfettered” markets and under-regulated finance, and the risks of letting them rip, have become undeniably clear. Even before the finance-infused housing bubble delivered the Great Recession, market-driven inequalities soared to levels we hadn’t seen since the 1920s.
Then there’s the fact that markets weren’t really “unfettered” (ergo, the scare quotes). Though their center-left proponents argued otherwise, trade deals were not for “free” trade. They were stacked to protect investors over workers and consumers (as Sen. Elizabeth Warren (D-Mass.) argued regarding the Trans-Pacific Partnership). Center-left policymakers didn’t just leave financial markets alone; they actively deregulated them (see the repeal of Glass-Steagall banking regulations supported by Clinton in 1999). And when the labor unions came knocking for political support, the center-left too often wouldn’t open the door (see the lack of support among moderate Democrats for the Employee Free Choice Act).
Next, center-left policies appeared insufficient to meet the challenges Democrats increasingly cared about, such as growing inequality, inaccessible health care, the cost of college, climate change, retirement insecurity and institutionalized racism. DeLong argues, with merit, that many of the center-left policies never got a chance because they depended on “a responsible center-right partner to succeed,” and such support was never even close to forthcoming.
But as with the trade deals, the problem wasn’t just political. Where center-left Democrats touted the need for “tough choices” on Social Security and Medicare (by which they meant, in part, cuts to benefits), the left wing of the party wanted to expand the programs, as is seen in today’s prioritization of Social Security expansion and Medicare-for-all.
For all these reasons, this twilight of technocrats makes sense to me. But it raises the question: What’s up in the morning? If the old left’s theory has been proved wrong, what is its replacement?
The Democratic left’s new theory of the case is still forming, but it looks something like this: Both parties have stood by while markets were rigged, and therefore, they — both markets and the old parties — cannot be counted on to solve the challenges listed above. We must de-rig them through antitrust action, robust labor standards, union power (as a counterbalance to capital’s power) and trade deals that are handshakes between workers across borders, not investors. At the same time, we can very progressively tax accumulated wealth and use the proceeds to both provide opportunities for those who have been left behind and fight existential market failures — most importantly, climate change.
What does the cast-aside technocrat have to say about that? The knee-jerk response is that such intervention into the market pushes too far and will kill the goose that lays the golden eggs. But this response is unconvincing. Social democracies have long existed (e.g., Scandinavian countries) that go much further to protect their citizens and their environment, spending 10 percentage points more of their GDP through the public sector ($2.1 trillion a year, in our economy) than we do without paying a productivity price for it. Obviously, universal health coverage is achievable, as it exists in every other advanced economy, at a cost of 6 to 8 percent of GDP less than we spend.
The fact is, while opponents scream about the massive negative market responses to the progressive agenda — People will stop working! Investors will stop investing! Doctors won’t take patients! — we don’t know either what the actual agenda will look like, if it will ever get legislated, or, if it does, what its impact will be on the zillions of moving parts in our economy.
All we know is that in some fundamentally important ways, what we’ve been doing hasn’t worked. DeLong’s right. It’s time to pass the baton.