Democratic Economic Policy

I think that Ryan Cooper is confusing the parties’ press releases with their policies. In his recent post at The Week he characterizes Republican policies:

One consistent theme of American politics over the last generation has been the increasingly strong ideological discipline of the Republican Party. What that has meant in policy terms is fairly clear: tax cuts for the rich, cuts to social insurance programs, deregulation, free trade, union-busting, and a belligerent foreign policy.

and then Democratic policies:

Certainly before 2008, one couldn’t say they had a starkly different set of policy ideas. Up through about the early 1970s, it had been a fairly straightforward working-class party, but after a generation of reform, under Bill Clinton it stood for a muddle of capitalism worship leavened with means-tested welfare programs. At bottom, it was a left-inflected version of the same neoliberalism that comprises Republican Party doctrine.

Let’s look solely at economic policy—Democrats and Republican share the same “belligerent foreign policy” and I’ll leave the comparison of the social policies of the two parties to others.

Republican economic policy is cuts in the personal and corporate income tax full stop. Look at what they do not what they say. Whenever they have control of both house of the Congress and the White House they cut personal and corporate income tax rates. They don’t cut spending, they don’t pare back “social insurance programs”, they don’t expand free trade, and they don’t break up unions. They also do not cut back on the size of government. “Party of small government” is just boilerplate for the rubes.

As to the Democrats they are not now and never have been the party of Keynesian economics. Consider this remark of Mr. Cooper’s:

The economic stimulus of 2009 — passed in a panic after Obama was inaugurated — prevented a full-blown depression, but did not restore full employment.

As 2010 progressed, it became increasingly obvious that the stimulus had been a severe undershoot. But Democrats did not pass another. The reason was ideological. The Keynesian idea that the government should spend until full employment was reached — as it did during the New Deal and the Second World War, thus fixing the Great Depression — took tentative hold in 2009, but soon afterwards the forces of neoliberalism regrouped and began loudly flipping out about deficits. Most Democrats had a vague at best understanding of the logic of stimulus, and quickly gave in.

By February 2010, Obama was “pivoting” to deficit reduction and austerity — and most of the party went along with him. It was a monumental political mistake: It meant unemployment was still nearly at 10 percent on election day in 2010, and hence absolutely crushing defeat — the loss of 63 House seats and control of the chamber, six Senate seats, and 680 state legislative seats.

First, the notion that Obama saved the country from a “full-blown depression” is arrant nonsense. Before a penny of the money that had been appropriated by the American Recovery and Reinvestment Act had been spent the recovery had already begun (the recession ended in the second quarter of 2009). Is it possible that there might have been a second, deeper dip without it? Sure. Without empirical evidence that’s just post hoc propter hoc. Tiger repellent.
There’s as much empirical evidence that the ARRA prolonged the recession as prevented it from getting deeper.

But there’s a reason that the Democratic leadership leapt on the opportunity that the recession presented, why they insisted on spending too small to offset the dip in private consumption, why they spent money as they did, and why they spread it out over several years rather than concentrating the entirety of the spending where it would do the most good. The leadership didn’t believe in that Keynesian mumbo jumbo but they did believe in pork barrel spending. After a long drought they wanted to give money to favored causes, shore up favored constituencies, reward donors and bundlers, and time everything to maximize political control. And that’s what they did. In that process they were aided by useful idiots like the Panglossian Lawrence Summers, always ready to lend his intellectual authority to what the political leadership had decided on anyway.

Just for the record I do believe in that Keynesian mumbo jumbo. I believe that carefully-crafted, well-timed stimulus can restore full employment under conditions of a shortfall in aggregate demand. I just don’t believe that the Congress is capable of producing a carefully-crafted, well-timed stimulus.

There was precisely one way to implement such a stimulus that wasn’t hopelessly regressive and that was by a full-blown payroll tax holiday but that wouldn’t provide the sine qua non of stimulus packages acceptable to the Democratic leadership: political control.

There’s a word that I use occasionally here that I’ve realized you may not understand, “nomenklatura”. In the Soviet Union the nomenklatura referred to the party officials who held key administrative posts in the government and, basically, ran the country. The golden thread that runs through domestic policies favored by today’s Democratic Party is that they maximize political control, i.e. the power of the nomenklatura. That was true of the ARRA; it is true of the Affordable Care Act.

I’m indifferent to whether we need a more Keynesian Democratic Party. I don’t think they can ever time or construct a stimulus package in such a way as to effect its goals. I do think that we need a more populist Democratic Party.