The Democratic Party’s “Centrist” Leaders Remain Clueless

By William K. Black

Cross-posted at New Economic Perspectives.

On December 10, 2016, a New York Times article entitled “Democrats Have a New Message: It’s the Economy First” that unintentionally revealed that the Party’s “centrist” leadership and the paper remain clueless about how to improve the economy and why the “centrist” leadership needs to end its long war against the working class.  This is how the paper explained the five “centrist” leaders’ framing of the problem.

It was a blunt, plain-spoken set of senators who gathered last Monday at the Washington home of Senator Heidi Heitkamp, Democrat of North Dakota, dining on Chinese food as they vented frustration about the missteps of the Democratic Party.

To this decidedly centrist group, the 2016 election was nothing short of a fiasco: final proof that its national party had grown indifferent to the rural, more conservative areas represented by Democrats like Joe Manchin of West Virginia, Claire McCaskill of Missouri, Joe Donnelly of Indiana and Jon Tester of Montana, who attended the dinner. All face difficult re-election races in 2018.

This non-centrist group was a gathering of five New Democrats.  President Obama self-identified himself as a New Democrat.  The Clintons and Al Gore are leaders of the New Democrats.  The leadership of the Democratic National Committee was, and remains, New Democrats.  On economic issues such as austerity, jobs, and full employment, the New Democrats are far more extreme than the (stated) views of Donald Trump.  The New Democrats are infamous for their close ties with Wall Street.  This means that the paper’s description of the Chinese nosh is as clueless as the five New Democrats kvetching about policy “missteps” that they championed for decades.  Of course, neither the paper nor the non-centrists mentioned that critical fact.  The blindness of the non-centrists to the fact that it is their policies that launched the long war by the New Democrats against the working class is matched by the blindness of the paper.

The kvetching may have been “blunt,” but it was also dishonest.  The five New Democrats know that they will likely be replaced in the 2018 elections by Republicans who share the New Democrats’ anti-working class dogmas.  What was really going on was an extended cry of pain about the five senators’ fear of losing their jobs.

Note that the paper never tells you what the five New Democrats so bluntly identified as the New Democrats’ “missteps” or what new policies they believed needed to be adopted by the Party.   This failure is particularly bizarre because the paper says that its reportage is based on sources that the paper agreed to keep anonymous so that they could speak frankly about this meeting over Chinese food.  That combination of supposed frankness from the sources gained by the grant of anonymity so them could describe in detail the purported bluntness by the gang of five should have produced some epic, specific condemnations of the Democratic Party’s leadership by the New Democrats.  Instead, it produced mush.  Focusing on the “economy” is the right general idea for any political party, but it is so general a word that it is close to meaningless without identifying the specific policy changes that the five New Democrats now support and oppose.  The mushy reportage provides a thin gruel to the reader.

Most of all, they lamented, Democrats had simply failed to offer a clarion message about the economy with appeal to all 50 states.

“Why did the working people, who have always been our base, turn away?” Mr. Manchin said in an interview, recounting the tenor of the dinner conversation.

And the “clarion message about the economy” that they proposed that the Democratic Party make was?  You would have thought that little detail would (a) be critical to the article and (b) would be something that the five New Democrats would have been eager to publicize without any need for anonymity.  Conversely, if even after the disastrous election, from their perspective, the five New Democrats could not compose that “clarion” call, then the real problem is that the New Democrats’ economic dogmas prevent them from supporting such a “clarion” pro-worker policy.

The second sentence of the quotation is equally embarrassing to the New Democrats.  It purportedly recounts “the tenor of the dinner conversation.”  The first obvious question is – how did each of these five New Democrats answer that that question?  That is what the readers would want to know.  Even with the grants of anonymity to multiple sources the paper inexplicably presents only the vaguest hints as to the five senators’ explanation for why the New Democrats waged their long war on the working class.

Notice also the unintentional humor of the five New Democrats finally asking themselves this existential question in 2016 – after the election.  The New Democrats began their long war on the working class over 30 years ago.  Tom Frank published his famous (initial) book warning that the New Democrats’ war on the working class would prove disastrous in 2004.  The five New Democrats are shocked, shocked that the working class, after 30 years of being abused by the New Democrats’ anti-worker policies and after being vilified for decades by the New Democrats, overwhelmingly voted against the Nation’s most prominent New Democrat, Hillary Clinton.  None of the five New Democrats appears to have a clue, even after the 2016 election, why this happened.

The article and the five New Democrats fail to discuss the anti-working class policies that they have championed for decades.  Job security is the paramount issue that drives voting by many members of the working class.  The New Democrats and the Old Republicans share a devotion to the two greatest threats to working class job security – austerity and the faux free trade deals.  This makes it ironic that the paper sought out the Party faction leaders who have been so wrong for so long as supposedly being the unique source of providing the right answers now.  If the five New Democrats had engaged in introspection and were prepared to discuss their disastrous, repeated policy failures that would have been valuable, but the New Democrats admit to making zero errors in the article.

The paper’s understanding of economics and jobs is so poor that it wrote this clunker.

But even liberals believe Democrats must work harder to compete for voters who lean to the right, if only to shave a few points off the Republican Party’s margin of victory in rural America. In some cases, they said, that may mean embracing candidates who hold wildly different views from the national party on certain core priorities.

First, the phrase and the implicit logic in the use of the phrase “even liberals” reverses reality.  It is progressives who have consistently called for the Democratic Party to return to its role as a party that champions working people.

Second, the issue is generally not who “leans to the right.”  Indeed, the 2016 election should have made clear to the paper the severe limits on the usefulness of the terms “right” and “left” in explaining U.S. elections.  Jobs are not a right v. left issue.

Third, the paramount policy priority – jobs – is the same regardless of whether one focuses on economic or political desirability.  So, how long does it take for the article, and the five New Democrats to discuss “jobs?”  Given the fact that they vented at length about the fear that they would begin to lose their jobs within two years, the subject of job security should have been paramount to the five New Democrats.  The article, however, never even mentioned jobs or any of the related critical concepts – austerity, the faux trade deals, or the refusal to provide full employment.  Further, the article did not comment on the failure of the New Democrats to even mention these any of these four concepts.

“A Clarion Message about the Economy with Appeal to all 50 States”

Here is UMKC’s economics department’s long-standing proposal to every American political party:

Our party stands for full employment at all times.  We will make the federal government the guaranteed employer of last resort for every American able and wanting to work.  We recognize that the United States has a sovereign currency and can always afford to ensure full employment.  We recognize that austerity typically constitutes economic malpractice and is never a valid excuse for rejecting full employment.  The myth that we help our grandchildren by consigning their grandparents and parents to unemployment is obscene.  The opposite is true.

The working class wants jobs and job security – not simply income.  Working class people overwhelmingly want to work.  Working class males who are unable to find secure, full time work often become depressed and unmarriageable.  If you want to encourage marriage and improve the quality of marriages, full employment and job security are vital policies.  There are collateral advantages to providing full employment.  Full employment can reduce greatly the “zero sum” fears about employment that can tear a society apart.  Each of these outcomes is overwhelmingly supported by Americans.

Good economics is not a “right” v. “left” issue.  Austerity is terrible economics.  The fact that we have a sovereign currency is indisputable and there is broad agreement among finance professionals that such a currency means that the federal government budget is nothing like a household.  The major party that first adopts the federal full employment guarantee will secure a critical political advantage over its rivals.  Sometimes, good economics is good politics.

Jobs, Jobs, Jobs — Not Austerity

By William K. Black

Cross-posted at New Economic Perspectives.

Bob Rubin and Alan Greenspan convinced the New Democrats, over a quarter-century ago, that the key to economic growth was to out-Republican the Republican Party in the fervency of their embrace of austerity.  This began the long war of the New Democrats against the working class that culminated in the loss of their candidate, Hillary Clinton, to Donald Trump.  Rubin’s and Greenspan’s support for austerity constitutes economic and political malpractice.  Austerity is the enemy of the general economy and the people of the world, but it targets for its greatest harm the working class.  As I have explained in earlier columns, Hillary was so devoted to austerity that she made it her major new policy theme in the closing weeks of her campaign – even as every poll warned her that she had enraged the white working class, a principal victim of austerity.

The stranglehold that Rubin and Greenspan’s anti-worker dogmas continue to exert over the Democratic Party’s faux centrists’ policies even after Trump’s election is illustrated by a December 5, 2016 New York Times editorialentitled “How to Help Working People” and Larry Summers’ December 4, 2016 op ed entitled “Trump’s tax plans favour the rich and will hamper economic growth: The proposals would threaten to increase federal debt and interest rates.”  Summers is Rubin’s protégé.

Any plan by Democrats to “Help Working People” should begin with the word “jobs.”  But the creation of “jobs” funded by the federal government in its critical role of employer of last resort is not even an option when policy is in the grips of austerity fever.  New Democrats take the bizarre policy position that it is too expensive to pay people who want to work to do useful work, but fine to pay them extended unemployment insurance because there are not enough private sector jobs to employ them full-time.

The NYT editorial is so mixed up that it never mentions either the primary problem – the devotion to self-destructive austerity of New Democrats and Old Republicans – and never mentions the essential policy that would transform our economy and win the devotion of the working class to whatever party puts the policy in place.  That policy is a dedication to permanent full employment by making the federal government the employer of last resort for any American who wants to and is able to work.  Instead, the editorial focuses on a number of desirable policies to help workers who are already fully employed.  Yes, most Americans who wish to work are employed and we should implement policies that help fully employed working class Americans.  But tens of millions of Americans are classified as “underutilized” by the Bureau of Labor Statistics.  Many were so discouraged by the job markets that they dropped out of the work force.  Worse, Americans in general and the working class in particular no longer believe that they have any meaningful job security – that our jobs could disappear without warning within months.  The federal employer of last resort would transform the workplace by restoring job security.

The editorial’s sole emphasis is on increasing the income of fully employed workers.  That is a worthy goal that should be pursued in parallel with the paramount goal – jobs and providing the security to all Americans of always being able to find a job if they are willing and able to work.  More income for the already fully-employed working class is great, but Americans want to work and working class males are the most vulnerable psychologically to being unable to hold a full-time job or the constant fear introduced by the destruction of job security.  When working class males are unable to hold down a steady job the results are horrible for family formation and family success.

Austerity’s Choice

Millions of Democrats are salivating at the prospects of being able (again) to chortle at the hypocrisy of Republicans when it comes to austerity.  Yes, Republicans always say they love austerity, but when they are in power in modern times they always rise above their pro-austerity dogma and adopt at least some stimulus.  Democrats are eager to attack the hypocrisy and Congressional Democrats are gleefully planning to trap Trump in a welter of demands for “revenue neutral” taxes (code for austerity) and “pay fors” (another code for austerity).  The New Democrats are so eager to attack Trump’s “mountains of debt” that they are about to launch a new offensive against the working class in the New Democrats’ long war against the working class via economically and politically illiterate austerity.

And how will the Republicans respond?  Enough will bend to Trump that they will likely do a major infrastructure program.  Then the Republicans will confront the New Democrats with their own odes to austerity and “pay fors” and demand that the New Democrats make an analog to Sophie’s choice.  Austerity demands budget cuts in other fields, so the Republicans will tell the New Democrats to choose which social program they are most desperate to preserve – and consign the other programs to death via austerity.  In sum, the New Democrats are about to replay the same disastrous economic and political mistakes that have caused so much harm to Americans, particularly the working class, and gifted the presidency to Trump.

Please read Randy Wray’s primer or his newest book.  A government with a sovereign currency such as the United States is not “just like” a household or a corporation or the State of Vermont.  A budget surplus or deficit for the U.S. federal government is not a moral issue.  A budget “surplus” or “deficit” is not an intrinsically good or a bad thing – it depends on the economic conditions of the real economy.  For the U.S., with its unique role as the international currency and large trade deficits, federal budget deficits are typically desirable – and typically occur under both Democrats and Republicans.  We do not “burden” our “grandchildren” when we run federal budget deficit in typical circumstances or in response to a Great Recession.  We greatly aid our children and grandchildren by rejecting austerity in such circumstances.  We would help them far more if we provided a federal job guarantee of last resort.

Summers’ Shout Out for Austerity

Summers’ subtitle warns that Trump’s tax proposals “would threaten to increase federal debt and interest rates.”  In other words, Summers is banging the war drums to renew the New Democrats’ long austerity war against the working class.  There are two parts to Summers argument.  First, Trump’s proposed tax cuts are crafted to help the wealthiest Americans.  Second, the tax cuts would increase the budget deficit.  Summers’ first argument is mostly fine, indeed, it is understated.  (He makes the false claim that President Reagan’s tax cuts did not favor the wealthy and represented a “bipartisan” “reform.”)  Trump’s plan is to betray the 99% and rig the system to lock in the power and wealth of the one percent (indeed, the top .0001).  Trump remains, as he has been for decades, a crony capitalist.

Summers’ second argument is “Austerity Forever.”  He leads with another code phrase for austerity, implying that the proper standard for any tax changes is that they be “revenue-neutral reforms.”  That means no net tax cuts.  Why?  What we know, as even Summers agreed, was that President Obama (who told New Democrats that he was a New Democrat) proposed a stimulus program that he knew (because Summers told him) was far too small and then turned his back on stimulus and then in early 2010 in the State of the Union abandoned stimulus and proposed austerity (the code, provided by the Rubinite Jack Lew, was that the federal government should “pull in its belt” in response to the Great Recession because households were doing so).

The 2009 stimulus, though deeply inadequate, materially increased U.S. growth.  The self-destructive switch by January 2010 to supporting austerity greatly extended the recovery time from the Great Recession and weakened job market reovery.  The U.S. economy could benefit greatly from stimulus even now, so why should Democrats be insisting that they will fight any net tax cut?  Summers’ answer, as always, is the need for austerity.  He stresses that Trump’s (net) tax cuts would violate austerity.

It would also mean grave damage to federal budget projections. The envisioned Trump tax cut is about the same size relative to the economy as the 1981 Reagan tax cut. It is worth remembering that Reagan, hardly a fan of reversing course or raising taxes, found it necessary to propose significant tax increases in 1982 and 1984 (the equivalent in today’s economy of $3.5tn over a decade) due to concerns about federal debt.

So, we now have the New Democrats’ lead economist, Summers, telling us we should be in panic mode because Reagan had such a dogmatic belief in austerity that he raised taxes (though, net, Reagan actually cut taxes).  Summers is seriously proposing that the Democrats should take their policy advice on austerity from Reagan!  He claims that Democrats, in response to the revolt of the white working class, should embrace austerity and renew the New Democrats’ long war against the white working class even though he knows that is terrible economics and politics.  Reagan knew next to nothing about macroeconomics.  Let me be explicit – both the Old Republicans like Reagan and the New Democrats shared this embrace of austerity’s long war against the working class.  Reagan’s embrace of austerity was a key contributor to the stagnation of working class wages and the rise of the plutocrats.  This is how out of touch the New Democrats are with the American people – Summers’ sees Reagan as the role model that Democrats should emulate.

Summers goes so far as to claim that stimulus would slow growth.

Today’s budget situation is much more worrisome. The baseline involves much higher levels of debt and deficits. Then the economy was suffering from a deep recession; now it approaches full employment. If extreme tax cuts are legislated in the next months, uncertainty about the federal budget and about further tax adjustments is likely to rise. Finally, I can find no basis in either economic history or logic for Mr Mnuchin’s claim that the proposed reforms would increase the economy’s growth rate from its current 2 per cent rate to the historical 3 to 4 per cent norm. Adult population growth has slowed by nearly a percentage point, the gains generated by more women entering the workforce have been exhausted, and it is far from clear why tax reform will hugely spur productivity growth.

Indeed, because the Trump proposal would redistribute after-tax income towards those most likely to save it, push up long-term interest rates because of debt pressures, increase uncertainty and the advantages of overseas production, it is as likely to retard growth as to accelerate it.

Summers’ second paragraph has some important truth.  As with the second President Bush’s tax cuts, Trump’s proposed cuts go so heavily to the plutocrats that they will have less stimulus effect because so much of the cuts will be saved rather than spent.  The reduces the stimulus of the proposed tax cuts, it does not eliminate it.

The first paragraph is mostly an opportunity for Summers’ to renew his “secular stagnation” claims that suggest that the U.S., and much of the global economy, will suffer from weak growth under austerity for many decades.  If Summers is correct, then stimulus is particularly vital now.  But Summers’ primary cause is austerity, so he claims that we should accept weak growth and higher unemployment.  If Summers were correct about secular stagnation, however, the imperative policy response would be to end the New Democrats and the Old Republicans’ long war of austerity against the working class and ensure that the federal government provided a guarantee that it would serve as the employer of last resort.  Summers, of course, claims that our current condition closely approaches “full employment” and we need not worry about the millions of Americans who have dropped out of the labor force or are unemployed or underemployed.  At the insipid growth rates he believes will become the norm under austerity, the unemployment rates would grow substantially.