Growth or Fairness: The Phony Debate

Robert Borosage

After the debilitating defeats of 2014, Democrats face a harsh winter, wandering in a bleak wilderness, trying to find the way out. Redemption will come only if Democrats use this time to rethink their course, and develop new ideas, a clearer sense of their own mission and more credible messages and messengers.

But the eternal campaign that plagues American politics allows little time for reflection and reconsideration. Already, every statement is parsed for its effect on 2016, every reform and critique weighed for its relevance to the presumptive Democratic nominee, Hillary Clinton. Even Republican contenders are measured by how they are likely to stack up against a Clinton candidacy.

What should be a rich debate rapidly is diluted to a thin gruel. The fundamental question – how do we fix this economy to make it work for working people once more? – has devolved rapidly to the political question of how do we re-engage with white working class voters. That turns to speculation on what can Hillary credibly champion that will show how she’ll be different from President Obama. The debate is no longer about the economic reforms needed to rebuild wide prosperity, but about the economic message needed to win the election. And, increasingly, that leads to the question about the discontented and the discordant, those who don’t seem to be on board, or “What does Warren want.” Rather than take this time to develop a rich new brew of big ideas – “a new foundation for growth” – as the president puts it, proverbial “Democratic strategists” offer off-the-shelf near beer, arguing about how to package the old stuff in ways that might have new appeal. “Mad Men” may be losing a step as a TV series, but its ethos still thrives in Washington.

At the center of this packaging debate is a false choice: Should Democrats champion a “fairness agenda” or an agenda for “growth and prosperity”? Will the “pragmatic center” that wants to “get things done” revive, or will the angry populist wing drive the debate? Or as William Galston puts it, what’s needed is a “nonpopulist liberalism, more interesting in diagnosing conditions than in identifying enemies.”

This theme – that the choice is between growth and fairness, between “getting things done” and “identifying enemies – is utterly disingenuous, part of an elaborate dance to mask the old failed ideas as part of a new reform era.

When it comes to making this economy work for the many and not just the few, the choice between growth and fairness is a fool’s choice. Growth is not enough. Since 2001, we’ve suffered two “recoveries” where the economy grew, but median household incomes fell. The wealthiest few captured all of the rewards of growth, while the vast majority struggled simply to stay afloat.

Yet robust growth that puts people to work and moves to a full employment economy is the most powerful way to address inequality. When jobs are plentiful and workers scarce, workers can exact a better deal out of employers. In the late 1990s, Fed Chair Alan Greenspan, infatuated with the bubble, let unemployment decline to less than 4 percent. Wages rose across the board, until the bubble burst, the stock market cratered and unemployment soared.

Finally, at our current level of Gilded Age inequality, it isn’t apparent that you can generate sustainable, robust growth without directly taking on inequality. This goes beyond the need to tax the rich and corporations to pay for the public investments vital to growth. As economist Joseph Stiglitz argues most forcefully, the extreme inequality derives from monopoly, entrenched interests, perverse policies, “market failures” that are rigged to reward the few at the expense of the many. The result not only fleeces the middle class, it saps the demand and competition vital to healthy economic growth.

Sen. Elizabeth Warren has led the exposure of these perversities. Global banks profit from gambling on exotic instruments with their losses covered by taxpayers. Multinationals ship jobs and hide profits abroad, undermining wages at home and short-changing funds needed for public investment. CEOs loot their own companies with stock buybacks, mergers and purges, while failing to make investments vital to the companies’ futures. Entrenched big oil interests use a big money lobby to cripple efforts to jumpstart competitive renewable energy sources. The list can go on.

The point is that any credible agenda for widely shared growth now has to include tough measures on inequality, on “identifying enemies,” in Galston’s term. And no fairness agenda makes much sense unless it is tied to a strategy for robust growth and full employment.

The ersatz nature of the current debate is revealed best after the “framing” or packaging, when you get a look at what is actually inside the box. Here, too often, the old ideas are offered with a new coat of paint.

In its characteristically tendentious post-election memo, Third Way – one of the gaggle of New Democrat organizations insuring Wall Street’s voice does not go unheard in Democratic circles – offers a program to make Democrats compelling on growth and opportunity.

Third Way wants to “Make it Here and Sell it There”, a reference to popular dismay with our unprecedented trade deficits. But under the new category, they offer old ideas:reform the corporate tax code so corporations don’t move jobs abroad (that should mean the end of deferral and a crackdown on tax dodges, but likely means corporate tax reform that lowers rates, shuts down loopholes, and will have no effect). Insure that the U.S. and not China sets the rules for the global marketplace. (A muscular way of supporting the current negotiations that would extend the NAFTA model to nations in the Pacific and Atlantic, undermining the rights of workers, consumers and the environment while expanding the rights of investors).

They want to champion a skills revolution, and include good reforms like universal preschool. They urge holding colleges accountable for producing results at a reasonable price. But no mention here about increased public investment to make college affordable again, or financing student loans to make them affordable, or making the investments we need to provide a world-class education to every student, no matter their race or class.

They elevate “modernizing our safety net” to the third plank, described as ways to “wring out waste” in health care and “secure” Social Security “through a commission” for the future. These are threadbare code words for cutting Social Security benefits at a time when we should be dramatically expanding this vital public pension to make up for the collapse of private pensions at the workplace.

Free trade, corporate tax relief, cutting Social Security – repackaged, new bows, new paint – but the same tired policies – tried and failed – that have helped contribute to this mess.

In reality, the growth and the fairness agenda are inextricably intertwined in an age of Gilded Age extremes and robber-baron excess.

We have obscene levels of private wealth turning to gambling for wont of viable investments. We have pressing public investment needs that are starved for funds. We should be taxing the rich and global corporations to rebuild the sinews of America – roads, bridges, mass transit, sewers and water systems, electric grids, broadband and more. These public investments will make life easier, the economy more efficient and competitive, and put people to work.

We cannot remain the consumers of last resort to the world. The massive trade and financial imbalances were central to the global economic collapse. We should move to balanced trade, putting multinationals on notice that if they plan to sell things here, they will need to produce things here. We need to put mercantilist nations like China on notice that they will no longer be able to manipulate their currency and their rules to drive export-led growth. They will need to generate more demand internally by building their middle class at home. We will seek more but balanced trade with all.

We cannot allow Wall Street to blow up Main Street. We need banking that is boring again. Federally guaranteed deposits might sensibly be limited to community banks and post offices handling the savings and checking of families and small businesses. Any bank too big to fail can’t be disciplined by the market or the laws. They should be broken up.

Workers need to share in the increased productivity and profit that they help to produce. That means some minimum worker rights – not just a higher minimum wage, but minimum benefits of paid family leave, paid sick days, enforced overtime, crackdown on wage theft, affordable health care. Workers should be empowered to organize and bargain collectively at the workplace. And perverse CEO compensation packages that give executives multimillion-dollar personal incentives to loot their own companies must end. Corporations should get a tax break when they give their workers a raise, not a tax dodge when they give their CEOs a stock option.

Climate change – already a clear and present danger – will drive a global green industrial revolution that will be a major source of innovation and jobs. We need an integrated strategy to ensure that we capture a lead in the growth markets of our time. Investment in R&D, a modernized grid, new standards to force innovation, new incentives to create markets.  We can’t allow the powerful interests of the past to block the opportunities of the future.

This isn’t neither comprehensive nor packaged prettily. It provides a sense of what a serious agenda might include if it is to actually generate growth with widely shared prosperity.

There is no path to growth without “naming enemies” and taking on the entrenched interests that stand in the way. There is no path to widely shared prosperity without generating sustainable growth.

Neither of these can be achieved, in this new Gilded Age, without taking on powerful and entrenched interests. The multinationals that dominate our global trade and tax policies. Wall Street that defends its casino. The business lobby that defends the perverse corporate compensation policies. The conservative phalanx that starves vital public investment. The big oil and King Coal lobbies that stand in the way of capturing a lead in the green industrial revolution.

The reason for this phony debate is clear. Democrats would like to think of themselves as the party that can cut a better deal between Wall Street and Main Street, the corporate executive suite and the work floor, the enlightened rich and the deserving poor. That way they can continue to fund their campaigns from the deep pockets while seeking their votes from working people.

But now the rules have been rigged systematically to favor the few. We are suffering a second recovery in which all the rewards of growth will be captured by the top 10 percent, and mostly by the top 1 percent. No fair deal is possible until we confront those who are stacking the deck. Want a growing economy in which the rewards are widely shared? You have no choice but to take on those who are standing in the way.

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