The Economic Debate and the Failed Consensus

Robert Borosage

This week, a policy debate threatened to break out in the presidential campaign. Amid the insults (“crooked Hillary,” “unfit Trump”), purblind lunacy and rolling scandals, invented and real, the two presidential candidates traveled to Michigan to lay out contrasting plans for the economy.

The moment was quickly lost in the din over Republican candidate Donald Trump’s latest idiocy (“Barack Hussein Obama is the founder of ISIS). But the two speeches (Hillary Clinton here; Donald Trump here) did give an indication of how the establishment economic consensus is beginning to crack, and where the two candidates truly divide.

Taking On the Rigged Global Economy

Most of the commentary focused on the traditional contrast between the candidates: Trump embracing Republican gospel of tax cuts for the rich and corporations; Clinton for raising taxes on the rich and lifting the floor under workers. But what is more interesting is how the two candidates are moving to challenge the old, failed, bipartisan “Washington consensus.”

Both candidates now trumpet their opposition to the bipartisan trade policies of the last decades. Trump’s assault on our “lousy trade deals” is the centerpiece of his appeal to working people. He promises to renegotiate NAFTA or tear it up, to crack down on China’s currency manipulation and mercantilist policies, and, of course, to oppose the Trans-Pacific Partnership trade deal that President Obama continues to promote. Trump’s alternative, naturally, is that he’ll negotiate better deals – whether these are better deals for global corporations or for workers is less than clear. He indicts Clinton for championing the old deals in office, while criticizing them on the campaign trail.

Under pressure from Sanders in the primary and Trump in the general, Clinton restated her opposition to the TPP deal that she had championed while secretary of state: “I oppose it now. I’ll oppose it after the election, and I’ll oppose it as president.”

She called for a new trade policy, beginning with a special trade prosecutor to crack down on trade violations, and promising to levy penalties on companies that move their headquarters abroad. Carefully attuned to polling data, Clinton touts the benefits of trade, innovation, and investment in education and training so Americans can compete. She has yet to detail what her alternative strategy would be.

But both candidates for president now stand in opposition to the establishment consensus. The editors of The Wall Street Journal and The Washington Post, fretting about the rising tide of “protectionism,” rebuked Trump and Clinton respectively. The old “Washington consensus” is beginning to crack.

Public Investment Over Austerity

Both candidates now support large-scale public investment as a source of jobs, economic growth and increased productivity.

Clinton promises to pass the “biggest investment in new, good-paying jobs since World War II,” calling for spending $275 billion over five years to rebuild our infrastructure plus an “infrastructure bank” that can mobilize private capital into public works investment. Trump says that her program is too small and he’d double it.

Both break from the austerity budgets of the last years that bear much of the blame for the slow recovery.

Tax and Spend vs. Tax Cut and Spend

Trump, the self-proclaimed “king of debt,” isn’t worried about increasing deficits and debt. He calls for massive tax breaks along with public investment in infrastructure and the military. He argues that these imperatives are more important than deficits, and that the resulting growth will pay for them in the long run.

Rather than reinforce this break from austerity, Clinton promises to pay for all of her investments by raising taxes on the rich and the corporations. She dons this straight jacket to counter fears of big-spending Democrats.

Ironically, mainstream economists – at the International Monetary Fund, the Federal Reserve, former Treasury Secretary Larry Summers, Clinton partisan Paul Krugman and others – increasingly are sounding the call for more deficit spending by the U.S., particularly with interest rates near zero and the dollar so strong. As Summers argues, the U.S. can make utterly imperative investments – in everything from basic infrastructure to renewable energy – with loans that are virtually free. The resulting jobs and increased efficiency and productivity will surely pay back more than the debts incurred.

The difference in the two candidates exposes a stark contrast in confidence. Republicans confidently call for massive tax cuts (and in Trump’s case large-scale public investments), arguing growth will cover the resulting deficits. This is despite that fact that this “supply-side” myth failed miserably under Reagan and Bush II. Democrats are too fearful to call for public spending without paying for it (other than in the very depths of an economic collapse). Yet there is every reason to believe that the resulting growth would in fact cover the cost.

Trickle-Down or Bottom-Up

Not surprisingly, the two candidates offer starkly opposing visions of how to move the economy. Trump embraces the traditional Republican trickle-down economics: tax cuts for the rich and corporations and deregulation. He simply ignores the reality that the rich and corporations have more money than they know what to do with. Corporations are using profits in stock buybacks and mergers rather than making productive investments. And of course, deregulation of Wall Street is what caused the Great Recession that we are still struggling to recover from.

Clinton sharpens the contrast. She would lift the floor under workers – raise the minimum wage, offer paid family leave, push for paid vacations, equal pay for women, expanded child care benefits. She’d expand Social Security and make college tuition free for all but the very affluent. She calls for empowering workers, arguing correctly that “strengthening unions doesn’t just serve members – it leads to better pay, and benefits, and working conditions for all employees.”

While she did not repeat the Democratic Party platform’s pledges on breaking up the banks, she continues to defend regulating Wall Street as imperative to the economy. She would offer tax credits for working and poor families, while raising taxes on the wealthy. She’d provide tax incentives to move investment to impoverished areas, while removing them from companies that move jobs abroad.

Poverty Ignored; Climate Obscured

Poor people don’t vote. And, of course, they don’t make campaign contributions. And although poverty is deepening, it is, as The New York Times noted, virtually absent from the speeches of the two candidates. Those in the middle class and those falling out of it are the centerpiece of the campaign. Clinton offers help for those with jobs: the minimum wage, equal pay, child care credits, etc. But with the middle class struggling, the poor are starved for attention as well as for food.

Similarly, catastrophic climate change ought to be the center of this debate. But Trump dismisses it as a hoax and doesn’t bother to mention it. Clinton addresses it as a subset of her public investment agenda. At least she understands that the transition to a sustainable economy will be a massive source of jobs, innovation and investment. But with polls showing Americans do not consider climate change an urgent issue, this fundamental challenge will continue to be slighted.

The Failed Consensus

Americans deserve a debate worthy of the challenges facing this country. On the economy (as well as on national security) the old consensus has failed. Our politics are dysfunctional. The economy does not work for working people. The middle class is sinking. Inequality has reached obscene extremes, while poverty has deepened. This is the second “recovery” in a row in which household income hasn’t recovered what was lost in the recession.

Donald Trump clearly can’t carry a policy debate. He will continue to campaign on insults, not ideas. The Clinton campaign, to date, has chosen to focus on Trump’s temperament and the fact that he is utterly unfit to be president. That reality can win her the election.

But to have a successful presidency, not simply a successful campaign, Clinton needs a mandate. She needs to lay out a big vision, a bold agenda, and rally Americans to it. She has to take the risk of telling us what she will fight for. The Democratic Party platform offers a bold statement; her speech in Michigan an opening argument. But she still needs to rouse Americans to join together to change the direction of this country.

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