In an earlier post, I wrote that the upcoming presidential election is about choosing between two political ideologies rather than between two candidates. Following the two conventions, it should be clear that the forthcoming elections are also about choosing between competing economic ideologies. An ideology is a system of ideals and ideas—of values and policies.
The Republican ideology remains that of Reaganomics: tax cuts to restrict the size and scope of government and deregulation to promote unrestricted free market activity. Except for taxing and spending on politically popular social programs, the Democratic ideologies of Clinton and Obama have been little different from the Republican ideologies of Bush and Trump. However, Biden has broken with the economic ideologies of Clinton and Obama and Harris has indicated she would take the break even further.
Previous Republican and Democratic administrations alike had prioritized economic growth and employment as measures of economic success. They tried to keep inflation and interest rates low to pacify consumers and encourage investors. They trusted the markets to distribute the benefits of a growing economy equitably and fairly.
Both Democrats and Republicans have seemed to assume that if the economy is growing and unemployment is low, with few exceptions, everyone has an opportunity to make a decent living and to be happy. “It’s the economy stupid!” was the slogan of the Clinton campaign.
Republicans and Democrats alike have refused to raise taxes to ensure the integrity of Social Security or Medicare or to fund other social programs. Both have promised tax cuts, the Democrats for the "middle class" and the Republicans for the "investor class." Both have been reluctant to impose the regulations on corporations needed to protect the environment and public health. Neither has been willing to do the things necessary to restore the economic competitiveness of markets needed to ensure that the economy works for the public good.
These economic priorities would have made sense if the U.S. economy of the 21st Century functioned even close to how competitive economies are assumed to function in economic textbooks. Tax cuts would lead to investments and investments would lead to increased production and employment, at wages and salaries adequate to buy the things produced as a result of the investments. The increased taxes associated with increased production and employment would more than offset the initial tax cuts. That’s the logic of trickle-down economics--and of neoliberal economics.
Democrats have claimed their policies would support the common good rather than incentivize corporate wealth. And since the 1980s, the economy has performed better statistically under Democrats than Republicans but the gap between the rich and the rest of us has grown larger under both.
Democratic administrations have been blamed for recessions triggered under Republicans but have benefitted statistically from presiding over the economic recoveries. However, most people haven’t felt the benefits of recoveries personally because the Democrats have trusted the markets to transform increased employment and economic growth into the common good.
The Clinton administration stimulated economic investments by lowering capital gains taxes by a third and increasing tax deductions for businesses but relied on economic globalization, deregulation of the financial market, and unrestrained corporate growth in the high-tech sector for economic growth.
The Obama administration addressed the financial crisis of 2008-2009 by bailing out the too-big-to-fail banks and global financial institutions. These institutions and their investors had made trillions by speculating in financial markets with money that could have been invested to provide economic opportunities for those in need.
Voters haven’t felt the statistical successes of Democratic administrations but they have felt the pain of the recessions and their lingering effects on society equity and justice.
The Clinton administration experienced federal budget surpluses due largely to the revolution in digital technologies. But administrations since have been able to run large federal budget deficits without triggering inflation in consumer prices because the economic benefits have gone to investors and speculators in stock markets and financial markets rather than to consumers.
Admittedly, the Clinton and Obama administrations both made major changes and investments in health care and education over Republican objections. However, Clinton supported major cuts to social welfare programs and Obama failed to respond to a voter mandate for transformative change when he had an opportunity to do so.
I suspect Trump voters see him as their best hope for real change. They are unaware, don’t care, or perhaps are willing to take the risks of losing the American democracy in the process.
However, real change is already happening. Biden has already broken with the neoliberal economic ideology of the previous Democratic administrations. Biden didn’t impose price ceilings when prices surged higher during the COVID-19 pandemic. The absence of competitive markets, meaning alternative suppliers and supply chains, left the government with no alternative means of meeting the basic needs of the people. Instead, the various government economic recovery and stimulus programs put money into the hands of people who needed it most rather than waiting for supply chains to recover and markets to respond.
This allowed the people in greatest need to pay the higher prices, which added to the inflation caused by price gouging. However, the nation and the world could have easily slipped into another Great Recession with unemployment, hunger, and homelessness persisting for decades. However, people tend not to value what they don't experience.
The tradeoff was between inflation and depression. Biden chose to help the people in need and to accept the political consequences of inflation, including the higher interest rates needed to bring down inflation. This probably cost him the presidential nomination but his actions reflected the historic ideals and ideas, the values and policies, of the American democracy.
The Biden administration also made major direct government investments in rebuilding infrastructure, incentivized investments in businesses critical to domestic security, expanded health care, and forgave billions in student loans. In addition to increasing guaranteed tax credits for children and direct payments to those in economic need, the Biden administration has focused on ensuring that social welfare programs benefit low-income families directly, rather than allowing funds to be diverted to other purposes.
In other words, even though the economy has recovered from COVID-19 and inflation rates are near pre-pandemic levels, Biden has not relied on markets to ensure the then basic needs of all are met. He has targeted government spending programs to meet specific needs of people, directly—not relying on corporate investment to trickle down.
Kamala Harris, in her acceptance speech, promised to create an “opportunity economy” that would do even more to meet the economic needs of the common people. Her plan focuses on lowering the costs of food, housing, health care, and childcare.
The proposals for her first 100 days include a federal ban on price gouging that would push the Federal Trade Commission and state attorneys general to investigate how corporations exploit consumers by raising prices for profit. She would address the housing shortage by incentivizing the construction of new housing units and providing a $25,000 down payment for first-time homebuyers. She would provide a $6,000 child tax credit for families with newborns.
She also has promised a tax cut for middle-income taxpayers, but unlike the two Democrats before Biden, she would not rely on tax cuts or trust the markets to ensure that the basic needs of all are met or to serve the common good of society.
Harris’s promise to stop corporate price gouging is perhaps the most controversial of her economic proposals. However, the Biden administration paved the way in 2021 by formally abandoning the “consumer welfare” standard for enforcing corporate anti-trust laws. They replaced it with a holistic approach that considers impacts on “market openness, economic fairness, and democracy; and the interests of workers, entrepreneurs, independent businesses, and consumers.” The impacts of the change are yet to be felt, but Biden has clearly made a break with the economic ideologies that have dominated both Republican and Democratic administrations since the early 1980s.
Trump denigrates Biden’s economic policies as a dismal failure and promises a return to his tax cuts and deregulation policies of the past. Harris has promised to target the benefits of a strong economy to those who need them most and has a realistic chance of breaking the corporate grip not only on grocery prices but on the economy overall.
The choice is between two different sets of ideals and ideas. The question is who should benefit from government programs and how to enact and implement policies that benefit them. The choice is between different economic ideologies.
John Ikerd
References:
https://www.project-syndicate.org/.../us-economic...
https://lawreview.gmu.edu/.../biden-antitrust-the.../