If liberals and New Democrats sometimes seem like the Hatfields and McCoys of center-left politics, it's because we each believe passionately that America's progressive soul is worth fighting for. For the most part, these debates within the family reflect principled disagreements about the best strategy for achieving both a just society and a progressive majority that embraces it. But though we still may disagree about some details, after years of radically conservative dominance of national politics, we find ourselves in vehement agreement with a simple proposition: The radical right is closing avenues of opportunity to working Americans.
This right-wing dominance, however, has produced a new unity on the progressive side. In this spirit, a group of us has gathered under a flag of truce to work out an alternative to Bushonomics: a progressive growth strategy for expanding the middle class.
Let's grant that it's not fair to blame presidents for all that goes wrong on their watch or to credit them for all that goes well, even if voters do it anyway. But it is fair to judge presidents on how well they play the hand history deals them. By this standard, it's fair to conclude that President Bush over the last three years has failed to cope effectively with America's core economic problem: 2 million lost jobs and the severing of the usual link between gross domestic product growth and job growth. Administration policies have failed to revive business and investor confidence in our economy, or to stem growing public anxieties over outsourcing and trade in general. They've made our tax system less progressive, starved government of the revenues it needs to tackle our most urgent domestic and security challenges, and submerged America's future in a rising tide of red ink.
Like their Gilded Age predecessors a century ago, today's conservatives have put government squarely on the side of entrenched wealth and unearned privilege. Their policies have enriched corporations but not workers. They have shifted the tax burden from the wealthy to working families. But they've done nothing to address health-care costs and health security for the working middle class, the prospect of losing one's job to outsourcing or trade, or a sharp rise in poverty.
Perhaps most insidiously of all, the right has dissipated the optimism and problem-solving confidence of the Clinton years. During the 1990s, smart public policies reinforced robust economic growth and job creation, public-sector innovation flourished, problems long seen as intractable -- such as rising crime and welfare dependency -- began to yield to new remedies, and Washington showed that it could equip and empower citizens to solve problems. Today the prevailing mood is pessimism. The public overwhelmingly believes that the country is on the wrong track and frets about a jobless recovery, our ability to compete in the global economy, and America's increasing isolation in the world.
A Political Economy of Privilege
Bush's economic policy is a radical departure even for the right. It reverses the one thing that traditional conservatives did well: resist public deficits. Instead, the right's program sacrifices sound economics to political redistribution -- the supposed sin for which conservatives lambasted progressives.
Democrats, of course, sought to redistribute resources and opportunities to the poor and the hard-pressed middle class. Bush's heart goes out instead to high earners groaning under the exactions of the lowest marginal tax rates in the advanced world and corporations oppressed by health, safety, and environmental regulations.
On Bush's watch, steel and timber companies get protection, energy and agribusiness concerns get subsidies, and multimillionaires get to pass on their estates tax-free, but somehow there isn't enough money to fund what the president once called his top priority -- closing the achievement gap between poor and middle-class students in America's public schools -- or to make sure that every worker has basic health insurance, or to provide working parents with decent child-care options, or to extend unemployment benefits for 760,000 workers who have exhausted their benefits looking for jobs that aren't there.
In 2003, Congress passed $148 billion in pro-business "incentives" over five years, including steep cuts in taxes on capital gains and stock dividends. To the chagrin of supply-side enthusiasts, however, these corporate goodies failed to unleash job-creating investments. And while corporate profits are up 30 percent since the 2001 recession, little of this bounty has been shared with workers. In fact, the median family income has declined by $1,462 under Bush. According to a recent Progressive Policy Institute study, the number of middle-income jobs has plummeted since 2000 and the only category to show growth is low-income jobs. The Economic Policy Institute calculates that in 2003, median wages actually lagged behind inflation.
The Bush program, in short, has aggravated the already glaring imbalances of power in our society between capital and labor, between entrenched corporations and new enterprises, and between the top 5 percent of earners and the bottom 95 percent. Such solicitude for the privileged would be perverse at any time; it's doubly so at a time of war.
In his February Meet the Press interview, Bush rather plaintively described himself as a "war president." True enough, but where's the wartime budget? Instead of calling for shared sacrifice, as presidents normally do when the nation girds for war, Bush used his prestige as commander in chief to pass two more rounds of tax cuts. He presided over an orgy of spending that culminated in last year's congressional passage of a budget-busting, $534 billion prescription-drug benefit for seniors -- a key swing group in this year's national elections. In addition to lowballing the cost, the plan enacted by Congress failed to meet the basic goal of Medicare reform: improving the system's ability to prevent and treat chronic diseases. In fact, the new Medicare program gives us the worst of all worlds -- unsustainable cost growth as well as inadequate drug benefits.
It should come as no surprise that federal spending under George W. Bush (averaging 7.6 percent a year) is growing at more than double the rate under Bill Clinton. Tax revenues, meanwhile, will fall to 15.8 percent of national output this year, compared with an average of 18.5 percent from 1980 to 2003. Indeed, federal revenues are now down to the level of the Eisenhower years. Unlike the recession or the terrorist attacks, this double whammy to the federal budget was an entirely preventable calamity. The Bush administration has slashed taxes to levels well below what is necessary to finance the public services and investments Americans need today, let alone meet the looming costs of the baby boomers' retirement.
In fact, it's not accurate to talk about the Bush tax "cuts," for what they actually represent is a tax shift. Since someone will have to pay for them eventually, the effect of the Bush tax changes will be to shift the burden of paying for government permanently from the wealthy to middle-class workers, from income taxes to payroll taxes, and from today's working adults to their children.
A Progressive Growth Strategy
What's to be done about the jobless recovery, colossal deficits, corporate malfeasance, growing inequality, and the exposure of wider swaths of our workforce to low-wage competition from abroad? The right hasn't a clue. Such problems demand collective responses, but today's radical conservatives -- having swallowed their own anti-government propaganda -- view government more as a means of buying political favor than as an instrument for achieving common purposes.
Progressives should start by embracing both a more efficient, less distorted market system and a new burst of public activism. Both are essential for rekindling economic innovation and job growth and ensuring that everyone can share in America's prosperity.
Where Bush and his crowd are merely pro-business, Democrats should champion a progressive growth strategy that encompasses dynamic market forces, robust public investment, and necessary regulation. No serious economist doubts that government plays an indispensable role in facilitating the proper functioning of markets. Through its laws and regulations, it must referee economic competition and prevent powerful actors from rigging the game. Through its investments in education, science, and infrastructure, it must rectify the market's failures to supply common goods that underpin entrepreneurship and growth. If you disable government, you diminish prospects for growth as well as fairer distribution of the fruits of prosperity.
An eroding middle class is the American nightmare, the undoing of the greatest progressive achievement of the 20th century. The more powerful global markets become, the more governments must lean against the disruptions and inequities that invariably accompany rapid economic change. The trick, though, is to devise modern ways to stimulate mass upward mobility that go with, rather than against, the grain of economic dynamism and progress.
Our progressive growth strategy aims at redressing today's imbalance between economic innovation and economic opportunity. It has four main elements:
1. Return fiscal sanity to Washington. As we learned in the 1990s, restoring fiscal discipline is integral to sustained economic growth as well as responsible government. It drives interest rates down, giving consumers and businesses the equivalent of a tax cut while also encouraging private investment. Let's start by rolling back the Bush tax giveaways to families earning more than $200,000 a year while protecting the tax cuts for middle- and low-income families. Then let's reinstate the inheritance tax, with a higher exemption for family farms or small businesses. These steps would save roughly $550 billion over the next 10 years while shifting the tax burden back from working families to the wealthy. And with an estimated $200 billion a year lost to tax cheating, a long overdue crackdown on tax-evading corporations and high-bracket individuals could capture a healthy chunk of this fugitive revenue.
The right has done almost as much damage on the spending side of the national ledger as the tax side. No one doles out pork like the GOP: The recently passed transportation bill was larded with 3,251 "earmarks" -- money added specifically for a particular member's state or district, or a special interest. This compared with just 538 in the 1991 highway bill. An important energy bill now languishes in Congress, in part because it was originally freighted with $31 billion in tax breaks for the oil, gas, coal, and electrical industries. No wonder even The Wall Street Journal editorially charged Bush with presiding over "the most profligate Administration since the 1960s."
To stop the pork spree, we'll need to restore real budget controls -- including stronger versions of the "pay as you go" rules that effectively constrained spending and tax cuts in the 1990s -- as well as budget caps. We should particularly crack down on corporate welfare -- billions in tax breaks and spending programs for companies that don't need or deserve government handouts.
2. Don't starve government, feed innovation. Restoring fiscal discipline in Washington is a necessary precondition for reviving broad prosperity in America. But it is not by itself an agenda for growth. As the next administration reduces long-term deficits, it must also find money for public investments we need to stimulate innovation and the creation of good jobs.
The right wants to put money in people's pockets by socking the next generation with a huge national debt. Progressives should do it the old-fashioned way -- by helping Americans earn more of it through more productive jobs.
In today's economy, knowledgeable people -- including entrepreneurs, skilled workers, cutting-edge researchers, and innovative companies -- are the drivers of growth. In a global marketplace, our economy increasingly must specialize in higher-skilled, knowledge-intensive production. The 21st-century economy grows not because we do more of the same but because we do things differently and better.
Government has a vital role to play in stimulating growth in the digital age. Strategic public investments in research, education, and new-economy infrastructure like broadband and smart highways, as well as energy independence, are essential to sustaining a culture of innovation and strong institutional supports for technological change. Government must promote free and fair competition by protecting the fruits of U.S. research from intellectual-property theft overseas, by opening markets so that U.S. businesses and workers can sell their products to countries that are happy to export to us but want to keep their own economies closed, and by toughening enforcement of trade agreements as well as labor and environmental standards. It's also essential that the rich countries get serious about reducing subsidies and trade barriers that deny developing countries opportunities to export and grow.
Public investments and incentives to boost science, technology, innovation, education, and skills are central to fueling a high-powered knowledge economy. Yet public investment in knowledge has been falling. As a share of the GDP, government support for basic research has declined under the Bush administration. We need major new investments in science and research, for example, an additional $10 billion per year in the advanced cyber-infrastructure program, industry-university research alliances, advanced manufacturing techniques, and a more robust National Science Foundation.
In the 1950s, Washington launched the interstate highway system, a network infrastructure for the postwar industrial economy. It's time to make a similar national commitment to build the network infrastructure of the knowledge economy: the "last-mile," broadband, high-speed telecommunications infrastructure in the home. There's no reason, other than lack of leadership, that America should lag behind nations like South Korea and Canada in the broadband quest. We should set a national goal of getting truly high-speed broadband into 75 million homes over the next decade.
It's also time for serious new initiatives that will lift the skills of American workers -- for example, through regional partnerships that would bring companies, labor unions, and public agencies together to set up new training systems for skills that are actually in demand.
3. Reform the tax code for the benefit of working families. Besides rolling back the Bush tax cuts for the rich, progressives should launch a comprehensive effort to simplify a tax code larded with confusing, overlapping, inequitable, and sometimes ineffective deductions, credits, and other breaks. For example, we could consolidate 25 existing tax incentives into just four provisions aimed at expanding middle-class opportunity: a college-opportunity credit for any student attending college or graduate school; a single-family credit to replace four current provisions (including the child-tax credit and the Earned Income Tax Credit) and more assistance to families than all of them combined; a universal pension account that would give all workers an incentive to open a pension savings account and take it with them from job to job; and a refundable tax credit for new homeownership that all taxpayers, not just those who itemize, could take.
The current tax preferences are skewed upward. The highest-income executives get the most tax subsidies for their pensions. The most lavish homes generate the most extensive mortgage interest deductions. By revising these tax preferences downward, we could use tax policy to help working Americans get a foot in the middle class and give middle-class families the relief they deserve.
4. Expand the economic winners' circle. Today's knowledge-based global economy presents us with a paradox: Growing opportunity seems inextricably linked to growing job volatility. This is particularly true as the information-technology revolution and cheap telecommunications continue to transform companies, work, and professional relationships, eliminating jobs through automation and enabling many others to move, either to lower-cost locations in the United States or, increasingly, overseas.
We can't turn back the clock to a time when workers could look forward to lifetime careers at a single company (or even industry). What we can do instead is reduce the tax incentives for inefficient economic activity motivated by tax avoidance and equip working Americans with a new set of tools they need to cope with change, manage risks, and take greater control over their own career security. There's a vital principle of equity here: How can we ask workers to brave the new rigors of global competition when corporate CEOs get golden parachutes even after running their companies into the ground? This new social compact should offer all U.S. workers lifelong access to career training, provide more effective public support for workers in transition, and allow more workers to secure an equity stake in their company and become owners of financial assets generally. We should create generous retraining funds for workers who lose their jobs through no fault of their own and modernize the unemployment insurance system to cover more part-time and low-wage workers and pay for skills upgrades.
These new worker strategies are complements to social insurance, not substitutes for it. Workers also need time-honored strategies for increasing their voice and bargaining power. These include a higher minimum wage, democratic trade unions, and the reform of the Wagner Act to ensure that workers can freely vote for unions if they so choose. Because of rising trade and productivity, we will never have the proportion of industrial jobs that we once did. But in a nation as wealthy as ours, there is no reason why every job cannot pay a decent, middle-class wage.
The next administration must take urgent action to hold down health-care costs and put America irrevocably on the road to universal health insurance. Soaring insurance premiums, which prompt companies to cut back on coverage and eat up workers' raises, are a major source of middle-class anxiety. Our health-care system is not simply inefficient; it's also inhumane, denying 44 million Americans access to basic health care. The Bush administration has no plan to deal with these twin challenges. While progressives differ on the exact means, we all support a universal health-insurance system that gives every American choices as good as members of Congress get.
Maybe we should take Karl Rove seriously when he draws analogies between the Bush White House and the McKinley administration, which cemented a GOP alliance with big business that lasted until the progressive triumph of 1912. We knew there was something atavistic about the Bush Republicans' vision; we didn't know it looked so far back, past Ronald Reagan to the GOP political economy of 1904, when the wealthy paid almost nothing in taxes, government provided little in the way of services or public-health and safety regulation, workers lacked economic power, and corporations, protected from foreign rivals, could wield their market power with impunity.
One thing is clear: Bush received no popular mandate in 2000 for such a radical and reactionary project. Many in his own party reject his program. Americans today face a stark choice -- between plutocracy and economic democracy, between policies that entrench privilege and policies that expand middle-class opportunity. For all of us who call ourselves progressive, that's a no-brainer.