The economic story Democrats need to tell

Last night my son asked me how so many non-rich people seemed to believe that cutting taxes on rich people was good for them.  Well, among other things, those low-tax-loving-rich-people (i.e., the selfish ones as opposed to the plenty of liberal rich people) spend lots of money supporting institutions like Fox News and supporting Republican candidates and think-tanks that put forth considerable effort telling ordinary Republican voters that low taxes on rich people are good for them, too.  And who are you going to believe?  Fox News and Donald Trump or those damn communist Democrats?

Anyway, reminded me of an excellent column last week from Michael Tomasky about how Democrats really need to put a stake through the heart of this pervasive and persistent lie:

Republicans have a theory and a story about how the economy grows. You know it as supply-side economics: Cutting taxes, especially on the rich, and decreasing regulation will unleash so much innovation and economic activity that tax revenues will actually increase and the entire economy will benefit.

This has been the conservative story, which the right has elevated to veritable religion, for 30 or 40 years now. And the Democrats’ alternative story is … what? If you’re not recalling it, that’s because there isn’t one.

The Democrats have impulses, they have beliefs, they even have principles. But they don’t have a story to challenge the supply-side story and tell people about how the economy grows and helps everyone.

They used to, once upon a time. It was called Keynesianism, or sometimes demand-side economics (which is why conservatives named their theory supply-side). Keynesianism — in a nutshell, government investment in public goods increase demand and prosperity — held sway from the 1940s through the 1970s, the greatest period of economic growth in history…

It seems to me that the Democrats’ story has to be built around the simple idea of investing in middle- and working-class people. Not “spending,” but “investing.” Spending sounds profligate; investing sounds prudent.

This is not to be done for reasons of “fairness.” That’s an absolutely vital point. Liberals reflexively want to make economic arguments about fairness. But this persuades only liberals. People who aren’t liberals — three-quarters of the country — don’t especially care about fairness. They do, however, care about growth. So Democrats need to argue that these investments, not tax cuts for the rich, are the way to spur growth.

Such an argument stands in direct contrast to the right’s story. Republicans say the rich, with millions returned to them in the form of tax cuts, know best what to do with their money and the market can make the best decisions about investments and society’s needs… [emphasis mine]

And now we have arrived at an alternate theory, a story: Giving more money to working people and investing in their needs is how an economy grows. That’s a direct counterargument to supply-side economics. If enough Democrats say it and say it and say it, they can drive a stake through supply-side’s heart.

Once Democrats can make that case, they’ll be able to turn the tables on the supply-siders. Republicans will argue that government investments and wage increases are “job killers.” But Democrats, rather than merely appealing to people’s consciences, will be able to respond that government investments and wage increases are growth producers that will spread benefits well beyond the top 5 percent or 10 percent.

The story could use a name. The venture capitalist Nick Hanauer and Eric Liu, a former Bill Clinton domestic policy adviser, coined “middle-out economics” five years ago. President Obama even used the phrase a few times.

The important thing is the idea. Democrats must persuade America that there’s a better way to expand the economy than the way Republicans have been advocating for decades. Just as inflation and other ills opened the door for critiques of Keynesianism in the 1970s, so have inequality and disinvestment done the same for critiques of supply-side today. Someone just has to make them.

Good stuff.  Sign me up.  Time for middle-out economics.

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About Steve Greene
Professor of Political Science at NC State http://faculty.chass.ncsu.edu/shgreene

One Response to The economic story Democrats need to tell

  1. R. Jenrette says:

    Sign me up too! And Democrats can show the facts that the nation including the wealthy prosper under Democratic administrations.

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