It's fast becoming a consensus in center-left circles that the future of the Democratic Party will rise or fall depending on the economic well-being of the masses. In the wake of the midterms, top-shelf commentators like Josh Marshall and David Leonhardt have correctly identified a decades-long trend of stagnant incomes as the major problem for the Democrats. If the party of the left cannot provide material security to the people, then it simply has no business being in power.
Luckily, this is actually an easy problem to solve. If markets aren't producing enough money through wages, then the government should step in and provide it. It is really that simple.
But tellingly, Marshall, Leonhardt, and other center-left liberals make it seem as if this problem is hellishly difficult. Education policy is hard. Climate policy is really hard. Handing out checks is stone simple by contrast. All you need is paper and a pen.
To become the party of the people, the Democrats will have to let go of an ineffective, neoliberal policy that has been baked into their economic platform for years now. Then they will have to overcome the skepticism of voters, who are unused to the idea of income transfers, even though it's part of a populist legacy that reaches back to the New Deal and the Great Society. This, more than anything, will be the crucial question for the American left over the next several election cycles.
Let's go over some flaws in the neoliberal position. Here's Leonhardt:
Washington could definitely do more to help growth: better infrastructure, a less burdensome tax code, a less wasteful health-care system, more bargaining power for workers and, above all, stronger schools and colleges, to lift the skills of the nation’s workforce. Countries that have made more educational progress over the last generation have experienced bigger income gains than the United States, and even here the pay gap between college graduates and everyone else has reached a record high. [The New York Times]
His sole other policy suggestion is a middle-class tax cut.
Now, a middle-class tax cut (or, alternatively, a boost in tax credits) wouldn't be a terrible policy. But the problem with Leonhardt's analysis is that it implicitly assumes that market incomes are the only legitimate incomes, and that the only legitimate ways of increasing incomes are those that work through market means. (He also ignores lowering the trade deficit, which would stoke demand and create jobs, as Dean Baker points out.)
Worse is the reflexive invocation of education as an economic panacea. Of course, everyone should have access to a quality education. But for the last 40 years, America has been cranking away at increasing both high school and college completion with great success, and during that time we did not see the slightest improvement in inequality, median wages, or poverty. On the contrary, median wages stagnated, poverty increased, economic growth eventually slowed to a crawl, and inequality rocketed to Roaring Twenties' levels.
Poverty and stagnant wages have a common root: a lack of money. And if you ignore the simplest imaginable solution to this problem — namely, handing out money — then restoring economic growth to the middle class is going to be really tough. Indeed, it might be impossible!
After the stark failure of neoliberal policy, blunter methods of raising incomes are at least worth a shot. These include policies like a universal basic income, a universal child credit, a climate dividend, and cash transfers known as helicopter drops.
But if these policies win on the merits, they still have to overcome the creed of neoliberalism. Matthew Stoller, in a great review of The New Democrats and the Return to Power by Al From, identifies the problematic legacy of From and other New Democrats. He notes that it is a bit strange that 21st-century Democrats have been consistently leery of economic populism despite the fact that background conditions would seem to make populism more appropriate than at any time in the last 80 years.
Still, you’d think that someone, somewhere would have populist ideas. And a few — like Zephyr Teachout and Elizabeth Warren — do. But why does every other candidate not? I don’t actually know, but a book just came out that might answer this question. The theory in this book is simple. The current generation of Democratic policymakers were organized and put in power by people that don’t think that a renewed populist agenda centered on antagonism toward centralized economic power is a good idea. [Medium]
As Stoller writes, because of the efforts of From and the political triumphs of Bill Clinton, practically the entire Democratic Party elite is composed of neoliberals with a bone-deep commitment to markets and a reflexive hostility to New Deal–style policy. But if the New Democrats derived their power and appeal from the crushing defeats Democrats suffered in the 1970s and '80s, the current iteration of the Democratic Party enjoys a solid presidential coalition of liberals. The party, in other words, no longer needs to tilt to the right.
Income transfers are the only policies muscular enough to immediately raise the prospects of the majority of Americans. They also represent the best way to get the Democratic base to turn out in the midterms. Marshall may be right that old-fashioned economic populism won't play well in a national election (ironically, largely due to years of neoliberal agitprop), but it's certainly possible to change that.
The left has to convince a critical mass of people that economic populism is good policy. The Democratic Party needs to cultivate leaders that can sell that message. If the Democrats can do that, then their fortunes might be rescued. Otherwise, they will just be part of the problem.