Good and bad economy is not a matter of political optics

The Democrats’ Next Job: Bury Supply-Side Economics

Win, lose or draw on Tuesday, the Democratic Party will almost immediately turn its focus to the next presidential election and the fight between the establishment center and the left wing. But while the Democrats have that argument, they must also undertake the far more important task of thinking about what they agree on, and how they can construct a story about how the economy works and grows and spreads prosperity, a story that competes with — and defeats — the Republicans’ own narrative.

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.

Let's be clear. The fact that Democrats have no good counter to the Conservative economic philosophy is not just a political problem, but a governing problem. A good economy is not something that randomly happens, while political parties offer campaign rhetoric in order to take credit or point fingers. Good economic results are a real thing that requires real economic policies, implemented with real action, and monitored with real governing oversight.

This is part of why so many economic conservatives are willing to ignore so many other political issues, while casting ballots for Republicans. There is clearly a lack of economic "seriousness" within the Democratic ranks.

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.

Then came stagflation, which opened the door for the supply-siders. Democrats, by and large, stopped talking about theories. Their story was discredited, so the supply-siders said. Democrats stopped defending public investment, and they stopped defending government.

Herein lies the fundamental problem with liberal or Keynesian economic policies. The simple idea that the Government can "create" a demand by spending money, is the antithesis to the idea that free market, along with private investment, allows the economy to thrive on the organic demand that already exists.

Moreover, nobody (who is serious) would suggest that government spending competed with things like the industrial revolution, the technology explosion, or any other major economic movements. Nearly every single economic boom in history was created due to the expansion of private industry based on some form or idea or economic principle that came from the free market.  Government didn't invent the light bulb, the phone, the automobile, computers, or anything of any real substance. They simply come along, after the fact, and attempt to regulate, monopolize, or otherwise grab a piece of these innovations by force.

The last major piece of Keynesian economic policy was the Obama trillion dollar economic stimulus package that promised an increase in economic stimulus, new business opportunities, and seven million new jobs. We got the slowest economic recovery in American history, most of the businesses the stimulus supported went under, and by the best of estimates the stimulus created about a fourth of the jobs that they believed it would. Even Obama himself admitted that the shovel ready work he believed was out there, really wasn't. The stimulus package was widely seen a resounding failure and was thought to be a large part of why the Democrats lost sixty three seats in the House, and six seats in the Senate.

It should be fairly easy for Democrats to say to Americans: Look around you. How has that worked out for you? Inequality is rampant. People fear being bankrupted by medical catastrophe (though not as much as they once did, thanks to President Barack Obama). Young people in college spend 25 years paying off debt. Young people not in college are working three jobs, none of which pays benefits or gives them steady hours. Your town is probably a shell of its former self, and some of your friends and relatives — all of them good, decent people — are in the grip of heroin or fentanyl addiction. This is what 40 years of market decision-making has done.

Yeah, it would seriously be easy for the Democrats to say this. Except for nearly everything this Tomasky (the author) is complaining about is not the fault of Republicans, and certainly not the fault of Trump and his economic policies.

The reality is that the economy is booming. GDP is high. Wages are up. Unemployment is at near record lows. Employment is at record highs. Business investment is up. Consumer confidence is sky high.

The fact that Democrats believe this is all wrong, because the Government isn't spending enough money to create demand for what Democrats thing we should want, is all the more reason not to take Democrats seriously when it comes to economics.