Many Diaries here have made a compelling case that Governor Romney is unqualified to be President. Yet here he is trailing by less than the margin of error in the national polls. How did this come about? Why are so few in the MSM shouting out that the would-be emperor has no clothes? Further, why do independents expect the two parties to cooperate in solving national problems when it is clear that the conservative agenda is built around a fantasy view of reality and complete refusal to compromise? With so many voters either clinging to or easily enticed to a view of the world with little resemblance to reality, the challenge of creating a majority coalition around a progressive agenda is a very daunting task, especially when the progressives are constantly having to respond to ridiculous assertions. The root cause of these problems is that progressives have allowed the right to frame the terms of the political debate to our disadvantage. If we want to create a coalition needed to advance a progressive agenda that will not require the cooperation of the right then we must bring about a paradigm change in both how we talk about addressing the challenges to economic progress and how we conduct political discourse.
As the past four weeks have demonstrated, it has become nearly impossible to have a coherent, rational debate on national economic policy even though it is key to revitalizing both the American dream and the economy. From what Governor Romney said in the debates, he has no meaningful plan to stimulate the economy, particularly in the short term. It is inexcusable that at such a critical time with America’s future in the balance, a presidential candidate’s economic plan, or lack thereof, is being ignored by the MSM and many misinformed voters. Some have blamed President Obama for his performance in the first debate or the MSM's failure to pursue the truth. There is merit in these arguments. However, the problem goes back decades as progressives and the MSM have allowed conservatives to define the paradigm for the national economic debate (competition and free markets vs. socialism) that makes it easy for the right to distort reality and deflect criticism.
It is past time to change the framework of the debate, because economics as an academic and policy discipline is clearly failing America. One can only hope that President Obama's lead holds up because as Professor Krugman points out, the world cannot afford for America to sit idle, or worse fall into another recession in this economic crisis. Rather than using economic double-speak that not even experts can truly agree on, we need a more concrete, business plan-like approach to framing the issues. The truths of the debate need to be more self-evident, so that a candidate cannot refer to obscure, biased blogs as studies that support his position. Without oversimplifying the issues, the new framework needs to be more understandable to most Americans.
The country needs a new economic paradigm for the challenges it faces. The discussions necessary to finding a new economic paradigm cannot be found in the free market/Chicago school of economics framework that led to our current mess. To make the challenge even harder, it appears that more than half the country has abandoned any meaningful discussions of the issues. So we also need a new paradigm for political discourse that makes it easier to discern the lies which the current paradigm allows to go unchallenged by the MSM.
The 2012 Democratic convention highlighted many initiatives that form a solid base for a broad set of five clearly understandable values that could form a progressive framework for both jump starting our economy and starting to change the framework of political debate. They are:
1. Economic Growth
2. Efficiency
3. Sustainability
4. Economic Fairness, and
5. Community.
It is critical to frame the progressive agenda in this fashion. If Progressives are to succeed in changing the framework of the debate, they must engage the electorate with a broader vision of our approach to modernizing our economy, de-emphasizing the narrower (but still valid) initiatives that the Democrats have focused on in the past. In fact, seen in the broader context of these values, we strengthen our arguments for individual reforms such as increased financial regulation, health care, equal pay, equal opportunity, and energy policy/global warming. This broader framework will require that we add new initiatives as well.
A further overview discussion of this approach follows below the orange scroll. Later diaries will contain more links to references and related articles.
Economics has failed America by one, having main stream practitioners that were so concerned about inflation that they nearly caused the much more serious problem of deflation; two, not developing a definitive unbiased dialog about national economic policy that provides governmental leaders from both parties with effective blueprints for responding to serious breakdowns in the economy, including financial bubbles; and, three, generally failing to denounce Romney’s dangerous economic plan. Had the economic “experts” done their job, President Obama would have been able to better frame the issues in the first debate and voters would have been better able to grasp that Governor Romney has no plan for the economy and his promises of continued economic growth are worse than meaningless. This demonstrates the plain truth that economics is too theoretical, too subject to bias engendered by the source of research funds, and lacks a sufficient consensus among its practitioners to serve as a linchpin for framing American economic policy and political debate. Most importantly, it is frankly is too complex for the average American who have never been exposed to even its basic principles in high school or college and too easy to distort with jingoistic malarkey.
As for Governor Romney’s “Plan,” as you are aware, conventional economic theory provides three main means of stimulating the economy, lowering interest rates, lowering tax rates and increasing government spending. Since one, interest rates are already near zero, two, Governor Romney has claimed his tax cuts will be revenue neutral (will not add to the deficit), and three he plans to cut government spending, a Romney administration will undoubtedly tip the country back into recession as his plan will clearly decrease demand rather than increase it. While I do think tax code simplification will help the economy (but not the regressive Republican tax proposals I have seen), it is too small a positive effect to overcome the economic challenges that we face. It is certainly too small to overcome the negative impacts of cutting government spending. And to be truly effective, tax reform must address the fact that our tax system is no longer progressive with the top 1% paying lower a total tax bill (federal, state and local) as a percentage of income than approximately 30 percent of lower earning taxpayers (see chart here). As for deregulation as an economic policy, this is not the 70’s, where regulatory agencies were standing in the way of lower prices and increased competition.
The problem is, you can’t just say Governor Romney has no effective plan because most people do not understand economics enough to follow complex economic arguments. Further, the fact that a major party has nominated a candidate for President in a time of economic crisis, that is proposing such a sham of an approach to the second worst economic crisis in our country’s history, shows the extent to which economics has marginalized itself to the point of uselessness. However, we do not need to rely on discussions of economic theory to communicate what must be done, as the following discussion of the five key values illustrates
Economic Growth. For the sake of our children. Economic growth is essential to the restoration of the American Dream. It is the only realistic way to reduce our deficit and to assure the promises of Social Security and Medicare. Five percent growth should not be our maximum annual growth rate, but our minimum goal. This is achievable because of the massive waste in our economy. It is not just government that is inefficient but the private sector as well. We just need to get everyone that wants to work working at jobs that produce real value added. The U.S. probably only produces 2/3’s of what we are capable of producing. Think about what could be achieved if we could take the money spent by the super pacs and spend it where it would do some good. Think about the more than 14% unemployed and underemployed. Think about the college graduates that take more than 4 years to finish school or are working jobs that do not require a college degree and the money wasted on college degrees that have very few job prospects. Think about the waste in the health care industry both in terms of delivery of medical care, the problems of the uninsured and excessive administrative costs. Think about the resources engaged in the marketing of dubious products, the spam, the viruses and the cost to prevent those abuses. Think about the useless earmarks. Think about crime, the war on drugs and the cost of police and prisons. The list of “goods and services” produced that add little real value to the overall economy goes on and on. Add the numbers up and it is a very large percentage of our economic capacity. The government must have as its first priority putting people to work where they will do the most good, relying on the market where reasonable and effective.
Two more points need to be made here. To reach and persuade the widest possible audience in order to build an unbeatable coalition, the focus of the message to the American people needs be on growth, not jobs. Unfortunately, a lot of people have jobs and because of that, many will not see the benefits of a jobs program to them personally and want to think of it as another wasteful government program. However, everyone wants to see more growth. Second, as the key to putting the country back on a sound financial footing, and revitalizing the American dream, growth must be first among equals of these five values and a key consideration in developing any other initiative.
Efficiency. The only sustainable means to significant growth. Achieving true efficiency in the economy is a very daunting task, both in both in terms of garnering the necessary political support as well as the challenges of accomplishing the objective in both the government and the private sector. However, better use of America’s human capital is the only realistic way of achieving faster economic growth given our slowing population growth, an aging population and increasing global competition.
Except for energy efficiency, Democrats do not easily embrace economic efficiency. Their reluctance to accept both the need for “creative destruction” generated by market forces, and the need to eliminate or completely restructure ineffective government programs will be particularly hard to overcome. I share many Democrat’s suspicions about the free market economy, which all too frequently results in very inefficient behaviors and market failures, such as the recurring bubbles over the past two decades. Nonetheless, I embrace creative destruction as a primary driver in a vibrant economy. When the government embraces creative destruction, significant progress can be made. The ban on leaded gasoline is a leading example of this. Republicans on the other hand, while being the biggest promoters of our free market economy, refuse to acknowledge either its failures or the fact that sometimes the government would be the most cost efficient provider of a good or service. That refusal occurs despite clear evidence to the contrary, best demonstrated by the Medicare Advantage program. The government has significant advantages that can far exceed the inherent efficiency of a private organization including lower capital costs, lower marketing costs and economies of scale.
If Democrats want to rebuild the American dream, they must promote efficiency at every opportunity. This includes: moving away from using the tax code to accomplish national policy objectives but using more direct and efficient approaches instead; using cost-benefit analysis for every existing and proposed regulation; mandating program sunset provisions; and, accepting the fact that trying to correct every aspect of a problem often results in not only waste but also a failure to achieve any significant objectives. Perhaps most importantly, it also means constantly revisiting past decisions to see if they were justified. The private sector does this; the government must do the same. This needs to include not only funding programs and regulations but prior outsourcing of work formerly provided by government employees as well. One critical example needing the later type of review is the results from using charter schools. There appears been very little analysis comparing the results of charter schools as compared to public schools, particularly with regard to cost effectiveness, as the few comprehensive studies appear to focus only on test results. Given the poor performance of many charter schools, at a minimum, it is important to study the successful charter schools to determine if their success can be replicated in the public schools and at what cost; if the standards for the granting of all charters need to be revised to achieve similar results in other government schools; and if those charter schools can be expanded. Winning the debate on efficiency offers not only the best chance for Democrats to enhance their political strength but promote the American dream and the economy.
Sustainability. For the sake of the world. Sustainability includes much more than environmentally related issues such as global warming. Many key aspects of our current economy are unsustainable including our tax cuts, our balance of trade, the social security and Medicare trust funds, the national debt, the annual federal deficit, past reliance of the economy on consumer debt, the number of high school dropouts, growing student debt, out of control medical costs, current funding of retirement, financial bubbles, etc. Every policy initiative must promote sustainability if we are to recapture the American dream.
Perhaps the most difficult sustainability challenge we face is our unsustainable balance of trade (which also raises issues of efficiency and economic fairness). There is nothing in current economic thought (or international law) that provides an efficient and effective way for countries to balance their imports or exports short of economic hardship. Yes, eventually America will become so poor from having to service our international debt that it will be forced to achieve a balance of trade but that will occur with a tremendous waste of resources and the loss of the American dream. While we should embrace creative destruction, I see nothing creative or efficient about shipping jobs oversees where the work is performed in sweatshops and throwing away our investment in our current manufacturing infrastructure which will make bringing those jobs back even harder to achieve.
President Obama's concept of economic patriotism is a key principle that needs to be considered in addressing a new debate of international trade issues. While it may make financial sense to buy goods from the cheapest supplier from a company perspective, from a national perspective it is unsustainable, particularly when other countries consistently take a different view of what is fair free trade. We need to change the framework of international trade policy so that countries can to respond to unsustainable levels of imports without wrecking their economy and their infrastructure, causing a trade war, or harming the considerable benefits of international trade.
Economic Fairness. For the sake of America. The importance of economic fairness is well understood by the Democratic Party, including maintaining an effective economic safety net, equal pay, immigration reform, economic regulation of the worst market abuses, responding to unfair trade practices, etc. All of these also contain elements of sustainability and efficiency issues as well. Most important of all, an effective democracy cannot be sustained in the face of severe divergence between the wealthiest and the average citizens.
Two points represent particular challenges. First there is nothing fair, efficient or sustainable about a regressive tax system in which the top one percent of taxpayers pay less than 30 percent of those with lower incomes, especially since that 30% probably includes the vast majority of small business owners (I seem to recall the President saying 97% but cannot find the data). Second, the U.S. economy remains the purest free market economy in the world. There are costs and benefits to that, and the benefits far outweigh the costs, provided that the safety net remains strong enabling the injured bystanders of creative destruction to get back to work. The free market economy without a strong safety net is also not sustainable.
Community. A Chain is only as strong as its weakest link. There are simply many things that the free market cannot effectively accomplish that the community can. The most important one is instilling in everyone the need for citizenship, as President Obama has emphasized in his speeches. We are all in this together and together we can accomplish much more than individual action. President Obama was right, growing the economy and restoring the American dream cannot be accomplish strictly by advancing ones own interest alone, it takes cooperation. Maybe some of our community goals and methods need work, but there can be no doubt that all of us are made weaker by the lack of a strong community. It would be wonderful if we all were highly productive, caring, self reliant and resilient but we are not. We do not need more consumer goods that we could have with lower taxes, anywhere near as much as we need to move forward on addressing difficult social issues that human nature being what it is, must be addressed by the community. Community as much as economic growth is key to recapturing the American dream.