[
Crossposted at The Agonist]
It was supposed to be the "neoconomy", unmasked by
Daniel Altman in his widely praised book on the Bush bet, and predicted by my own
The Fourth Republic in 2001.
It has unravelled and now Bush and company are scrambling for their next bad business plan.
What is the Bushconomy going to consist of?
In a word: Poverty.
That '60s Show
The povertization of America will be aimed at forcing as large a fraction of the American population below the line of affluence as possible. This will dramatically reduce energy costs, since there will be a much smaller number of stake holders. This is the economy we had in the 1950's - energy costs were much higher, and the share of the population in poverty was much higher as well. What changed this was the 1960's.
The first phase of this change was Kennedy's economic program. It did not put people back to work as quickly as other post-war economic programs. Indeed through 1963, the Kennedy recovery was the slowest on record. However, what it did do was rapidly "depovertize" the low end of the working wage scale. This rapid increase in low end working rates gave the Republicans a talking point that they still use today: the minimum wage causes unemployment. While it was not entirely a deliberate policy choice, the effect was dramatic - more people than ever before could afford cars, houses and other affluent goods, including what would become the iconic consumer good: the television. Kennedy made it possible for people to afford to live in the world that the 1930's had invented: telephone, television, automobile and house.
The second phase of the depovertization of America was Johnson's Great Society. It is the Great Society that the Republicans have hated, perhaps even more than the New Deal or New Frontier. It set America on a course of economic inclusion and was the economic side of the great expansion of citizenship that voting rights and civil rights brought. It is not an accident that at the same time that America was put back to work - at higher wages - it was also given access to the voting booth in a series of constitutional amendments - there were three voting rights amendments passed as a result of the 1960's - and court decisions, including the landmark Mapp v Ohio which established the principle of "one man-one vote".
This second phase continued to bring Americans back into the workforce, and dramatically increased the share of affluence. It had only one problem: Johnson took his eye off the ball. He fought in Vietnam, thinking the danger was "communism", when he should have been stabilizing the Middle East. It was not "Guns and Butter" that caused what would follow, but Guns in the wrong place.
In 1967 an Arab-Isreali War showed the problem: the United States would, eventually, have to open itself to Middle East oil. In 1967, remember, the US had oil import quotas, and that had created an oil boom inside the US, as it encouraged internal US production. It also meant that the US imported energy in covert forms: as manufactured goods. Ask yourself why Japan produced "cheap plastic junk" in the 1960's. It is because that was where their economic advantage was.
The 1967-1973 period is the unravelling of the post war march of prosperity, and we are still fighting that period today, because the choices we made during that period, in both parties, have shaped the polity ever since. Dylan was right when he said "the time won't soon come again". It hadn't. And it has now.
The Age of Nixon
It is no accident then that the Republican Party is the "we hate the '60s" party. They went to a slice of the American public, particularly that slice that had been just above the margin in the 1945-1975 period, and told them "those lazy black people are taking your jobs" and "those evil liberals are taxing you so they can live well". It is like Heinlein's miner's breaking open the bank, only to find that there is no money there. Told over and over again that the money was "in Washington", when, in fact, Washington sent most of the money back out to the country, they voted to stop sending the money to Washington.
Nixon embodied a dark and nefarious version of this idea, but fell because he tried to by a Keynesian boom. The Republicans would learn three important lessons from Nixon. The first was not to buy more of a boom than they needed. The second was to have a President who did not have that aura of scuzziness about him. And the third was to make sure the President could not be connected with scandal. The three parts fit together, and Reagan was, in essence, the colour remake of the black and white era Richard Nixon.
This came together in 1984. In 1984, as with 1972, a Republican President won a landslide for having weathered the crisis. But unlike in 1973, the economy did not fall apart all at once. The 1986 hard landing and 1987 crash did not produce the all at once economic shockwave that made Nixon vulnerable.
The second and third parts came together with Iran-Contra. It was a genuine scandal, it got traction because of the economic problems that, while not enough to create an aggregate recession, were enough to collapse parts of the economy. However, the economic problems were not enough, and the Democratic Party was not what it had been. And Reagan, headed deep into Alzheimer's dementia, was protected because America dared not show weakness, and would not believe that Mr. Sunny-side up had his brains scrambled.
Five O'Clock Shadow on the Face of the Nation
Which brings us to the the present, and the fourth Fourth two term Presidency of the Age of Nixon. Bush has tried to portray himself as Ronald Reagan, out of touch and optimistic, a hands off manager who never the less leads by emenating some mysterious aura.
As noted Bush stands at the top of a party whose real meme is "we hate the 60's". This unifies the attacks the Republican Party uses to hold power.
- It was Women's lib. From Abortion to attacks on political correctness, the change in the role of women is one pillar of the attack. Since women are not going to go back to the grinning girdled mistress of the griddle, this is good for a permanent whisper into the ears of men who are not quite making it in the economy that, if only all those women were at home, there would be more money for them.
- It was those Commie-Pinki-Hippie-Queers. This attack links the Soviet threat to the counter culture. Since a large fraction of the left wants to link communism to the counter culture going the other direction, this creates a permanent push and pull, which is very difficult to step outside of.
- It was those swarthy types. And this links to the second, because it was civil rights, not anti-war, that first muscled its way on to America's television screens.
- It was those egghead technocrats. This is the most insidious attack, because it rests on a fault line within the Democratic party - namely, Vietnam and the results of "urban renewal". The progressive critique of the technocratic government programs of the 1960's.
- It is those crime filled corrupt cities filled with commies, women, swarthy types and egg head technocrats. This is the result of adding up the first four: the money is "in the cities", which get subsidies for those lazy black people and bra burners to take the hard working value that hard working pickup truck Americans create.
Now this picture, and it is a picture, not an argument, has three components.
The first component is the people who remember the tensions and upheaval of the 1960's. This is the core "we hate the sixties" vote.
The second component remembers the late 1970's and the great inflation under Carter. This confirms that "if the liberals get in charge, everything will fly apart" view of the first group, and creates the second part of the Republican coalition: anti-tax, anti-"big government" which, while they maybe socially liberal, are willing to vote for keeping a lid on the economy. Americans that have become pathalogically afraid of real prosperity. This wave supplies the religious right and libertarian anti-liberals. The religious right beleives that things flew apart in the 1970's because of immorality, ironically, an idea that Jimmy Carter subscribed to in a very different form, and the libertarians because of "all those taxes". The echos of the effects of bracket creep.
The third component is from the downsizing of the military establishment in the late 1980's and early 1990's. This is rooted in the "liberals hate the military" anti-1960's meme, and in the "liberals take money from hard working Americans to give it to those lazy black people." These supply the freep: the militarist base bunny vote that is willing to riot to preserve their right to strip mine the aquifer to build houses.
Part of the reason this picture works is that people only remember trauma clearly, and politics is often about blaming the trauma on people. Clinton bashing is merely the descendant of "if you don't vote Republican, Carter's inflation will return". Since cause and effect is a matter of orwellian history, what matters is not the facts, but a story. In Libertarian circles Johnson's two very small deficits caused everything bad that happened afterwards, even though Nixon ran a couple that were just as large, and Reagan dwarfed them all any one year of his Presidency.
This picture works because people forget the parts of the 1960's they like. Pop music came of age, colour television came to living rooms, Americans got cars. Many of the people who hate the sixties mistakenly believe that they would have been among the affluent then, because they are among the people who are affluent post-Kennedy.
This picture also has grains of truth in it - almost all good legends are based on true events, even if rearranged and stripped of context. It works because liberal technocracy did screw up certain things in the 1960's. It works because the people don't realize that much of what happened in the 1960's happened everywhere in the developed world in the 1960's because of the baby boom. It works because we still have not solved the structural problem of oil that helped unleash economic turbluence. And it works because we have set up a class civil war, which means that somebody somewhere is always sure that one of his peer-competitors is getting ahead at his expense.
It also works because the Democratic activist and policy wings are both locked in the 1960's as well. The activist base attachment to the 1960's has been gone over so many times that I don't need to more than touch on it here. Every social revolution spawns conservatives that defend it, it has too. Political correctness, and parts of the activist base are part of what George McGovern rightfully points out is American conservative culture: protecting liberal and progressive changes. As conservatives, and I know this is controversial to write, even though it is true, this slice of the Democratic movement subsists on memory. On one hand it can be exasperating, on the otherhand, it is also necessary. Who is to defend freedom if everyone moves on.
But it is the technocratic wing of the Democratic Party, and its attachment to the 1960's, which is as important to the Republican picture, and as important for their hold on power. Afterall, the Republican Party has had repeated low points - 1982, 1986, 1992 - and today as well. But until there is another party to vote for, and not just the Republicans to vote against, there will be no realignment. Nixon could not realign, because he could not create a base of power. A base of power that saw an alternative to the 1960's. The Republican party became the pro-fifties party only when the real 1950's politician left it. It could then collect all of the "we hate the sixties"
The technocratic wing still believes we can simply tax the rich to get out of our current problems, and pursue an inflationist monetary policy to rev the economy up. These are the people who begged Alan Greenspan to lower interest rates more in the mid 1990's. These are the people who are today saying he should not raise them as fast. Many of them are brilliant men and women who are worthy of admiration and respect, who have dedicated their lives to public service.
But who have not grasped the lesson of the 1960's and are willing to repeat it again.
And that lesson is this. We are not facing a repeat of the problems of the 1960's. We are facing the 1960's in reverse: instead of having a liberal technocratic government that is trying to manage the transition to a more inclusive society, we have a reactionary plutocratic government that is trying to sell putting people back in the bottle. Instead of having a society that must avoid a coming energy problem, we are a society that has one, and must correct it or spiral out of control.
it is for this reason that many of the policy proposals from the technocratic left are misguided: they take an inflationist road to solving problems, without corresponding deflationist pressure. This is to miss the most important lesson of the New Deal and of liberal government in general. A lesson that is the synthesis of progressivism and populism that created liberalism in the first place.
The Democratic Equilibrium
That lesson is this: populism is inflationist. From its inception, the populist believes that if you allow currency to proliferate, then the problems of the working man, and proprietor owner, will be solved. It never works: inflation begets inflation, and people run back to reactionary hard money. Progressivism is deflationist - it opens trade barriers, it creates transperancy, it breaks up corrupt little economies and forces them to join the big economy. Liberalism is the realization that one can have populist monetary policy, to the extent one has progressive fiscal policy.
Let me repeat that: liberalism is setting populist and inflationist policy against progressive and deflationist policy. Within that liberal movement there will always be - and should always be a debate between the inflationists and the deflationists. Between the Bob Reich's on one hand, pushing for more inflation, and the Bob Rubins on the otherhand, looking to keep a lid on inflation and to create deflationary free trade. That is the liberal formula - inflationary policies for labor and new capital - deflationary policies for rent and old capital.
Let me repeat that again: liberalism is a dynamic tension between to counterlevered world views. World views that are joined by a belief in a surplus society. The trick is getting the right people in the right places, and setting the pressures against each other. One needs a Bob Rubin to open trade, and a Bob Reich to make sure that the benefits of that trade's deflationary pressure are used to create inflationary openings for increased wages.
Let me repeat it one more time: the tension within the Democratic Party right now is that almost all of the mythology of the party remembers only one side of this equation - the inflationary demand side. However, liberalism, from the beginning, was also about creating new supply. Power for the public, universal access for telephones and electricity, roads to bring goods to market, new technological development, education.
The key to a revitalized Democratic Party intellectually is to restore this tension. And now let me put the blame on why this tension is not re-established: the deflationist wing of the Democratic Party has as its spokesment Dinocrats. Joe Lieberman - his slot should be filled, not by a left basher, but by a left-enabler. The purpose of deflationary policies in a liberal government is to create room for inflationary policies elsewhere. This was true - from the First Hundred days of FDR. FDR's second bill of the hudred days, was to cut government expenditures by 25% - so that money would not pool up in Washington, and he had more to spend on agricultural aid and other forms of relief.
The Next Frontier
Having worked my way in, I will now work my way back out again. The Republican Party uses a "we hate the sixties" placement to market a policy of inflation for the top, and deflation for the bottom of society. It has developed a series of political constituencies that are pro-deflation for the bottom, on the belief they can inflict that deflation on their economic competitors, and pro-inflation for the top on the belief they can ride that inflation upward.
Thus we are still fighting the election of 1960. The Republicans have learned how to get beyond their mistakes - and in 2000 proved that they understood that 1960 went wrong for them precisely because they didn't have the guts to go that extra mile to steal the election.
The Democrats need to embrace this frame, because it focuses American's attention back. But to embrace the frame is not to mimick it in detail while leaving it in spirit. We cannot win the election of 1968, simply because 60% of the country voted against a continuation of the Democratic Party in the White House. We can, however, win the election of 1960.
If we embrace it. And part of embracing it is to embrace, not protectionism, pure inflationism and populism without perspective - but that very part of the rhetoric of the Democratic Party that the Republicans keep trying to veneer over themselves: the belief in the future.
The Republicans use technosloptimism to hide their real agenda: the povertization of America. Let me take an example of how this works: Arnold Schwarzenhagger pushed "The Hydrogen Highway". People love fuel cells, the emit hot water as their by product, and offer a way to end the pollution of personal transporation. However, hydrogen isn't something that exists in large mines below the earth. It is bound up in something, and to put hydrogen in the car, is to have separated it. that separating, surprise, surprise, costs as much energy as you are going to get out the other side if you do it from water, and if you do it from hydrocarbons, you still have to sink the carbon.
The right wing plan is to force a hydrogen infrastructure, and then spring on America the costs of "carbon sinking". We will have the same car economy we have now - only many fewer people will be able to afford it. The Republicans will expempt the "red zone" from such cars, so there will be two car economies - an expensive one that burns oil processed to hydrogen for cities, and a cheap one that zooms along on high octane hydrocarbons.
This is really a pessimistic vision - higher costs for energy, higher costs for cars, a giant consumption tax on cities, and far more people who are not able to live the affluent life that having the choices that come with having a car. But they have a gloss on it that makes it seem like a Spielberg film.
But reclaiming this high ground means changing the very nature of the Democratic presentation, learning when to put forward proposals that rest on the faith in the future.
The Surplus Society
This is the end point of the argument, the Democratic movement must claim the position of the surplus society. It must attack solutions which are deficit based, including deficits of environment, education and investment. The Republicans have played the game of creating deficits, and then daring the Democrats to pay for them. Since half of the liberal movement is "be responsible and pay for things" they can often get cleavage and then blame the Democrats for the pain that was generated by Republican gain.
Surplus solutions should be proposed every time the Republican Party predicts a deficit. The Republican Party did so often enough itself: using Stockman's "rosy scenario" - a feat repeated for Bush's tax package. Surplus solutions work, so long as they really exist.
It is the vision of a surplus society that clings to Kennedy, because it was the last moment where it seemed we could unequivocally make it work. It is also the moment before the Democratic Party made a very bad bet on which region of the world to lock down with military force, and the moment before the demographic wave brought us crime, urban turbulence and uncertainty.
It is also that aspect of policy and vision that both wings of the Liberal movement can agree on.
But getting there means learning how to tack between inflationism and deflationism. This is mentally harder than simply setting one's course in one direction. This is a criticism that applies in both directions. But without it, there is no victory, because it is deflationism that allows us to pay for inflationism. The Republicans damn "tax and spend", because "tax and spend" is the degenerate form of tension between deflation and inflation. Afterall, taxing is one way to generate deflation, and spending one way to generate inflation.
It also means learning to condemn the Republican topsy turvy version of the liberal state - welfare for the rich, taxes for the the poor - and the top down economy that they have created. But without destroying the system itself. The answer to this part is simpler: the American public already doesn't like the raw deal it is getting, and "borrow and squander" neatly encapsulates the deficit driven inflation at the top, with deflationary pressures from the bottom.
But the first is not a matter of mere rhetoric, it is a matter of balance, and endowing one's thinking with an automatic search for creating a balancing pressure.
Let me take trade. Free trade is a deflationary pressure. It deflates the cost of wages, the cost of goods, and the value of capital here by creating it abroad. As a free trader, I recognize all of these things as long term goods. But the Free Trade wing of the Democratic Party has often not understood that it must also create an inflationary pressure to match this deflationary pressure - or form a coalition with a group of populist Democrats who have an inflationary idea that Free Trade can be matched against. If there is blame in this, it is on both sides of the fence. Free Traders have to realize that to sell Free Trade is to match it with the way of creating the rising tide that balances its ebb tide. And the populists must realize that what is coming to be called "Fair Trade", which is an inflationist policy of raising barriers - can only exist as a cantilever to Free Trade's deflation.
The solution is not to promote one over the other - but to create a larger catagory where trade that is both "Free" and "Fair" are woven together. The Republicans, you will notice, are the most ardent of protectionists, and their core constituencies - defense, housing and doctors - are all protected economy constituencies. The way to defeat the Republicans is not for the Free Traders to attack the Fair Traders - nor the reverse, but to have both groups weave policy together, so that the Fair Trade is not a rubric for solving problems by creating barriers, and Free Trade is not a license to try and Thatcherize the world.
Creating that tension, and that larger rubric, and the Democratic movment is free to use Free Trade liberalization as a club on one side, and Fair Trade progressivism as a spear. The stealth protectionism is hit coming and going.
And this is only one example of the need to gather the two sides of the coin together. But it is not being done, because so often these internal debates are phrased as "either/or", but "both/and"
Conclusion
The Republican Party uses a "we hate the 1960's" package to sell a top down economy, and a mix of inflationary wins for the rich and deflationary pressures for the poor. The Democratic Party has allowed itself to be framed as the "1968" party, existing in a narrow sliver. It has also allowed the two wings of liberalism - the inflationary populism and the deflationary old meaning of progressivism - to be rent assunder.
The way to end this is to reframe the Democratic party back to the root of the conflict - the two roads open to us in 1960, and the Republican Party as the party of Nixon. It will also require changing the way the Democratic conversation is carried out, so that we no longer have the current debate which frames every question as inflationists against deflationists, but each problem as one which is to be solved by apply inflationism and deflationism in combination to produce a better balance.
It is this way that removes the Republican Parties ability to play the rift between populists and technocrats that developed over Vietnam, and that has remained in various forms. This is not an easy shift to make, and therefore it will be less popular to many than simply putting a new package on our old mindset. But it is this, to use an over-used phrase, "paradigm shift" that is essential.
But it is happening. The Social Security message of "There Is No Crisis" is a powerful first step towards a Surplus Society rhetoric. But it must be followed up with proposals that use this idea as their fundamental engine. And it must be applied in other places. This is because the Republican Party has been very good at framing what the "crisis" is, and then spending freely to meet it, only to leave the bill to Democrats to pay. Alan Greenspan even made Americans believe, enough to allow it to happen, that budget Surpluses, were a crisis that had to be met.
I know this has been a long journey, and I know that what is being reccomended is harder to take, because it requires looking inward at the problems of the Democratic Party and Democratic Movement - which overlap but are not the same. It also requires making changes in ourselves and our rhetoric, biting back obvious things we have all said a thousand times.
It is, however, based on that most important plea, "let us not make our differences into divides". It may be useless, afterall, entrenched patronage in the Democratic Party is often based by appealling to one wing as a way of "protecting" us from the other. And there are many leaders, such as Joe Lieberman, who have cynically exploited this divide for personal political gain.
But it must happen, and therefore I believe that it will happen. Because the alternative is a society which submerges more and more people into poverty, ruining them with health care bills and then wrecking them into permanent poverty with the bankruptcy bill. The Republican Party is the party of poverty and pessimism - and while Democrats are often avid consumers of pessimistic scenarios in the present, we must not become the party that lives acting like a vulture. If we have faith that the reactionary party is wrong, then it does not matter when the problems finally manifest, or even how they finally manifest: the system will break somewhere somehow. What is important is having the trust of the American people to get the job of fixing it, and having the intellectual and political tools to get the job done when it happens.