Take Back Our Party: Restoring the Democratic Legacy – The American Prospect

The Prospect is proud to exclusivelyrelease the bookTake Back Our Party: Restoring the Democratic Legacyby JamesKwak. We will release one chapter every other day over the next two weeks,starting with todays introduction.

Kwak, the co-author of13 BankersandWhite House Burningand the author ofEconomism, is a keen observer of policy and politics, and his book offers powerful evidence of how the Democratic Party drifted from its traditional position as a party of the people. He adds his prescription for how the party can get back on track. As the battles for the soul of the Democratic Party continue,Take Back Our Partyis a field guide to that debate. We're excited to bring it to you.

We live in troubled times.

Ordinary Americans are struggling. Despite decades of technological innovation and economic growth, the typical familys net worth is no higher than in the 1980s. Health care costs, including rising insurance premiums, deductibles, co-payments, prescription drug prices, and often unexpected out-of-network charges, bankrupt a growing number of once-secure families. Young adults are burdened by student loan payments extending as far as they can see. Steeply rising rents make finding an affordable home virtually impossible in more and more cities. State and local governments are failing to deliver even essential services like clean water to their residents. A handful of companies controlled by billionaires have levels of control over our lives once imaginable only in science fiction. Increasingly precarious federal government finances threaten future reductions in the Social Security and Medicare benefits that many elderly Americans rely on. And decades of unsustainable growth have already profoundly changed the climate of our planet in ways we are only now beginning to realize.

Yet despite these disturbing developments, many peopleparticularly those who are well-off and well-educatedinsist that nothing could be better. As of 2019, the United States is in the 11th year of an economic expansion that has seen the stock market rise and the unemployment rate fall to record levels. We remain enthralled by every years new marvels produced by the dream factories of the technology superpowersself-driving cars, drone deliveries to your doorstep, virtual reality, space travel, and on and on. (The full realization of these wonders always seems just out of reach, but no matter.)

The explanation for this divergence is simple. Over the past 40 years, the economic fortunes of the very rich and more or less everyone else have become completely uncoupled. From 1980 to 2014, the total incomes of the top 1 percent more than tripled, while those of the bottom 50 percent remained essentially unchanged. The previous 34 years, from 1946 to 1980, saw the opposite pattern: Income growth was substantially higher for the bottom 50 percent than for the top 1 percent. If you have the money, you live in one economy, with the best health care in the world, easy access to green space, the finest restaurants that have ever existed, elite educational institutions from preschool through the most opulent research universities anywhere, and luxury goods and services that once were reserved for royalty. If you dont have the money, you live in another economy, where your familys welfare is vulnerable to sudden changes in the demand for your skills generated by distant markets, you breathe the dirty air produced by uncontrolled development or drink the toxic water delivered by a crumbling infrastructure, your children go to underfunded public schools, and you are rapidly being priced out of the health care your family needs.

Obviously there is no border wall that cleanly divides the very rich from everyone else. There is an intermediate zone, roughly from the 75th to the 95th income percentile, where people are more or less comfortable in a material sense. But they can see the speed with which the truly wealthy have separated themselves from the rest of society, and many of them are desperate not to be left behindif not for themselves, then for their children. Anxiety about getting into a good college, landing choice summer internships, and securing a job at one of the handful of highly selective companies that promise entry into the economic eliteGoldman Sachs, McKinsey, Google, Facebook, Amazon, and their few peersis at pathological levels. The recent college admissions cheating scandal is not only more proof that the very rich live in a different world from everyone else, but also shows that they, too, are desperate to place their children on the educational escalator to success and fortune. The forward march of inequality is there for anyone to see, and no one wants his or her family to be caught on the wrong side of history.

This divide between the vast majority of Americans, who face the prospect of negligible improvements in their living standards at the cost of constant insecurity, and a small minority who both literally and figuratively jet away into another world, is the central economic challenge of our time. It is a problem in clear view today. Only one in five Americans think that todays youth will have a better life than their parents generationstark skepticism about what for centuries we have been calling the American dream.

Inequality is a problem that, on its own, will only get worse. Technological advances will vastly increase the advantages of being rich and well-educated and the costs of not being so fortunate. Increasingly capable machines will displace low-skilled workersconsider how apps and kiosks are doing the job of cashiers at casual restaurants and big-box storeswhile enriching the people who design them and the shareholders of the companies that manufacture them. Artificial intelligence will replace many knowledge workers while rewarding a small elite of computer scientists and their employers. It is true that people made the same doomsday predictions about earlier inventions, and in past ages of capitalism the market found higher-value occupations for many workers (though not necessarily for those who lost their jobs to new technology). It is possible that a society could adapt to these transformations in ways that help everyone, not just an intellectual and economic elite. But there is little reason to think that ours is such a society. In trusting to markets to allocate all good things, we have allowed the benefits of automation to be monopolized by people with the capital to invest in new technology and those with the skills to master it.

This is not merely an economic problem. It is hard to see how a society can long endure when the precarious fortunes, interests, and life experiences of its people become foreign to a small ruling class. (Let them eat cake, a noblewoman in 18th-century France is reputed to have said upon hearing that the peasants had no bread.) The rise and fall of nations depend on the extent to which their economic and political institutions remain open to a wide range of interest groups within society, as documented by Daron Acemoglu and James Robinson in decades of research. Fourteenth-century Venice was both a democracy of sorts and a thriving commercial center of the Mediterranean. Once political power was seized by a closed hereditary aristocracy, however, the city-state fell into irreversible economic decline, eventually becoming the sinking museum that it is today.

In a modern democracy, this should not happenat least in theory. When everyone has an equal vote, a tiny minority of the super-rich should not be able to run away with the lions share of societys economic gains. In the classical model, there should be a party of business and a party of labor, generally representing the rich and working class, respectively. The United States has never had a true labor party, but through the middle of the 20th century these roles were more or less approximated by Republicans and Democrats. The Republicans were the party of business, generally favoring lower taxes, smaller government, and fiscal responsibility. The Democrats were the party of labor unions and immigrant minorities, favoring higher taxes, bigger government, and more generous social programs. In the 1930s, it was Democratic President Franklin Roosevelt who established the federal safety net with public jobs programs and Social Security. In the 1960s, it was another Democratic president, Lyndon Johnson, who created Medicare and Medicaid, the last major expansions of the welfare state, and launched an optimistic war on poverty.

During the past half-century, however, the tectonic plates of the political landscape have completely shifted. It is common knowledge that the Republican Party has been taken over by radical conservatives who want to dismantle government altogether (or, as Grover Norquist famously said, reduce it to the size where I can drag it into the bathroom and drown it in the bathtub) and hold a host of unsavory views on immigration, racial and ethnic diversity, and womens rights. The parallel transformation of the Democratic Party has received relatively less attention. Todays Democratic eliterepresented by Bill Clinton, Barack Obama, and Hillary Clintonhas, in deed if not in word, repudiated the heritage of Roosevelt and Johnson, fleeing what it sees as an embarrassing legacy peopled by unionized workers and welfare recipients. Instead, todays establishment Democrats style themselves as expert managers of a sophisticated market economy, friends of big finance and big technology, and architects of growth and opportunity. Instead of a party of capital and party of labor, the United States today has two parties of capitalone insular and white nationalist, the other generally tolerant and multiculturalor, as the pathbreaking economist Thomas Piketty has argued, two parties that represent different segments of the elite. When it comes to economic policy, one is absolutist and ideological, the other technocratic and evidence-based, but both see growth as the overriding objective and markets as the optimal way to produce and distribute goods and services.

This is the political context that made it possible for the 1 percent to reach economic escape velocity and launch themselves away from the mundane, stagnant, anxiety-ridden lives of everybody else. The Democratic Party is dominated by people who fear nothing more than being called liberals (let alone socialists) or being seen as soft-hearted, soft-headed believers in big government and the welfare state. Since the 1990s, the partys economic platform has been that markets deliver prosperity, and the role of government should be limited to correcting market failures such as externalities, adverse selection, or moral hazard, in the academic jargon employed by the policy elite. This is why Bill Clintons lasting economic policy achievement was the introduction of work requirements for poverty assistance; this is why the greatest financial crisis in 70 years did not lead to structural change in the banking sector; this is why the health care program that bears Barack Obamas name is a warmed-over version of the plan introduced by Mitt Romney in Massachusetts, which was originally the brainchild of the reflexively conservative Heritage Foundation. As Republicans have succumbed to tribalism and irrationality, Democrats have claimed the mantle of fiscal prudence and responsible stewardship of the capitalist market economy.

The consequence is that the Democratic Party of the past 25 years has done next to nothing about inequality and has little to say about it. The party establishment has only taken up progressive policy ideas, such as the $15 minimum wage, when forced to by activists, usually working at the state or local level. The onetime defenders of the working class have stood idly by as the 1 percent has swept up an increasing share of the gains from economic growth, including the benefits of the post-recession recovery. Its response has been to lecture that a rising tide lifts all boatsa maxim that differs little from the trickle-down economics so dear to conservatives. (Nominating Barack Obama for president at the 2012 Democratic National Convention, Bill Clinton acknowledged that too many people did not yet feel the effects of economic growthbut, he promised, if you will renew the presidents contract, you will feel it.) Alternatively, Democrats will claim that some bundle of clever, market-friendly policiesfunding for infrastructure spending and incentives for clean-technology investment are the current darlingswill magically shift the distribution of income and wealth down toward the working and middle classes.

Of course, the rise of inequality and the stagnation of the middle class are more the fault of the conservatives who took over the Republican Party than of the moderates who responded by shifting the Democratic Party to the political center. It is crucial to understand the conservative movement in order to appreciate how we got ourselves into our current mess. I have written books that were largely about Republicansabout their campaign to deregulate the financial sector, their willingness to sacrifice two centuries of fiscal responsibility on the altar of tax cuts, and their use of simplistic economic theories to mask policies that favor the rich.

But I am not a Republican and, if you are reading this, you probably arent, either. More to the point, we can be certain that todays Republican Partydominated as it is by ultra-wealthy donors and a fundamentalist ideology of cutting taxes for the rich and eliminating programs for everyone elsewill do nothing to stem the rising tide of inequality or improve the economic fortunes of ordinary families. If we are going to more fairly share the vast wealth that our society produces, we first need a political party dedicated to improving the economic well-being of all Americans. That means we have to restore the historical identity of the Democratic Party as the champion of the poor, workers, and the middle class.

And so, because this is a book about how to make things better, its a book about Democrats. Its about how, in the wake of the Reagan Revolution, we latched onto the idea that a more modern, more sophisticated, more business-friendly Democratic Party could successfully compete for the White House. Its about how this transformation, while paying off in victories in four of the past seven presidential elections (six if you go by the popular vote), has left us impotent in the face of growing inequality, even when in power, and incapable of making the case that we can help families struggling against economic insecurity and misfortune. And its about how a new Democratic Party, dedicated to a progressive economic agenda, can take up the challenge of ensuring a decent life for every American.