Neoliberals Passing the Baton
Brad DeLong got a huge amount of attention by saying it was time for neoliberals such as Brad DeLong to pass the baton to those to their left. Alarmingly, he seems to have written this first on twitter.
Zach Beuchamp rescued it from tawdry twitter to now very respectable blogosphere with an interview.
One interesting aspect is that Brad has very little criticism of 90s era Brad’s policy proposals. Basically, the argument is that Democrats must stick together, because Republicans are purely partisan and no compromise with them is possible. I absolutely agree with Brad on this.
But I also want to look at criticisms of Clinton/Obama center left policy as policy.
Brad tries to come up with 2 examples
I could be confident in 2005 that [recession] stabilization should be the responsibility of the Federal Reserve. That you look at something like laser-eye surgery or rapid technological progress in hearing aids, you can kind of think that keeping a market in the most innovative parts of health care would be a good thing. So something like an insurance-plus-exchange system would be a good thing to have in America as a whole.
It’s much harder to believe in those things now. That’s one part of it. The world appears to be more like what lefties thought it was than what I thought it was for the last 10 or 15 years.
Now monetary vs fiscal policy is only considered right vs left because of the prominence and fanaticism of Milton Friedman. Is see no connection between laser eye surgery, hearing aids, and private health insurance. Medicare for all is not a National Health Service (note I am not conceding that a national health service would be bad for medical innovation). Brad did not advocate insurance/plus/exchange system in 1993. He (and Bentson, Summers and Rubin) advocated a payroll tax financed system not the Clinton-Clinton and Magaziner mess. I think he is stretching to get a second example.
I think the first isn’t really left vs right and the second is and always was a bad political calculation. IIRC Obama certainly said that he thought single payer was better policy but politically impossible. That was the general line on the center left wonkosphere. I think the case for insurance-plus-exchange was at most a bad political argument disguised as a bad policy argument.
In another twitter thread (no not the one where he says twitter is a horrible medium for serious discussion) Paul Krugman comments
I want to focus on two of his tweets
Last point: wages. Here’s where research has convinced me and others that wages are much less determined by supply and demand, much more determined by market power, than we used to believe. This implies a much bigger role for “predistribution” policies like minimum wage hikes 10/
Pro-union policies, and more than we used to think. “Let the market do its thing, but spend more on education/training and a bigger EITC” no longer sounds like wisdom 11/
I listed this as the one economist’s mea culpa based on empirical evidence which came to my mind. A lot of center left economists used to oppose minimum wage increases and were convinced by empirical evidence (mostly by Card and Krueger) that this is actually good policy. But I don’t see any problem with the EITC. Rather, economics 101 based arguments against the minimum wage and unions have been undermined by evidence*.
I think Krugman’s problem with “a bigger EITC” is political. It appears on the Federal budget so deficit hawks won’t allow a really huge increase. In contrast, people can think firms pay the minimum wage, so increasing it sounds like a cheap way to help the working poor.
More generally, I don’t see any reason to abandone redistribution (like the EITC). In fact, I think that is both excellent policy and political dynamite. I note that Bill Clinton and Barack Obama campaigned promising to raise taxes on the rich and cut taxes on everyone else. Also they won. Other Democrats didn’t promise that and they lost. A more progressive income tax is a relatively market respecting policy long supported by left of center economists. Oh and also Alexandria Ocasio Cortez. I don’t think there is any evidence against the Clinton 1993 tax increase combined with EITC increase.
The fact that it is totally obvious that it is good politics (rejected absolutely by the Republican party and supported by most self identified Republicans) doesn’t mean that it is too obvious to stress. It means debating redistribution vs predistribution is a distraction (which one here is not like the others)?
I personally have criticisms of Bill Clinton type neoliberalism after the jump
OK so what can I add ?
I could bring up a really bad Clinton administration policy proposal based on neoliberalism: financial deregulation, and, in particular, Clinton’s last act signing the commodity futures modernization act. This was absolutely policy based on pro free market beliefs of people who cared about fighting poverty (Rubin himself was a relative skeptic compared to other people and the Clinton Treasury whom I will not name and criticize).
I won’t discuss welfare reform or the Clinton crime bill. Both were opposed by the center left wonks. That was politics not policy.
But there was strong support among neoliberal wonks for reinventing government, that is for outsourcing and replacing public provision of services with vouchers. There clearly was a strong view that the private sector is more efficient than the public sector. There was I think sincere support for reducing the number of Federal employees.
I think there is now strong evidence that the public sector is often more efficient than the private sector. Part of the case was politics disguised as policy. Voters hate the bloated Federal Bureacuracy (based on total fantasy about its size and cost). There is a theoretical argument that civil servants don’t work because it is very hard to fire them. In fact, they do work. This is a failure of vulgar economics 101 in which people are assumed to care only about consumption and leisure.
In contrast there are huge problems with contracting out to private firms. The incentives civil servants face is enough to overcome the laziness of people less lazy than me (almost everyone) but it is nothing compared to the incentives private contractors have to take advantage of the government. What I always say is that a large state is costly, but the cost depends on the surface area — it is very costly for the state for modestly paid civil servants negotiate with businessmen and highly paid private managers (before going out the revolving door). Reinventing government makes it more costly. The key example is not a Clinton reform (although Clinton reluctantly signed the bill) Medicare Advantage was supposed to cause Medicare to wither on the vine because the Centers for Medicare and Medicaid Services (CMS) couldn’t compete with private insurance. By 2010 defenders of private insurance (crucially including Joe Lieberman) were absolutely determined to prevent the CMS from competing with private insurance, because they knew private insurance companies couldn’t survive the competition.
Also school vouchers have been shown to have large negative effects on achievement.
I’d say considerable evidence of positive long term effects of welfare programs has accumulated. The assumption based on economimics 101 that welfare reduces pre-transfer income by distorting incentives has not fared so well. The evidence tends to suggest direct benefits. I promised not to discuss this one, because I am sure that welfare reform was based on political calculations not bad policy analysis (it was not a policy of the Rubin wing of the party — Rubin advised Clinton to veto the bill).
Now on another topic. How about winning elections. Isn’t that important too ?
In the interview, Brad discusses policy and parliamentary (in the USA Congressional) politics. He could also argue about electoral politics and say Democrats have to move left to win elections. In any case I will argue that.
Brad’s argument is distantly related to the mobilize the base vs capture the center political strategies. He doesn’t stress this in the twitter thread or the interview, but he could discuss voters and how few genuinely indpendent voters there are. Like me, he can vividly recall the 80s when lots of smart Democrats (and also Robert Waldmann) argued that the party had to move rightward to recapture the center. I recall reading something by Robert Kuttner about what the party needed was left populism and this was blocked by the power of money in the Democratic party (think Bernie Sanders back when Sanders was mayor of Burlington). When I first read that, I thought it was crazy. Now I think it is totally right. Also note that, by promoting the internet, Al Gore saved the party from centrists like Al Gore. Now candidates and candidate-candidates can raise huge amounts of money with small donations and don’t have to get along with and flatter rich people. Obama proved this 8 years before Sanders proved it again.
There are fewer swing voters and much less ticket splitting than their used to be. This means that elections are determined mainly by whether young people vote. Sneering and Alexandria Ocasio Cortez is not good political strategy (also unwise unless one is a smart as she is and few people are).
* I have to say what I think of unions there was a liberaltarian argument that unions help insiders and create inequality (and support racial segregation). Also it was argued that unions prevented productivity growth by featherbeading and generally being rigid. These claims were never supported by evidence (empirically oriented labor economists like Richard Friedman always contested them}. In any case, the extreme decline of unions in the USA provides strong evidence that unions weren’t the problem. They declined at the same time that there was a huge increase in inequality (there has also been an increase in racial wage differentials). Also their decline correlated with a marked decline in the rate of productivity growth. This is crude evidence, but detailed evidence long contradicted the case against unions. I think part of the shift is new evidence and part of the shift is more respect for evidence vs theory among economists. On the other hand, it’s a whole lot easier to raise taxes on the rich and cut taxes on the non rich than to bring unions back.
Most accurate thing is the simple and obvious fact that the idea of the mythical independent voter is pure rubbish.
Yeah, I got the registration thing. Means nothing. There are independents that only vote Rep when they vote and independents that only vote Dem when they vote. This idea of swing voters is absolutely crazy.
Probably happened the last time in the 60’s(if even then). Play to your base. It is all that matters.
“I could be confident in 2005 that [recession] stabilization should be the responsibility of the Federal Reserve.”
This is odd given how long it took for the FED – despite its lowering of interest rates starting in late 2000 – to get us back to full employment. And this is with the Bush43 tax cut (Mankiw says this was done for Keynesian reasons whereas Hubbard claimed it would actually raise savings but hey) and the Iraq war stimulus.
I’m very interested in commenting on this — basically it’s not a truly free market if labor cannot command the max price that the consumer is willing to pay — if the labor market is sort of sequestered in a race-to-the-bottom side show (which too many academic progressives don’t seem to sense anything untoward about/a natural state of man or something) — something like that (think continental Europe for God’s sake).
Meantime nothing could be easier that bringing labor unions back (and maybe even further than before to more like German union density) — with a labor law proposal that would guarantee to take back for the Democrats the so-called battle ground states for good measure:
Why Not Hold Union Representation Elections on a Regular Schedule? Andrew Strom — November 1st, 2017
“Republicans in Congress have already proposed a bill that would require a new election in each [private employer] unionized bargaining unit whenever, through turnover, expansion, or merger, a unit experiences at least 50 percent turnover. While no union would be happy about expending limited resources on regular retention elections, I think it would be hard to turn down a trade that would allow the 93% of workers who are unrepresented to have a chance to opt for unionization on a regular schedule.”
Making the Republican party disappear while re-making the country economically and politically: nothing could be easier. Back to mulling this all over.
“basically it’s not a truly free market if labor cannot command the max price that the consumer is willing to pay”.
Wait – we like Wal-Mart pricing for goods. OK Wal-Mart’s “always low wages” is bad. If we could get UAW wages and Wal-Mart pricing, that would be great for the average Joe. OK – insanely high returns to investment and sky high stock valuations might disappear but then the average Joe would never notice.
Old poster to go with your complaint.
Unfortunately, the discussions on how to fix inequality do not acknowledge the one real issue unless you start talking unions: real income distribution via wages earned.
Higher taxes on the wealthy should serve to pay for the amount of government they use, not just to produce a guaranteed income for those of lesser earnings. It also served to preserve democracy.
An increased minimum wage I am afraid, will not create a better curve of income distribution as it only moves the bottom sector of wage earners. Nor does it assure they will further receive future productivity growth earnings. Nothing about it assures the companies will cut any further into their share of income to pay their remaining income brackets of workers.
Thus, what is missing in all of the current suggestions is the return to rise in productivity going to the workers. It was a natural event (if there is such a thing in economics) that assured equitable distribution of income via the effects of unions balancing market power.
You can have unions or you can have a lot immigration. You cannot have both. A lot of low wage workers —> a lot of replacements for union workers if the union workers go in strike.
Mike, I just learned that in Mexico — in Mexico! — you cannot hire scabs. It will be possible to make our laws labor friendly (the great majority of voters after all) once we rebuild our union component.
“when a union officially declares a strike, “a workplace cannot be opened”
Pgl, Obama’s Jason Furman said — and I quote:
“There is little dispute that Wal-Mart’s price reductions have benefited the 120 million American workers employed outside of the retail sector. Plausible estimates of the magnitude of the savings from Wal-Mart are enormous – a total of $263 billion in 2004, or $2,329 per household.2 Even if you grant that Wal-Mart hurts workers in the retail sector – and the evidence for this is far from clear – the magnitude of any potential harm is small in comparison. One study, for example, found that the “Wal-Mart effect” lowered retail wages by $4.7 billion in 2000.”
Of course, if we cut 10% off those savings we could give everybody at Walmart a $20,000 raise. They will get that raise (from their consumers) the day they are “free to choose” not to show up for work.
Another thing: if, say, a lot of McDonald’s customer-demographic moved into a McDonald’s neighborhood, Mc’ would do better. Also, if a lot of the neighborhood’s current Mc-graphic gets a big raise, Mc’ will do very well. IOW, a large scale raise for the bottom 40% — say, from 11.3% of overall income to 20% — won’t leave them short of demand; possibly quite the opposite.
Of course, folks higher up the income line will take the hit instead but that’s sort of the idea. Can’t leave 40% scrounging on 11%.
Walmart/Sams is a predator which depends upon state/federal subsidies to fund Labor for various benefits to exist. By demanding work requirements for Medicaid, states force Labor to work for such places. It is a vicious circle and that money comes back in the form of taxes. I have just touched on Labor. Both organizations are big on demanding tax deferrals from cities, counties and townships before they will build. I have yet run into a housing developer who would do such or choose not to build in one area. Amazon’s demands from Queens NY was a $120,000 /employee subsidy, with little or no amount set aside by Amazon to improve infrastructure such as the subway or roads, etc., and would lead to the destruction of the affordable housing in the area.
In my own township as the Vice Chair of the Planning Commission and when a shopping center developer was going to build a Sams in what was supposed to be an upscale life style mall, I told them in a public meeting I would vote “no” for the whole development. Sams and Walmart did not fit upscale. Furthermore when they move out to a different community, the locale is left with the building as they will not sell it to a competitor.
The strain on a local economy is enormous from these predators.
You continue to post this garbage about building unions with legislation that clearly would annihilate unions. It is a Rep plan, and you play along with it constantly.
Read the bill, and stop shilling for the people who have attacked unions for decades.
“The key example is not a Clinton reform (although Clinton reluctantly signed the bill) Medicare Advantage was supposed to cause Medicare to wither on the vine because the Centers for Medicare and Medicaid Services (CMS) couldn’t compete with private insurance. By 2010 defenders of private insurance (crucially including Joe Lieberman) were absolutely determined to prevent the CMS from competing with private insurance, because they knew private insurance companies couldn’t survive the competition.”
No doubt there is waste in Medicare. The waste of procedures and treatments which are not needed or produce less than optimal results as compared to others. The lack of coordination between doctors with each one still bringing their own views to the record. Archaic processes which cause inordinate amount of work. Medicare is not perfect and as Berwick pointed out before he left in 2011, much can be done to improve Medicare and doctors know it. Dr. Berwick is now on Medicare.
You can be thrown off of Medicare Advantage. It does come with a 15% premium (may be off on the percentage) price/cost to be on it and to the insurance companies just to provide all of the same care as is provided if you went with Part A & B alone. If you change your Medicare Advantage plan, they can reject you later on the same as with your Medigap for Part B if you bump up to a better plan. Advantage plans are not worth the extra money paid to insurance companies to have them compete with administering and providing Medicare-like benefits the same as Medicare does and a few extras.
Betsy DeVos’s shill Libermann was shilling for Aetna back then, the same as Biden was doing for MBNA and Delaware incorporated banks in pimping students on their loans. His duplicity in stopping the Public Option is notable and he deserves the asterisk on his legacy history. There was no call for this action by Liebermann other than serving big business using it as a reason to shield his vanity. We lost something else in this passage of healthcare and the dilly-dallying around so long to pass the ACA. It died with Ted Kennedy and any other opportunity to improve upon the ACA with the loss of Ted’s Senate seat, it was a Long Term Healthcare plan. This too was on Ted’s radar.
Ahhh yes Labor. In the scheme of things the costs of direct labor had evolved since the sixties of being a small percentage of the costs of manufacturing coming after Overhead and the far larger component of Materials. We did not look much at Labor other than detach its true cost from the amount of Overhead burdening it. The evidence has always been there if one would look at site manufacturing rather than just the numbers in an office listed in reports. One of our/my projects at a tubing manufacturer gave a very clear picture of this in the proposed reduction of costs brought about through planning changes of the shop floor.
Ah, Biden, the Republican who has run and is running as a Democrat. Forget about Joe inspiring anyone with a progressive inclination.
The Democratic Party official platform is satisfactorily progressive, while also being widely popular — and as a result of that popularity, “centrist” by definition. Democratic leadership has made the mistake of thinking that centrism is some mid-point on various issues between the Democratic position and the Republican position: “Democrats want to preserve Social Security benefits, Republicans want to cut them by 7%. Therefore, we will do a Grand Bargain and only cut benefits by 3.5%. The public will like us because we aren’t as bad as Republicans; we are the centrists and the adults in the room — and the Washington Post will approve.”
The problem is that the public overwhelmingly does not want to see Social Security benefits cut either. That by definition is the centrist position, even if, for the time being, it would be considered the left position — by the Washington Post, anyway. So the public instead of approving sees the Democratic Party as mealy-mouthed and standing for nothing — maybe even more interested in being lionized at their next DC cocktail party with Dem and Republican guests alike — and in the Washington Post — than actually winning and advancing the purported Democratic agenda. Some will even become so disgusted with the Democrats that even though they voted for Obama in 2008 or 2012, they’ll vote for the outsider candidate who promises to clean the swamp even if he is a Republican.
The party does not need to move towards the center or towards the left. It will do just fine if candidates simply run on the platform that already exists and unites all but the most fringe people who lean Democratic. Hillary Clinton made many excellent speeches grounded in the platform, but the ad campaign run for her didn’t touch any issues in the platform with a 10-foot pole. It didn’t even promote Hillary Clinton herself as the Democratic candidate. All it did was attack the character of Donald Trump, a line of attack that should have been part of the mix but not the whole thing. Nothing was done, either, in the way of national mass communications to promote Democratic candidates as better because they are Democrats.
That refusal to be stand up and be counted on the core Democratc platform needs to change if big money propping up Republicans can be defeated on a consistent basis.
“I think there is now strong evidence that the public sector is often more efficient than the private sector.”
I believe you but would really appreciate links.
Welcome to Angry Bear. First time comments always go to moderation to weed out spammers and advertising.
Even with its waste, Medicare is more efficient and effective than commercial healthcare. You could also say the same for the VHA. That is my $.02. Other commenters may have a different opinion or have others to mention.