Domestic Bliss

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This article from The American Prospect was written by Matthew Yglesias.

The near simultaneous release of Bill Clinton's memoirs and some good news on the job front has afflicted the right with a case of cognitive dissonance. Clinton, as you'll recall from the nineties and today's commentary, was lucky rather than good. Presidents don't really have all that much influence over short-term economic trends, which are mostly in the hands of the Federal Reserve and the business community. Bush, however, deserves full credit for the current growth spurt though not, of course, the blame for the recession that followed his inauguration or the long jobless recovery that followed. In reality, they were closer to right the first time.

Liberals, meanwhile, have taken to arguing that the economy isn't really very good. The job growth comes in the context of a long period of labor market weakness that's nearly without precedent. Most of the gains, meanwhile, have been captured by higher corporate profits, while wages continue to lag behind inflation. This is all true, but as a political argument it's rather weak. Not only does it hand the GOP fodder in the insipid debate over which party is more optimistic, but it's really not clear how much of it is really Bush's fault. He didn't create the rapid productivity increase that's allowed the economy to grow much faster than the employment rate, and though he's done many terrible things, he hasn't signed a law mandating an increase in profitability at the expense of labor compensation (at least not yet; who knows what a second term might hold).

Worse, this is a situation that could change at a moment's notice without John Kerry being able to do anything about it. The economy really is better than it was six or twelve months ago, and may well be better still on Election Day. Relying on an argument that might vanish at any time is a losing strategy, and somewhat dishonest as well. Democrats won't turn into Bush supporters if wages go up this summer, nor would Kerry have been endorsing Bush's re-election if the economy had been growing faster for these past three years.

The real lesson of the Clinton era isn't that Democratic policies made the economy boom, but that these policies -- higher taxes on the wealthy, higher spending on the poor, more regulation to protect labor and the environment, a higher minimum wage, and a budget aimed at sustaining Social Security for the long-term -- were perfectly compatible with the longest economic expansion of American history. Conversely, nothing Bush has done or is proposing -- tax cuts for the wealthy piled upon tax cuts for the wealthy, and giveaway after giveaway to corporate lobbyists -- is either necessary or sufficient to bring about economic growth. Taken to extremes, interventions could do real harm: A $70 per hour minimum wage or a total ban on burning coal would shut the economy down, but this isn't what we're talking about. The minimum wage has been much higher in real terms in the past and the economy grew steadily, while we were enforcing clean air standards properly just a few years ago with no visible ill effects.

Put this way, we can see what the real debate in America is all about. There's one party that wants the government to do more to clean the environment, to protect workers' rights, and to raise the funds necessary to spend more on health care and education while narrowing the deficit, and there's another party that's ideologically committed to doing none of these things. These differences will persist whatever the economy does, and insofar as the president impacts the economy over the short-run it has more to do with things like Clinton's deft intervention in the Mexican peso crisis that have little relationship to the main ideological divide in the country.

Fortunately for the Democrats, the public agrees with their take on all of these issues. If the Republicans could win elections by telling us what they really think about taxes -- that progressive taxation is morally wrong and taxing the rich at the current rate is unfair -- they would do it. Back in the real world, they don't want to lose, so they make up scare stories. The '93 budget deal, as you'll recall, was going to plunge us into the dark night of recession. Nowadays we hear that if people maintain the right to sue doctors who mistakenly or maliciously injure their patients there won't be anymore health care for anyone. Unless we lavish more subsidies on the oil industry the lights will all go out. Restoring taxes to their 1999 level will somehow crush the economy even though the economy was fine in 1999. It's dishonest, but it's dishonest because the real motives for these policies -- a mixture of ideology and simple corruption -- can't be sold to the public.

All the more reason for Democrats to refuse to play this game. Insofar as the domestic policy debate moves off "the economy" and toward the concrete social policy issues the government really does control, the Democrats will win every time. Indeed, the latest "Washington Post" poll showed that while Kerry enjoys a modest five point lead on the economy, he's way ahead on actual domestic issues like prescription drugs (12 points), taxes (13 points), and education (10 points). On health care in general he's up by a devastating 21 points. In this context, an argument about the economy is a distraction at best.

The real way a president affects the economy, anyway, is over the long term through his policies on these other questions. The issue is whether swing-state voters in the Great Lakes and the Southwest want the country as a whole to look more like the low-tax, low-spending poverty-stricken backwaters in the South and the Plains which have enjoyed decades of conservative governance, or more like the relatively high tax coasts where increased social investment has consistently brought greater prosperity over the long term. Voters might pick Bush on other grounds, but faced with a real debate about economics, the Democrats are almost certain to win.


Matthew Yglesias is a Prospect writing fellow.


By Matthew Yglesias
Reprinted with permission from The American Prospect, 5 Broad Street, Boston, MA 02109. All rights reserved
  • Bootie Cosgrove-Mather

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