Tuesday, July 25, 2017

So, Do We Have a Plan?

Well, sort of....With the release of the Democrats' "A Better Deal" plan they do have an opening bid on an economic message for 2018. This is a step forward from running against the Many Bad Things about Donald Trump. 

But is it sufficient? I'm not so sure. As summarized in a useful Vox article, the plan basically has three components:

  • Break up consolidated corporate power through tougher merger standards and a new federal "trust-buster" agency.
  • Crack down on prescription drug pricing by using Medicare Part D to negotiate drug prices.
  • Job creation through infrastructure spending and tax credits.

This all seems laudable if not terribly exciting. And the tag line, A Better Deal, is not terrible but not great either. Who can remember all these "Deals"?

No doubt a lot of populist rhetoric will be deployed along with the various specific proposals. That's fine. But at its core it does sound a bit too much like the same old same old.

Better I think would have been some attention-grabbing signature proposal. For example, in the Center for American Progress’ Toward a Marshall Plan for America (full disclosure: I work at CAP and was a co-author of the paper), a domestic Marshall Plan for jobs and community investment is proposed that includes a jobs guarantee through "a large-scale, permanent program of public employment and infrastructure investment". The proposed infrastructure investment includes not just roads and bridges but also central community institutions like schools and child care centers. The overall intent is to revitalize communities where noncollege workers are falling farther behind the rest of America.

More generally, I don't see why Democrats don't put down a bigger bet on economic growth. The best answer to Trump's assertions that he will create 3 percent (or more!) economic growth is not to say that economic growth faster than 2 percent (the "new normal") is impossible but rather to argue that his terrible policies and handouts to the rich will do nothing to actually increase economic growth. But faster economic growth is possible--whether it is 3 or 2.5 percent--with the right policies including (fill in your investment, infrastructure and full employment agenda here).

The whole new normal thing is a classic example of "presentism" that the left should reject. As Neil Irwin noted in the New York Times' Upshot, the idea that productivity growth can't get any better than it is now is highly suspect. Rather than low productivity causing slow growth, it could be that slow growth is causing low productivity. Run a high pressure economy, with tight labor markets and rising wages--as Democrats should be advocating--and we may very well be surprised at the resulting productivity performance. 

This point is developed in detail in chapter three of my book.

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