The New York Times reports that 'Rubinomics' is no longer the unchallenged economic philosophy of the incoming Democratic leadership. Rather, 'populism' is in vogue. It's both interesting and instructive that the new Democratic leaders are trying to replace an economic program with a political philosophy most closely associated with the late 19th century:
...Overcoming protests from labor unions, a traditional constituency, the Clinton administration vigorously supported free trade agreements like Nafta and agreed to China’s admission into the World Trade Organization. If there was damage to workers, then the Clinton camp proposed dealing with it after it occurred — through wage insurance, for example, or worker retraining and other safety-net measures.
This approach coincided with a period of economic prosperity, low unemployment and falling deficits. Over time, this combination — called Rubinomics after the Clinton administration’s Treasury secretary, Robert E. Rubin — became the Democratic establishment’s accepted model for the future.
Not anymore. With the Democrats having won a majority in Congress, and disquiet over globalization growing, a party faction that has been powerless — the economic populists — is emerging and strongly promoting an alternative to Rubinomics.
The populists argue that the national income has flowed disproportionately into corporate coffers and the nation’s wealthiest households, and that the imbalance has grown worse in recent years. They want to rethink America’s role in the global economy. They would intervene in markets and regulate them much more than the Rubinites would. For a start, they would declare a moratorium on new trade agreements until clauses were included that would, for example, restrict layoffs and protect incomes.
“We are at a point where the Reagan era might finally be over, including the eight years of Bill Clinton,” said Jeff Faux, a fellow at the Economic Policy Institute, a labor-oriented research group partly financed by the A.F.L.-C.I.O. “The historic juncture here is whether the Democrats can come up with policies that get to the level of the problem...”
Economic populists in and out of Congress are organizing to push their proposals, coalescing around the Economic Policy Institute. The A.F.L.-C.I.O. is a very visible member of this coalition. Unions have gained political influence because of their get-out-the vote role in battleground states like Ohio, where Democrats made substantial gains in the midterm election.
“We feel we have a stronger voice now in the deliberations of the Democratic Party,” said Ronald Blackwell, the A.F.L.-C.I.O.’s chief economist.
Just as the populists have organized, tentatively calling their group Shared Prosperity, so has the Democratic establishment. Its counterpart is “the Hamilton Project,” formed last spring to elaborate policies in anticipation of a Democratic Congress and, in 2008, a Democratic victor in the presidential election. Mr. Orszag, who was a senior economist in the Clinton administration, directs the project. The financing comes from wealthy Democrats, among them Mr. Rubin.
As the two groups face off, Lawrence Mishel, president of the Economic Policy Institute, contends that the populists are pushing much harder than the Rubinites for government-subsidized universal health care. They also favor expanding Social Security to offset the decline in pension coverage in the private sector...
Read the whole piece, for a great look at a significant fight in the Democratic party. It's fascinating to me that the Left is continuing to fight against Clintonomics by calling it an extension of Reagan's economic policies. If that were the case, what was the big fight over in 1992? Didn't Clinton say something about 'change,' and doing something new with the economy?
But I digress.
The real excitement here is that labor unions and others are now pushing the Democratic party to promote policies that have consistently led to poor income growth, poor job creation, and economic stagnation. Do they not know that other countries have experimented with higher taxes, increased government benefits, expanded regulation, bans on firing employees, and protectionism? The record has not been all that great.
If Democrats abandon the formula that won Bill Clinton the support of the middle-of-the-road voter, in favor of the populist, protectionist snake-oil that has been rejected every time it's tried, their majority will be brief indeed.
Funny, that's a phrase that's getting repeated quite a bit, what with Murtha, the draft, insults to the military, and all sorts of things the Democrats are talking about since the election.
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