REAGANOMICS V. BIDENOMICS
“For riches and reputation and power, if devoid of wisdom and of moderation in conduct and in the exercise of authority, are characterized by shamelessness and insufferable arrogance. There is, indeed, no uglier kind of state than one in which the richest men are thought to be the best.”
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Cicero, On the Commonwealth (I, 34)
A constant refrain from ideological conservatives is that the Democratic Party is wrong for America because it is devoted to turning the USA into a “socialist state.” This of course is nonsense and is used as a scare tactic, given how the word “socialism” has been used indiscriminately to refer to authoritarian states such as the former Soviet Union. The USA has always had a “mixed” economic system involving both free-market capitalism and socialism, starting with the Post Office, a government-controlled agency for delivering mail explicitly authorized by the Constitution.
So, with the “socialist” canard dumped into the junk folder, what is the basic difference between the Republican and the Democratic economic program?
Present Republican economic theory, variously called “top-down,” “supply-side,” “trickle-down,” or “Reaganomics,” holds that material prosperity is best achieved by lowering taxes, decreasing government regulation, and allowing free trade. It’s called “top—down” because its focus is on the producers, those who supply goods and services. Through governmental legislation favoring these producers, they supposedly can produce more and better goods and services, hire more workers, and lower prices (via competition with other producers). Thus, material prosperity should “trickle down” throughout our society. This is the theory. The problem, however, is that this theory obviously is not working today, and indeed it has never worked.
The problem with lowering taxes, especially on the wealthy, is that instead of using their extra cash on investing in production—thus providing jobs, more and better goods and services, lower consumer prices—the wealthy have simply invested their money in financial markets and bought stock in their own companies, thus increasing their personal wealth. The problem with decreasing government regulation is that, in their pursuit of profit, entrepreneurs and corporations seek to minimize their expenses any way they can, thus, for example, making the pollution and environmental degradation they cause someone else’s problem. Were it not for government regulation, such as the Fair Labor Standards Act of 1938, desperate families would still be sending their young children to work in factories and mines for survival wages. Were it not for government regulation via the Environmental Protection Agency, the Olin Corporation would still be dumping 26.6 pounds of mercury a day in the Niagara River in upstate New York. The problem with free trade is that corporations are free to send their manufacturing operations overseas to take advantage of extremely cheap labor, thus avoiding the expense of compensating domestic workers who, to survive if not to moderately prosper, need a living wage. And of course corporations can park their money and let it grow in tax havens like the Cayman Islands, thus increasing the tax burden on the middle class, until our government tells them they can’t do that.
Here’s why Reaganomics doesn’t work. Since the primary driver of the entire system of capitalism is the profit motive, the producers are in competition with each other to increase their market share (the demand of consumers for their products). The more a producer’s goods and services are purchased on the free market, the more profit (the difference between production expenses and income) the producer makes. Increased profit means increased wealth, and wealth is a kind of power – the capacity not only to influence one’s own life destiny but the life destinies of others. The pursuit of material wealth is, then, a pursuit of power, one of the deepest motives of human behavior. And it is here that the whole edifice of Republican “top—down,” supply side economic theory shows its flaws. It naturally leads to a kind of plutocracy, or, in effect, the rule of the wealthy, who use their wealth to support policies and politicians who pass legislation that favors the wealthy. The logic of deregulated capitalism has now led, as it did during the “Gilded Age” of the 1870s and the “Roaring 20s,” to 1% of the population holding 40% of the national wealth, while the bottom 90% –that’s you and me, folks-–hold less than 25% of the national wealth!
The “rising tide that lifts all boats” was an apt metaphor to describe the national economy from the end of World War II in 1945 up to about 1970. Wealth was distributed evenly and everyone benefitted. Since then, largely due to Republican “supply-side” economics, the top 10%, following the logic of the profit motive, invested in themselves rather than in measures that produced economic growth and fair distribution. Infrastructure, public education, environmental issues, labor unions and workers—all these and more suffered losses that resulted in, among other things, the rise to the presidency of a vulgar selfish demagogue who epitomizes everything that is wrong with the legacy of the “Reagan Revolution.” By preying on what he called from one side of his mouth the “losers” (everyone but the financial top 10%) and from the other side of his mouth “great patriots,” Donald Trump targeted and fed the anger, frustration, and resentments of all those who since 1970 have seen their previous prosperity drain away, convincing them that their wealth was going, not into the pockets of the plutocrats, but rather the pockets of immigrants, deadbeat welfare cheats, and a smug college-educated elite.
To counter the Republican-sponsored economic disaster, President Biden has repeatedly used the phrase “bottom-up and middle-out” to describe the economic theory favored by the Democratic Party. It is a form of “demand-side” economics, also called “Bidenomics,” and it holds that material prosperity is best achieved by favoring the broad middle class rather than the rich: increasing the tax rate on corporations and of those earning over $200,000, increasing the minimum wage, expanding access to healthcare, instituting a childcare tax credit, expanding worker training, investing in clean energy and infrastructure, forgiving student loan debt, and recognizing the growing economic threat of China in its bid for hegemony. These policies are a much-needed corrective to the failed policies of the past 50 years. Instead of providing incentives for the wealthy to invest their capital in ways that would benefit everyone—something the wealthy have stubbornly refused to do—Biden’s plan is to reverse the flow of the national wealth to the top 10% and redirect it to the rest of us. Conservatives who complain that this policy interferes with the “internal regulation” of the free market disingenuously ignore the effects of decades of lowered taxes, loopholes favoring corporations and the rich, government deregulation, and increased government spending. All of these policies interfere with the so-called “invisible hand’ of the free market. It is “social engineering” for the rich instead of everyone else.
The fundamental flaw in Republican conservative-libertarian economic policy is its basic premise that we human beings are essentially individuals or autonomous agents, and that the primary function of government is to provide a structure of laws that enable us to function freely and independently as we see fit. This premise is false. The whole political tradition of humankind, whether from Plato and Aristotle in the Western tradition or Confucius and Kautilya in the Asian tradition, is based on the premise that we are essentially social beings. That means that the fundamental essence of humanity is not the individual but the group or community. The Western tradition, beginning in the Enlightenment period (during which the United States was founded) and coming to a head in the Romantic period (starting with Rousseau), as it were, invented “the individual”—a unique being with the freedom to act independently on his (and eventually her) own volition and inclination. This was a great invention (or discovery, if you wish), and it led to the Bill of Rights being added as a stunned afterthought to the great U.S. Constitution. It must be stressed, however, that this notion of “the individual” is not absolute. It must be balanced in equipoise with the fundamental premise that we are essentially social beings. The notion of “the individual” is a value, a powerful idea; but our essential social nature is a fact.
We are indeed, through our tradition, individuals; but we are also members of a community, and not one merely determined by consanguinity but one organized to achieve justice. Such a community is a political community. In the terms of the above argument, justice would be achieved when the rights of free individuals would be balanced by the right of their community to have its common needs satisfied.
We are like sailors on a ship – the “ship of state,” if you will. Most of us are common seamen; some are cooks and carpenters and other tradesmen; some are officers; one is the captain. We all have our private lives, but we also have our jobs and responsibilities, and we all must do our part. A few – the very young, the very old, the infirm — may be passengers, but they utterly depend on us, as we depend on each other. If the cook gives us spoiled food, we get sick and are unable to perform. If the carpenter saws a board too short, the ship leaks. We all are responsible for “the ship of state.” We sink or we sail together.
RES PUBLICA 