Biden Wants to Change How We Think About the Economy
Joe Biden’s economic plan, Build Back Better, is not just a change in strategy. It is a different way of thinking about the economy and the forces that drive it forward. Workers matter.
The prevailing economic policies of the past 40 years have reflected the Chamber of Commerce mantra that business is the “job creator”. Capital investment is the force that drives the economy. The rest of us, workers and consumers, play no essential role. We are beneficiaries of the initiative and industry of the job creators.
We should be grateful. There is the threat, spoken and unspoken. “We will bring our jobs to you only if you lower our taxes, reduce regulations, accept lower wages, and give us cash incentives.
We remember Scott Walker’s commitment to Foxconn of $3.5 billion if they brought their new factory to Wisconsin. And the bidding wars that Amazon started for their new distribution centers.
“Supply side economics” was the theory that justified the competition to offer the most lucrative incentives to business. If capital investment is the force that drives everything else, it makes sense to give capital all the goodies. The rest of us will share the gains in the long run as benefits trickle down through the economy.
But that hasn’t happened. The theory doesn’t work. Inequality has grown to record levels. Increases in wealth and income have stayed at the top. Today, the wealthiest 1 percent own more than the total owned by 90 percent of the population. The top 1 percent of income-earners make more than all of the bottom 50 percent of earners combined.
Over the same time a large chunk of the total tax burden has shifted from corporate profits to workers’ wages. The costs of education, health and housing are taking up larger shares of personal income. The middle, between the rich and the poor, has shrunk.
Build Back Better seeks to reverse all that. It is based on a different theory, one that draws on more classical economics. Workers are as important to the economy as investment. It is the joint effort of labor and capital that moves us forward.
Investing in workers, teaching new skills, lowering the cost of education, providing the social supports that make holding a job easier and less stressful, not only make the economy more productive, work is more satisfying and more rewarding. By putting resources where they are now scarce, inequality is directly reduced.
Two years of free community college, expanded opportunities for technical education and apprenticeships and increases in college scholarships will build human capital. Expanded child and home health care, paid family leave, and lower health costs make joining the workforce possible for more of us. All paid for by undoing some of the tax cuts given to those who benefited the most from the economic policies of the last 40 years.
Why is reducing economic inequality important? It is a matter of justice and survival. Going back as far as Aristotle, it has been recognized that economic inequality results in political instability. When the division of the economic pie is not perceived as fair, that the slice one is served does not reflect one’s effort and contribution, people get restless and look to change their circumstances, by force if necessary.
The French, Russian, and Chinese revolutions all took place in countries with vast differences in wealth. In recent months, protests in Chile, Lebanon, Tunisia, Thailand, and even the yellow jacket protests in France have been fueled in part by inequality.
Absent intentional policies to limit it, economic inequality grows naturally. The rich get richer; the poor get poorer. Even China, ruled by a communist party that originally promised equality, has found it necessary to embark on a policy of “common prosperity” to combat rising economic inequality that by some measures comes close to the United States.
The specifics sound familiar. According to the New York Times China’s goals include increasing the incomes of workers and reducing the costs of education, housing, child care and health. Also being considered, stronger collective bargaining for workers and giving them shares in company profits. Large companies are being told to share their wealth.
President Xi Jinping is quoted, “We cannot let an unbridgeable gulf appear between the rich and the poor.”
We usually think of the global contest among nations in military terms. Who has the soldiers and the weapons. Biden sees the contest as a political contest. “We have to prove democracy still works. That our government still works … It is clear, absolutely clear ... that this is a battle between the utility of democracies in the 21st century and autocracies … can you get consensus in the timeframe that can compete with autocracy?”
The votes in Congress over the next month or so on Biden’s economic plan to reduce inequality will be one answer to that question.
The stakes are high. When democracy doesn’t work, autocracy takes its place. Is our politics so dysfunctional we can’t do what is necessary to heal our divisions and restore a common purpose?
Douglas Kane is the author of "Our Politics: Reflections on Political Life" published in 2019 by Southern Illinois University Press
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