Why Economic Populism Remains the Winning Ticket – The New York Times

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In “The Middle Out,” Michael Tomasky contends that Joe Biden is following a smart path in a time of growing inequality and financial distress.
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THE MIDDLE OUT: The Rise of Progressive Economics and a Return to Shared Prosperity, by Michael Tomasky
For those who see the Democratic Party in turmoil, poised to lose its razor-thin congressional majority in November, and then the White House in 2024, Michael Tomasky has a message for you: Calm down.
The party is back in good hands, moving cautiously to the left, where Tomasky, the liberal editor of The New Republic, insists it belongs. Democrats are most successful, he believes, when they focus on the economy and the ways in which big government can make the lives of ordinary Americans fairer and more secure. It’s been a winning formula since the days of Franklin Roosevelt, he writes in “The Middle Out,” an engaging, briskly paced mix of partisanship and history, and it has found a new champion in a president not previously known for his economic populism.
The story begins with F.D.R., the godfather of modern liberalism, whose New Deal programs provided a vital safety net for the hungry and unemployed without actually ending the Great Depression. World War II did that by creating millions of high-paying but potentially short-term jobs in the defense industries. Could full employment be sustained in peacetime, or would the nation sink into another depression?
The coming decades would turn out to be the most prosperous in American history. Wages shot up, unemployment remained low, the middle class exploded in size. And the key reason, says Tomasky, was the government’s unprecedented involvement in the economy — the Keynesian approach begun by Roosevelt and continued by future administrations, Democrat and Republican, until Ronald Reagan took office in 1981.
The 1940s and ’50s brought the G.I. Bill that provided returning veterans with a college education and generous mortgage assistance; the Marshall Plan that rebuilt war-torn Europe with American products; the National Interstate and Defense Highways Act that boosted everything from gas-guzzling cars to fast-food chains; and the enormous peacetime defense budgets that ballooned with each new Communist threat, real or imagined.
It was a heady but imperfect time. Racial and gender discrimination kept large swaths of the population from sharing equally in the bounty, while the curse of McCarthyism was on full display. Yet for all its faults, notes Tomasky, the nation enjoyed a “shared prosperity, compared with today.” People may not have known much about John Maynard Keynes, but they did learn to trust the government’s expanded role in their lives.
Tomasky pays particular attention to income inequality. Indeed, the book’s title refers to a “middle out” philosophy in which the government creates a more democratic economy, not a nanny state, by focusing on ways to enlarge the middle and working classes at the expense of the wealthy.
“We still had rich and poor,” he writes, comparing the early postwar years with our own, “but the rich just weren’t nearly as rich, and there weren’t nearly as many of them.” Rising corporate tax rates and higher brackets for the wealthy (larded, of course, with loopholes and deductions) allowed the government to spend as never before. It was a time, moreover, when the culture frowned upon the accumulation, and flaunting, of excessive wealth — when chief executives didn’t earn hundreds of times more than their workers, and when Major League Baseball players took off-season jobs to support their families.
When did the forces of free market capitalism re-emerge? In Tomasky’s telling, the first seeds were planted with the publication of Milton Friedman’s “Capitalism and Freedom” in 1962. Friedman, a professor at the University of Chicago, had spent much of his career writing libertarian tomes for fellow economists. But “Capitalism and Freedom,” which argued that government had no business doing most of what it did — be it running national parks or providing Social Security — reached a much wider audience.
“It was brilliantly titled,” says Tomasky, who portrays Friedman, a Nobel laureate, as both an ideologue and a tireless self-promoter. And it found a ready audience, “especially rich people, most of whom had always despised Roosevelt and Keynes and taxes and government but hadn’t had anyone of prominence and authority come along to start ripping the clothes off the emperor. Now they did.”
The tipping point came in the 1970s, when Friedman’s calls for privatization, tax cuts and deregulation gained political traction. Tomasky superbly reconstructs the ideas and personalities behind this “neoliberal” advance.
But he doesn’t connect them to the devastating events that caused Americans to lose faith in the government’s handling of the economy. There is barely a word about the OPEC oil embargo, the Iranian boycott or the appearance of “stagflation,” in which unemployment and inflation, normally polar opposites, rise in tandem. Even Paul Volcker, the Federal Reserve chairman whose draconian policies are credited with reversing the downward economic spiral, goes unmentioned.
While Republicans wear the dark hats in “The Middle Out,” Democrats to the right of Senator Elizabeth Warren fare poorly as well. “He was, in fact, the most economically successful president of the last 60 years,” Tomasky writes of Bill Clinton. Job creation surged, as did median family income. Inflation held steady and the massive deficit run up by Ronald Reagan disappeared. Indeed, Clinton handed George W. Bush the rarest of gifts: a $236 billion surplus.
So, what’s not to like? Tomasky faults Clinton’s most touted policies — welfare reform, financial deregulation, a balanced budget — for widening the gap between the rich and everybody else. It isn’t that Clinton was uncaring; Tomasky is careful to praise him for investing heavily in science and education and for raising the minimum wage. It’s rather that Clinton too often favored the free market when key decisions were made. As Tomasky puts it: “He said, famously, that ‘the era of big government is over,’ a phrase that will hang over his legacy forever.”
The consensus among the liberal economists and policymakers quoted in “The Middle Out” is that both Clinton and Barack Obama grew too close to their Wall Street and Silicon Valley donors, and that both feared the political fallout from being labeled big spenders. As such, they downplayed the legacy of Roosevelt and Keynes.
Enter Joe Biden, whose 36-year Senate career had been spent in the center lane of Democratic politics. Running for president in 2020, however, he moved decisively to the left — and for good reason, says Tomasky. The Democratic Party apparatus had become more liberal in recent years, fueled by activists and think tank intellectuals sympathetic to solving big problems through Keynesian means.
That included the pandemic that had upended the global economy. Only the federal government had the resources to confront it. Even the Trump administration had opened the coffers for vaccine development, while reluctantly supporting the $2.2 trillion CARES Act to keep the economy afloat. For Biden and his advisers, however, the pandemic exposed the inequities that Keynesian methods had mitigated in the past. Poorer Americans, especially Blacks and Hispanics, had higher rates of sickness and death. Many suffered from pre-existing conditions; others lacked transportation to vaccination centers; and few, by comparison, had the luxury of working from home.
Biden responded with a $1.9 trillion rescue plan that included enormous outlays for schools, public safety, health care and infrastructure — all geared to a future beyond the pandemic. Dramatic social change requires a catalyst, and in this case a deadly virus provided it. “The pandemic was a devastating tragedy,” writes Tomasky, “but politically speaking, it gave American liberalism an opening.”
Whether this will be enough to keep Democrats in control of Congress and the White House remains to be seen. Portraying big government as a friend of the working and middle classes will take some doing. Even the massive federal response to the pandemic that Tomasky praises has emboldened Americans who regard Washington as an enemy intent on further controlling their lives.
Still, says Tomasky, the liberal vision for America — that the nation is best served when prosperity is widely shared — will be a winner if Democrats can make the case that they “are far better stewards of the economy by every major measure.” It will be a tough sell, given current inflation and supply chain problems, but it’s an argument that has worked selectively in the past. On balance, history appears to be on Tomasky’s side.
David Oshinsky is a professor of history at New York University and a professor of medicine at NYU Langone Health.
THE MIDDLE OUT: The Rise of Progressive Economics and a Return to Shared Prosperity | By Michael Tomasky | 304 pp. | Doubleday | $28
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