A Progressive's Guide to Populist Economics

The American economy is doing badly. The boom of the "roaring '90s" has vanished, replaced by a fragile "jobless recovery" with insecure foundations. The end of prosperity -- of growing wealth, rising pay and plentiful jobs -- coincided with the arrival of George Bush in the White House, raising inevitable questions about whether the new President is to blame for the country's changing fortunes.

The short answer is yes. The boom of the '90s was bound to end sometime, but the Bush administration took a bad situation and made it much worse by cutting taxes, loosening regulation over corporations, imposing destructive protectionist measures and spending freely on foreign wars.

Democrats ought to make hay over Bush's economic failures, but they are failing to do so for two reasons: Bush has engineered a phony economic recovery; and the progressive remedies for American economic weakness are hard to sell politically.

The Phony Recovery

Bush engineered rapid growth in the second half of 2003 through enormous borrowing by the federal government coupled with tax cuts. Combined with low interest rates, the easy money got consumers spending, but because there remains a glut of capacity in both industry and services, corporations have responded by continuing to pare jobs and restrain their own investments. The result is jobless economic growth.

For the moment, Bush gets to claim that he has righted the economy. But only for the moment. The Federal Reserve, in late January, signaled that it may soon raise interest rates, because of growing concerns over inflation. The mere specter of a rate-increase appears to have ended the latest stock boom. Meanwhile, the outlook for new employment is poor, raising the odds that when voters go to the polls in November the Democratic presidential candidate will be able to say that Bush's first term cost 2.5 million American jobs.

The Hard Sell

Despite America's dismal economic performance under Bush, restoring policies that promote equitable and sustainable growth remains difficult. The remedies -- higher taxes, more government regulation of business, and the restructuring of government programs to benefit the swelling ranks of the poor and lower-middle class -- are not generally viewed as politically attractive. How can Democrats present a progressive economic program that is at the same time politically popular? The outcome of the presidential election will likely turn on this question.

Bashing greedy corporations and unethical executives will only get Bush's opponents so far. A positive plan is needed. Democratic candidates for President are, significantly, calling for a reversal of some of Bush's tax cuts. Such a reversal would help undo the economic damage of Bush's presidency. More taxes will raise government revenues, thus reducing the huge deficits that are otherwise likely to burden the government for many years. But in order to succeed with a tax-increase message, Democrats must re-frame the issue of taxes as one about investment in the country's future. Paying taxes must also be framed as a variety of patriotism -- and an especially important symbolic act in a time of threats to U.S. security.

Merely calling for an increase in taxes isn't enough. Democrats need an array of fresh economic ideas that excite voters who are listening to a barrage of dissembling from the Bush administration. Without new ideas suited to a new economic moment, Democrats won't defeat Bush in November. Before we address ways in which Democrats can frame economic alternatives in ways that make them popular politically, let's review the core economic principles that distinguish progressive Democrats from profligate Republicans.

Understanding the Principles

Democratic economic principles are defined by the following: