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The Democrats’ Failure Is Complete

July 25, 2022 | Author: | Posted in Uncategorized

Joe Biden once dreamed of an FDR-size domestic-reform agenda. But the collapse of negotiations in Congress on the compromise of the compromise of that agenda will ensure he achieves nothing of the sort — not Roosevelt-size, not Obama-size, nor even Clinton-size. (Bill Clinton managed to increase taxes on the rich, expand the Earned Income Tax Credit, and create a health-care benefit for poor children.) In addition to losing its chance to address any domestic social need in an enduring way, the administration is also having imperiled its global leadership on climate change and a global corporate minimum tax, two measures that hinged on Biden getting his own country’s house in order.

It would be unfair to measure the Democrats against the full-bloom version of their most ambitious measure. They deliberately set out the most ambitious version of their agenda at the beginning in the understanding it would have to shrink — and indeed, not all the components had the administrative capacity to be enacted anyway. Razor-tight margins of control in both chambers of Congress always meant compromise would be necessary.

At the same time, by realistic or even minimal standards of performance, this two-year term, almost certain to be the last period of Democratic-controlled government for the foreseeable future, has been a failure. The ramifications of this defeat — political, economic, and ecological — will reverberate.

The official cause of death for the Democrats’ domestic ambitions was a decision by Joe Manchin to back away from measures he had previously supported, citing rising prices. “Senator Manchin,” according to his spokesperson, “believes it’s time for leaders to put political agendas aside, reevaluate and adjust to the economic realities the country faces to avoid taking steps that add fuel to the inflation fire.” (On Friday morning, he claimed to still be open to a larger bill, down the road, pending new data on inflation.)

This explanation makes no sense. Manchin had framed the latest version of the bill, which would have reduced the deficit, as a plan to reduce inflation. And while the counter-inflationary effects would have been small, this ambition was at least directionally correct. Measures to restrain prescription drug costs, produce more energy, and increase tax revenue all would have placed at least some downward pressure on prices. Manchin said as much in public. He is now saying that high inflation requires him to abandon plans to fight inflation.

But Manchin is merely the most prominent author of a catastrophe that has a thousand fathers. More facts are certain to emerge in the coming days and weeks. (Those privy to negotiations had every reason to withhold their complaints while success remained possible — collapse will open a floodgate of recriminations.) Even so, several broad causes are already apparent.

The administration’s broad strategy was to use its first major piece of legislation, enacted at the crest of Biden’s political capital shortly after he took office, to stimulate the economy as it recovered from the COVID recession. Only after that would they craft enduring social reforms. The theory, which seemed logical to many of us at the time, was to first ensure a prosperous economy and then leverage the political benefit of that prosperity to pass permanent social-welfare measures. Instead, the American Jobs Plan overshot, injecting more demand into an already heating economy. It did not cause high inflation, but it exacerbated it. And thus, rather than producing a prosperous economy that gave Democrats more confidence to pass Biden’s domestic agenda, it led to a sour inflationary economy that had them running for cover.

Lawrence Summers, the Democratic economist and former Treasury secretary who has warned about inflation and been cited by Republicans, has also said Biden’s long-term domestic-spending measures would not worsen inflation and urged them to pass them. But economic reason gave way to hysteria and folk wisdom. Conservatives kept citing Summers’s concerns about inflation as a reason to vote against a bill Summers insisted would not aggravate inflation.

Biden’s plan did include one measure that Democrats intended to seed permanent reform: an enhanced child tax credit. The bill funded the payments for just one year. They believed the payments would prove so popular that the public would demand they continue. Social scientists have unequivocally shown the payments reduced child poverty by impressive levels without the side effects on parental work effort that conservatives warned about. Yet Manchin opposed extending the payments anyway — reportedly muttering in private that his constituents were squandering the money on drugs — and political demand to continue them never materialized.

The failure of this broad strategic gamble was followed by a series of smaller tactical errors. Manchin remained willing to support sizable measures, privately agreeing with Majority Leader Chuck Schumer to vote for a trillion-and-a-half-dollar bill in the fall, and then bungling a negotiation between Manchin and Biden in the White House. (The hypersensitive Manchin demanded the White House refrain from naming him as the instigator of a pause in negotiations; inexplicably, a White House spokesperson triggered him anyway by naming him in a statement.)

As the top-line cost of their bill shrunk, Democrats proved unable to prioritize their competing social demands. Rather than anger professional advocates for any of the social spending programs they had supported by removing some programs to save the rest, Democrats continued pretending for months that somehow all their programs could be preserved. They used budget gimmicks to phase in and phase out different programs, to make it appear they were spending less than their programs would actually cost. Manchin rightly demanded they abandon those gimmicks — but the time it took for Democrats to finally comply wasted precious months when the window for agreement was still open. (He has since abandoned his one sensible negotiating principle, and is now supporting a two-year extension of Obamacare subsidies.)

In the final weeks, Manchin returned to the bargaining table with a deal that still would have counted as a substantial achievement. The plan would have raised taxes on the ultrarich and allowed the federal government to save money by negotiating the cost of some prescription drugs. The proceeds from these measures — likely around a trillion dollars — would have been split between deficit reduction, energy investments (short-term fossil-fuel production, and long-term green-energy investment), and enhanced support for tax credits to help people buy health insurance.

A key faction of Democrats in the House, along with Senator Kyrsten Sinema, blanched at the tax hikes. Moderates have been privately coordinating their opposition, and it seems very likely that Manchin’s sudden opposition to raising taxes on the rich comes not from him, but from them — he sometimes takes the heat for fellow Democratic moderates. In this case, he is likely channeling their concerns and passing them off as his own.

The persistence of Democratic opposition to raising taxes on plutocrats remains the party’s most damaging political liability. The party’s political and policy agenda hinges on taxing the wealthy. As a political matter, taxing the rich is highly popular. The proceeds from those taxes allow Democrats to spend money on other popular causes. In theory, this method can only work for so long, until you run out of efficient and productive ways to raise taxes on the affluent. In practice, the American tax system is nowhere near that point. It is shot through with loopholes and giveaways that sober, moderate economists believe can be closed without creating economic drag. This is free money on the sidewalk that a handful of Democrats refuse to let their party pick up. And the reason is simply that they listen to rich people rather than economists.

Donald Trump was able to unite his party behind an unpopular tax cut for the rich. Biden was unable to unite his party behind a popular reversal of that bill, or even a partial reversal. Political scientists have an explanation for both these things: The wealthy hold a disproportionate influence on both the elite in parties, pulling Democrats to the left of their voters on social issues, and Republicans to the right of their voters on economic issues.

Stripped of their ability to run on taxing the rich, Democrats lose the backbone of their populist connection to Americans of modest means. The party’s long-term political crisis is rooted in the defections of its non-college-educated voters: The white working class has fled, and now the non-white working class is beginning to drift away, too. The party is being trapped in a worldview shaped by the cultural priorities of its college-educated elite.

Democrats such as Sinema and House moderate Josh Gottheimer pose as enemies of their party’s socially liberal identity, but they have more responsibility than anybody else for its persistence. Without their popular economic message of taxing the rich and helping the working class, there is little left for the Democrats but social issues.The Democratic Party, like any successful party, needs to accommodate a broad range of viewpoints. Refusal to accept pragmatic and efficient tax hikes on the rich is one position Democrats simply cannot tolerate. Here is one place where sacrificing a few recalcitrant candidates for office would bear long-term fruit.

In the meantime, Democrats are staring at a political abyss whose bottom cannot be seen. The short-term political dynamics of an economy suffering from global inflation are punishing. The long-term prognosis of the party’s alienation from its multiracial working-class voters is grim. And the specter of the Republican Party’s descent into authoritarianism looms over everything.

Democrats needed to rise to the challenge of proving they had the capacity to use their limited powers in creative and productive ways. It is almost impossible to imagine now they will be able to say they succeeded.

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