EZRA KLEIN: How liberalism could dream bigger
Sunday, Feb. 13, 2022 -- Most liberals can list the programs they want the government to create or expand. Fewer can name the five technologies they want the government to finance or the five scientific challenges they want to see it mobilize to solve. But technology is central to how we make the future look different from the past. To leave that to the market, or to think it apolitical, is abdication.
Posted — UpdatedIf you had to distill the ambitions of the Democratic Party down to a single word, you might well choose “Denmark.” But “France” would also work. Or “Germany.” Any Western European nation, really, with the social insurance options many of us envy: universal health care and affordable child care, to name but a few. Much of modern American liberalism is designed to close those gaps, to build here what already exists there.
I hope to close those gaps, too. But what about building here what does not already exist there?
Over the past few years, social insurance programs did much to ease suffering, but it was mRNA vaccines that did the most to protect human life. And this points toward a place where American liberalism could dream bigger dreams. Most liberals can list the programs they want the government to create or expand. Fewer can name the five technologies they want the government to finance or the five scientific challenges they want to see it mobilize to solve. But technology is central to how we make the future look different from the past. To leave that to the market or to think it apolitical is abdication.
That’s a change. Supply-side economics has traditionally been the redoubt of Republicans. They, too, said the economy didn’t have what it needed to grow as it could. But they believed the problem was too much government and too little private capital and dynamism. The rich needed more reason to work. The poor needed more punishment if they didn’t work. Corporations needed more reason to invest. Their prescription followed logically: tax cuts for the rich, spending cuts and work requirements for the poor, and a bonanza of financial and environmental deregulation.
Yellen is arguing that even where Republicans succeeded, they failed. The growth we’ve had in recent decades isn’t an unalloyed good. Too much of it has gone to the rich, and too much of it has rewarded those who are accelerating a climate crisis. “We aren’t just focused on achieving a high top-line growth number that is unsustainable,” she said. “We are instead aiming for growth that is inclusive and green.”
My worry is rather the opposite: that the Biden administration’s supply-side agenda is stuck in the past and not yet imagining the future.
In her speech, Yellen gave three examples of the new supply-side economics, all of them drawn from Biden’s foundering Build Back Better agenda. First, increasing the supply of workers “by making it easier for working-age parents to participate in the labor market.” She pointed to a few policies that fit: expanded prekindergarten, paid leave, subsidies for child care, subsidies for elder care and a bigger earned-income tax credit. Good ideas, but hardly unfamiliar.
Second, making workers more productive. Here, she name-checked investments in community college; in worker training; and in broadband, ports, basic scientific research, rail and renewable energy infrastructure.
Finally, Yellen talked about Biden’s tax agenda and, in particular, the effort to impose a global minimum tax. That would raise U.S. tax revenues, which could finance more investments, and push companies to compete based on production and innovation rather than by gaming tax systems.
Part of the problem here is that Yellen is trying to fit her modern supply-side economics to the existing Build Back Better agenda. Ben Harris, her assistant secretary for economic policy, said as much. “The idea was to be forward-looking,” he told me. “The second part driving it was that there didn’t seem to be a good organizing principle of what Build Back Better was designed to do.”
But that will require resolving two fundamental tensions in how Democrats conceive of not just what the economy needs but what the government can do to help and how to know when what the government is doing has hurt.
Many Democrats still fear the dreaded specter of “industrial policy” — of government picking winners and losers and wasting money or reputation on bad bets and patronage. That pushes them to extremely general goals: more workers, or more research, or more broadband.
But that fear is now matched by a horror of where markets are leading us: into climate crisis. Here, the Biden administration gets specific. It names the technologies it wants and the kinds of infrastructure we lack: better batteries, more electric car charging stations, cheaper solar panels and next-generation geothermal and nuclear technologies.
Yellen doesn’t see this as a tension. The government’s role is to step in when markets fail, and climate change is a market failure. “There are areas where you can say the private sector doesn’t have sufficient incentives to engage in applied research we need and that would easily pass a cost-benefit test,” she told me. “Environmental economics is one clear example of it.” But is climate change truly such an exception? Take the pandemic we’re living through now. The private sector doesn’t have the incentive to build and maintain the vaccine manufacturing capacity necessary to inoculate the world against rapidly evolving strains of a pandemic virus. Nor did it have reason to stockpile the masks and tests and assorted other materials we needed.
Alec Stapp, co-founder of the Institute for Progress, had a formulation here that I liked. “This isn’t about government controlling the means of production,” he told me. “It’s about government controlling the ends of production — deciding what we are producing toward, what we are building for.”
“Part of the thesis of COMPETES is, yes, we’ll do cutting-edge science research,” said Rep. Ro Khanna, D-Calif., a key backer of the bill and author of the new book “Dignity in a Digital Age.” “But we’re also going to pay attention to production and commercialization. We need to be a nation of producers. And that was one of the biggest obstacles: this sense of, are we diluting pure science? Are we making it too industrial and too commercial?”
These are strange questions for politicians to agonize over. They reflect the long sweep of anti-government rhetoric in America. Picking winners and losers means picking some losers. Venture capitalists can brag about their failures, but bureaucrats are flayed for them. That the Obama administration funded Solyndra is canon. That the same program threw a lifeline to a struggling electric car manufacturer named Tesla is trivia. Democrats have run scared from accusations of big government for decades, so they continue to try to show that they will leave the market to its magic, the scientists to their beakers, and confine government to cushioning the blows or looking after the children.
When I asked Wilson how the COVID-19 mobilization compared, he sounded almost sad. “I haven’t been particularly impressed with the government’s imagination or the speed and size of the response,” he said. But he also thought it was predictable. “The New Dealers or World War II builders are dead and gone. My lifetime has been a story of a shift toward another sensibility of economics and politics, where that kind of aggressive government building is looked down upon as backward and inefficient. There’s been an ascendance of thinking markets can solve the problem more quickly.”
If Democrats don’t always admit how much government can do to help, they also don’t always admit how much it can do to hurt. The market would build more housing if local zoning czars would let them. Companies were clamoring to sell more rapid tests earlier, but the Food and Drug Administration wouldn’t let them. All across the country, nuclear and solar and wind projects are being tied up in red tape.
You can go too far with this, and Republicans often do. The frustrating truth of regulation is, there’s no one position you can have on it. Good regulations are good; bad regulations are bad. But bad regulations are hard to unwind, and they’re often unseen.
This is a view Yellen shares. “In some cases, regulation can have costs that greatly exceed the benefits,” she told me. “I’m no expert on housing, but in many localities, it seems the restrictions on local zoning make it extremely hard to build affordable housing and keep prices high. There certainly is some effort in the administration to convince states and localities to ease regulation to increase the supply of affordable housing.”
That effort needs to become louder and more insistent. If Democrats want to claim a bigger role for government in shaping our future, they need to be the ones who are most outraged when it is government that is holding us back.
But to do that, they need a vision of America’s future that’s not just lifted from Western Europe’s past.
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