I continue to be amazed at how the use of language has gotten skewed in America. “Conservative” and “liberal” were once descriptive (or at least the degree to which they were pejorative depended on who was using the term). Today, “conservative” means “responsible” and “liberal” is “out to get the rich and destroy the economy.” And of course, “populist” is a more active, and therefore more dangerous form of liberal.
Their language, and to some degree their proposals, reflect a striking contrast with the approach taken by Democrats during much of the 1990s, when President Bill Clinton asserted that trade would create American jobs and that paying attention to the concerns of Wall Street would help the economy by lowering interest rates. The more populist tone is one indication of a broader debate among Democrats over economic policy and how much they should break with the careful centrism of the Clinton years embodied by Robert E. Rubin, the former treasury secretary, who was a champion of free trade and cutting deficits.
So far, Republicans have, by and large, stuck by their free-market philosophy. They point to a rebounding stock market, declining deficits and steady if unspectacular economic expansion as evidence that conservative policies of tax cutting, less regulation and more trade are working.
Baker, an economist, will have none of it:
The NYT had yet another piece giving the conservative line in which policies that redistribute income upward are defined as being the “free-market,” while policies that promote equality are seen as government intervention. For example, the article touts the usual nonsense about “free trade” agreements implying that a system that subjects less educated workers to competition with people in the developing world, while largely protecting highly paid professionals, has anything to do with free trade.
The article also implies that negotiating drug prices with manufacturers is interfering with the market, while allowing them unfettered patent monopolies is a free market policy. And of course, having special low tax rates for private equity and pension fund managers appears also as free market policy.
It will be nice when the media will just tell us about the policies that politicians support and their implications and stop giving us their ideological spin.
And as to the “declining deficits” argument, have a look at a paper by Laurence Kotlikoff “Is the United States Bankrupt?” published by the St.Louis Fed last year. If you expect an article in that venue to be using such a lurid title for effect, you’d be incorrect. Kotlikoff argues that the US is indeed well on its way to bankruptcy, in the absence of some radical reforms, we will repudiate our debt via inflation.
Now this piece came out around the time Bush was trying to push through his Social Security reforms, and the center of the argument is we can’t afford our intergenerational transfers. Others have said that the big problem is Medicare, not Social Security, which is out of control because medical costs in general are out of control. If we addressed the medical cost problem, the intergenerational transfers become more manageable (a combination of lifting the payroll tax ceiling and raising the age at which one can access Social Security and Medicare would go a long way towards remedying the situation).
While one may take issue with Kotlikoff’s remedies, his assessment of the magnitude of the problem appears sound.