The G.O.P. Promotes Leftism
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Greg Ip, an economics columnist at The Wall Street Journal whom I admire, recently wrote a column lamenting the Democratic Party’s newfound hostility toward market economics.
“Where [Bill] Clinton once championed welfare to work and an expanded earned-income tax credit to help the working poor, party activists want the federal government to guarantee everyone a job, a $15 minimum wage and to tax companies whose employees earn so little they need food stamps and Medicaid,” Ip wrote. “Where [Barack] Obama backed a cap on carbon-dioxide emissions and tradable permits, party activists want to force the country off almost all fossil fuels in a decade via a Green New Deal.”
Ip concluded: “Yet before Democrats conclude markets are a failure, they should recognize that market-based mechanisms have in many cases not even been given a chance.”
The United States doesn’t have a meaningful cap-and-trade program for carbon emissions, he pointed out. The private insurance markets in Obamacare have been undermined by President Trump and other Republicans. The Earned Income Tax Credit isn’t nearly as large as it could be.
All of this is true. But the main reason that Democrats — including many centrist Democrats — are moving away from market-based programs is not that they have had a change of heart. It’s that they are coming to terms with political reality.
There are two big problems with market-based policies today.
The first is that most Republican politicians aren’t interested. They oppose almost any ambitious government policy, market-based or otherwise. Today’s Republican Party is adamantly opposed to fighting climate change, expanding health insurance or to reducing income inequality.
And if Republicans are going to fight or undermine them, market-based programs probably aren’t going to happen. Such programs are often designed to be a compromise between the two parties — policies that essentially use the market to correct a market failure. I realize that some people would argue that Democrats should still promote market-based programs even if Republicans won’t.
But that brings us to the second problem.
These programs tend to be more technocratic and complex than direct government programs. As a result, they also tend to be less popular with voters. Medicare is more popular than the Obamacare insurance exchanges. The basic idea of a Green New Deal — subsidizing clean energy — is more popular than a carbon tax. A higher minimum wage is more popular than an intricate series of tax credits for job retraining.
The bottom line is that Democrats would be foolish to push for complicated market-based policies when Republicans are hostile and voters are skeptical. Yes, these policies have the potential to be more efficient than direct government benefits (which is why policy wonks like me and Ip like them). Sometimes, though, market-based programs are more efficient only in a theoretical world where politics doesn’t intrude. To take Obamacare as an example, the direct expansion of government health insurance — through Medicaid — has worked better than the private markets.
When there are government expansions that can strengthen the country, Democrats should pursue them, without apology. And when Republicans are again willing to consider market-based programs, Democrats should remain open to compromise.
Until then, the Democrats’ newfound skepticism of market-based policies is the only rational response to a radicalized Republican Party.
Related: My recent Magazine piece delves further into this subject, with a focus on climate policy.
The Argument, live
Ross Douthat, Michelle Goldberg and I had a great time taping our podcast, “The Argument,” before a live audience in New York last week. You can listen to the episode here. We deliberately picked topics — immigration politics and 2020 Democrats — that are as relevant this week as they were last week.