The New Populism, if it exists, and isn’t just a creation of Washington villagers wanting to give an attractive name to the new feint of the Administration toward the progressive base of the Democratic Party, can be a turning point for America’s domestic economy, but only if it can avoid certain tropes, shibboleths, and myths that people associated with it, such as Bernie Sanders, and various other supposedly “left” members of the Democratic Party in Congress seem to delight in reinforcing. Again, Robert Borosage’s little piece on “The New Populism” provides more examples of such tropes:
Much of this debate has been framed around the faltering recovery, as the Congress perversely punted on the opportunity to rebuild America when we could borrow money for virtually nothing, with construction workers idle and eager to work. But in the end, this is a question of making the public investments we need, and paying for it by ending the tax dodges and tax breaks that enable the rich and the multinationals to avoid paying their fair share of taxes. The Congressional Progressive Caucus budget shows what is possible, while still bringing our long-term debt under control.
Well, Congress did that, and the Treasury certainly could have borrowed “money for virtually nothing,” and spent it on infrastructure and the public commons while creating many millions of new jobs and cutting greatly into our massive unemployment problem. However, why should Borosage and others writing about the new populism assume that such deficit spending has to be accompanied by borrowing money?
It’s now two and one half years since the idea of Platinum Coin Seigniorage (PCS) was first discussed in the mainstream press. Have Borosage and other new populists never heard of it? Have they been oblivious to all the articles in December 2012 and January of 2013 that debated it? Did they miss the further discussions at the time of the Government shutdown in the fall of 2013? Are they ignorant of the President’s comment that it is “off the table” because using it would displease people who buy our securities (but by implication not because he doesn’t have the legal authority to do it)?
If not, then why not at least mention a proposal like minting the $60 T coin as an alternative to borrowing for virtually nothing in order to fund programs for the public purpose? Does Borosage think that it’s better to issue debt instruments to facilitate Congressional deficit spending appropriations than it is to issue Platinum Coins to force the Fed to use its reserve creation power to fill the public purse after Congress makes deficit spending appropriations?
If so, and that’s what the new populists really think, then I ask: “what kind of new populism is it that objects to the Treasury using its legal authority to harness the Fed’s power to demonstrate that the Treasury can always pay for deficit appropriations of Congress without ever running out of money?” And what kind of new populism is it that suggests the inference that we need to exercise a rare opportunity to borrow money at virtually no interest to “pay for” what we need from non-Government sources, when we need not borrow any money at all, but can simply create it?
And why is this “. . . a question of making the public investments we need, and paying for it by ending the tax dodges and tax breaks that enable the rich and the multinationals to avoid paying their fair share of taxes”? Now, I’m all for seeing to it that the rich pay their “fair share” of taxes. And I also think that their doing so is a moral issue. But, if the new populists are claiming that making the pubic investments we need right now is dependent on us getting the rich and the multinationals to pay their fair share, than that is just wrong, and tells us that there is another lesson the new populists must learn.
The new lesson is that taxing the rich and multinationals, and deficit spending to create and maintain full recovery and full employment are two separate fiscal issues that are unrelated in the short-term. We can have recovery without having that additional tax revenue and we can also get that tax revenue and still not have recovery.
In fact, getting the additional revenues from taxing the rich, and doing nothing else to compensate for the resulting loss in aggregate demand can bring the economy down further into depression. On the other hand, getting the deficit spending on recovery and the proper full employment programs, can work to get the economy roaring and to increase tax revenue, even without any tax reform at all.
I am not arguing against tax increases on the wealthy as a plank in the new populist agenda. Such increases can work to decrease economic inequality and to dampen asset bubbles and decrease inflation when we have some. But what tax increases cannot do is effect the capacity of our fiat sovereign government to spend what it needs to in order to meet our problems.
That capacity is the same whether we increase taxes or not. We don’t need to tax or borrow in order to “pay for.” The new populists should repeat that mantra to themselves 35 times a day.
Another core challenge will be to revive our ability to make things in America once more. America needs a manufacturing strategy to ensure that we not only remain a center of innovation, but also a center of production.
I agree with the general idea of having an industrial policy and have said so recently. And I certainly think we ought to have a renaissance of manufacturing in the United States. But we are still very far away from a world government, and my view is that we are too dependent on other nations for manufacturing capability, and that this needs to change. But, I also think that the trope of “let’s manufacture again” shouldn’t morph into “let’s manufacture everything or anything.” I think we need to pick our spots carefully.
Borosage implies this by calling for “a manufacturing strategy,” and this is good. But the new populism needs writing and debate on this strategy and also needs to be careful that the strategy doesn’t preempt the need for reinventing our public commons and public spaces and for protecting our environment and the climate.
This new manufacturing strategy must also respect the limits we need to place on the private sector, so that the public sector can flourish again in the United States. Over the past 40 years we have learned again that there are many things that the private markets cannot do either best, or at all, and that must be entrusted to all of us working together through the Government. We need a rebirth of that as much as we need a rebirth of manufacturing.
(Cross-posted from New Economic Perspectives.)