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The Redistribution and Regulation Party

eye on the news

The Redistribution and Regulation Party

Democratic presidential candidates have abandoned the idea of economic growth. September 11, 2019
Politics and law
Economy, finance, and budgets

During a recent visit to Toledo, Ohio, to speak at a local school, I saw remarkable signs of an improving economy in this Rust Belt city. My taxi driver from the airport boasted that he could leave his position tomorrow and have his pick of other jobs. The hometown law students with whom I lunched had renewed confidence that they could remain in the area because business was better than at any time in the last two decades. I stayed at a hotel that had opened just weeks earlier, and another, across the street, was scheduled to open this fall.

Toledo’s recovering prosperity is emphatically not a story of the rich getting richer. A driver for hire does not make more than the median income, and the law students were young men graduating from a regional school, not highflyers on their way to Wall Street firms. Nor were the benefits of economic growth merely economic: I could hear in the driver’s voice the sense of autonomy and self-worth that comes from knowing that you can quit today and be employed tomorrow. The law students enjoyed having the choice of staying near friends and family. To be sure, Toledo is still relatively economically distressed, but it’s striking that the dynamism of America’s economic recovery is being felt even here.

Being in Toledo reminded me of something that Robert Lucas, a Nobel Prize winner in economics, said: “Once you start thinking about economic growth, it is hard to think of anything else.” Economic growth compounds, potentially doubling or tripling incomes over a lifetime. Growth also enables nonmaterial opportunities, from changing jobs to sending one’s children to better schools.

It’s distressing, then, that Democrats have given up on economic growth as a central concern. Bill Clinton ran for president on a platform of economic renewal. “It’s the economy, stupid” was a signal that his policies would aim at promoting growth. And his mantra of rewarding people who played by the rules was a nod to the culture of personal responsibility that undergirds growth.

The recent presidential debates reflect a complete reorientation of the Democratic Party—away from growth. Elizabeth Warren was the only candidate to tout a proposal for increasing economic growth—breaking up big companies, particularly tech companies. That idea certainly doesn’t enjoy consensus support from economists, and few see it as a significant spur to growth, in any case; large tech companies have been responsible for much of the increase in GDP over the last decade. They have also provided services—like the ability to search on Google—whose value cannot be captured by conventional growth measures, because they’re free. A few candidates, like Pete Buttigieg, talk about building infrastructure, which could be growth-enhancing. And a third-tier candidate, John Delaney, argued for free trade, a certain promoter of growth.

But the Democratic field’s overwhelming focus has been asset redistribution—providing free health care to all, forgiving student debt, or giving every adult an annual stipend of $12,000. It’s hard to see how these policies could promote growth. They move America toward the welfare states of continental Europe that have economically underperformed the U.S. for decades—and this difference in performance is understated because other nations ride cost-free on our innovations in technology and medicine.

Leading candidates like Warren and Kamala Harris have even suggested that they’re open to packing the Supreme Court. Buttigieg has a detailed plan to change its membership. These are attacks on the rule of law, crucial to economic growth. Confidence in settled rules affecting property and contract give people the confidence to invest and take risks. While it might seem that our modern Court is largely focused on civil rights, economic issues remain salient. Labor and administrative law are contentious matters that bear on economic production, and the takings and contract clauses remain litigated constitutional provisions. An enlarged Court, with justices dedicated to a progressive, rather than a constitutionalist, agenda could undermine the legal basis for American prosperity.

Coastal elites will fare just fine, no matter who is president. In fact, heavier regulation, like that contemplated by the Green New Deal, will help the cognitive elite by requiring companies to hire them to navigate the obstacle course of swelling government. But the loss of focus on economic growth will be disastrous for the American middle, like my new acquaintances in Toledo.

Photo by Justin Sullivan/Getty Images

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