A winning economic message for Democrats: Government works

By William Berkson:

Republican “trickle down” policies have failed spectacularly. But their anti-government economic narrative retains a hold on the electorate. In 2016, despite the long Obama era economic recovery, 3% more voters thought Trump would handle the economy best.

What Americans want is inclusive economic growth, and without a rival narrative to achieve it, Democrats will continue to fail at the ballot box.

This counter narrative exists, founded on indisputable evidence: not less, but more government intervention, of the right kind, is critical to growing the economy.

The facts tell the story. On the “inclusive” part of inclusive growth, “trickle down” has utterly failed. For decades, households that have remained below upper middle class income have suffered stagnant or declining wages.

During this time, Democrats have championed programs that have actually reduced economic inequality, such as health care and social security. In fact, since 1980 only under Democrats did real median wages grow substantially, net—first under President Clinton, and again during Obama’s second term, with a spillover into Trump’s first year.

On the “growth” part of “inclusive growth”, Republicans again got poor results. Cutting taxes and regulations didn’t lead to economic boom, but to “secular stagnation,” as productivity growth has remained below earlier levels. Again, the exception was under Clinton, with the internet boom.

The only way that America and other countries have succeeded in sustained economic growth is through massive government investments in public goods and services. Successful public investments have been in human capital—education, intellectual capital—research and development, and physical capital—infrastructure.

Every country that has transformed from subsistence agriculture into a modern wealthy industrial economy, including the U.S., has done so though targeted public investments, sustained over decades. And while investments can fail if they are corrupt or misguided, wise investments have proven to be the only way that governments can sustain economic growth. Government involvement in the economy, done right, is not antithetical to the private sector, but necessary for private business to keep thriving.

To sustain large investments, we need more revenue. America is the wealthiest country by far, with 40% of the world’s personal wealth, and is one of the lowest taxed wealthy countries. However, economists have found that the top rate associated with highest growth in wealthy countries since 1960 is not our under-40%, but rather 60%. And the lowest top rate from 1936-1980, when our economy grew more, and much more equally, was 70%.

President Clinton found the winning slogan: “Make the rich pay their fair share.” The top dollars of the rich create far more economic growth not when left in their pockets, but rather when taxed and invested in public capital—education, infrastructure, R&D.

In the battle of economic narratives, Democrats can gain the upper hand by showing the failure of the Republican position and the success when government takes a stronger, more effective role.

Democrats should adopt this clear narrative: We don’t need more welfare for the wealthy, but instead more government investment in America’s future.

William Berkson is a member of Hunter Mill District Democratic Committee and chair of Herndon Reston Indivisible’s Economics Committee. A PhD in Philosophy, he is author of four recent articles on political economy in Washington Monthly

.