In Which The Democrats Finally Get A Clue

Screen Shot 2015-01-20 at 11.41.29 AM

I have to say that, as rumors and reports came in last week that Obama was going to propose a straightforward redistribution from the mega-mega-rich to the struggling middle classes, I could scarcely believe it. I mean: how often does the Democratic party actually exercise solid pro-active political judgment? How often do they seize the policy initiative from Republicans? How often do they propose things thay passionately believe in and unabashedly direct the message to the vast majority of Americans treading water in rougher and rougher seas? How often does a winning Congressional party get effectively marginalized in the public debate just after a stunning mid-term win?

Screen Shot 2015-01-20 at 11.48.40 AMThe proposal will no doubt be tossed around, as it should. But I see it as narrowly targeted in precisely the right way. It’s aimed at the way in which the super-rich avoid paying the same rates as middle class Americans, via a low capital gains rate; and in which they avoid taxes – the “step up in basis” loophole – which allows inherited wealth to be a much bigger factor in social and economic equality than is in any way justifiable in a democracy that values work over inheritance. It’s nicely targeted at the super-rich, super-shameless 1 percent, now busily taking even more sunlight away from Manhattan. And all this $320 billion would be redirected to the middle class – a tax cut for married couples; free community college; bigger tax credits for higher education; and wage subsidies for the working poor.

The term “populist” has been used to define this kind of package. I don’t quite buy that. Sure, it’s a piece of major redistribution. But that has to be seen in the context of the post-Reagan decades. Inequality now is far, far higher than it was in the 1970s and even the 1990s. If one tiny sector of society has seen its income (let alone wealth) go up by 120 percent in 35 years, while the vast majority have seen their incomes flat for the same thirty years, this is not populism. It’s an attempt at rescuing the basic social compact at the heart of any functioning and healthy democracy.

The wealth imbalance is at century-level highs. And socially, we are, it seems to me, at that Tocquevillean danger point, at which expectations as the economy recovers are getting higher. Dash those expectations with continuing minimal gains for the 99 percent – and continued enrichment of the very, very rich, and you have, to this conservative, a deeply unstable society, one teetering Screen Shot 2015-01-20 at 11.42.30 AMon the edge of serious unrest. That unrest never seems likely to come until it does. And so I see Obama’s redistribution from the mega-rich toward those who are not part of the rentier class of the finance sector as a balancing, rather than a revolution; as actually concerned with social stability and the sense of fairness that underlies the very legitimacy of a democracy, rather than the abstract theories of those Republicans still stuck in the 1970s (if you’re lucky) and the 1870s (if you’re not).

Some are claiming that this is “pure politics” because with a GOP-controlled Congress, none of it stands a chance of passing. You could say the same thing of much of what the GOP is proposing and has proposed for the last six years. And politics is made by bold moves like this that seem to read the signs of the times. They force the opposition to fashion a response to the same set of problems. And, in the recovery, they insist that the struggles of the middle class can indeed be ameliorated a little by government. What’s the GOP alternative? Giving the most reckless and culpable part of our economy – the finance sector – what it wants to unraveling Dodd-Frank bit by bit.

Torture defender Marc Thiessen suggests the following response to Obama’s sudden move:

Last July, Rep. Paul Ryan (R-Wis.) — now the chairman of the House Ways and Means Committee — laid out serious anti-poverty initiatives, including “opportunity grants” that would allow states to test different ways of fighting poverty and an expansion of the earned-income tax credit for childless workers, paid for by eliminating ineffective programs and corporate welfare. Other good ideas include my American Enterprise Institute colleague Michael Strain’s proposals to create relocation vouchers for the long-term unemployed, which would help those in high-unemployment areas move to states where jobs are abundant, as well as a lower minimum wage that would encourage firms to hire the long-term unemployed while supplementing their income with an EITC-like payment.

Those ideas are all worth exploring, but can they actually match the sheer appeal of a more direct lifeline to the middle class? But lowering the minimum wage at a time like this – even with an expanded EITC? Helping people to move to states with more growth? And the costs will be borne not by the top 0.1 percent, still making out like bandits on a bender – but by “eliminating ineffective programs and corporate welfare”. Let’s see them spell that out. But if the debate is about helping a middle class left in the dust of globalization and technological change and financial sector recklessness, you think that’ll work?

And this debate will take place, it now seems likely, at a time of rising growth rates, tumbling unemployment, unprecedented energy independence and an American economy now out-stripping all its developed country peers – even as the US middle class has stagnated, as Andrew Ross Sorkin notes today with a link to this graph:

Screen Shot 2015-01-20 at 11.25.39 AM

There is something truly odd about the wealthiest country no longer with the wealthiest middle class, and in which every major competitor’s middle class is converging with ours’ in standards of living. This is the real end of American exceptionalism, in which working hard in the middle class is like being on a treadmill rather than a track.

Or to put it in another way: nothing Obama is proposing does more than spit in the wind of the soaring inequality of the last three decades. He would not even begin to preside over a society as equal as when Ronald Reagan was president. He’s just trying to use government to nudge us back toward that sane, middle-class, democratic middle so essential to a functioning and health democracy. I’d love to see the Republicans counter with something – but their ideology still prevents them from using government as a real tool in combating the dangerous trends of social and economic inequality.

So Obama’s next term begins today, in effect, because it will chart the future of Democratic priorities and offer them a clear and popular set of policies that address majority concerns in ways that the GOP has yet to figure out. My suspicion is that Jeb Bush gets this – and his position will strengthen as the appeal of the Democratic proposals sink in – for once, they’re easy to explain). Can Hillary Clinton channel her inner populist? She’d channel her inner anything if it meant winning the presidency. Can Jeb Bush persuade his Fox-addled base that only he can successfully counter the appeal of this populist agenda with a kinder to bankers, gentler to plutocrats version of the same? I don’t know.

What I do know is that the pattern we’ve observed with Obama from the get-go is reasserting itself yet again. Hang on the ropes; get pummeled; get shellacked; then punch suddenly back. What we’re seeing from Obama now is an attempt to shape the future of the Democrats for the next decade or so. And he’s kinda forcing Clinton’s hand in this. If she’s smart – and she is – she’ll grasp it tightly and go on the offensive.

Meep meep motherfuckers.

(Charts via Mother Jones here and here)