Economic Populists vs. Rubinites to Shape Dems' Future

Louis Uchtelle's "Here Come the Economic Populists" in The New York Times Week in Review spotlights the internal struggle within the Democratic Party between "economic populists" and "the Rubinites." While the marquee conflict between the two groups has been globalism vs. protectionism (or 'free trade' vs. 'fair trade'), there are other major issues at stake, as Uchitelle explains:

As the two groups face off, Lawrence Mishel, president of the Economic Policy Institute, contends that the populists are pushing much harder than the Rubinites for government-subsidized universal health care. They also favor expanding Social Security to offset the decline in pension coverage in the private sector.

Fortunately, there are common areas of agreement uniting the two factions:

Both would sponsor legislation that reduced college tuition, mainly through tax credits or lower interest rates on student loans. Both would expand the earned-income tax credit to subsidize the working poor. Both would have the government negotiate lower drug prices for Medicare’s prescription drug plan. And despite their relentless criticisms of President Bush’s tax cuts, neither the populists nor the Rubinite regulars would try to roll them back now, risking a veto that the Democrats lack the votes to override.

The economic populists clearly have the momentum as a result of the November 7 election, and their numbers will swell when the freshman are sworn in. But the Rubinites may still have considerable leverage in the Party. The one thing that seems certain is that the era of runaway globalism is coming to a close.

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Brent Wall | November 28, 2006 12:07 AM | Reply

"Free" vs. "Fair" Trade

As the Rubinites and the economic populists square off on a number of issues which includes the free versus fair trade debate, the narrow use of the term "fair" trade by some Democrats borders on a disguised and thus disquieting form of rank economic nationalism.

Free trade is not fair trade when our government, thanks to powerful and well-heeled lobbies, refuses to couple "free" trade with the abolition of the patently inefficient subsidization of cotton, wheat, and sugar production in this country, among other such supports. These subsidies underwrite a monied elite while increasing the price of these products for consumers, not to mention the denial of economic opportunities for foreign workers. (Here in Florida, for example, we not only subsidize "big sugar" and thus pay more for our sugar, but we also subsidize their cost of doing business by using tax dollars to clean up their despoilment of the Everglades.)

An example of this "fairness" is reflected in the draft free trade agreement with Peru. As drafted, its implementation would demolish the Peruvian wheat, cotton, and sugar industries, for even with their lower wage rates, they cannot compete with the artificially supported low prices for these products.

Some Democrats are calling for better labor and environmental laws and their enforcement, which in Peru's case could be strengthened, but this call is being made without any discussion whatsoever of the "unfair" destruction of three Peruvian industries.

The money we waste on welfare for industries that don't need protection could be better spent on the social nets necessary for a fair trade driven economy.

In short, if the economic populists are going to argue for fair trade then they should use that term consistently to apply not only to our trading partners but to ourselves as well.

Alan Harvey | November 28, 2006 11:53 PM | Reply

My memory of Rubinomics associates it with bringing down the interest rate and reducing the deficit, rather than free trade. This apparently has changed in the post-election discussion.

The benefits of free trade have not been shared, no doubt. The "free" part has been taken by opportunists to mean free from the need to share gains or mitigate pains. Populists are right to shut down the store until accounts are set up correctly.

But the other side of Rubinomics is no less difficult. Getting the budget under control. Debt service and the retiring baby boomers are going to set up an impossible situation. Remember, off-the-books borrowing from Social Security and Medicare funds is not only going to stop, but will need to be reversed simultaneous with the ballooning debt service.

Clearly fiscal responsibility means revenue increases. Tax increases? Not on the middle class. That is the Democrats bargain with the voter in the past election. And we'd better not renege on that. The 1994 election, if you'll recall, was demagogued by the Gingrich and the Republicans using very meagre tax increases.

Where then? I'd like to see somebody else's ideas. I would first end the cap on payroll taxes. This would have the effect of increasing the top marginal rate by 16% or so for earned income, earmarked for the entitlements that will be needing it.

Symbolically, it might be neat to institute a new top marginal rate of 80 or 90 percent on income over $3 million.

An idea that is not mine, but I forget where I saw it, was to get rid of all the income tax deductions and credits and bells and whistles in favor of five: children, pensions, health care, education, mortgages. This might net the most, while holding the middle class harmless.

"Taxes" won't be such a dirty word if it is applied to the other guy.

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