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The New Economics Is Here

Legislative compromise is always disappointing, but we’re really moving toward an economy that’s more caring, more green, and more equal.

President Biden and Senate Majority Leader Chuck Schumer
Drew Angerer/Getty Images
President Biden met with Senate Majority Leader Chuck Schumer last month to discuss the Democrats’ $3.5 trillion reconciliation package.

Senate debate continues this week on the bipartisan infrastructure bill. The proposed legislation marks the first in a series of policy actions that, taken together, could transform our economy and our politics. The trillions of dollars across various interrelated legislative vehicles address a range of social problems, but they are more than just a list of priorities and programs. Together, they represent a new approach to economic policy years in the making.

This is a once-in-a-generation opportunity, not just for policy but for politics. If Democrats use this moment the right way, they could fundamentally restructure both our economy and our political landscape. It requires something Democrats have not done for at least half a century: put forth not just talking points on the virtues of individual programs but a clear vision for how the entire economy can work. After decades of political hand-wringing and messaging failures, success for Democrats will be elusive. But thinking of this as a political moment as well as a policy one would open the door for a new politics based on the core idea that progressives can manage the economy for growth, prosperity, and the public good.

The story is one of smart policy choices. Legislative success would be part of a larger sweep of economic changes. The pandemic revolutionized the ways Americans fight recessions, for which Democrats should take credit. The $1.9 trillion American Rescue Plan has catalyzed economic growth, with steady and increasing monthly job numbers. With an average of 605,000 new jobs a month since February, the economic recovery after 2020 has been one of the fastest in generations. According to the Economic Policy Institute, at the current pace, we are likely to recover at five times the speed of the recovery from the 2008–09 Great Recession: This means in two years, not 10. Cumulatively, over the past year-plus, lawmakers have authorized over $6 trillion to stabilize American incomes during the pandemic. Gross domestic product growth through the first half of 2021 was a strong 6.4 percent, outpacing earlier predictions—though certainly we can expect more ups and down ahead, especially as the delta variant of the coronavirus wreaks increasing havoc.

This is the result of policy choices. Thus far, we have avoided the worst mistakes of the Great Recession. Much of the initial $800 billion stimulus passed in 2009 to fight the Great Recession was offset by austerity at the state and local level. This dragged on for years, as more and more layoffs and disinvestment by governments in turn kept the economy sluggish and led to weaker prospects for the private sector. But today, the American Rescue Plan provides $350 billion to states, municipalities, and tribes, blunting any state or local moves toward slashing budgets. Reopening quickly, providing direct support to workers and small businesses, and preventing local backsliding: This is the success story of this recovery.

This has allowed us to see the beginnings of an economic boom, a recovery that pushes against what we had believed to be the productive limits of our economy, and it transforms our potential. Unless the delta variant and the exasperating rate of vaccine hesitancy win out, the economy will continue to reopen, and new job starts will continue to accelerate. Thanks to the direct relief checks and expanded unemployment insurance provided by the American Rescue Plan, workers have more power in bargaining with employers than they’ve had in a generation, driving wage increases, especially for low-income and hourly workers. This power in a recovery is making a $15-an-hour minimum wage, for so long the focus of advocacy campaigns, increasingly the norm for workplaces.

This recovery will be bumpy, but we can manage the boom as long as we understand that one major challenge is the speed of the recovery itself. Especially in the second quarter of this year, the economy recovered so quickly that it hit bottlenecks, which showed up in higher than expected inflation. Though many policymakers are nervous, it is important to remember that inflation has been limited to industries that economists warned about months ago. In April, the Council of Economic Advisers predicted that industries impacted by the pandemic, such as airlines, would see higher price increases. The same is true for industries that rely on semiconductors, especially automobiles. Though inflation may be elevated for a period, there’s every indication it will level out and decline in the year ahead as supply chains normalize. As Federal Reserve Chair Jerome Powell testified recently, “Measures of long-term inflation expectations … are in a range that is broadly consistent with the [Federal Open Market Committee]’s longer-run inflation goal.”

However, continuing the boom will require investments that take the pressure off strategic bottlenecks, as well as the care infrastructure necessary to ensure that families can work, as the recovery will seek out more and more workers. We will need to face our three intertwined crises: jobs, climate, and care. All the central items that we must address can be done in the spending packages being contemplated here. We have the ability and capacity to invest in infrastructure that will rebuild our industries and provide better jobs. We can support care work and provide greater economic security to families. We can also tackle climate change, creating investments that start to turn the tide. More, we must do these things; there’s been too much delay on addressing these crises, and now is both economically and politically the best time to attempt to do so.

We’ve delayed too long on all these priorities, and the problems have become far worse as a result. Our physical infrastructure is crumbling, and we are increasingly in a poor position globally to lead the industries of the twenty-first century. Each summer, especially, we see the increasingly devastating impacts of climate change—fires, floods, famines—and realize how much worse this will get in the years ahead. This could have been prevented with smaller efforts decades ago; now we need a much greater level of investment to tackle this problem. Also, within government, much of the expertise and personnel needed to create real investments and resiliency in the economy has atrophied or been eliminated over the past decades. Government must invest in the capacity necessary to carry out public good investments, which are central to the new approach.

There are two core challenges. The first is the question of scale. The two spending packages currently being debated add up to around $4 trillion. It’s essential to remember this starting point is still insufficient to the full crisis we face. Yet there will be pressure to cut the top-line number down. This will be the case even with interest rates remaining low, and even falling further in recent weeks, and ample room to appropriately finance long-term investments with debt. It’s worrisome that $4 trillion has become anchored as a ceiling on expenditures, because spending less would compromise the transformative prospect of this moment.

The second challenge is one of structure, and how these programs will be put together. Though structuring policies are less dramatic and grab fewer headlines than the question of spending trillions of dollars, they are no less important. Whether these programs are structured to deploy public power well will be essential to how policies are executed and whether they work as intended for real people. This question can get lost in specifics, so it is important to remember there’s a baseline continuum between two visions. The first is more public and more direct, with guardrails to ensure that the money is spent equitably and with real democratic accountability. The second is privatized and opaque, driven through private agents and easily captured by corporate interests. There’s a lot of range between these two, but policy designers will choose where to place each program along this line. The second is easier for legislators, as lobbyists and corporations can volunteer to take control of the programs, taking responsibility off lawmakers. Yet the predictable failures that come with this approach also mean the economic and political wins will probably disappear, too.

Getting the economics right will be treacherously difficult. But doing so is only the first step. We also have to get the politics right. Progressive movements have driven virtually all of these policy innovations over the past decade, and Democrats have put many of them front and center over the past several years. The Biden administration, to the surprise of many, has built on these earlier successes.

But exactly how all this works, and adds up to real economic transformation, isn’t clear to most voters. So Democrats have a lot of explaining to do. They need to explain how the Rescue Plan is driving the economic boom. And they need to explain why now is the time to build on that success to catalyze a once-in-a-generation transformation.

This is central to the future of the Democratic Party. During each of the last four presidential elections, voters have named the economy as the most pressing issue facing the country. And voters have regularly said that they trust Republicans rather than Democrats to handle the economy. In early July, the overall “economic management trust gap” between Democrats and Republicans was 12 points—in the GOP’s favor. Persuadable 2022 voters trust Republicans on the economy by almost 30 points. Black and Latinx voters, while still reliably Democratic overall, are split on whether they trust Democrats to manage economically. This, despite clear empirical evidence to the contrary.

The problem is at the center of Democrats’ political fortunes. But now, for the first time in close to three decades, the economic boom Democrats are creating will give the party a new way to frame its economic policies and its economic record. This will require more than just taking credit for economic gains. It requires explanation—because the shifts we are seeing are happening against the backdrop of a decades-long effort to entrench a set of beliefs about what the economy is and how it works. Though there are signs of openings, most American voters—especially those who formed their understanding of the economy under the neoliberal regime of the 1980s, 1990s, and 2000s—do not have a clear understanding of how the economy works and often default to assumptions that the state of the economy is naturally determined by the free market and there is little government can do about it. 

Without an alternative explanation of how and why today’s economy is booming, voters will hold onto their preexisting models and will fail to connect their higher paychecks to the policy choices progressives have made over the past two years. Any electoral messaging about the status of today’s economy will fail to land. And more importantly, Democrats will miss the opportunity to remake the mental models people have of the economy in this moment of profound shift.

The political hill to climb for Democrats is steep. Covid-19’s uncertainty is one factor. Zombie neoliberalism is also a culprit, as is the vicious cycle of partisan vitriol, whereby good news—The economy is reopening! Wages are rising!—is weaponized against those who are the architects of the recovery. The real-time evidence of success is moving faster than our mindsets can shift.

This is political work, made all the more difficult because most professional political communicators do not regularly spend time on the wonky, often technocratic economic details. But politicians must learn to say it plainly: Government action over the last two years has put more money in the pockets of nearly every American than they would otherwise have had. This gave workers more power to bargain for better jobs and higher wages, and, with more money to buy things, is building a virtuous cycle in the economy that can make businesses stronger.

Now, with a boom on the horizon, it’s time to keep our foot on the gas. The strongest economy is one that pools our resources to tackle the very things that are holding us back: family obligations that make it hard to meet the demands of jobs and jobs that make it hard to meet the needs of our families; basic things like roads and bridges that keep us from the things that need doing; and the real need to decarbonize now while we still can, and while we all still stand to benefit. We can more than afford to make these investments now, and doing so will make us a more innovative, more productive, more cohesive, and more resilient country in the future.

This is an argument that Democrats can and should make to all Americans—white, Black, brown, Asian, Native. In electoral politics parlance (and per the 2020 Democratic election autopsy now circulating), everyone is now a persuasion target. Or, to use less electoral language: We have to cut through the technocratic confusion and understandable fear of these last few years to explain that we have the tools to do better.

So let’s persuade. The new economics is here. It’s not that complicated. Let’s invest and innovate our way to a low-carbon, high-care economy. We can talk about this clearly. If we do so, we can remake not just our national conversation but our country.