Doing Good by Doing Well
In the 1970s, the Republican Party was known by another nickname than the Grand Old Party. It was also known as “the tax collector of the welfare state.” Hard as it may be for us today to believe or to remember, a generation ago, the Republicans, not the Democrats, were the incessantly tax-raising party. Congressional budgeting went along these lines: Democrats proposed social programs, and Republicans offered taxes to pay for them, in the name of balanced budgets. It was a hopeless electoral posture and was largely responsible for the party’s tiny positions in Congress and the state houses.
This system came to a moment of truth in 1980 when the majority-Democratic Joint Economic Committee of Congress issued a report calling for tax cuts. It was an election year, the president balked, and Republican candidate Ronald Reagan took up the cause. How different political history would have been had the JEC report persuaded the top of the Democratic ticket in 1980—Jimmy Carter may well have won re-election and presided over a prosperous 1980s. Instead, in short order, there was a Reagan boom, and Democrats became deficit scolds, the medicine-taking party of tax increases, belt-tightening, and no more “culture of greed.” Inevitably, this led to a general impression that Democrats were lukewarm on economic growth. Hence the importance to the future viability of the Democratic Party that there was a boom under Bill Clinton. It gave Democrats the opportunity finally to claim the high ground lost in 1980 and declare economic growth a fundamental party value. But it remained an open question whether Democrats would take advantage of this opportunity once Clinton left office.
Economic consultant and author Gene Sperling wants to be sure that Democrats do not fail on this score—that they not return to seeing growth as a cause inimical to them. His Pro-Growth Progressive, which is a useful and informative book, is meant to rally Democrats (and confreres on the left) to the cause of growth.
Sperling was a member of Clinton’s economic team in the White House, and every impression the book gives is of a true Clintonista—young, single, verbose, idealistic, knowledgeable, naïve. The book is part memoir, part manifesto, and its constant theme is that Democrats—“progressives”—must realize that there are plenty of pro-growth policies that are also morally straight, by the lights of the left, no less. To become the “party of limits” again, Sperling advises, is not only political suicide but, from the perspective of policy, unnecessary.
For example, Sperling presents free trade as a winning issue on both economic and moral terms. He shows that no matter how dire the working conditions in those third-world “sweatshops,” employment coincides with things like decent nutrition, children going to school, startups in ancillary industries—in short, improved living standards. As for the American home market, the flood of cheap goods from abroad increases the savings pool and with it entrepreneurship and therefore good jobs.
Sperling’s recollections of Clinton’s forays into free trade are something to behold. They reflect well on the former president. Constantly over his two terms, Clinton toured the globe promoting free trade, at virtually every stop lectured by the local pipsqueak about this or that American inadequacy. The president and his associates characteristically put up with such stuff, and then hammered out an agreement on enlightened American terms. The world is more prosperous for it.
It is also quaint to recall Clinton’s spending objectives. After 1994, Clinton’s program initiatives typically were “targeted” little irrelevancies, accounted in the millions, not billions, nothing adding up even to what the innocuous Americorps spent. Conservatives should not be put off when Sperling writes lines like this: “Currently the U.S. commits only a paltry $3 million a year for education in Kenya.” Here is a high Washington official getting excited about the low millions of dollars.
Sperling’s book goes badly awry when it tries to dismiss supply-side economics, which, the author admits, he learned about mainly through talk radio. We can leave it at that, save one tangential point. If liberals are going to insist on calling government spending on education, job training, infrastructure, etc., investment, then they must concede that it is proper to pay for all this with debt. Investments are things that produce returns in the future and thus can pay off debt inherently. Indeed, it would be uneconomical not to pay for investments with debt. Clintonites routinely use the rhetoric of government spending-as-investments and therefore undermine any justification for their cherished concept of a budget surplus.
If only the faults of Benjamin M. Friedman’s Moral Consequences of Economic Growth were rhetorical. This book strives to show that eras of social and political “backwardness” coincided with periods of economic stagnation and that, conversely, a “society more open, tolerant, and democratic” arises during periods of economic growth. Thus the moral imperative of spurring economic growth.
The book is mainly about America, though it ranges around the globe by and by. The gist of the argument is this. America was socially and politically backward in these periods: 1880–1895; 1914–1929; 1973–1993; 2001–present. In contrast, America showed democratic promise in the other periods, beginning with 1865. In the backward periods, economic growth was slow, in the progressive periods quick, the only exception being the 1930s. Message to liberals: economic growth is your friend. Friedman’s attempts to demonstrate what constitutes social and political backwardness and the contrary are an exercise in cherry-picking. But the book’s real weakness is its economics. It is utterly untrue that economic growth was slow 1880–1895, indeed that it was slower than 1895–1914, or that growth was slow in the 1920s or 1980s. In fact, the opposite is true. Anyone can look up the GDP numbers and see this. Yet in 400 some pages, Friedman never even mentions GDP.
With good reason, Gross Domestic Product is the first of all economic statistics. It is aggregate and cannot be easily massaged: how much stuff did a country produce in one year. The secondary statistic of economics is GDP per capita, and then come all the tertiary statistics: income per capita; household income; etc.
Friedman’s book rests on economic calculations all done from personal income, a tertiary statistic. It was necessary for the author to do it this way, because had he used GDP, times like the 1980s would appear as booms, and then the argument about backwardness and stagnation would have to go. Without going into the econometric longheurs, income statistics are compromised by many things, not least unrealized capital gains and a 60,000-page tax code that makes it very worth one’s while to ensure that new wealth is not classified as income.
Speaking of growth as income, not GDP, growth began in the 1980s, once it became plain that Reagan had produced a big boom. The search was on in the liberal economics establishment for statistics that would misrepresent this reality, and personal income per capita served the purpose. It was a shabby endeavor, and Friedman’s book is the latest epiphenomenon. It is unfortunate that Friedman was not more serious in his economics, because the general endeavor connecting growth and the development of the moral sense is worth pursuing. For it seems that economic growth is a necessary prerequisite to morality in the modern period. Marxism, for example, was very clear on this point.
Marxism held that morality is impossible when the conditions of material abundance are not present. Under conditions of subsistence or worse, it is simply unreasonable to ask of persons that they share and that they treat others as ends rather than means; it is tantamount to asking people to starve or to waste away. Therefore, for Marxism, the first responsibility of those who would bring about a moral world is to effect material abundance through industrialization. Once plenty exists, persons will have the confidence and leisure required to inculcate morality. This is why avarice—the unwarranted desire for goods—is the consummate sin in Marxism.
One may reasonably ask, in skepticism of Marx, why the Middle Ages were not a notably amoral era. After all, things were not in abundance then, and holiness was a popular enthusiasm. As perhaps Christopher Dawson has most expertly related to us, the sense of the common Christian project of all of civilization was so strong in the Middle Ages that the individual’s own experience of penury was not particularly disconcerting. One’s sense of accomplishment did not derive from one’s own stash of stuff in life, but from the realization of the small but important role that one played in the society-wide endeavor to bring about a Christian order.
Cervantes’s Don Quixote was only the first announcement that these aspirations held in common—however imperfectly realized in practice—had fallen by the wayside in favor of individual self-interest. There were David Humes and Adam Smiths who would contend that this new kind of self-interested man would be a uniquely moral agent, but the Marxists made a fair point in asserting that in a society of individualists, if you want people to get along, there had better be plenty.
That is to say, if we are not going to have common, non-economic, possibly religious goals in our society, we’d better goose growth.
Brian Domitrovic teaches at Sam Houston State University. He is at work on a history of supply-side economics, called “The Money Touch: The Supply-Side Revolutionaries and the Restoration of American Prosperity.”
Posted: December 25, 2007
Did you see this one?
Reasons to Believe
Volume 46, Number 2 (Summer 2008)