In the second installment of his column Quo Vadis , TomPaine.com associate editor Doherty argues that the United States is facing deep structural challenges that demand liberals' and Democrats' attention. Why spend our time finding better social safety nets if things are so bad that the majority of Americans will need them? We need a plan for overhauling our market economy so that it is aligned in a positive relationship with our social and strategic objectives. The time for tweaking is past.
Patrick C. Doherty is associate editor at TomPaine.com . Previously, he spent a decade working on conflicts and economic development in the Middle East, Africa, the Balkans and the Caucasus.
It's two weeks after the elections, and around town, Democrats are doing one of three things. Some groups, like the AARP, are preparing to jump into familiar trenches and defend signature democratic gains. Some, like Evan Bayh and the DLC, are hoping to capture Kerry's momentum to support the idea that Democrats are tough on security. A few others—like Gary Hart, John Podesta and Michael O'Hanlon—are looking for new big ideas, but are admittedly stuck when it comes to the specifics. Having none at hand, many argue that the Democratic Party needs more funding and institutions for generating ideas.
While I am certain that all these various leaders and thinkers in the party are motivated by the desire to make America better, America won't get there if the various wings of the Democratic Party don't stop a moment to assess where we are, figure out where we're going and then decide how to do it. It has to be done before we begin funneling money to new scholars, new initiatives, new organizations—before bureaucratic inertia sets in. Looking at the bigger picture is what this column is all about. Every other week, Quo Vadis —Latin for "where do we go from here?"—will advance the quest for a new progressive agenda.
Don't Act, Assess
We have to get back to fundamentals and challenge 40-year-old orthodoxies before roaring out with the next iteration of an Iraq strategy, before calling the elderly to the barricades, or before we give birth to a sibling for the Center for American Progress. As my friends in the military taught me, success depends on having a superior decision cycle: observe, orient, decide and then act. Democrats so far are choosing not to observe, condemning themselves to the same misconceptions that lost the last two elections.
As I wrote in my last column, the 2004 Democratic campaign was fought with the same assumptions that prevailed in 1964. Yet our macroeconomic reality in 2004 is radically different. If folks like the Center for Budget and Policy Priorities and Pete Peterson are to be believed, domestic economic activity is defined more by wealth transfer (from the bottom 80 percent to the top) and indebtedness than by wealth creation. Likewise, Hart, O'Hanlon and many others recognize that our strategic situation is driven by our own dependence on oil more than any independent existential threat. This simple failure to update America's narrative explains why Democratic policies could never add up to a coherent message. We were looking at the wrong intelligence. How can you have a coherent Iraq or terrorism policy if you ignore oil? How can you create jobs if there are record deficits, no sources of growth and families are in hock?
For argument's sake, let's just assume that, in fact, the problems America faces are indeed rooted in the social dysfunction and energy dependence of our economic engine. If that were the case, the challenge facing the United States would be how to convert our economic engine to one that produces widespread prosperity at home while reducing strategic conflict abroad. Given our hard resource and ecosystem realities, that means an economic engine characterized by resource efficiency and renewable energy.
Exorcizing Keynes
If the problem lies in our economic engine rather than in the quality of individual policies or, worse, "messages," Democrats face a major conceptual obstacle due to their long history of Keynesian public policy formulation.
Keynes? Alas. When you boil it all down, Democrats believe in spending government revenues to further social or national security objectives. Three times, that was the right thing to do, such as the countercyclical government spending in Roosevelt's New Deal, the Marshall Plan and Containment and the social entitlement programs forged by Johnson's Great Society. But now it is the wrong thing to do. Dumping additional government spending into an economy that transfers the vast majority of GDP to the top five percent will at best only delay the inevitable.
Now it is time to redesign the core economic engine of the United States. We did it in the '40s, and we can do it again. A redesign requires legislation, to be sure, but not by spending. It's done by tax. Not how much the government taxes, although this is important. The main vehicle for transforming the dysfunctional, insecure, wealth transfer machine we call the American economy is what we tax.
The Time For Tweaking Is Past
What we tax shapes the nature of our market decisively. Since the income tax was made universal to fund World War II in 1942 and '43, our government has relied on the taxation of wages to generate the revenue it required to operate. Income tax was appropriate as long as America was growing in population and expanding suburbia. But with expansion slowed and the global economy hitting the sustainability wall, taxing wages creates perverse incentives. The most obvious examples are increased unemployment and a severely distorted market.
By making labor artificially expensive, the employer, who is seeking to maximize profits, will be able to hire fewer workers for the same price. To make matters worse, by getting revenue from wages, the government is short-circuiting the power of the market, distorting it by weakening consumer power. With cheaper labor overseas, business strategies based on mass consumption will find it more profitable to relocate. Band-Aid measures to keep industries in the United States that use income tax revenue to subsidize corporations directly—through tax breaks or through subsidized natural resource pricing—merely corrupt the market, the government and the environment.
America's post-war economy is clearly not dead; it's pathological—and that is worse. Finding better social safety nets is foolish if the majority of Americans will need them. Promoting democracy abroad with millions of dollars is useless if oil is corrupting governments with billions. Democrats need a plan for overhauling our market economy so that it is aligned in a positive relationship with our social and strategic objectives. The time for tweaking is past.
The Mother Of All Contrasts
Realigning our economic system with our social and national security will mean eliminating the tax on all but the wealthiest Americans while shifting it to what we're wasting: energy and resources. Pioneers like Rocky Mountain Institute and Redefining Progress are already figuring out how. With employment increasing, consumers empowered and prices aligned with our nation's goals, America will be poised for a new boom. A sustainable America will break down the barriers keeping global trade low and global poverty high.
The political implications of this line of reasoning are significant. The Democrats would be able to abandon fossil fuels, sprawl, income tax and corporate subsidies to the GOP. Let them defend the old system that is weakening America and threatening its shores.
The thinking that dominated the 2004 election—and every election since 1964—cannot be allowed to dominate the efforts of the next four years. America needs a new narrative, a new vision and a new strategy to make it possible. It's the next American Revolution, and we have to start working on it now. It is vision that will win votes in 2008—and we need to start investing.
