Reaganomics For The Left: Are Democrats Becoming The Party Of Tax Cuts For The Rich?

For quite some time, the effects of the Democrats' economic policies have differed little from those of the Republicans. Though the economy tends to do better under Democratic presidents, the fact that income inequality has increased at pretty much the same rate since 1978 whether Democrats or Republicans are running the government shows that both parties are mainly inclined towards helping the rich.

But while Democrats, formerly the party of the people, joined this neoliberal coalition by adopting the Republican Party's positions on trade, Wall Street, and (to an extent) entitlement programs, the main economic issue that the two parties have remained in disagreement on is taxes.

Prior to the 1990's, wherein Bill Clinton's tax policies involved raising rates on the wealthy, there was an era where tax cuts were a bipartisan issue. After the 1980 election, Democratic strategists decided to essentially adopt Ronald Reagan's position on the matter. In his 1984 DNC speech, Walter Mondale assessed this shift by saying that after losing, Democrats "began asking where our mistakes had been," and then talking about how their updated platform didn't include increased taxes. Throughout the Reagan years, Democrats lived up to this, with Reagan being able to pass his upper-income tax cuts while Democrats held the majority in the House throughout his entire presidency (Tip O'neill, the Democratic House Majority Leader during this time, is pictured above).

But despite the Democrats having then taken on a neoliberal slant regarding trade deals, Wall Street regulation, and other issues, the one way in which the Clintons shifted their party to the left had to do with taxes. Though the rich own both parties, since the 90's, they've largely been able to rely on Republicans, not Democrats, to grant them tax breaks.

Except it looks like Democrats are evolving on taxes again, and this time they're headed back in the direction of Reaganomics.

The first sign that the party is making a turnaround on this issue came in 2010, when the idea of letting George W. Bush's tax cuts expire was being negotiated. The 2003 cuts, whose unfairness towards the middle-class contributed to the rise in income inequality (and would not have passed had just three more Democratic senators opposed it), were now being extended by Barack Obama and most of the Democrats in the House and the Senate.

This represented a major ideological shift within the party. Democrats had regained control of the government in the 2006 and 2008 elections partly by promising to let the tax cuts expire, and now they were doing exactly the opposite. The excuses Democrats used for doing so-we can't raise taxes during a recession, raising taxes would hurt small businesses and the middle class-held no water, and the only conclusion one could have objectively come to was that the Democratic Party had moved to the right on economics since the Clinton years.

And though Obama has since proposed (to no avail) a tax increase on the one percent, his record on the issue has been very questionable. The unwillingness of him and other Democrats to pass tax reform during the two years that they dominated politics has left us with a highly unfair tax system that won't be changed for the foreseeable future. It was also a Democratic administration that passed the Panama-United States Trade Promotion Agreement in 2011, which famously led to opportunities for massive money laundering and tax evasion for many global elites (Obama then responded with a mainly symbolic tax reform bill after that fact was made public earlier this year).

What Democrats have done in recent years that most resembles their past of embracing upper-income tax cuts, though, has to do with just that. The tax proposals of Democrats, which have included lowering the estate tax, expanding the exemptions for the alternative minimum tax, and extending Bush's tax cuts to stock dividends and capital gains in addition to the other cuts of his, have, as Mother Jones writer Josh Harkinson assessed in 2012, had similar effects as the ones of Republicans:

The big debate in Washington right now centers around whether or not to "tax the rich." This week, Senate Democrats passed a plan to cut income taxes on the middle class while increasing them on families that make more than $250,000 a year. Next week, House Republicans will push through a bill to extend (the erstwhile "temporary") Bush-era tax cuts for the middle class and the rich. But scratch beneath the surface of these dueling tax plans, and it quickly becomes clear that the GOP isn't the only party in Congress that wants to help the rich get richer. As Ezra Klein notes at Wonkblog, the cumulative effect of Democratic tax proposals will most likely be a $17,000 tax cut for the top 1 percent of earners (compared to a $75,000 tax cut under the GOP plan).

Another way Democrats are working to reduce the tax burden on the wealthy is through lowering corporate taxes. In 2012, Obama proposed cutting the corporate tax rate. Though the bill also included ideas for cracking down on corporations that exploited tax exemptions, his desire to cut taxes on them was helpful for none other than the corporate executives it targeted. The main reasons Republicans shot down the bill, it seems, was because it didn't cut taxes as much as they would have preferred.

And for the foreseeable future, this newfound Democratic enthusiasm for reducing taxes on the economic elite will only get more significant. Though Obama's Trans-Pacific Partnership, which might hold similar implications for tax evasion to that of the Panama trade deal, doesn't look like it will pass before the end of his term, his successor will pursue it further. Hillary Clinton, who will be the next president barring something unforeseen, has very much failed the test of whether her actions show she's sincere in her promise to oppose the TPP, and when she flips again on the deal as one of her insiders expects, only a strong showing of public protest will stand in the way of its passage.

There are many additional signs that the second President Clinton's tax policies won't very much resemble those of the first. A plan proposed by Tony James, one of Clinton's Wall Street backers and a possible future financial advisor of hers, aims to raise taxes on the middle-class and funnel it to private equity and hedge fund firms. There's also a great deal of evidence that Clinton intends to grant corporations tax cuts, with Democratic insiders like Peter Orszag and Chuck Schumer openly talking about her succeeding where Obama failed in aiding the corporate monopoly of America's resources. Hillary and Bill Clinton have privately endorsed such a measure as well.

And with Republicans expected to keep the majority in both the House and the Senate-thanks in part, ironically, to the fact that Clinton is the nominee-achieving such neoliberal goals will be easy for her. In spite of the initial partisan disputes, I expect that President Hillary Clinton will be able to work very well with the Republicans in the House and the Senate in terms of fighting the more liberal Democrats in parliament so that they can get the policies where their views overlap on-which are numerous-enacted into law. There's also a possibility that with Republicans having the power to box Clinton in politically, she'll reverse her currently liberal stance on income taxes and sign a tax cut similar to that of Reagan or Bush.

By the end of Clinton's term, with her being the main representative of the Democratic Party, I believe the Democrats will for the most part have turned into an institution which supports the Reaganist view on taxes. Thus, with Democrats also supporting corporatist trade deals, aggressive foreign policy, Wall Street deregulation and bailouts, and money in politics, their transformation into the second party of the billionaire class will be virtually complete, with the only remaining differences between the two parties having to do with social issues and spending on social services. At that point, with the record income inequality that such actions have produced having reached a level that motivates the public to stage a populist revolt, hopefully Americans will largely abandon the Democratic and Republican parties and work towards the rise of an alternative.

Democrats Share As Much Of The Blame As Republicans Do For Trump's Rise

As Donald Trump's campaign appears to be collapsing, with the weeks-long period of him refraining from doing anything politically self-destructive that allowed him to nearly take the lead in national polls ahead of September's presidential debate now over, Democrats can once again bask in the comfort of having such a weak opponent.

It's in times like these that Democrats can also take Trump's nomination as a means to feel superior to Republicans. There are many internet memes which include things like a picture of a laughing President Obama saying, "And then my successful, scandal-free administration pissed them off so much, they actually lost their minds and nominated Donald Trump for president!" The real Obama's take on why Trump succeeded is basically an elaborated version of that: "What is happening in this primary is just a distillation of what’s been happening inside their party for more than a decade. I mean, the reason that many of their voters are responding is because this is what’s been fed through the messages they’ve been sending for a long time — that you just make flat assertions that don’t comport with the facts. That you just deny the evidence of science. That compromise is a betrayal. That the other side isn’t simply wrong, or we just disagree, we want to take a different approach, but the other side is destroying the country, or treasonous. I mean, that’s — look it up. That’s what they’ve been saying."

His view of the race, undoubtedly shared by most other Democrats, is very much accurate. The Republican electorate's embrace of Trump can indeed be largely attributed to the reactionary rhetoric, escalated partisanship, and, frankly, anti-intellectualism of conservative figures in politics and the media over the course of the past several decades.

What Obama and Friends would rather not focus on, though, is the fact that they've played their own role in this.

The Trumpist electorate

Before I move to the main focus of this article, I'll provide some background as to who exactly Trump's supporters are.

While it would be somewhat of an overstatement to say that those responsible for Trump's nomination are generally as economically disadvantaged as, say, Bernie Sanders supporters, their judgement has certainly been influenced by financial circumstances. Though an analysis from Gallup has found that most of Trump's supporters are in fact relatively well-off economically, when income inequality is at record levels, "relatively well-off" can in itself be a relative term.

The study also shows that they tend to live in communities in which their younger, poorer neighbors tend to have a difficult time getting ahead. Because of this, and perhaps also because these older, middle-class whites recall times where there was more economic opportunity, it may well be that they're embracing Trump's bigoted but still economically populist message because they worry for the livelihoods of their children. As Washington Post writer Max Ehrenfreund observed when writing an article about the Gallup survey:

Trump supporters might not be experiencing acute economic distress, but they are living in places that lack economic opportunity for the next generation.
Rothwell [the economist who conducted the analysis] used data from Harvard economists Raj Chetty and Nathaniel Hendren, who studied how children born in the 1980s moved up or down the economic ladder depending on where they grew up. Children raised in places with high economic mobility, such as Boston or Pittsburgh, often surpassed their parents in socioeconomic status. Children raised in places with low economic mobility, such as Raleigh, N.C., and Indianapolis, struggled just to do as well as their parents in adulthood.
Trump was especially popular in these parts of the country.

In short, though Trump's brand of reactionary, xenophobic populism deserves no appreciation, and his economic agenda in fact does nothing to help working people (aside from his admittedly correct stance on trade), he would not have been able to get this far without having taken advantage of the public's mounting dissatisfaction with their place in the economy. This is just one part of a larger phenomenon that's appeared throughout the industrialized world in the last several years wherein demagogues like Trump are succeeding by capitalizing on people's growing economic insecurities, and misguided as Trump's followers are, it's not enough to simply write them off as products of an unenlightened facet of our culture. This is where the Democrats come in.

Reaganomics for the left

Most Americans are in agreement that the elite-oriented, neoliberal policies of the past thirty-five years or so have not helped their economic interests. But while Republicans have naturally been worse than Democrats on protecting the middle-class and helping the economy grow, the latter party certainly deserves much of the blame for getting us where we are today.

Firstly, though Franklin Roosevelt and the Democrats who succeeded him in the following decades do deserve credit for their commitment to the rights of workers compared to that of the Republicans, they in fact share some responsibility for ushering in Reaganomics. Because, as Tony Wilsdon writes regarding the deeper economic effects of Roosevelt's Democratic Party:

Roosevelt was elected in November 1932, four years into the Great Depression – which was caused by the collapse of the financial speculation of the 1920s – as a fiscal conservative. Unrest was growing across the country as tens of millions of unemployed and impoverished workers were close to starvation. Determined demonstrations and strikes – including local general strikes – began to multiply, and growing numbers of workers were starting to criticize the capitalist system that had so wantonly cast them aside.

Roosevelt saw the radicalizing labor movement and the growing influence of socialists as a potential threat to the capitalist system. He abandoned fiscal conservatism, which was only making the conditions of ordinary people worse and preventing economic recovery, and instead adopted policies based on pumping money into the economy to support demand. This approach was most famously advocated by the British economist John Meynard Keynes and such policies are often described as “Keynesian.” Sections of the ruling class opposed Roosevelt’s policies as “socialism” but, as he explained, his intent was to save the system, not undermine it.

In other words, unlike the methods that the Scandanavian countries employed around that time to fight corporate power, the policies of Roosevelt's Democratic Party didn't go far enough to curb the problems of the established economic system. This, argues Wilsdon, led to the recession of the 1970's, which gave advocates of big business an excuse to make America give up the Keynesian spending on social programs that had gone on during the past several decades. What followed, of course, was the normalization of neoliberalism in the politics of the U.S. and most other countries.

The Democrats' response to this trend, especially after having contributed in part to the factors that set it in motion, was utterly irresponsible. Rather than fighting Reaganomics, they worked to help it, with Ronald Reagan being able to get his 1981 and 1986 tax cuts through Congress despite Democrats holding a majority in the House in both cases. The same is true for Reagan's ultimately disastrous deregulation bills, all of which were approved by a Democratic Party that had drifted disturbingly far from its more populist past since the 1980 election. Walter Mondale admitted this ideological shift in his 1984 DNC speech, saying that "After we lost we didn't tell the American people that they were wrong. Instead, we began asking you what our mistakes had been." He then pointed out that the Democrats' platform now included no business taxes that "weaken our economy."

Though if you look at the history of income inequality in the U.S, embracing neoliberal policies turned out to not be such a good idea, that didn't stop the Democrats from continuing to do so. The Democratic Party of the Clintons thankfully wasn't an extension of its past enthusiasm for tax cuts, but it did introduce the Democrats to another, similarly destructive facet of neoliberalism: the violation of worker's rights, or as it's more often referred to, "free trade."

The North American Free Trade Agreement-praised by Bill Clinton after signing it as something that meant "good paying American jobs"-has since killed over 1 million jobs in the US and wrecked Mexico's economy. Clinton's implementation of the world trade organization has had similar consequences. Obama has repeated Clinton's policies on trade, with the U.S.-Korea Free Trade Agreement of 2011 having so far destroyed more than 106,000 American jobs. And perhaps the most destructive "free trade" deal that Democrats are responsible for is been the 2011 U.S.-Panama Free Trade Agreement, which allowed thousands of wealthy individuals around the world to avoid paying hundreds of billions of dollars in taxes.

The worst, though, may be yet to come, as the Obama Administration continues to pursue the passage of the Trans-Pacific Partnership, an even more ambitious version of NAFTA which would kill jobs and consumer protections. Although the TPP has an almost zero chance of passing this year, and Obama's likely successor Hillary Clinton claims that she opposes the deal, it's almost certain that that isn't her true position on the matter.

Additionally, since their ideological transformation during the 1980's and 90's, Democrats have killed welfare, instituted Wall Street deregulations that played a large part in the 2008 financial crisis, passed a trillion dollar Wall Street bailout at the expense of taxpayers, and even narrowly given George W. Bush the majority of House votes needed to pass his disastrous 2003 tax cut bill. These and other instances of Democrats betraying their middle and working class base during the past few decades have played an important part in the enormous transfer in wealth towards the top that's occurred since the late 70's. Had Democrats been willing to sufficiently confront the problems with our economic system during its Roosevelt era, or at least have not resorted to neoliberalism during the Reagan era, it's safe to say that the economic factors which produced Trump would not have come to be.

Thankfully, they won't be able to keep doing so for much longer.

A breaking point

It's been made clear this year that as a consequence of the facts above, Clintonism-the neoliberal, politically triangulating strategy of the modern Democratic Party-has wrought its own doom by alienating working class people on both the left and and the right. Well, it's not quite dead, obviously, given Hillary Clinton's most recent poll numbers, but were she running against any of Trump's former Republican challengers, things would be very different. In this way, we can consider Donald Trump the life support for Clinton's campaign-and for Clintonism in general.

But even life support might not be able to keep Clintonism alive for much longer.

Because of the increased concentration and financialization of the economy that occurred because of the 2008 Wall Street bailout which Barack Obama, Hillary Clinton, and many other Senate Democrats voted for, the meager economic recovery that Obama has given us is about to go out the window. The dangerous re-wiring of the economy that the bailouts caused, wherein the big banks are now firmly in control of the world's markets, has set the stage for another financial collapse. And given the massive debt bubble that's occurred globally, along with the development of a new housing bubble and a stock market that's ripe for another crash, this catastrophic event could very well begin before the election-which, I believe, would easily give Trump the presidency as voters become dissatisfied with the Democratic Party.

Whether such a thing transpires will all depend on how the stock market behaves this next month. If the financial dike can hold until after then, Clintonism and the Democratic Party will be able to survive for a few more years, with Hillary herself making its final stand before being dislodged in the politically transformative 2020 election. Hopefully by then, given how reforming the Democratic Party into something better is pretty much impossible, we'll have seen the rise of a populist third party that takes its place. But in the meantime, as the unfortunate phenomenon which is Trumpism threatens our country in this election and will continue to threaten it in the coming years, it's important to cast the blame where it belongs: on the political establishment, Republican and Democratic.