One of the hoary talking points Republicans will pull out in the general election campaign is that Democrats are for larger government, and the GOP is for smaller government. This won’t be as easy a sell as in past elections, given the massive expansion of federal spending during the Bush-Cheney administration, not to mention Republican support for highly instrusive government limitations on civil liberties.
But Democrats will need to make the case that stronger government is truly necessary if we are to reverse the extraordinary income inequality of recent years, and the rapid erosion of the middle class, and of economic security for all but a fortunate few. That’s the argument made in detail by TDS Co-Editor Bill Galston in the latest issue of The American Prospect.
Galston’s determination to champion a stronger public sector role in national economic life should draw some attention, given his important role as a domestic policy advisor to Bill Clinton at the time when Clinton was claiming that “the era of big government is over.” This is, he argues, a very different era:
From today’s vantage point…the 1990s appear to have been the proverbial calm before the storm. Although the Bush administration’s misguided fiscal and foreign policies have worsened our plight, our problems are structural and long-term, and no simple return to the status-quo ante will resolve them. Most analysts and policy-makers underestimated the impact of huge numbers of new workers in China, India, and the former Soviet Union entering the global market system. International economic forces are limiting wages for most U.S. workers, increasing income inequality, and heightening pressure on the World War II–era system of benefits provided through the private sector. In these circumstances, average families have resorted to record levels of borrowing to maintain purchasing power, driving the savings rate into negative territory for the first time on record and raising personal consumption to an unsustainable 70 percent of GDP. The Bush administration has squandered the resources it could have used to ease the reform of the large entitlement programs. And the back-loaded costs of deregulation are now clear: among them, an epidemic of corporate misconduct and crisis in credit markets, here and abroad.
Galston examines a variety of negative trends for middle-class families, but simple compensation provides the most alarming picture:
Recent work by MIT economists Frank Levy and Peter Temin shows that a wedge has been driven between productivity gains and compensation (wages plus health care and fringe benefits) for full-time workers at peak earning age. Since 1980, productivity has increased by 71 percent while median compensation rose by only 19 percent, and 82 percent of personal income gains went to the top 1 percent of the population.
Stronger government efforts to create a “21st century social contract” will inevitably require an expansion of the public sector, and perhaps, given the fiscal climate and the need to sustain economic growth. That’s why Galston continues to believe that government policies must be reformed, including, perhaps, limitations on publicly financed health care benefits, if costs cannot be contained otherwise. But the alternative to stronger government is a big government that doesn’t accomplish much of anything in terms of providing equal opportunity or economic security. And that’s the path we are on under Republican governance.
