A decade ago it was believed that the Fed couldn’t simply print money with devotion. It was believed that the government could not reduce huge debt without boosting inflation and crippling the cost of debt payments. Both concerns have been thrown out the window by a great number of thinkers. We have seen years of high debt and loose monetary policy, but inflation has not come.
So the shackles were thrown aside. We are now experiencing a monetary and fiscal policy that would have been inconceivable a decade ago. This is like the moment the GOP abandoned fiscal conservatism over the excitement of the supply-side economy – which eventually led to pointless tax cuts for the rich.
The role of government is being redefined. It is now believed that government should intervene to reduce economic insecurity and inequality. Even Republicans like Tom Cotton and Mitt Romney are devising a plan to actively boost wages for American workers.
It’s not socialism. This is not the federal government taking control of the dominant heights of the economy. This is not a series of programs designed to limit corporate power. Americans still have little confidence in the government. This is the transfer state: the government redistributes huge sums of money by cutting checks to people and trusting them to spend them properly.
Both parties are adjusting to the new paradigm. With the wind behind their backs, Democrats conclude that Biden’s decision to avoid bipartisanism in order to pass an aid package is better than Barack Obama’s attempts to put it on. I don’t know if the filibuster is going to go away, but it definitely looks like it’s going to be watered down.
Bad economic conditions pushed the GOP from Milton Friedman libertarianism to Donald Trump populism. Republicans have learned that in this new era it is stupid to fight Democrats on redistributive policy, but they can win elections by waging culture wars. As Yuval Levin of the American Enterprise Institute notes, because Republicans have found so many cultural avenues to gain votes, there can be a realignment of politics without realigning the partisans.
I worry about a world where we spend borrowed money with devotion. The skeptical headline in the last early retirement column by the great Washington Post business columnist Steven Pearlstein resonated with me: “In progressive Democratic Paradise, borrowing is free, spending pays, and interest rates never rise.”
However, income inequality, widespread child poverty and economic precariousness are the problems of our time. All of this is well worth taking a chance to tackle. At first, Biden appeared to be the third chapter of the Clinton / Obama center-left era. But that’s something new.
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