The Crisis of the Democratic Establishment

The Democratic Party is at a crossroads. On a host of issues, it is clear what we stand for and how we differ from the Republicans: minority rights, abortion, immigration, gun control, climate change, the importance of facts, and, of course, whether or not the president is above the law. On economic issues, however, the picture is not so clear. Elizabeth Warren’s speech at St. Anselm’s College on Thursday is an attempt to fix that problem — and also a shot across the bow of the Democratic elite.

With each passing year, the widening gulf between the very rich and everyone else becomes more and more apparent. Even after ten years of economic expansion and with unemployment at historic lows, working-age adults in the bottom half of the income distribution make less than they did a full two generations ago, while the very rich now count their wealth with twelve digits instead of eleven. Yet the Democratic establishment insists that we must stay the course, and shared prosperity will be just around the corner.

Ever since the rise of the New Democrats in the 1980s and the election of Bill Clinton in 1992, the party’s power brokers have preached the gospel of “growth and opportunity.” (This is the story I tell in the first chapter of my new book, Take Back Our Party, available for free at The American Prospect.) All good things come from the private sector; government’s role is to help markets function efficiently, create the conditions for private sector growth, and help people participate in those markets. Hence welfare reform, financial deregulation, and Obamacare, among other things. Hence also the intense, coordinated assaults on Bernie Sanders in 2016 and both Sanders and Warren today.

Senator Warren’s speech today exposed the failings of the Democratic economic platform of the past thirty years. Yes, markets produce growth. But she highlighted the question that the Clinton-Obama policy elite never wanted to answer: Who benefits? For the establishment, even to pose the question is to commit the mortal sin of “class warfare.” They take as axiomatic — an iron law of economics — that a rising tide lifts all boats, that growth is the best way to help the 99% as well as the 1%.

But the unwelcome fact is that, in recent decades, increases in productivity and output have primarily enriched corporate executives, fund managers, and the wealthy people who own most of the assets in our economy. Literally none of that growth is trickling down to half of our population. (See Chapter 2 of Take Back Our Party.) That’s why Warren proposes to change the way markets distribute wealth in the first place — by strengthening the bargaining position of workers and attacking economic concentration.

Senator Warren also shines the spotlight on the failings of our economy. Despite ten years of growth and low unemployment, families from the poor through the middle class struggle with constant economic insecurity — with record levels of student debt, rising urban rents, insufficient retirement savings, and the increasing cost of simply using a health insurance plan.

The signature policies of the Clinton and Obama administrations were sorely ineffective in the face of rising inequality: Welfare reform contributed to a tripling of the number of people living in extreme poverty; financial deregulation eventually cost nine million families lost their homes; cheaper student loans created a generation buried in debt; and Obamacare’s inability to control costs led to a rapid increase in deductibles and co-payments.

That’s why, instead of the empty promise of “growth and opportunity,” Warren wants to give people the things they actually need: child care, free college, expanded Social Security benefits, and Medicare for All. Yes, market capitalism makes it possible for many people to find satisfying jobs producing valuable goods and services. But if you can’t, for whatever reason (poverty, bad education, disability, racial discrimination, etc.), that doesn’t mean you don’t exist.

And this is what frightens the Democratic elite most. It’s not that they really think that Warren’s policies will be bad for the economy. Her plans in aggregate represent the largest ever transfer of wealth from the very rich, who tend to save or “consume” paintings that were painted centuries ago, to the poor and the middle class, who tend to buy things they have to. And taking the problem of health care away from businesses will eliminate the single biggest burden weighing on long-term profits.

The problem is that she is threatening their self-identity by hearkening back to the historical legacy that they rejected thirty years ago. The Democratic Party was once the party of the New Deal and the War on Poverty, of unions, the social safety net, and a government that tried to help people. But in 1980 and again in 1984, Ronald Reagan successfully branded the Democrats as tax-and-spend liberals, in the pocket of union bosses who raised taxes on workers to funnel benefits to mythical “welfare queens” — a framing that simultaneously appealed to an entire bundle of common prejudices.

Instead of defending government and social solidarity, the New Democrats adopted the same attack lines and the same economic vision. To return to power, they argued, the party had to discard the now-tarnished legacy of the New Deal and create a new identity: finance, not manufacturing; business, not government; balanced budgets, not domestic spending programs; and growth, not redistribution.

Warren’s speech points out the obvious: that the Democratic establishment has failed to do anything about (or actively enabled) today’s unfair economy, in which a small handful of highly skilled, well connected, or simply rich people appropriate the spoils; and that, in taking the money of the billionaire class and catering to their policy preferences, they have become unable to do anything about this rigged system and the inequality that it produces. And the billionaires themselves, from Bill Gates to Michael Bloomberg, are terrified because Warren refuses to court them, signaling an end to decades of business as usual.

The real problem with her vision, for the party’s current bosses, is that it represents a complete repudiation of their precious image of themselves and their place in history. She promises worker power instead of corporate profits, domestic spending programs instead of cleverly designed markets, redistribution instead of the glib proverb of the rising tide, and a government that actually helps people instead of one that oversees the economy from on high and lets the chips fall where they may. What we are seeing is the existential crisis of the Democratic establishment. And it isn’t pretty.



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James Kwak

Books: Take Back Our Party, Economism, White House Burning, 13 Bankers. Chair, @southerncenter. Co-founder, @Guidewire_PandC. Freelance cellist.