Democrats and Depoliticizing Markets

Even as the Republicans increasingly abandon free markets, we are witnessing some evolution on the issue among Democrats.

While Democrats have been more in line with classical liberal thinking in regards to social freedoms they were previously behind the Republicans on this matter. But as Republicans have moved toward central planning Democrats have had second thoughts on their previous views on regulations and economics.

FREE TRADE

Polls show Democrats to be far more supportive of free trade than Republicans tend to be. When it comes to movement of labor, capital and goods across borders the typical Democrat today is more laissez faire than the typical Republican. When it comes to economic freedom, and all other freedoms, the Republican president is a hard-core dirigist and an advocate, and practitioner of crony capitalism.

Former Congressman Jim Backus, a Democrat, reminded leaders of his party, “I have a message for my former Democratic colleagues on Capitol Hill: You might not be backing trade, but our base has beat you to it.”

Ronald Brownstein, at CNN, reminded Democrats:

While many Democrats still think of the party as the home of blue-collar industrial regions hostile to trade, in fact, the party is now centered in the major metropolitan areas that are integrated into global markets and at the forefront of the transition into the information-age, digital economy. The most telling measure of that shift: while Hillary Clinton won fewer than one-sixth of America’s counties in 2016, her counties accounted for nearly 60% of all US exports, according to calculations by the Metropolitan Policy Program at the center-left Brookings Institution.

…Polls now consistently find that Democratic voters are more supportive than Republicans of free trade. A national Quinnipiac University survey earlier this month found that while nearly three-fifths of Republicans backed Trump’s aluminum and steel tariffs, almost three-fourths of Democrats opposed it.

That Quinnipiac poll found “Every listed party, gender, education, age and racial group oppose steel and aluminum tariffs, except Republicans, who support tariffs by a lackluster 58–20 percent and white voters with no college degree, who are divided with 42 percent supporting tariffs and 40 percent opposed, the independent Quinnipiac University Poll finds.” Note for emphasis “every” group normally polled opposed these taxes on free trade with one exception — the anti-market vote was Republican.

Last year Pew Research found “Republicans [were] far more likely than Democrats to have a skeptical view of these [free trade] agreements.” Republicans were happy to goose-step behind President Trump when he announced his opposition to free trade large numbers of Republicans suddenly changed their mind. When ordered from the top they obey — not really the view of “limited government” advocates. In April, 2017 Pew noted:

“In October, just 29% of Republicans and Republican-leaning independents said free trade agreements have been good for the U.S., down from 56% just a year-and-a-half earlier. Today, 36% of Republicans view trade agreements positively, an increase of seven percentage points from October.”

OCCUPATIONAL LICENSING

In recent years one of the best exposes of the risks of occupation licensing laws didn’t come from a conservative think tank, but from the Obama White House. In July 2015 they released the important report Occupational Licensing: A Framework for Policymakers, which among other virtues openly cited the libertarian Cato Institute as one of their sources. The Obama White House warned:

The current licensing regime in the United States …creates substantial costs, and often the requirements for obtaining a license are not in sync with the skills needed for the job. There is evidence that licensing requirements raise the price of goods and services, restrict employment opportunities, and make it more difficult for workers to take their skills across State lines. Too often, policymakers do not carefully weigh these costs and benefits when making decisions about whether or how to regulate a profession through licensing. In some cases, alternative forms of occupational regulation, such as State certification, may offer a better balance between consumer protections and flexibility for workers.

Democrat Congressman Dwight Evans of Pennsylvania, earlier this year added his voice to the chorus advocating reform:

Since the 1950s, the number of licensed workers has jumped from just 5 percent of the workforce to nearly 30 percent today — that’s nearly 1 in 4 workers. Yet, not every occupation is regulated consistently across States. Fewer than 60 occupations are regulated in all 50 States, showing substantial differences in which occupations States choose to regulate.

Making the situation worse for workers, many of whom are striving to be small business owners, are the fees required, training costs, and time spent studying and testing. While the requirements serve a functional purpose, they are also a barrier for entrepreneurs to enter an occupation — especially low-income and immigrant workers.

In Nebraska State Senator Laura Ebke (Libertarian) introduce legislation to reform occupation laws. While generally considered left-wing the American Civil Liberties Union teamed up with Ebke to sponsor “a series of town halls on ways to streamline Nebraska’s occupational licensing laws.” ACLU Executive Director warned: “Our burdensome licensing structure, hurts Nebraska’s workforce and our economy, particularly communities of color and low-income Nebraskans.”

In Louisiana Governor John Bell Edwards, another Democrat, has thrown his support behind measures to reform occupation licensing to increase job opportunities in the state.

HOUSING REGULATIONS AND ZONING REFORM

Democrats are also now challenging zoning regulations and restrictions that reduce the supply of housing and raise costs. In Oregon, House Speaker Tina Kotek, a Democrat from Portland “is drafting a proposal that would require cities larger than 10,000 people to allow up to four homes to be built on land currently zoned exclusively for single-family housing.” By removing these restrictions on building Kotek believes — correctly I think — the supply of housing will increase and cost will decrease relative to what it would have been absent the reform.

In Minneapolis the city council is controlled by the Democratic-Farm-Labor Party with one Green holding a seat. There are no Republicans, yet the city faces some dramatic free market reforms in regards to housing. Earlier this month The New York Times reported:

In a bold move to address its affordable-housing crisis and confront a history of racist housing practices, Minneapolis has decided to eliminate single-family zoning, a classification that has long perpetuated segregation.

The Minneapolis City Council voted last Friday to get rid of the category and instead allow residential structures with up to three dwelling units — like duplexes and triplexes — in every neighborhood. Minneapolis is believed to be the first major city in the United States to approve such a change citywide.

City Council President Lisa Bender accurately noted: “We don’t have enough homes for people who want to live here. Increasing our housing supply is part of the solution.”

San Francisco was long dominated by anti-housing activists who claimed to support “affordable housing” but really reduced the supply while driving up prices. These people were working diligently to destroy the housing market while claiming it would create utopias. Apartments that once rented for a few hundreds dollars when I lived there are now in the $5000 per month price range. These “activists” destroy the diversity of the city by driving out minorities and lower income groups.

Even here reforms toward freer markets are creeping back. The city often used parking as an excuse to deny permits. Each new building required additional parking spaces, but such space was at a premium and often impossible to supply. This means no new building or rejection of measures that would increase population density. In other words, this little regulation over something minor, parking, had large ramifications on the supply of housing.

One of the virtues of San Francisco, when I lived there was there was no need for a car. While I moved there with a vehicle I soon found I had it parked permanently because I didn’t need it. I eventually got rid of it, finding it more efficient to periodically rent a car when one was needed. Yet, building regulations would require parking spaces for people like me. As left-of-center Slate noted: “Some of the country’s least-car-friendly cities have become it’s more desirable.” The city removed those requirements, a deregulation Slate said “Proved to be a very onerous stipulation for developers, adding tens of thousands of dollars to the cost of every new unit. In a city with a never-ending housing crisis, scrapping the required parking space is an easy way to lower construction costs.”

In addition to San Francisco removing these regulations other parking deregulation examples include Cincinnati, New York City, Minneapolis, and Buffalo, New York. Democrats control all of them.

In California — a state that formerly elected Republicans to statewide office frequently — the GOP is now largely decimated due to its embrace of religious authoritarianism. Yet, deregulation measures are now widely discussed in the state legislature even though only 25% of the House and Senate is Republican.

State Senator Scott Wiener (D-San Francisco) has offered a proposal, SB-50, Vox calls “sweeping housing legislation. Vox explains:

Wiener’s bill, described by Politico as a plan to “spur housing development near transit, job centers” and the LA Times as a “bill to boost apartment complexes near transit,” does not directly require anyone to build any apartment complexes anywhere.

What it does is prevent cities and towns from banning apartment construction, at least in certain specified areas.

Professor Ilya Somin, George Mason University, wrote regarding these important reforms:

Exclusionary zoning is possibly the most important policy issue most nonexperts have never heard of. In addition to greatly increasing housing costs, it also cuts off many poor and lower-middle class Americans from valuable job opportunities, thereby greatly reducing economic growth and cutting GDP by as much as 9.5%. It is one of the main factors holding back both poor minorities and working-class whites, and preventing millions of Americans from having the opportunity to “vote with their feet” for areas that offer greater opportunity.

The issue unites economists and land-use scholars across the political spectrum. But until recently, progress has been stymied by a combination of public ignorance and resistance by powerful interest groups. But the firewall holding back zoning reform finally seems to be cracking.

A lot of the debate on housing deregulation among Democrats has centered on the role zoning played in creating segregated areas in practice, while avoiding the term in the actual laws. One example is a book by Richard Rothstein of the left-leaning Economic Policy Institute, The Color of Law: A Forgotten History of How Our Government Segregated America.

THE SHIFTING DEBATE

Obviously, the struggle is far from over. The reforms discussed above only represent incremental progress, and none go as far as I and other libertarians would want — or even as far as many mainstream liberal economists would want. But they are important steps in the right direction. And the more such efforts succeed, the more they might stimulate imitation in other cities and states. That’s a thought that should bring some cheer during the holiday season!”

All of these measures, reports and proposals are important signs that there may be a shift among Democrats on key economic issues. One problem is communicating these reforms to their wider base. And it is here many libertarians and the few remaining free market conservatives have failed. Too often they have used rhetoric and language to which Progressives and “liberals” can’t relate. The liberal market reformers are talking about the impact of regulations on the poor and minorities.

The left-of-center publication The Nation, once an outpost for classical liberalism reentered the debate on inequality with an article by Steven Teles and Brink Lindsey. Using language that resonates with the Left, Teles and Lindsey warned:

The state has also worked to redistribute wealth upwards through its interventions in the housing markets of high-income cities. Up through the 1980s, overall housing supply in a given metropolitan area generally kept pace with demand, even if zoning and other land-use restrictions affected the location of new housing. In recent decades, however, this process has been short-circuited, as existing homeowners in places like Boston; Washington, DC; New York City; Los Angeles; San Francisco; and San Jose have used their political power at the local level to step on the hose of new housing construction. As David Schleicher of Yale Law School has argued, the hyper-localism of zoning decisions means that, even though these regions are desperate for new housing, the way we organize zoning decisions gives vastly outsized weight to the preferences of existing homeowners at the expense of everyone else.

They reminded our progressive friends government has a dark side and the regulatory state can be used to redistribute wealth up the economic ladder and to destroy opportunity for lower-income individuals — which disproportionately burdens minority groups.

Ever since the Progressive Era, people on the left have been primarily concerned with removing restraints on the government’s ability to intervene in the economy. But we have learned that some of those tools are far more likely to be captured by the wealthy and organized than are others. State licensing boards, for instance, appear to regularly operate as extensions of the professions they regulate, rather than protectors of the public interest. Antitrust laws are beginning to be used to rein in their scope and jurisdiction, but far more could be done to limit their power. Local governments have used their exceptional powers to stymie building in high-growth cities. Tighter state or even federal controls on their ability to do so, of the kind that California is just starting to put in place, would generally serve the interests of the less advantaged.

One of the most galvanizing figures in the modern left movement in America was Senator George McGovern, the presidential candicate for the Democrats in 1972. He warned his fellow progressives to be weary of over-regulation. He said after leaving the Senate he learned the problems over-regulation produces for small businesses.

I also wish that during the years I was in public office, I had had this firsthand experience about the difficulties business people face every day. That knowledge would have made me a better U.S. senator and a more understanding presidential contender.

Today we are much closer to a general acknowledgment that government must encourage business to expand and grow. Bill Clinton, Paul Tsongas, Bob Kerrey and others have, I believe, changed the debate of our party. We intuitively know that to create job opportunities we need entrepreneurs who will risk their capital against an expected payoff. Too often, however, public policy does not consider whether we are choking off those opportunities.

One of his final warnings before his death was:

In short, `one-size-fits-all’ rules for business ignore the reality of the market place. And setting thresholds for regulatory guidelines at artificial levels — e.g., 50 employees or more, $500,000 in sales — takes no account of other realities, such as profit margins, labor intensive vs. capital intensive businesses, and local market economics.

The problem we face as legislators is: Where do we set the bar so that it is not too high to clear? I don’t have the answer. I do know that we need to start raising these questions more often.

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