“Let’s tell the truth. Mr. Reagan will raise taxes and so will I. He won’t tell you. I just did.”— Walter Mondale, 1984 Presidential Acceptance Speech
“The era of big government is over.”— Bill Clinton, 1996 State of the Union Address
An epic battle is coming and it doesn’t involve building a wall. We are at a paradigm-challenging moment, the kind we see once every couple of generations, when a long-entrenched political regime runs out of intellectual energy and then rapidly loses legitimacy.
For over four decades after the Great Depression, spending on social programs and raising taxes to support them was mainstream politics. This was the era of the New Deal and the Great Society, a period dominated by the liberal belief that an active government could serve the public interest. This belief and the political alignment that supported it fell into disfavor beginning in the 1970s, but no one bothered to tell the Democratic Party. Walter Mondale ran for president in 1984 on a platform of equitable tax increases — in contrast to tax increases that would hurt the middle class for the benefit of the rich, as he alleged of Ronald Reagan — not realizing that the mere mention of tax hikes was political poison. Even after three Electoral College wipeouts in four elections, it took until the mid-90s for a Democrat to decouple himself from New Deal liberalism, which by that time had been effectively re-branded by the right as “tax and spend” liberalism, and declare an end to the era of big government.
Of course, in vintage contradictory fashion, Bill Clinton’s next words in his 1996 State of the Union Address were: “but we cannot go back to the time when our citizens were left to fend for themselves.” He never quite said how that was supposed to happen without the protection of government policy, especially as he was on the verge of turning Aid to Families with Dependent Children into Temporary Assistance for Needy Families. But he had his finger on the pulse of the politics of the moment. Clinton knew he was a president of the minority party trying to govern in a world defined by Ronald Reagan, who declared in his 1981 inaugural, “government is not the solution to our problem; government is the problem.”
During the decades following Reagan’s election, conservatives made sure the country would not be tempted to return to its New Deal ways by setting the terms of debate in such a way as to make it impossible to pay for new or expanded social programs. Conservatives successfully insisted that new social spending had to be paid for, while not extending the same requirement to tax cuts, which in Supply Side theology are supposed to pay for themselves. Over time, this because conventional wisdom in political circles, making it impossible for any expensive proposal to be taken seriously for longer than it would take opponents and journalists to ask how we’re going to afford it. It’s why Obama labored under the excruciating weight of having to justify how he was going to pay for health care reform while Trump could add almost $2-trillion to the national debt with tax cuts for the wealthy and not pay a political price.
These terms are now being prominently challenged. For the first time in four decades, national Democrats are talking out loud about not just raising taxes but significantly changing tax policy, and they are being heard. Not surprisingly, the conversation originated on the party’s left flank, but the fact that tax-hike proponents are being engaged by skeptics and opponents rather than marginalized is an indicator of how swiftly and dramatically the scope of political debate has widened. About a month ago, New York Rep. Alexandria Ocasio-Cortez told Anderson Cooper on 60 Minutes that she favored raising the top marginal tax rate to 70% to pay for a “Green New Deal” to combat climate change. Shortly afterwards, presidential hopeful Sen. Elizabeth Warren floated a wealth tax of 2% on individuals with assets over $50 million, rising to 3% on assets above $1 billion. Even in the recent past, these ideas would have been disregarded and their proponents dismissed as fringe elements. Today, they are generating controversy and their proponents are generating a lot of attention. Something has changed.
That something is Donald Trump, who is sucking the last vestiges of legitimacy out of a party long out of ideas. Let’s not forget that Trump tapped into economic populism as a candidate, before reversing course and signing on to a Republican agenda written by and for the very few. Shutting down government services most people find essential turned out to be a great way to remind people that government isn’t always the problem (and if you want to know how things turn out politically when people are denied government services for more than a month, see Kansas). There is a restlessness in the country and it is generating an appetite for long-dormant ideas.
This will create an interesting dynamic in the 2020 election. Progressive economic policies have a lot of mass support in the Democratic base and broadly in the general electorate. They face resistance among economic elites who have an outsized influence over policymaking, including some in the donor class of the Democratic Party. That is where the battle will rage — between the people who bankroll the political process and those who have the numbers to overrule them but never have. It’s already clear that the powerful and well-connected will have to do better than Howard Schultz, the former Starbucks CEO who could probably become president if the election were held in Davos. In the real electorate, there is little appetite for a platform of protecting billionaires. But billionaires should be worried that something significant is changing. Because it is.