Cash, Prices, Debt, and Taxes

Since at least the 1970s, the Left has relied on a straightforward economic message in most of the developed world: elect us and we will provide more spending for social programs. The theory is that the Left ought to offer a variety of social spending that can ease cost burdens on workers and consumers. This has been a path of moderate success. Parties of the Left have indeed been able to create new social programs and fund them, and they have modestly benefited from those programs politically. In fact, throughout the entirety of neoliberalism, the share of GDP spent on social programs in advanced economies has consistently increased. Social assistance programs are the goal. Democratic planning and redistribution are not.

The bundle of social spending called Build Back Better embodied just such a theory. And those who insist today that these programs would have made all the difference politically embody the philosophy of the Left under the neoliberal period. The Build Back Better framework, for instance, sought to provide tax credits and subsidies for a variety of services, most of which would be bought on the private market. No doubt these programs would have eased cost burdens, and there is good reason to think that more ambitious social spending in this direction could have led to a Democratic victory. But the fact remains that this vision amounts to little more than throwing cash at social problems.

Consider that, because groceries are too expensive, Build Back Better promised to give working families a $300 check each month. Great! But as Isabella Weber pointed out recently in Jacobin, such an action would do nothing to challenge the pricing dynamic itself. In fact, if producers maintain their markups by passing costs onto consumers, and if the government subsidizes those consumers’ purchases with tax credits and cash transfers, then corporate giants stand to reap even larger profits since buyers will be able to tolerate even higher prices. Ironically, a cash transfer without complementary price and tax policies could result in an overall upward redistribution of wealth. And in a market society, wealth is power.

That’s one reason why Anton Jäger and Daniel Zamora Vargas call basic income programs “welfare for markets.” Because the social and economic order is predicated on maintaining a certain level of consumer confidence, cash transfers are not threatening to the rulers of the age; instead they provide the means to shore up demand in a low-wage economy. Many of the world’s richest individuals had no objection when the government doled out stimulus checks signed by Trump during the COVID-19 pandemic.

Consider also that, even when the state does increase social expenditures, it does so by going into debt. As Wolfgang Streeck has shown, most parties of the Left have been unable to make any headway on raising taxes on the rich — a move that genuinely threatens their power. Instead progressive governments have won new assistance programs by piling on public debt in order to “buy time.” And while “modern monetary theorists” like Stephanie Kelton disagree, the state’s slide into debt may actually be dangerous. Economically, a situation of government indebtedness empowers the state’s creditors in international finance and on Wall Street, who can threaten to tank “business confidence” and crater investments if they ever get a whiff that their interest will not be paid. Politically, high debt empowers budget-hawk business groups and billionaires like Elon Musk, who are dead set on slashing public spending. And socially, an overreliance on debt, publicly and privately, helps to subsidize low wages in the cruelest way by forcing the poor to pay back with interest what ought to have been provided to them in kind — social investments in high-wage jobs. The politics of this “debt state” have led political parties of the Left into a blind alley.

If prices are one political third rail, taxes are the other. No new wealth taxes, profit taxes, or income taxes were seriously implemented or even considered under the Biden administration. In fact, after railing against Trump’s Tax Cuts and Jobs Act of 2017 as the “biggest tax cut in history” and vowing to repeal it, Democrats left the measure entirely intact.

It’s true that Bidenism wasn’t ambitious enough, but a more ambitious welfarism isn’t the solution. Even if the Left did succeed in offering new and expensive cash transfer programs, as we’ve seen, it wouldn’t force much of a confrontation with the power of concentrated wealth. And that means the corporate giants who control investment and the financial titans who service the debt would remain the untouchable rulers of the economy, leaving governments utterly dependent on currying their favor. The simple fact that inflation was such a vexing issue for the Democrats — as a policy challenge and a political one — suggests that the structure of the economy itself needs to be confronted.

Toward an Industrial Populism

Despite the fondness that many on the Left had for Build Back Better, in some ways, much more ambitious policies were found in Biden’s Inflation Reduction Act, Infrastructure Investment and Jobs Act, and CHIPS and Science Act, all of which offer hints at what a new economic model might look like. For one thing, a bigger emphasis on productive investments would directly provide more and better jobs for workers in struggling parts of the country. While welfarists on the Left assume that the economy has a natural inclination away from manufacturing jobs, the belief that the United States cannot rebuild its industrial base is just that — a belief. And faith in that belief is increasingly strained, as evidence of Biden’s comparatively modest investments makes clear. These measures brought hundreds of thousands of new manufacturing jobs online, with more to come.

Unfortunately, it’s nowhere near enough. As Amtrak remains clogged, expensive, and often unusable with derailments and equipment failures, bridges in much of the country continue to rust and rot; school buildings need retrofitting, new buildings need to be built, and local transit systems are in a near-permanent crisis. All these problems are stuffed with the potential for jobs. They require a ton of industrial materials to be manufactured and assembled. These jobs could be manned by union labor and provide family-sustaining wages. And because they provide income — that is, because they are productive investments — they will have a far greater social effect than simply subsidizing consumption.

Put another way, the Left must make the case for making things. There is a reason why socialists have always been so obsessed with production. Right now, the Left approaches crises like inflation in a surprisingly laissez-faire way, the assumption being that the government has no means to do anything about prices, either through temporary price fixing or through longer-term investments in supply.

During the election campaign, it was common to see flabbergasted progressives shocked that voters were blaming inflation on Biden. “What on Earth could the president do about that?” they seemed to say. The reason why progressives were puzzled is because their long-standing welfarist theory is all about subsidizing social costs but not about steering the economy. Indeed, liberals freaked out at even the most modest suggestion of temporary price controls. Yet as we’ve seen, progressive welfarism has existed throughout the entirety of neoliberalism, and it has not succeeded in increasing labor’s share of wealth nor even generating a stable majoritarian political base for parties of the Left.

As the Republican trifecta gets set to take over the levers of power, we’re going to see the fruits of their national populist project. That project is also producerist, and it too sees a much larger role for the state in the matters of economic direction. Domestically, the GOP plans to impose high tariffs on imported goods to incentivize domestic manufacturing, and it plans to restrict immigration in the hopes of raising workers’ wages. Yet its agenda is conservative and not truly developmentalist. That’s because the program also insists on massive tax cuts for the rich, a libertarian regulatory environment for business, and what seems set to be a particularly hostile legal environment for labor as Musk’s own lawsuit challenging the constitutionality of the National Labor Relations Board winds its way through the courts.

That leaves it to the Left to develop a genuine alternative: a social productivism. A program that promises to build ambitious projects — projects designed to provide millions of high-wage jobs and restore our collective faith in the democratic project. It’s an appeal that will break with the dogma of the neoliberal period by insisting on taxing the rich and their wealth, investing in productive and not merely consumptive programs for social uplift, and confidently stating the need to manage the economy in a much more direct way. It’s an appeal, then, that will go far beyond the economic vision of Bidenism.