Joe Biden’s multi-trillion-dollar infrastructure plan is big and bold. Most pundits and the media see it as a rejection of the prior half century of small government, free-market conservative thinking and a new kind of growth policy. As the Wall Street Journal puts it, “It all marks a major turning point for economic policy. The gamble underlying the agenda is the belief that government can be a primary driver for growth.”
But this is wrong. The plan, and much of the administration’s economic agenda, is not based on the belief that government can be a primary driver for growth, any more than the conservative’s free market agenda was based the belief that free markets were the key driver of growth. Free-market conservativism was first and foremost about freedom. Progressive economics is first and foremost about fairness: widescale redistribution of income and wealth.
This gets to the pivotal question for our nation’s economic policy: what should the overarching goal be? There are three choices.
Freedom: limiting the role of government. This means limiting taxes and regulation, keeping U.S. markets open to goods, services, and people, and ensuring that contracts are enforced. The fact that free-market conservatives claim that this is the best recipe for growth is largely irrelevant. Their goal remains freedom. As Friedrich Hayek, the patron saint of economic conservatives, stated in his classic book The Road to Serfdom, “personally, I should much prefer to have to put up with some such inefficiency than have organized monopoly control my ways of life.”
Fairness: ensuring that lower-income Americans have significantly more wealth, income and government services. This means increased regulation, taxes and spending. For at least a decade, the progressive left (whose views now have largely taken over the Democratic party) has argued that income inequality is out of control, and more recently, that racial and gender fairness should be the top economic policy goal. One can dispute how much inequality has grown (not as much as most progressives assert) or wages stagnating (median wages have increased, but not as fast as incomes for the top earners). But the real question is should fairness be the principal goal of U.S. economic policy. If it should be, then higher taxes on companies and the wealthy, more regulation, breaking up big companies, and more government spending makes sense.
Flourishing: spurring faster per-capita GDP growth, more innovation and greater U.S. competitiveness, especially in advanced industries. This means an anti-trust policy that enables large oligopolies compete globally; a tax code that spurs business investment; and government investment in the building blocks of growth and innovation, especially R&D, new machinery and equipment, critical infrastructures and worker skills. Flourishing doesn’t mean rejecting markets and business, especially non-financial businesses. And it doesn’t mean rejecting a larger and more strategic role for government. It does mean rejecting freedom and fairness as the overarching goals of economic policy.
Given all the challenges America faces, including the military and economic threat from China, a massive national debt, sluggish productivity and wage growth, anemic innovation rates, climate change, and the baby boom retirement bubble, I choose flourishing.
Knowing that many Americans see flourishing as the right goal, both the freedom and fairness camps claim their policies generate flourishing. But mostly they don’t. Cutting taxes on rich people does little to spur growth, especially if that comes at the price of government investment. More money for caregivers, paving roads, and building or retrofitting housing does little to spur growth. notwithstanding flawed studies advocates rely on.
Making flourishing the centerpiece of economic policy doesn’t mean limiting and punishing business. A flourishing economy depends on flourishing businesses, including large oligopolies. It doesn’t mean limiting government. A flourishing economy, especially with the U.S. competing against China Inc., requires smart government policies focused on real investment, not social spending called “investment.”
Finally, while flourishing is most important, freedom and fairness are not unimportant. Conservatives are right to warn of an over-regulatory and active state. And progressives are right to warn of dangerous increases in income inequality. But flourishing can support freedom and fairness. Spurring innovation through the tax code, and ensuring light-touch regulations preserves freedom. Supporting a higher minimum wage, raising taxes on dividends to pay for a more generous R&D credit, and expanding R&D funding to create technology hubs in the heartland supports fairness.
After Trump, and with the rise of China, some of the right seem to have come around to the view that the 50-year run of “freedom” economics should come to an end or at least be modernized for the new challenges facing the nation. Unfortunately, most progressives seem to believe that a 50-year run of “fairness” economics should replace it. Unfortunately, the Republic cannot wait a half century before the ship of state finally embraces flourishing.