Old Democrats vs. New Democrats: Faux vs. Sperling

Jeff Faux and Gene Sperling are two titans of democratic economic policy. Last week (February 23, 2006) they debated the core economic policy differences that define and divide old Democrats from new Democrats.

Jeff Faux is the founder and former President of the progressive Washington think-tank, the Economic Policy Institute. Gene Sperling was the head of President Clinton’s National Economic Council from 1996 to 2000. Both have just published new books. Faux’s book is titled “The Global Class War: How America’s Bipartisan Elite Lost Our Future – and What It Will Take to Win It Back.” Sperling’s book is titled “The Pro-Growth Progressive: An Economic Strategy for Shared Prosperity.”

The two books provide a marvelous window on today’s Democratic Party. Faux is an old labor Democrat, Sperling a new Democrat. It is striking that two leading Democrats could come up with such fundamentally different accounts of the American economy. This suggests that the Democrats are really two parties when it comes to the all-important economic agenda.

Faux is a political economist, and therefore emphasizes politics in his analysis. Political power lies behind economic policy. His core thesis is that America’s elite, drawn from both Republicans and Democrats, has abandoned America and joined a new global political party - the Party of Davos. Globalization therefore represents a new class war. On one side is a new global uber-capitalist class. On the other side are the rest of us, which is workers everywhere – not just the United States.

Sperling is a policy economist, and accordingly his outlook emphasizes policy – fiscal responsibility, policies to help workers adjust to trade related job losses, public investment in education, and tax incentives to help people save and accumulate wealth.

These are the bright eye-catching differences between Sperling and Faux. However, there are deeper analytic differences rooted in competing assessments of today’s economic policy mix. Faux seeks a reconfiguration that is nothing short of paradigm change. Sperling accepts the current paradigm and is content with small adjustments. These foundational economic differences have not been adequately framed. Democrats must come to grips with them, so here is a stab at framing them.

Ron Blackwell, Chief Economist at the AFL-CIO, talks of how working families are boxed in by economic policy. This metaphor can be used to dissect the old (Faux) versus new (Sperling) Democrat debate. Imagine a square whose sides are labeled globalization, less than full employment, privatization and government spending cuts, and labor market flexibility. Standing inside this square are working families who are impacted from all four sides.

The old labor Democrat interpretation of the box sees workers pressured from all four sides. Globalization is more about competition than trade—exerting massive pressure on private sector workers that drives down wages and benefits. Manufacturing has borne the brunt thus far, but the larger service sector is now increasingly in play because services can be provided over the Internet. Globalization brings lower prices, but it does so at the high cost of lower wages and job insecurity. Public sector jobs and wages are threatened by the privatization and government spending cuts side of the box which puts them in competition with private sector workers.

Both private and public workers are pressured from the other two sides. Less than full employment is where the Fed enters. Because the Fed puts a floor to the unemployment rate in the name of price stability, it contributes to weakening workers’ bargaining position. Meanwhile, ‘labor market flexibility’ is code used by conservative business leaders for eroding the minimum wage and employee protections, and attacking unions. This shifts bargaining power to business and lowers wages for all workers, not just union members.

New Democrats (Sperling) have a dramatically different take on the box. For them, globalization benefits working families by providing cheap imports that raise the standard of living, improve productivity via heightened competition, and provide jobs in the export sector. Sperling recognizes this creates losers as some jobs are eliminated, and therefore calls for programs like worker trade adjustment assistance that can supposedly be paid for from the gains of globalization.

In the new Democrat economy, working families benefit from the Federal Reserve’s less-than-full employment approach because it brings low inflation which brings down interest rates, thereby spurring investment and growth. This is why new Democrats were okay with Alan Greenspan, except when he strayed into Social Security or tax policy as in 2001. Indeed, Alan Blinder – another highly respected new Democrat economic adviser – calls Greenspan “the greatest central banker ever.”

When it comes to privatization and cutting government spending, there is some agreement among new and old Democrats that these policies need resisting. Thus, Sperling supports public spending on education and childcare. However, in the background lurks “Rubinomics”, which means that budget constraints and fiscal responsibility can always put the kibosh on these plans.

Finally, new Democrats are largely silent on the labor market flexibility agenda, and appear uncomfortable confronting it. This is the case with Sperling’s book. While he does support the minimum wage, he says nothing about the right to organize unions or strengthening the minimum wage by indexing it to wages so as to create a true floor that can rise with growth. This silence reflects new Democrats’ discomfort with questions of power as the labor question has always been one of power in capitalist economies. This contrasts with Faux’s interest in politics.

Republicans argue that all four sides of the box benefit working families. In many ways, that makes new Democrats closer to Republicans than to old Democrats. New Democrats are essentially on board with the corporate globalization and less than full employment agendas. At the same time, new Democrats are largely silent on the question of minimum standards and protections for workers. Additionally, Rubinomics and its focus on deficit reduction, provide an escape from public investment commitments.

From an old Democrat perspective, new Democrats persistently seek to deal with “effects”, and refuse to deal with “causes”. In other words, new Democrat policy solutions are simply not proportionate to the scale of the problem facing America’s working families.

That inevitably leads back to Faux’s focus on politics, money, and power. Dealing with causes challenges the political and economic power structure. However, power pays the bills, and new Democrats want the money that the powerful currently give them. Ergo, new Democrats refuse to challenge the power structure, and hence their band-aid approach to working family economic woes.

6 Responses to “Old Democrats vs. New Democrats: Faux vs. Sperling”

  1. pinky Says:

    bright accurate
    but a trace britttle

    as a summary
    but labels and frames aside

    (labor) dem vs new dem

    i make it

    klass confliction vs krass contrivence

    key point to whither one’s ardor

    if you are correct and

    “power pays the bills,
    … Ergo, new Democrats refuse
    to challenge the power structure, …”

    who will pay the klass klash dems bills ????

    surely not them damn “old “unions

    wasn’t “the old new “deal’s ultimate kold war
    achilles heel
    those very same old klass collaborative unions ????

    the class struggle dems
    in fighting the bi partisan traitors
    of laputa capitalism
    ie ” the davosians ”
    need a financial spine
    otherwise short of a mass eruption
    they’ll remain righteous hot air funnels

  2. E T Spoon Says:

    I found your essay very enlightening. However I find the labels of of “Old” versus “New” Democrats a rather distasteful dichotomy. “New” implies that the DLC element of the Democratic Party, and they do like to fashinon themselves “New” Democrats, is somehow more vital, progressive and visionary than the “old” Democrats, represented by Mr. Faux in your column.

    The so-called “New” Democrats, even by your desription, resemble nothing more than Rockefeller wing of the Republican Party, now deceased. It would be better to call the “New” Democrats “Investor Democrats” because it is the investor class’s interests whom they serve with a modicum of succor for the poor on the side.

  3. Ed Beaudoin Says:

    I think everybody is losing sight of what our governments function is.To provide the best standard of living business conditions and freedom for American citcens to pursue life liberty and happiness.We put people in office to negotiate on our behalf as a society.When it works we create a model for the rest of the world while enjoying the benefits.By following the rule of law we have the stability to achieve these ends.Some folks have taken the stability of our government and legal system and manipulated it for private gain at the expense of the middle class American.As this happens our social values will change,our laws will change and our poeple will suffer.In contrast all of the comepetition,China,Mexico,Thailand,brazil,Venezuala,Japan etc are all strongly Nationalist/protectionist societies trying to achieve exactly what we have already with one exception,they are doing it along with the rest of the third world.Our leaders are just making it easier for the lowest bidder to rise above the pack while they cash in.Thus the race to the bottom and of course the winner won`t be known for years but the losers are lining up by the day. I for one can put off the new DVD player for now so long as my kids can get medical treatment and I can afford to feed them.

  4. colorless green ideas Says:

    I beg to differ…

    “The old labor Democrat interpretation of the box sees workers pressured from all four sides. Globalization is more about competition than trade…”

    First of all, I think “old labor Democrat” is the wrong term, I think “progressive Democrat” is more accurate; there are really very few old labor Democrats left. The progressive Dem sees “Globalization” and “Free Trade” as inevitable and potentially good, but asks “who benefits and why”? Are winners and losers the natural result of “Globalization”, or are they created through the structure of the agreement? The answer is the latter, and that is the problem.

    Honest free trade would remove tarriffs, open borders, abolish subsidies, and so on. However, that would be closer to anarchy than real policy, so we write Agreements, and the Agreements benefit the economic and political incumbents, and their supporters. It’s easy to write Agreements that let companies build all their new factories and R&D depts overseas, while exporting pollution to Mexico and China, and quietly encouraging a large supply of cheap unskilled labor to cross the border. It’s much more difficult to write Agreements that allow a steady supply of cheap skilled labor (say doctors, lawyers, MBAs, and even economists) to freely enter our country, and removing barriers on, say… pharmaceuticals.

  5. Rich Truxel Says:

    Why are we looking at these issues under the term globalization?
    Low employment
    Government spending cuts
    Flexible labor supply.

    What do these have to do with free trade?

    Low employment - Any policy seeking this is inherently bad.
    Government spending cuts - A good economic policy would spend tax money more efficiently. For example building infrastructure creates good jobs and increases the common wealth, but social programs increase dependence on government and ensure a pool of low wage workers. Hey I’m all for helping those who need it, but give them what they need - money! A person living in g’ment housing with Medicaid and food stamps costs us a lot of money, and their is nothing they can do to really make their lives better. Give them the money and let them move on. Lower the assistance slowly as they make more money.
    Flexible labor supply - The only beneficiaries of labor flexibility are laborers. The only losers are unions. For example, the UAW and USW. Far more steel and cars are produced in the U.S. today than 20 years ago. Wages and job security are much higher than in 1980. But, our friend the union leader is upset because unions have lost their political clout and the interests of workers and employers became the same. Remember - unions serve the interest of unions, not workers. For example, today one of the the issues in negations is guaranteeing a minimum number of union jobs. What do they concede in order to gain this goal? Lower wages. Given this choice
    1,000 jobs at $40K plus $7k benefits= $4.7 million.
    900 jobs at $45k plus $7 = $4.5 million.
    What is better for Companies? Workers? Unions?

    Trade:

    Import barriers give domestic corporations protected monopolies over consumers and workers. Why would a company undergo growth and investment if they had no competition? They could make a big profit just by raising prices.

    “Sperling is a policy economist, and accordingly his outlook emphasizes policy – fiscal responsibility, policies to help workers adjust to trade related job losses, public investment in education, and tax incentives to help people save and accumulate wealth”
    policies to help workers adjust to trade related job losses - These just don’t work. Good policies would promote workers voluntarily leaving low skilled / import sensitive jobs for better jobs.
    “and tax incentives to help people save and accumulate wealth” - Talk about harming those you seek to help, not to mention enshrining wealth and power in the hands of the few: The “help” they give results in having to give my money to financial institutions or pay a huge tax penalty. If I only have to pay $x in taxes when I put my money in a Citibank 401k and have a big mortgage with Citibank, why do I have to pay so much more if I take my money and pay off my loan? At this rate I will give Citibank $1,000 per month of my income and pay them $1,000 per month interest for the next thirty years. They control my money and own my house. Then, in thirty years they will pay out a small amount per month. Does this sound like a “free market?”

    Does anyone remember the deepest recession in modern history:
    highest level of unemployment
    highest inflation
    real incomes falling for last 6 years (only time in history)
    This was 81-82 following 10 years of strict import bans (Republican led) .), five years of fed tightening, thirty years of high taxes (since arch con. Ike), and ten years since Nixon put in price controls…

    Giving more economic control to the government was not and is not the recipe for prosperity.

    “Regarding the present crises, your government is not the solution - your government is the problem.” RWR 1981 1st innaugural.

    Other thougts:
    Min wage - What will happen if we link it to average wage growth instead of inflation?
    Average wage growth will fall far more than min will rise.
    If min wage does rise so will inflation.
    No one wins.

    A focus on raising the min is not the answer. If the min rose a real 20% over the next few years a person would go from $15k to $18k.
    Raising the min wage and protecting low wage jobs is not the answer - this will result in more low wage jobs. We have to focus on increasinbg the number of higher skill higher paying jobs. Promoting job security is counter productive. Promoting better job opportunities is productive.

    Regrding the evils of “cheap imports” - would anyone prefer expensive imports? THis is the primary result of trade barriers. We don’t make more here. We either pay more for what we buy or we have to make due with less. Ans we don’t just pay more for the imports, but for everything. If a tax is added to an appliance made in mexico, anyone making a like product here would also raise the price.

  6. Erik Says:

    I lobby for a major international union. I am quite familiar with the members of Congress. I am quite familiar with Jeff Faux’s book and his body of work. I assure you the majority of Democrats march in practical lockstep with the majority of Republicans on this issue, in support of pretty much all “free trade.” Some Democrats maintain a traditional labor view. and some Democrats and some Republicans do see the inherent dangers of the country’s free fall into the free trade trap and both of these minorities feel a moral obligation to protect American workers by keeping jobs in America.

    But in total these members of Congress are in a small minority. From personal professional experience I tell you the majority of both parties has been co-opted by the corporate world view which is hammered into their heads daily by the overwhelming might of the corporate lobbyist army.

    There is one case where the free trade majority changes its view: when grassroots outrage becomes clear in large, intimidating numbers. This was the case in the CAFTA vote. CAFTA was nearly defeated because of a clear grassroots outrage. If only a couple more Democrats had voted party line, or a couple more pro-American jobs Republicans had the courage to buck their President, CAFTA would have died. The significance of this near-victory for the grassroots is huge: the corporate lobbying army that was nearly defeated normailly dwarfs “the workers” in its influence and power.

    Overall, every economic study using actual data, not projections based on corporate outlook or government numbers that merely take into account job growth not income stagnation or income supression, supports Jeff Faux’s viewpoint.