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trade
Why China Stands to Benefit From Trump's Incoherent Trade Policy
If the U.S. is not going to be a reliable trading partner for at least the next four years, and possibly many more years into the future, Europe would be wise to look elsewhere. And there is one obvious elsewhere: China.
Jan 04, 2025
One development for 2025 that can be seen clearly in the crystal ball is improving trade ties between China and Europe. The reason this is a virtual certainty is Donald Trump is doing everything he can to convince the world that, under his leadership, the United States is an unreliable trading partner.
He already worked hard to establish this point in his first term when he arbitrarily slapped tariffs on various imports from Canada and the European Union. His ostensible rationale was national defense, but no one outside of Mar-a-Lago could take that one seriously. We worried that we may not be able to get steel from Canada if the US is engaged in a war with another country? Or maybe we’re worried we will be at war with Canada, and they will cut us off.
But Trump is showing that the craziness will get even worse in his second term. Before even taking office Trump made strong demands that Canada and Mexico essentially do things they are already doing (block drug shipments and restrict the flow of immigrants) or he will slap 25 percent taxes on all the goods we import from them.
This is the way Trump has always done business.
This is bizarre from many angles, but most notably because Trump’s proposed import taxes would be a flagrant violation of the trade agreement he negotiated with Mexico and Canada just four and a half years ago. If Trump can just toss into the garbage a trade deal with two of our closest allies — one that he widely trumpeted at the time — then what would be the value of any deal he would strike with European countries? Clearly Trump does not feel bound by his commitments and there is no one in the US political structure who can force Trump to adhere to agreements made by the government, even when it was Trump himself who made the deal.
This is the way Trump has always done business. He routinely reneged on his commitments and often refused to pay contractors after they had done work on his projects. Many contractors would insist on payment in advance from Trump because they knew they would have a tough time collecting after the fact.
If the US is not going to be a reliable trading partner for at least the next four years, and possibly many more years into the future, Europe would be wise to look elsewhere. And there is one obvious elsewhere: China.
China’s economy is in fact already considerably larger than the US economy and growing far more rapidly. This fact is obscured by the tendency in the US media to use exchange rate measures of GDP, rather than purchasing power parity (PPP) measures.
An exchange rate measure simply takes a country’s GDP, measured in its own currency, and then converts it into dollars at the current exchange rate. By contrast, a PPP measure uses a common set of prices to assess the value of all the goods and services produced in each country. This would mean that we apply the same price for a car, a computer, and a haircut, in both the US and China. Economists would usually argue that for most purposes the PPP measure is more useful.
By this measure, China’s economy grew larger than the US economy roughly a decade ago. It is now almost 30 percent larger, and according to I.M.F. projections will be more than 40 percent larger by the end of the decade. It’s not clear why the U.S. media insists on using the exchange rate measure of GDP in reporting that routinely refers to China as the world’s second-largest economy, perhaps it’s just nationalistic chauvinism. In any case, that call reflects political biases not realities in the world.
The larger size of China’s economy makes it a more attractive trading partner in any case, but it is also more likely to stick to its commitments than the United States as long as Donald Trump is in charge. For this reason, we can be fairly certain that Europe will be looking to shore up its trade relations with China as Donald Trump puts on his clown show in Washington and Mar-a-Lago.
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How Will Trump Manage—or Mismanage—China?
In all aspects of the U.S.-China rivalry, Trump will be pulled toward both increased militancy and combativeness and a more pragmatic, transactional approach.
Dec 18, 2024
Gaza, Haiti, Iran, Israel, Lebanon, Russia, Syria, Ukraine, and Venezuela: President-elect Donald Trump will face no shortage of foreign-policy challenges when he assumes office in January. None, however, comes close to China in scope, scale, or complexity. No other country has the capacity to resist his predictable antagonism with the same degree of strength and tenacity, and none arouses more hostility and outrage among MAGA Republicans.
In short, China is guaranteed to put President Trump in a difficult bind the second time around: He can either choose to cut deals with Beijing and risk being branded an appeaser by the China hawks in his party, or he can punish and further encircle Beijing, risking a potentially violent clash and possibly even nuclear escalation. How he chooses to resolve this quandary will surely prove the most important foreign test of his second term in office.
Make no mistake: China truly is considered The Big One by those in Trump’s entourage responsible for devising foreign policy. While they imagine many international challenges to their “America First” strategy, only China, they believe, poses a true threat to the continued global dominance of this country.
Trump will enter office in January with a toolkit of punitive measures for fighting China ready to roll along with strong support among his appointees for making them the law of the land.
“I feel strongly that the Chinese Communist Party has entered into a Cold War with the United States and is explicit in its aim to replace the liberal, Western-led world order that has been in place since World War II,” Rep. Michael Waltz (R-Fla.), Trump’s choice as national security adviser, declared at a 2023 event hosted by the Atlantic Council. “We’re in a global arms race with an adversary that, unlike any in American history, has the economic and the military capability to truly supplant and replace us.”
As Waltz and others around Trump see it, China poses a multi-dimensional threat to this country’s global supremacy. In the military domain, by building up its air force and navy, installing military bases on reclaimed islands in the South China Sea, and challenging Taiwan through increasingly aggressive air and naval maneuvers, it is challenging continued American dominance of the Western Pacific. Diplomatically, it’s now bolstering or repairing ties with key U.S. allies, including India, Indonesia, Japan, and the members of NATO. Meanwhile, it’s already close to replicating this country’s most advanced technologies, especially its ability to produce advanced microchips. And despite Washington’s efforts to diminish a U.S. reliance on vital Chinese goods, including critical minerals and pharmaceuticals, it remains a primary supplier of just such products to this country.
Fight or Strike Bargains?
For many in the Trumpian inner circle, the only correct, patriotic response to the China challenge is to fight back hard. Both Rep. Waltz, Trump’s pick as national security adviser, and Sen. Marco Rubio (R-Fla.), his choice as secretary of state, have sponsored or supported legislation to curb what they view as “malign” Chinese endeavors in the United States and abroad.
Waltz, for example, introduced the American Critical Mineral Exploration and Innovation Act of 2020, which was intended, as he explained, “to reduce America’s dependence on foreign sources of critical minerals and bring the U.S. supply chain from China back to America.” Sen. Rubio has been equally combative in the legislative arena. In 2021, he authored the Uyghur Forced Labor Prevention Act, which banned goods produced in forced labor encampments in Xinjiang Province from entering the United States. He also sponsored several pieces of legislation aimed at curbing Chinese access to U.S. technology. Although these, as well as similar measures introduced by Waltz, haven’t always obtained the necessary congressional approval, they have sometimes been successfully bundled into other legislation.
In short, Trump will enter office in January with a toolkit of punitive measures for fighting China ready to roll along with strong support among his appointees for making them the law of the land. But of course, we’re talking about Donald Trump, so nothing is a given. Some analysts believe that his penchant for dealmaking and his professed admiration for Chinese strongman President Xi Jinping may lead him to pursue a far more transactional approach, increasing economic and military pressure on Beijing to produce concessions on, for example, curbing the export of fentanyl precursors to Mexico, but when he gets what he wants letting them lapse. Howard Lutnick, the billionaire investor from Cantor Fitzgerald whom he chose as Commerce secretary, claims that Trump actually “wants to make a deal with China,” and will use the imposition of tariffs selectively as a bargaining tool to do so.
What such a deal might look like is anyone’s guess, but it’s hard to see how Trump could win significant concessions from Beijing without abandoning some of the punitive measures advocated by the China hawks in his entourage. Count on one thing: This complicated and confusing dynamic will play out in each of the major problem areas in U.S.-China relations, forcing Trump to make critical choices between his transactional instincts and the harsh ideological bent of his advisers.
Trump, China, and Taiwan
Of all the China-related issues in his second term in office, none is likely to prove more challenging or consequential than the future status of the island of Taiwan. At issue are Taiwan’s gradual moves toward full independence and the risk that China will invade the island to prevent such an outcome, possibly triggering U.S. military intervention as well. Of all the potential crises facing Trump, this is the one that could most easily lead to a great-power conflict with nuclear undertones.
When Washington granted diplomatic recognition to China in 1979, it “acknowledged” that Taiwan and the mainland were both part of “one China” and that the two parts could eventually choose to reunite. The U.S. also agreed to cease diplomatic relations with Taiwan and terminate its military presence there. However, under the Taiwan Relations Act of 1979, Washington was also empowered to cooperate with a quasi-governmental Taiwanese diplomatic agency, the Taipei Economic and Cultural Representative Office in the United States, and provide Taiwan with the weapons needed for its defense. Moreover, in what came to be known as “strategic ambiguity,” U.S. officials insisted that any effort by China to alter Taiwan’s status by force would constitute “a threat to the peace and security of the Western Pacific area” and would be viewed as a matter “of grave concern to the United States,” although not necessarily one requiring a military response.
If, however, he chooses to act “crazy” by embracing “strategic clarity” and stepping up military pressure on China, he would likely receive accolades from many of his supporters, while provoking a (potentially nuclear) war with China.
For decades, one president after another reaffirmed the “one China” policy while also providing Taiwan with increasingly powerful weaponry. For their part, Chinese officials repeatedly declared that Taiwan was a renegade province that should be reunited with the mainland, preferably by peaceful means. The Taiwanese, however, have never expressed a desire for reunification and instead have moved steadily toward a declaration of independence, which Beijing has insisted would justify armed intervention.
As such threats became more frequent and menacing, leaders in Washington continued to debate the validity of “strategic ambiguity,” with some insisting it should be replaced by a policy of “strategic clarity” involving an ironclad commitment to assist Taiwan should it be invaded by China. President Joe Biden seemed to embrace this view, repeatedly affirming that the U.S. was obligated to defend Taiwan under such circumstances. However, each time he said so, his aides walked back his words, insisting the U.S. was under no legal obligation to do so.
The Biden administration also boosted its military support for the island while increasing American air and naval patrols in the area, which only heightened the possibility of a future U.S. intervention should China invade. Some of these moves, including expedited arms transfers to Taiwan, were adopted in response to prodding from China hawks in Congress. All, however, fit with an overarching administration strategy of encircling China with a constellation of American military installations and U.S.-armed allies and partners.
From Beijing’s perspective, then, Washington is already putting extreme military and geopolitical pressure on China. The question is: Will the Trump administration increase or decrease those pressures, especially when it comes to Taiwan?
That Trump will approve increased arms sales to and military cooperation with Taiwan essentially goes without saying (as much, at least, as anything involving him does). The Chinese have experienced upticks in U.S. aid to Taiwan before and can probably live through another round of the same. But that leaves far more volatile issues up for grabs: Will he embrace “strategic clarity,” guaranteeing Washington’s automatic intervention should China invade Taiwan, and will he approve a substantial expansion of the American military presence in the region? Both moves have been advocated by some of the China hawks in Trump’s entourage, and both are certain to provoke fierce, hard-to-predict responses from Beijing.
Many of Trump’s closest advisers have, in fact, insisted on “strategic clarity” and increased military cooperation with Taiwan. Michael Waltz, for example, has asserted that the U.S. must “be clear we’ll defend Taiwan as a deterrent measure.” He has also called for an increased military presence in the Western Pacific. Similarly, last June, Robert C. O’Brien, Trump’s national security adviser from 2019 to 2021, wrote that the U.S. “should make clear” its “commitment” to “help defend” Taiwan, while expanding military cooperation with the island.
Trump himself has made no such commitments, suggesting instead a more ambivalent stance. In his typical fashion, in fact, he’s called on Taiwan to spend more on its own defense and expressed anger at the concentration of advanced chip-making on the island, claiming that the Taiwanese “did take about 100% of our chip business.” But he’s also warned of harsh economic measures were China to impose a blockade of the island, telling the editorial board of The Wall Street Journal, “I would say [to President Xi]: if you go into Taiwan, I’m sorry to do this, I’m going to tax you at 150% to 200%.” He wouldn’t need to threaten the use of force to prevent a blockade, he added, because President Xi “respects me and he knows I’m [expletive] crazy.”
Such comments reveal the bind Trump will inevitably find himself in when it comes to Taiwan this time around. He could, of course, try to persuade Beijing to throttle back its military pressure on the island in return for a reduction in U.S. tariffs—a move that would reduce the risk of war in the Pacific but leave China in a stronger economic position and disappoint many of his top advisers. If, however, he chooses to act “crazy” by embracing “strategic clarity” and stepping up military pressure on China, he would likely receive accolades from many of his supporters, while provoking a (potentially nuclear) war with China.
Trade War or Economic Coexistence?
The question of tariffs represents another way in which Trump will face a crucial choice between punitive action and transactional options in his second term—or, to be more precise, in deciding how severe to make those tariffs and other economic hardships he will try to impose on China.
In January 2018, the first Trump administration imposed tariffs of 30% on imported solar panels and 20%-50% on imported washing machines, many sourced from China. Two months later, the administration added tariffs on imported steel (25%) and aluminum (10%), again aimed above all at China. And despite his many criticisms of Trump’s foreign and economic policies, President Biden chose to retain those tariffs, even adding new ones, notably on electric cars and other high-tech products. The Biden administration has also banned the export of advanced computer chips and chip-making technology to China in a bid to slow that country’s technological progress.
Accordingly, when Trump reassumes office on January 20, China will already be under stringent economic pressures from Washington. But he and his associates insist that those won’t be faintly enough to constrain China’s rise. The president-elect has said that, on day one of his new term, he will impose a 10% tariff on all Chinese imports and follow that with other harsh measures. Among such moves, the Trump team has announced plans to raise tariffs on Chinese imports to 60%, revoke China’s Permanent Normal Trade Relations (also known as “most favored nation”) status, and ban the transshipment of Chinese imports through third countries.
Most of Trump’s advisers have espoused such measures strongly. “Trump Is Right: We Should Raise Tariffs on China,” Marco Rubio wrote last May. “China’s anticompetitive tactics,” he argued, “give Chinese companies an unfair cost advantage over American companies… Tariffs that respond to these tactics prevent or reverse offshoring, preserving America’s economic might and promoting domestic investment.”
But Trump will also face possible pushback from other advisers who are warning of severe economic perturbations if such measures were to be enacted. China, they suggest, has tools of its own to use in any trade war with the U.S., including tariffs on American imports and restrictions on American firms doing business in China, including Elon Musk’s Tesla, which produces half of its cars there. For these and other reasons, the U.S.-China Business Council has warned that additional tariffs and other trade restrictions could prove disastrous, inviting “retaliatory measures from China, causing additional U.S. jobs and output losses.”
As in the case of Taiwan, Trump will face some genuinely daunting decisions when it comes to economic relations with China. If, in fact, he follows the advice of the ideologues in his circle and pursues a strategy of maximum pressure on Beijing, specifically designed to hobble China’s growth and curb its geopolitical ambitions, he could precipitate nothing short of a global economic meltdown that would negatively affect the lives of so many of his supporters, while significantly diminishing America’s own geopolitical clout. He might therefore follow the inclinations of certain of his key economic advisers like transition leader Howard Lutnick, who favor a more pragmatic, businesslike relationship with China. How Trump chooses to address this issue will likely determine whether the future involves increasing economic tumult and uncertainty or relative stability. And it’s always important to remember that a decision to play hardball with China on the economic front could also increase the risk of a military confrontation leading to full-scale war, even to World War III.
And while Taiwan and trade are undoubtedly the most obvious and challenging issues Trump will face in managing (mismanaging?) U.S.-China relations in the years ahead, they are by no means the only ones. He will also have to decide how to deal with increasing Chinese assertiveness in the South China Sea; continued Chinese economic and military-technological support for Russia in its war against Ukraine; and growing Chinese investments in Africa, Latin America, and elsewhere.
In these, and other aspects of the U.S.-China rivalry, Trump will be pulled toward both increased militancy and combativeness and a more pragmatic, transactional approach. During the campaign, he backed each approach, sometimes in the very same verbal outburst. Once in power, however, he will have to choose between them—and his decisions will have a profound impact on this country, China, and everyone living on this planet.
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Kamala Harris, Candidate of Economic Change, Breaks With Old Democratic Thinking
The key question remains: have voters heard her?
Nov 04, 2024
In mid-June I went to Nashville for a reunion of old friends who were activists with the Southern Student Organizing Committee, a group founded in 1964 by young Southerners inspired by the sit-in movement and devoted to dismantling racism all over the South and the nation. Like Martin Luther King Jr., we also went to work to end the war in Vietnam. In Nashville we shared stories about having stood up early—when it was dangerous—for racial justice and against a tragic war.
But today, decades later, we were staring into the vacuum of a terrifying potential disaster: Donald Trump—candidate of fascism and racism, enemy of women’s rights, friend of American billionaires and Russian oligarchs, and the guy who wants to dismantle U.S. democracy—could be (re)elected President.
My old friends—who stood up to George Wallace and Richard Nixon back in the day—were all committed to defeating Trump. But back in June many shared a troubled question about the Democratic incumbent. “Biden did a great job in the White House, but isn’t he too old to make the case against Trump—and for a better future—in this election?” Only a few months later—after Biden bravely stepped away and Kamala Harris and Tim Walz began energetically taking on Trump—celebration and optimism have reigned on our follow-up Zoom calls—because now we had a candidate who could talk with the American people—about making life better for working Americans. And many SSOC veterans, especially those in Georgia and North Carolina, have been working hard to build the movement that we hope will win in those key swing states.
Clearly, the Harris team (and Democratic operatives) have made saving democracy and reclaiming abortion rights as their key issues. When your opponent is a self-declared fan of Hitler and an enemy of democracy—and brags about getting rid of Roe v Wade—clearly saving our democratic political system and guaranteeing reproductive rights have got to be key to your primary message to voters. She and Tim Walz have been doing that—with joy and energy. And supporters are working hard to get all those folks who understand the Trump threat to come out to vote.
But an even larger group of Americans keep telling pollsters that the economy is their major concern. Many have faulty memories— of Trump’s White House years as a time of prosperity—and of the Biden-Harris years as COVID-driven chaos and inflation. As a result, many Democratic Party operatives and media pundits have pushed Harris to distance herself from Biden—and, to some extent, she has done so.
Even in the narrow context of today’s political debate, many Americans just don’t want to remember how big a medical and economic mess Trump left for Biden and Harris to clean up.
But this “Don’t talk about Biden” strategy has prevented Harris (and Democrats) from being able to tell a powerful story about the Biden-Harris presidency—and it has limited her ability to talk about what is wrong about the economic system—and to about what kind of economy agenda we need to build for working Americans.
Joe Biden and Kamala Harris literally saved the U.S. and the world economy. They won the White House in 2020 in part because Donald Trump showed voters he was incompetent in the face of the COVID pandemic. And as a result of that pandemic-driven economic shutdown, Biden and Harris had to take on and reverse the most serious recession since the Great Depression. The amazing thing is that they actually pulled it off. When Biden and Harris took office, Americans had endured 8 months of official recession—and four years ago, the Trump unemployment rate was 9.2 percent. Deaths from COVID, which began in Trump’s last year in office, far from getting better, were at a deadly all-time high when Biden was sworn in.
Today, as a result of very ambitious policies that Biden and Harris put forward—and got passed through a divided Congress—the U.S. unemployment rate came down to below today’s 4.1%, and—if the Fed doesn’t blow it (or if Trump doesn’t win)—interest rates are coming down and inflation is stabilizing at 2.1% annual rate (down from the peak of 9.06% in June 2022). This Biden-Harris economic recovery is the envy of many other advanced nations that are still struggling to reduce unemployment. And we needed to remind voters that Biden and Harris surprised many economic experts by achieving a “soft landing”—getting jobs growing and bringing inflation down without tipping the economy into another recession. Ronald Reagan didn’t have such a great record when he ran for re-election declaring it was “Morning in America.”
Now clearly, working class Americans, white and black, don’t feel like it is Morning in America. But that feeling that the country is on the wrong track is not a recent development. For decades now, the very wealthy have gotten astronomically richer, and corporations have gained greater and greater control of our political and economic system, while middle-class and working-class people have seen declining real wages and fewer opportunities for themselves and their kids. Americans have been worried about their economic prospects for decades.
But even in the narrow context of today’s political debate, many Americans just don’t want to remember how big a medical and economic mess Trump left for Biden and Harris to clean up. And, since Democrats have been instructed to not talk about the Biden years, voters are now hearing just one explanation from Trump about what caused the post-COVID inflation: “Biden and Harris did it.” In other words, Trump blames the very Biden-Harris policies that helped Americans get through the COVID recession—and got the economy growing robustly.
Although not too many voters have heard it, Democrats have a different explanation: As the pandemic—worsened by Trump’s idiotic failures—literally shut down the global economy, the fragile international supply chain network froze up. And during the long period when the global factory system shut down—everything from food to cars to computer chips were stuck in container ships circling the globe or stuck in ports, huge parts of the U.S. economy were either forced to shut down—consumers experienced major shortages on store shelves or car dealers. Biden and Harris worked successfully to untangle these supply chain problem -- but the temporary shortages created huge opportunities for American corporations to raise prices and keep prices high (known as price gouging) for months and months. The painful result: higher prices for groceries, gas and oil, housing, and other essentials.
The Biden stimulus worked—the economy is growing and the inflation rate has come down for a rare “soft landing.” The Biden economic program wasn’t the cause of inflation. And without the Biden-Harris economic agenda, over the past few years Americans would have been struggling with the worst of both problems: high unemployment AND inflation.
Having revived economic growth and gotten the overall inflation rate going down—now at an annual rate of 2.1%—Kamala Harris took over as the Democratic nominee and began to lay out a positive agenda to take on corporate price manipulation and real shortages in food, housing, energy, and health care.
She vowed to break the power of corporations to take advantage of shortages to raise prices and keep them high. This dynamic is most obvious in the food sector (where corporate concentration gives corporations great power) and in the health care sector, where she and Biden have already begun to force pharmaceutical companies to compete on the price of essential drugs. And public health insurance, like Medicare and Obamacare, are still too dominated by corporate insurance companies. In housing, although interest rates are going down, Harris pledges to fight for a long-term project to build more housing, break the power of speculators in the rental market, and help first-time home buyers with up to $25,000 to cover their down payments. And in energy, where the prices of gasoline and other fuels have come down, she also pledges to continue to support alternative sources of power, like solar and wind, and hydro—all of which will bring down prices for individuals and for utilities.
Keep in mind that Donald Trump has advanced no ideas at all for reducing inflation. He did meet with oil industry CEOs to demand $1 billion to finance his campaign in return for massive huge policy giveaways – and if you think that would lower energy prices, I have a bridge I’d like to sell you. Trump’s plan to impose tariffs on all imports would increase inflation dramatically, according to economists right, left, and center.
A Harris presidency would work to reorganize each of these key sectors to bring down prices—while creating new public systems to help families with other basic needs, like free or subsidized child care (and in home senior care), the costs of which is now borne almost entirely struggling middle class and poor families.
Based on polling that shows inflation and the economy are the top issues for many voters, some progressive analysts have been arguing that Kamala Harris and her campaign are not talking enough about her economic agenda.
Pollster Stan Greenberg has been making the case that the Harris-Walz campaign would be pulling strongly ahead if they were doing more to educate voters on Harris’s economic plans. He cites a TV ad tested by the super PAC Future Forward that garners strong support when tested with working people:
In that ad, (Kamala Harris) said, ‘When I am elected president, I will make it a top priority to bring down costs. We should be doing everything we can to make it more affordable to buy a home and more than 100 million Americans will get a tax cut. I will help families; letting you keep more of your hard-earned money. As president, I will be laser focused on creating opportunities for the middle class that advance their economic security, stability and dignity.’
Greenberg argued “Closing positive with Harris battling for the middle class and helping everyone on their very top issue will engage and unite the Democrats’ base. That will shift the trajectory of this race.”
Certainly, the next two days will tell if he and other progressives are right.
How Harris could have distanced herself from Democratic orthodoxy
Kamala Harris has been constantly pressured—by the media and some Democrats—to show how she would distance herself from Joe Biden and Democratic orthodoxy. As we have seen, the Biden economic agenda was remarkably successful—and that may be one good reason why she refused to attack the Biden-Harris economic strategy. But in response to this pressure, she has shifted her campaign to attacking Trump as an extremist. Greenberg and other progressives argue that she should have campaigned more on her anti-inflation plans and the larger economic agenda she has put forward.
Here's another approach: Kamala Harris—as candidate and as our new President—could distance herself from several generations of Democratic leaders. For decades now, several generations of activist movements have pushed energetically for a new economic agenda for the Democratic party. It has been a hard slog, but we have made progress even with party elites.
1. Inflation killed the Presidency of Jimmy Carter, who was the last Democrat who had to deal with high inflation. Prices were rising by 9.9% and remained high throughout his term. Shorly after he took office a coalition of progressive groups called Consumers Opposed to Inflation in the Necessities met with Carter and made the case that he should fight inflation in the key “basic necessities” sectors where increasing prices were driving inflation. Carter ignored us and instead listened to more conventional voices, and he tried various experiments in “deregulation,” none of which worked. Finally Fed Chair Paul Volker raised interest rates to 19 percent, precipitating a recession. And Carter lost his election to Ronald Reagan, who attacked him for 13 percent inflation and high unemployment. The good news is that Kamala Harris (and Joe Biden) took another path—and that new approach is working.
Kamala Harris—as candidate and as our new President—could distance herself from several generations of Democratic leaders.
2. Trade Policy advanced by conventional Democrats has ignored the economic pain and devastation caused by treaties like Bill Clinton’s NAFTA and his sponsoring of China joining the World Trade Organization. Hillary Clinton and Barak Obama both fiercely promoted another, even more ambitious treaty, known as the The Trans-Pacific Partnership. Eventually, both realized that voters hated these job-killing trade deals, but not until they greatly damaged the Democratic brand with heartland working class voters, and they gave up on the TPP. Many people remember the 1999 “Teamsters and Turtles” demonstrations in Seattle that brought together over 50,000 protesters—union members, environmentalists, family farmers, indigenous rights activists, faith-based groups, and solidarity organizations—to confront global elites attending the ministerial meetings of the WTO. Slowly, those groups have moved Democrats to understand the need for a trade policy that preserves and creates good jobs, reduces global warming and creates prosperity. The Harris campaign has broken with the old “free trade uber alles” agenda of the Democratic Party. And just in time, because she will forge a more functional trade regime that is more progressive than the mindless and opportunistic trade agenda of Donald Trump.
3. Industrial Policy is closely related to trade. For years Democrats joined Republicans to denounce any kind of industrial policy (except for military spending) aimed at making American industry more productive, cleaner, and more competitive—or to help create new high-tech industries that can anchor economic development and replace jobs lost to mechanization. But there has been a citizen movement demanding action. And polls show that most Americans—especially blue-collar workers—strongly support smart industrial policies. Biden and Harris made huge strides in this new direction with the passage of The American Recovery Act, which helped revive all sectors of the economy. The CHIPS and Science Act of 2022—to rebuild our semiconductor industry. The Inflation Reduction Act—which included $369 billion for a climate initiative to reduce greenhouse emissions and promote lean energy technologies. This legislation put an annual cap of $2,000 for out-of-pocket prescription drug costs for those insured by Medicare—and helped improve Obamacare, which was a beginning of an industrial policy for the huge and costly American health industry.
4. Investing in a Stronger Social Contract for Middle-Class and Working People—by Ending Austerity, Taxing the Rich, Growing the Economy.
The creation of Social Security by Franklin Roosevelt and Medicare by Lyndon Johnson marked major milestones in the ongoing quest to put an economic floor under the lives of working folks and poor people. After many battles which pitted the vast majority of Americans against Republicans (and conservative Democrats) who wanted to cut benefits or “privatize” these beloved social insurance programs, a new generation of activists have learned to stop attacks—and many are now working to expand and improve Social Security and Medicare, long harmed by conservative governments. And while we must protect the Affordable Care Act, millions of Americans are working to transform Obamacare into a more comprehensive and less expensive system of health care.
If we want to live as well as the social democratic countries of the world, we will need to greatly improve our health care system.
Most advanced capitalist countries guarantee child care, pre-care education, paid family and medical leave, and in-home or community care for seniors and people with disabilities and their families. And if we want to live as well as the social democratic countries of the world, we will need to greatly improve our health care system.
Today there is a growing movement to win these expanded social insurance plans that can help make individuals and families more secure—and people who work for small businesses and corporations more productive.
Our crazy system of financing college and trade school education was so bad that when young people started talking about wiping out student debt—and making state universities tuition free, the idea took off like a rocket in the political debate—and Joe Biden and Kamala Harris became the champions of this big change. If Kamala wins the White House, we can expect her to keep pushing.
Popular programs like these are expensive. But our corporations and billionaires pay less in taxes than most other wealthy countries. Big coalitions like Americans for Tax Fairness are working for fair taxes—and an end to the Trump tax giveaways to the rich and corporations—that would provide us the resources we need to invest in a stronger social safety net.
5. Donald Trump thinks global warming is a hoax, but most Americans know we must act boldly to reduce carbon emissions. Unfortunately, for years Democratic leaders tried to achieve this by putting a tax on energy consumption—which would have raised costs to working Americans. Bill Clinton tried to pass a carbon tax in 1006, but even Democrats wouldn’t vote for it.
Eventually, after being schooled by climate activists—and by labor unions, who came to understand that transforming our energy system will mean good jobs—the Biden team proposed and got passed a historic legislation that used Federal funds to invest in energy conservation and new forms of green energy production. Those investments are producing millions of new jobs, many of them union jobs.
6. American workers have a right to be represented by a union. This proposition is increasingly popular today as billionaires and monopolies have come to dominate the economy and work places. The best unions have become creative about helping workers organize to secure rights at work and better lives for their families. And the Biden-Haris administration has not only taken important symbolic steps to support worker struggles—like Biden and Harris’s support for the historic United Auto Workers strike— they have made real change—for example by appointing Jennifer Abruzzo to the post of general counsel of the National Labor Relations Board. She has charted a dramatic new path to strengthen and defend workers rights to organize and to challenge anti-labor employers. Democrats have long given lip service to passing a new labor law—known as the Pro Act—to strengthen worker rights. And if Kamala Harris wins the Presidency—with a Congressional majority, she should be expected to write and pass an even tougher labor rights bill that can begin the process of guaranteeing that American workers have the kind of rights at work that workers in other advanced countries won years ago.
If we want a government that works for a better life for Americans, we must get big money out of politics.
7. We must take our democracy back from the wealthy and corporate elites. It is hugely important that we stop Donald Trump’s systematic attacks on our democratic system. But even when we defeat him—we will still have a political system that is dominated by massive amounts of money—including an obscene $134 million this year from crypto-currency investors to buy elections for House, Senate and White House. The U.S. now has a legal framework in which the Supreme Court’s Citizens Uniteddecision allows corporations and billionaires to flood elections with unlimited money—and which allows lobbyists to reward Members of Congress to do their bidding. And in order to use democracy to clean up the system we are going to have to make the U.S. Senate more democratic—by abolishing the filibuster that now requires a super majority in order to pass any significant changes. And grass-roots Democrats have discovered that we need to change party rules to prevent mysterious and evil dark money from dominating the system for nominating Senators and Members of Congress. If we want a government that works for a better life for Americans, we must get big money out of politics.
8. The rich have gotten richer and they have hollowed out the middle class.
The economic gap between the very rich and the rest of us has been growing dramatically for the past 30 years and more.
Income disparities are now so pronounced that America’s richest 1 percent of households averaged 139 times as much income as the bottom 20 percent in 2021, according to the Congressional Budget Office.
In the 1980s, when the Economic Policy Institute was founded as a think tank for working people, EPI’s early research began to demonstrate that the income and wealth of the richest Americans was pulling away from middle-class and working Americans. At first establishment economists denied the trend—or they said it was only temporary. Today everyone—left, right and center— acknowledges the problem, and the debate is about what to do about it—or about whether we can or should do anything about it. But most working people now know what growing inequality is doing to their families. And they want solutions. And one of the first battles Kamala Harris will face require us to rally the country to put an end to the Trump tax cuts for the rich and corporations that did so much to accelerate inequality of income and wealth.
All of the inter-woven movements for economic change described above aim at making the U.S. a society where there are fewer extremes of wealth and income—and where the very wealthy do not have the power to block the aspirations of the rest of us for a better life.
The New Centrism
In May, the respected New York Times senior reporter David Leonhardt wrote an important article entitled “A New Centrism Is Rising in Washington: Call it neopopulism: a bipartisan attitude that mistrusts the free-market ethos instead of embracing it.” Here’s what he wrote in his article in the Times:
For decades, Washington pursued a set of policies that many voters disliked and that did not come close to delivering their promised results. Many citizens have understandably become frustrated. That frustration has led to the stirrings of a neopopulism that seeks to reinvigorate the American economy and compete with the country’s global rivals.
A defining quality of the new centrism is how much it differs from the centrism that guided Washington in the roughly quarter-century after the end of the Cold War, starting in the 1990s. That centrism—alternately called the Washington Consensus or neoliberalism — was based on the idea that market economics had triumphed. By lowering trade barriers and ending the era of big government, the United States would both create prosperity for its own people and shape the world in its image, spreading democracy to China, Russia and elsewhere.
Winning this election is just the beginning of the work that needs to be done...
That hasn’t worked out. In the U.S., incomes and wealth have grown slowly, except for the affluent, while life expectancy is lower today than in any other high-income country.
Americans lean left on economic policy. Polls show that they support restrictions on trade, higher taxes on the wealthy and a strong safety net. Most Americans are not socialists, but they do favor policies to hold down the cost of living and create good-paying jobs. These views help explain why ballot initiatives to raise the minimum wage and expand Medicaid have passed even in red states. They also explain why some parts of Biden’s agenda that Republicans uniformly opposed, such as a law reducing medical costs, are extremely popular. This is where the center of gravity in the country is.
Leonhardt is right that this new neopopulist approach to economics is very popular across the spectrum of Americans—with those who didn’t go to college and those who did, with men as well as women, with people struggling to stay middle class and with working class and poor people—white, Black, Hispanic and Asian. But this new popularity is not just the result of “new thinking” by academics and policy advisers. What he calls this new “centrism” is now making sense to voters and politicians alike because of the work of several generations of progressive activists—from my old friends fighting for civil rights and against a terrible war—to today’s generation of activists fighting for economic equality, to break the power of corporate manipulation of our political system, and to build an economic system that can build a better life for all Americans. That multi-generational movement (See the Solidarity Agenda) has helped shape the Biden-Harris presidency—and we all must hope that our work has helped to put Kamala Harris into the White House. And, after all our work, we will need to take a breath, get some rest—and then get to work to make that new agenda a reality.
Assuming Kamala Harris wins the election, it will be due in part to her campaign to fight back against the Donald Trump’s destructive attacks on women, on democracy, and against his desire for authoritarian power. But her victory will also be due to her ability to lay out an economic agenda that builds on the record of her service with Joe Biden’s administration—which represented a sharp break with Republican and Democratic neoliberalism. But winning this election is just the beginning of the work that needs to be done to create a better life for the American people.
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