Column: Private Sector No Longer a Growth Machine
Have American liberals moved too far to the left? That’s long been the contention of conservatives contemplating liberal positions on a host of issues, such as gay marriage and the legalization of undocumented immigrants. But opinion polls on these issues show that yesterday’s far-out liberal positions are quickly becoming today’s conventional wisdom.
A more nuanced conservative critique focuses on liberals’ support for a greater government role in the economy. To be sure, New York Times columnist David Brooks argued in a recent column, liberals have traditionally urged government to take up the slack in economic activity during recessions, but now, as the budget proposal of the Congression-al Progressive Caucus shows, liberals believe that “government is the source of growth, job creation and prosperity” even when the economy has righted itself. The progressives’ budget, Brooks complains, proposes spending $450 billion on public works and sending $179 billion to the states so they, too, can provide more services and pave more roads. All this and more would be financed by increases in progressive taxation — draining the private sector of the capital it needs to grow, hire and produce prosperity.
Not surprisingly, liberal economists have jumped on Brooks’ arguments. Lawrence Mishel of the Economic Policy Institute argues that the economy is still performing so under par — $985 billion below its potential output if all our factories were going full tilt — that it needs a major boost from government-financed economic activity to increase production, employment and consumption. Coincidentally, the day after Brooks’ column was published, Gallup released a poll showing that 72 percent of Americans, including a majority of Republicans, would support a major federally financed infrastructure repair program and a federal program creating 1 million jobs. Nearly 80 years after Franklin Roosevelt created the Works Progress Administration, it seems the American people would like the government to re-create it.
But there’s a bigger problem with the conservative contention that government stands athwart the private sector’s capacity to create jobs and prosperity: It fails to acknowledge that the private sector no longer creates jobs and prosperity like it used to, completely apart from whatever effects governmental policy may have on job creation. Entirely on their own and well before Obamacare was a gleam in anyone’s eye, employers began cutting back or altogether dropping health coverage and retirement benefits for employees. Nor have government regulations compelled employers to increase the share of company revenue going to profits (which is at its highest level in decades) and reduce the share going to wages (which is at its lowest level in decades).
The U.S. corporations that make up the Standard & Poor’s index of the 500 largest publicly traded companies get almost half their revenue from sales abroad, according to a 2011 S&P analysis, and, despite all the hoopla about bringing manufacturing back to the States, much of their production is going to remain abroad. The rise of machines has, we all know, taken its toll on employment, too. U.S. corporations are sitting on $1.7 trillion in cash, with share values and profits that render most of these businesses’ leaders happy campers. Even if the U.S. economy continues to fall far short of full employment, and even if the rate of work force participation continues to decline, these businesses can still sell their products all over the world. Unlike in the 1930s, the shortfall in domestic consumption does not present them with a crisis but with perhaps nothing worse than a missed opportunity.
In short, the economy is working for our economic elites. The massive changes they would have to make to investment strategies and the division of corporate revenue so that the economy worked for the majority of Americans are nowhere on the horizon. The great growth machine that once was the U.S. private sector ain’t what it used to be — which is one reason each recession since 1990 has been longer, deeper and more intractable than the last.
That’s the new economic reality in this country, and that’s what the budget of the Congressional Progressive Caucus responds to. It’s not that liberals have been prompted to move leftward through the readings of ancient socialist gospels or by smoking some stash left over from the ’60s. It’s that the economy has reached a dismal stability far short of its full employment potential or renewing the promise of widespread prosperity, and government investment is required to make up the difference. If anyone is smoking something, it is conservatives who foresee a rebirth of prosperity if only the private sector is left alone.
Harold Meyerson is editor-at-large of The American Prospect.