Update 650 — Economic Message Reset:
Democrats’ Disadvantage or Opportunity?
Conventional wisdom has long assumed that Americans understand and trust the GOP on economic policy issues, and support its candidates more often than Democrats. Voters this cycle favored Republicans almost 20 percent more on the economy than Democrats. This can’t be the norm if we want a durable majority.
The election results deprive Democrats of their House majority but hand them a critical opportunity to pivot and prepare for the next cycle. Democrats need a clear, coherent, and common sense economic message, and now, for a change, the other side seems to have no such vision to offer.
Speaking of resets, Speaker Pelosi’s announcement today that she is stepping down from the Speaker’s office brings one in leadership, and a new era in Democratic politics. In time, Speaker Pelosi will take her place alongside counterpart Lyndon Baines Johnson, master of the Senate, as the two most gifted legislators in their respective chambers in recent American history.
Democrats outperformed midterm expectations and defied the odds for any party in power, let alone one that voters blame for rising prices, a top issue among the electorate. Nevertheless, Democrats touted an economic record of job growth, lowering costs for Americans across the country, and investing in infrastructure, manufacturing, and a renewable future. This message, while perhaps effective in the short term, does not address the root causes of inflation. To do so, Democrats need a forward-looking message to address supply chain issues, tackle corporate consolidation and price gouging, and prioritize good-paying jobs for every American.
Making it in America
Democrats are setting the country up for long term economic success with investments in manufacturing and creating jobs in America instead of outsourcing jobs overseas. Democrats are rewarding new domestic investments instead of de facto supporting the offshoring of critical industries. This boosts our economy with supply chain resiliency, granting us control over our key supply inputs, decreasing dependence on foreign authoritarians, and boosting the prosperity of American workers.
Formerly a Republican rallying cry bolstered by Trump, Democrats are actually delivering on bringing jobs back to the industrial heartland and making America the industrial superpower it once was. However, these critical investments take time to implement. Voters might not immediately see the rewards of infrastructure, manufacturing, and energy investments, even as headlines flood the front pages of local papers about future investments. Democrats have an opportunity to message on how they are creating a successful economy that we will reap the benefits of in years to come.
With a divided Congress looming, Democrats can reinforce bipartisan investments like the CHIPS and Science Act, which makes smart investments to strengthen American research and development, reinforce supply chains, and compete on a global scale. This undertaking in semiconductor technology is only the start of an industrial policy platform that will bring manufacturing jobs back to the U.S. and reaffirm our leadership in manufacturing, research, and technology. Through prioritizing manufacturing, the U.S. can create good-paying jobs and make America competitive.
Democrats passed the Inflation Reduction Act (IRA) in August, which is the largest investment in renewable energy in U.S. history. This historic action will boost domestic clean energy production, create over 9 million jobs nationally, and reduce household energy costs by as much as $1,135 annually by 2030. There is opportunity for further renewable energy investments to make the United States a global leader and cut down on international energy dependency. Democrats are creating good-paying jobs that set us up for the future and bring us closer to not just energy independence but energy dominance.
The United States’ historic shunning of government subsidies for industrial development stood uniquely apart from its allies in the West that made these investments a regular part of their macroeconomic programme. An intentional investment policy informing and yes, subsidizing, industrial development would level the playing field for American firms and workers.
At home, the attention literally should be on homes. A market that is generally known to be volatile tied to the economic situation, the US housing sector has effectively gone from bad to worse in as little as two years, with little to no Congressional intervention in sight. Rents and mortgage payments have skyrocketed, and there is a nationwide shortage of 3.8 million housing units that hinders renters and prospective homebuyers, especially young people, from finding secure, affordable housing. This is an opportunity for Democrats to pivot and address this critical sector of the economy.
The Democrats’ most meaningful attempt to correct the housing crisis emerged in 2021’s Build Back Better, when House Financial Services Committee Chairwoman Waters introduced housing provisions intended to:
- Expand access to affordable, accessible housing;
- Help 294,000 households afford their rent; and
- Build, upgrade, and retrofit over 1.8 million affordable housing units.
Despite compelling momentum from the White House and the Democratic party alike, the $150 billion dollar investment was stripped and Build Back Better ultimately fell flat. Although the measure was unsuccessful the first time around, Democrats now have an opportunity in the 118th Congress to push housing to the top of their economic agenda and focus on providing relief to millions of working families across the country. Democrats should revitalize and expand upon the housing title in Build Back Better with an emphasis on finding pathways to increase affordable housing supply and lower the costs associated with buying a home, particularly for first-time-buyers.
Democrats should also build on their recent accomplishments in the higher education system. President Biden’s policy to cancel up to $20,000 of student debt for millions of dollars was an unprecedented achievement for both the White House and Democratic Party, but there is much work to be done in terms of accessibility and affordability. Placing investments into higher education has the power to increase growth and productivity within US borders and make the country more competitive on an international scale.
Democrats can look to invest in workforce training in order to create opportunities for displaced workers, new entrants, and current workers seeking higher-paying and more fulfilling work. This can increase labor productivity and result in positive economic growth. Investing in the nation’s workforce also means paving the way to a more fair and equal one.
Democrats must also work to modernize and expand upon the Pell Grant Program to allow recipients more education and training options. The Pell Grant, which serves about one-third of U.S. graduates, predominantly non-white students, should be expanded to cover qualified short-term programs which would in turn create a stronger workforce with substantially higher wages. Housing and education are priorities that have been given short-shrift in Congress at political cost — recovered largely by the administration’s student debt relief plan.
Fairness Through the Code
Democrats have great plans to make the tax system more equitable, but the party needs to translate those plans into a cohesive message. There are a couple ways to promote this message, especially after positive changes in the tax code in the Inflation Reduction Act. The IRA smartly instituted the following tax reforms included a 15 percent corporate minimum tax and increased investments in the IRS for modernization and enhanced enforcement.
Americans deserve a tax system that rewards work, not wealth. We need a fair tax system that requires wealthy corporations and individuals to pay what they owe. This is popular among voters: 77 percent feel bothered that corporations and wealthy people don’t pay their fair share in taxes.
Republicans have long had one clarion and popular message: cutting taxes. But the party is parting from the Grover Norquist line.
- GOP Consensus Gone: Republicans upset their multigenerational consensus that taxes must be cut when the party went overboard with the TCJA in 2017, throwing fiscal responsibility out the window and forcing self-reflection over the efficacy of tax cuts.
- Popular Opinion Abandoned the Consensus: Republicans can’t reclaim the consensus as they hold the debt limit hostage and violently increase the deficit. Tax cuts are now seen as a vehicle for helping the wealthy.
Republicans’ 2017 individual tax cuts expire in 2025, and the party is pushing to make its expired and expiring corporate tax cuts permanent during the lame duck. This is where the 2024 message will be critical. Democrats can point out Republicans are in the pocket of corporations, not working families.
Democrats can build on making the tax code support working families by building upon a popular tax program. They should expand the child tax credit to a monthly, fully refundable tax credit. When the American Rescue Plan expanded the child tax credit, instituting monthly refundable payments, child poverty decreased by 46 percent compared to the year before, the lowest child poverty rate on record. Democrats can run on this record of helping out children and families and should push to expand the CTC as smart macroeconomic policy.
21st Century Economic Message
Democrats have a positive, forward looking record they can tout on the economy. While inflation will persist for the next several months, instead of being blamed for its impact, Democrats can make a contrast from Republicans. They can draw the contrast by demonstrating a plan that can fit on a bumper sticker and says Opportunity for All.
Democrats have consistently worked to improve the economy: creating jobs, lowering the deficit, and investing in manufacturing, infrastructure, housing, and tax equity to ensure the economy benefits working families, not just the wealthy few. If Democrats can consistently share this message, while creating a stark contrast with Republicans, they can turn the tide on conventional wisdom and show they are the party strong on the economy.