The Cory Booker imbroglio has ignited a silly but
potentially pernicious debate in the Democratic Party between so-called
"pro-growth centrists" who want the President to focus on how well he's
done getting the economy back on its feet after the Bush administration
almost knocked it out, and "pro-fairness populists" who want him to
focus on the nation's widening inequality and Wall Street's (and
Romney's) continuing role in generating profits for a few at the expense
of almost everyone else.
According to the National Journal's Josh Kraushaar, for example:
"Conversations with liberal activists and labor officials reveal an 'unmistakable hostility toward the pro-business, free-trade, free-market
philosophy that was in vogue during the second half of the Clinton
administration'... Moderate Democratic groups and officials, meanwhile, 'privately fret about the party's leftward drift and the Obama campaign's
embrace of an aggressively populist message.' [T]hey wish the
administration's focus was on growth over fairness."
This is pure bunk -- or should be.
Fairness isn't inconsistent with growth; it's essential to it. The
only way the economy can grow and create more jobs is if prosperity is
more widely shared.
The key reason why the recovery is so anemic and so much income and
wealth are now concentrated at the top is America's the vast middle
class no longer has the purchasing power necessary to boost the economy.
The richest 1 percent of Americans save about half their incomes,
while most of the rest of us save between 6 and 10 percent. That
shouldn't be surprising. Being rich means you already have most of what
you want and need. That second yacht isn't nearly as exciting as was the
It follows that when, as now, the top 1 percent rakes in more than 20
percent of total income -- at least twice the share it had 30 years ago --
there's insufficient demand for all the goods and services the economy
is capable of producing at or near full employment. And without demand,
the economy doesn't grow or generate nearly enough jobs.
Wall Street is part of the problem because it's responsible for so
much of the concentration of income and wealth at the very top -- and for
much of the distress still felt in the rest of the economy after the
Street nearly melted down in 2008.
The Street has turned a significant part of the economy into a giant
casino involving mammoth bets with other peoples' money. When the bets
go well, the rich owners of the casino (Wall Street executives, traders,
hedge-fund managers, private-equity managers) become even richer. When
the bets go sour, the rest of us bear the costs.
The casino also requires continuous transfers of wealth from ordinary
taxpayers. Some are built into the tax code. One is the preference of
debt over equity (interest on debt is tax deductible), which awards Wall
Street banks like JPMorgan for risky lending and awards private-equity
firms like Bain Capital for piling debt on the firms it buys.
Another is the "carried interest" rule that, absurdly, allows
private-equity managers (like Mitt Romney) to treat their income as
capital gains even when they haven't risked any of their money.
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The biggest of all is the invisible guarantee that if the biggest
banks get into trouble, taxpayers will bail them out. This subsidy
reduces the big banks' cost of capital relative to other banks and fuels
even more risky lending.
None of this is fair. It's also bad for economic growth and jobs -- as we've so painfully witnessed.
Translated into presidential politics, all this means the President should be talking about fairness and growth and jobs, and explaining why we can't have the latter without the former.