8 Key Issues Democrats Must Face

Now that the dust is settling from the Democrats’ dramatic repossession of the Senate, pundits are beginning uncertainly to debate the political significance of the recent elections. Will the Tweedledees simply replace the Tweedledums as heads of congressional committees? Or will a significant shift in policy orientation result?

The 100th Congress faces an economy that continues to stagnate, with lagging productivity growth and languid investment, while a significant polarization of wealth and income is apparently accelerating. Here is my list of eight critical issues, in alphabetical order, which the Democrats must confront if they seriously intend to help revive the economy and promote economic equity and justice:

- The Farm Crisis. It is obvious that rebellion against the Reagan Administration’s “let them eat bank notes” farm policy played a major role in the Democrats’ success in the Midwest and some Mountain states. The farm bill introduced in the last session by Sen. Tom Harkin (D.-Iowa) would take some sensible first steps toward management of agricultural supply as a device for both supporting farm incomes and rationally managing use of farmlands. One important litmus test of the seriousness of the new Congress will be the speed and clarity with which it considers the Harkin farm bill.

- The Fed. Real interest rates remain very high by historical standards while debt burdens grow heavier and heavier. Moderating interest rates requires challenging the political independence of the Federal Reserve Board. Congress has the constitutional right both to mandate the specific content of monetary policy and to establish the conditions of the Fed’s relationship to the rest of the government. The issue for the new Congress is not whether to constrain the political independence of the Federal Reserve Board but how.

- Labor Law Reform. Labor unions are in crisis. While there is much to criticize about the sluggishness of trade union leadership, a vital labor movement remains an urgent priority for working people in this country--and for nearly everyone else. Recent studies affirm, for example, that unions contribute to more rapid productivity growth rather than impeding it.

And yet, the obstacles to workers joining or forming labor unions are considerable. Surveys suggest that at least one-third of non-unionized workers, representing roughly between 25 million and 30 million employees, would prefer to be represented by a union. The Labor Law Reform Act of 1978 proposed some sensible and reasonable reforms that would at least partially reduce some of the existing barriers to unionization; it was defeated as a result of vigorous opposition and lobbying by business groups, particularly the Business Roundtable. Something like the 1978 proposals should be back on the floor of Congress. We need a vigorous labor movement, and that requires labor law reform.

- Military Spending. The defense budget is approaching $300 billion a year. There are two reasonably persuasive grounds for moving toward significant cuts in the current levels of military spending:

First, the defense budget is perhaps the biggest target of opportunity if the Democrats want to help control the government deficit, let alone marshal some funds for critically needed policies on social programs and building the nation’s infrastructure; second, U.S. defense policy is not merely wasteful but also adventurist.

Many neo-liberals, led by retiring Sen. Gary Hart (D-Colo.), have explicitly avowed, in the words of Hart’s recent book, “America Can Win,” that “the current and popular political debate about spending more or spending less is largely irrelevant.” The levels of miliary spending do matter and must be cut. Will the new Democratic Congress finally muster enough courage to challenge the Pentagon?

- The Minimum Wage. Politicians have succumbed to the remarkable belief that low wages are good for the American economy. Quite to the contrary, we need desperately to promote more rapid wage growth. Families are being squeezed by declining real wages. And it is reasonable to argue that wage growth helps promote productivity growth by creating demand for products, stimulating more efficient use of available resources and providing workers with a real stake in the performance of the economy.

One of the most immediate and practicable public-policy tools for having at least some influence on wages, especially at the lowest tiers, is the statutory level of the minimum wage. The minimum wage has not been touched since 1980, remaining firmly lodged at $3.35 an hour. Its real purchasing power has declined by 24% since 1979. The Democrats should initiate a plan for increasing it dramatically, in phased increments, over the next several years.

- Progressive Taxation. Even liberal Democrats persuaded themselves that the tax reform legislation enacted by the 99th Congress was a triumph. Tax simplification and closure of many corporate tax loopholes was welcome. But those gains were purchased at enormous cost. The tax rates on top-level incomes were cut nearly in half. The principle of progressive taxation was essentially thrown out the window.

Some Democrats in Congress justified their support of this silver-platter service for the rich on the grounds that the most important concessions on tax progressivity could be reclaimed in the next Congress. “The (top) rates will never (actually) go down to 28%,” Rep. Tom Downey (D-N.Y.) has confidently predicted. “Sometime next year, we’ll simply say we can’t let that happen.”

Now, with a surprisingly ample 55-45 vote margin in the Senate, it’s put up or shut up for the Democrats. They should move aggressively either to re-establish some significant measure of progressivity in the personal income tax structure or to establish a separate tax on wealth or capital income. The clock is ticking.

- The Trade Deficit. The Democrats apparently agree that foreign trade policy must be one of their highest priorities in the forthcoming legislative session. Again, the critical question is not whether but how?

Many Democrats appear to agree that they must move beyond simple knee-jerk protectionism. It seems reasonably clear, in the first instance, that the government must become much more actively involved in seeking to restructure the terms of our relationship with the rest of the world economy, especially through concerted efforts to promote more rapid productivity growth and improve the relative attractiveness of U.S. products.

Building on that assumption, two further priorities seem crucial. We need to move toward new bilateral and multilateral trading agreements, not only with advanced countries but also with many Third World countries. And we need to steer away from the jingoistic appeals for aggressive export promotion that characterize many recent neo-liberal proposals. We should tend our own front yards rather than trying to beggar our neighbors’, moving toward policies aimed explicitly at substitution of more competitive domestically produced goods for imports rather than policies of headlong export promotion.

- “X” Policy. Back in 1982-83, it appeared that the Democrats might be moving toward serious proposals for “industrial policy.” But the term itself was quickly tainted, and industrial policy proponents faded into the woodwork.

We should forget about the labels. Let’s call it “X” policy. What we need--whatever we call it--is a concerted and coherent set of government policies aimed at improving the performance of U.S. industry and to smooth the transition of workers and firms from one industry to another. Almost all of our major trading competitors, who have been collectively slashing our tires in international competition, engage in such “X” policies. We must join them. And soon.

That’s my checklist. I’ll be keeping my ratings as the 100th congressional session unfolds. Political columnist William Greider recently wrote: “What the Democratic Party will desperately need is (someone) who is willing to campaign on the party’s first principles. Someone who isn’t spooked by Ronald Reagan. . . . Someone who will lustily attack not just greedy millionaires but their collaborators within the Democratic Party.” Indeed.