Can the New Deal Come Again? : THE LIFE OF THE PARTY Democratic Prospects in 1988 and Beyond<i> by Robert Kuttner (Elisabeth Sifton/ Viking: $18.95; 257 pp.) </i>

Robert Kuttner, former editor of the “progressive” 1970s magazine Working Papers and now economic correspondent for the 1980s “neo-liberal” New Republic, has a “radical” point of view. “Since the late 1970s,” Kuttner states at the outset of “The Life of the Party,” “many Democrats and most political commentators have concluded that the party can be rebuilt only by abandoning its historic commitment to political and economic populism.”

“My own view,” Kuttner says, “is that this counsel is self-defeating.” He argues--and all in the Democratic Party ought to accept this as a central premise--that “as Republicans have built a temporary alliance of middle-class voters with the upper class, an alliance nourished by visions of laissez-faire riches, Democrats need to champion opportunity and security for ordinary people and thus restore a broad coalition of voters.”

The crucial question is how to get there from here. Kuttner labels his approach “progressive,” a term popular on the left now that “liberal” has fallen into such ill repute. He defines progressivism as “the active use of the public sector to offset the inequalities and anomalies of a laissez-faire market economy,” a succinct summary of what, in my view, differentiates liberals from conservatives.

Kuttner’s progressive would implement this view of government in a manner very different from my liberal, however. Kuttner recognizes the need to “realign” liberal policies “to fit popular economic and social needs of today and tomorrow.” Thus, in advocating an interesting “labor market board” concept--something of an industrial policy for labor instead of capital--he states that we “would have to combine our several disparate (existing) programs, each with its own bureaucracy, into a functioning, coherent system, with a clear set of goals. What we have now is, on the whole, marginal. Few get much benefit, and yet we are spending a lot of money on it.”

What Kuttner says of current employment programs could be said of practically everything left us by the New Deal and the Great Society. The miasma of piecemeal poverty programs, for instance, forms a welfare “system” that no one with a normal mind would possibly design. Change, clearly, has to come, and none of the system’s component programs, no matter how infested with liberal mythology, ought to be viewed as above that change. Too few liberals today are willing to seek such change.

Kuttner does, but unfortunately he looks for change in unpromising places. We need his labor market board, for instance (which, incidentally, comes from Sweden, a one-word symbol of what most Americans either mock or fear about liberals), “to socialize the costs of industrial transitions, so that the costs don’t fall solely on displaced workers and communities.” But most economists would explain the same thought by saying that we must internalize the costs of industrial transitions; the difference between internalizing and socializing costs is at the heart of Kuttner’s vision. He spends the entire book attacking reliance on market solutions, failing to differentiate between the laissez faire of Reaganomics and progressive market regulating.

The recent stock market developments, by reaffirming that another great depression is unlikely precisely because of “liberal government programs” ranging from securities regulation to Social Security, have reminded us that, despite the President’s ideology, the marketplace requires government to correct for both its unfairness and its malfunction. The question is whether government should assist the market or displace it. The challenge for liberalism now is to better utilize market correction, rather than displacement, without turning into a pale managerial neo-liberalism.

A liberal but market-based solution would internalize worker-retraining costs by requiring firms to maintain payments to laid-off workers until the workers could find reasonable employment, thereby encouraging the firm to retrain and place these workers, as it could probably do more efficiently than the government. By contrast, Kuttner seems to see the future of progressivism in socializing such efforts. In short, he envisions an expanded direct role for the state, as if to finish what Roosevelt left unfinished in the 1930s.

Kuttner believes that a good old-fashioned leftist campaign could light a fuse under millions of voters, increasing turnout and winning elections for Democrats. He even seems to see the current “climate of disconnection and voter cynicism” as the cause of today’s vapid “politics of symbolism,” rather than the other way around.

Democrats could well attract voters, as Kuttner repeatedly states, by restoring the majority’s sense of being connected to the benefits doled out by the government and the party. The old sense of social compact can return. But this does not require erecting the imposing edifice of the state advocated by Social Democrats. Rather, updating the liberal vision “to fit popular economic and social needs of today and tomorrow” means recognizing, as Kuttner does, that government programs aimed at only the down-and-out are not enough to win elections anymore (this does not mean they should be abandoned).

Most people today are middle class--but not comfortably so. Liberal obsession with the neediest reflects one of two problems: either obliviousness to liberalism’s own economic successes over the last several decades, or a distaste for middle-class Americans not deemed poor enough to be “worthy” of liberal compassion. Either is a sufficient, and deserving, basis for losing an election.

“The Life of the Party” is, despite my disagreements, by far the best discussion that I have read in years of both the substance and politics of the Democratic Party’s future. Its intelligent gropings toward a better Democratic formula demonstrate that there is hope yet for the party, not just because, as its founder, Thomas Jefferson, once observed, justice cannot slumber forever, but also because the Democratic Party is at last thinking about what an awakened justice might want to do.