Economic Issues

Democrats Need A Strategic View

A Strategic View

Democrats have a fractured base and credibility problems. They need to do more than just refine their “message” and vote-gathering tactics. In addition to thinking about how they can win, they must think about why they deserve to win. They need an honest explanation of what they think America needs, how they intend to govern, and what they want to accomplish.

Just “fighting for you” is not enough. The explanation must show what America and its role in the world should be and how all levels of government can be repaired to work properly. It must be a realistic, strategic view that will inspire voters. It must be a strong backbone with domestic and international sides that support consistent policies and legislative proposals.                      

The Domestic Side

In order to truly lead, Democrats must think like new product designers who spot needs before most others do and develop ways to meet them. The domestic side of their view should be based on Abraham Lincoln’s call for a “government of the people, by the people, and for the people” about which he had previously said:  

“The legitimate object of government is to do for a community of people whatever they need to have done, but cannot do at all, or cannot so well do for themselves, in their separate and individual capacities.” 

Here are five key issues for the domestic side that Democrats are not discussing:     

1.  Understanding the US Dollar. Much that needs to be done will require money. But Democrats have been sucked into the myth that the federal government is limited by scarce dollars. On the surface, this makes sense. We know that families, companies, and lower levels of government must balance their budgets. So it seems to follow that the federal government must also take in dollars before it can spend them. But if that were true, where did the dollars that Uncle Sam takes in with taxes come from in the first place? 

Before the federal government was formed, there were no US dollars anywhere. The US money supply now has more than 13 trillion of them (M2). Trillions more are in longer term investments and held by other countries. Unlike minerals that humans can’t create, dollars are created by the country’s money system. If that were not true, dollars wouldn’t just seem scarce, they wouldn’t exist. Democrats must show voters how the government can lead by using the money system to create the dollars needed to pay for progress as opposed to staying captive to the dogma of those who oppose government.    

To explain it simply, when the government spends, it pays dollars into the economy. When it taxes, it takes them out. If the government has a balanced budget, the spending and taxes are equal so it does not change the number of dollars in the economy.

When the government runs a deficit, it spends more dollars than it takes out with taxes, and laws require it to sell bonds. But unlike taxing, selling bonds takes no value out of the economy. The buyers just swap their cash for the bonds which are also assets that they can save or sell. Unlike taxpayers, bond buyers give up no wealth.

So when the government runs a deficit, the bond sales don’t reduce the total value in the economy, but the spending creates new dollars and feeds them into the economy. The job of creating new dollars is one reason why the federal government is different from states and everyone else. Deficits are not dangers to be avoided, they are the way new dollars have always been created that the economy must have in order to grow. 

As federal bonds mature they can be replaced with new ones. In total, the bonds will never have to be repaid as long as the country survives. Thus they cannot become burdens on future generations. 

But the bonds are assets that banks, insurance companies, retirement plans, and others buy as safe places to put their savings. A large part of Americans’ financial wealth is invested in federal bonds.

Those who want to cripple Uncle Sam say that he is just like a state or everyone else that must get dollars before spending them. But in reality, he is the mirror image of everyone else. He must create new dollars by spending them into the economy before any one else can get them to use. Leading modern economists explain this in more detail.  (Note; this explanation ignores the role of banks.)    

When Democrats learn how new dollars are created, they will see why Social Security, Medicare, and Medicaid don’t have financial problems. They will see that dollars can be created to reduce global warming and prepare for its consequences; to improve health, educate the young and provide for the aging; to build new industries with jobs that cannot be exported; and do many other things that are needed to improve the lives of all Americans and prepare for the future. But until Democrats learn this, they can make only marginal changes and will fall short of their potential.

For decades, conservatives have promoted ideologies based on the myths that dollars are scarce and deficits are bad. Democrats running for office can’t fight this campaign on their own. The Party must develop a clear, authoritative explanation that candidates can point to with confidence, of how the power to create dollars can be used safely and properly. It must show why conservative claims are false and why fiscal responsibility is impossible without treating both the economy and the federal budget as interrelated parts of the single, national system. It must show why fears of runaway inflation, bankruptcy, and burdens on future generations are nonsense.

Desperate people try things they normally wouldn’t consider. Question: Are Democrats desperate enough yet to learn how those who oppose government promote false economic ideologies in order to increase their power and wealth?

2.  Limiting Corporations. The legal status that corporations now enjoy make Lincoln’s vision impossible. Some corporations have become super persons that extort concessions from states and national governments. Their lawyers run roughshod over the rights of ordinary people. Their power to control markets trashes the Republican mantra of free markets. Their dedication to increasing shareholder wealth has turned them into invasive parasites. And their insiders build fortunes using corporate stocks in ways that no one else can do. Trump’s use of corporations and lawyers to build his fortune while shielding himself from those he cheated shows how corporate abuses can compound.

Corporations are not mentioned in the Constitution. Democrats should make reducing their power a major goal. They can start by attacking the 1886 court ruling in Santa Clara County v. Southern Pacific R. Co. in which the conservative but activist judge said:

“The Court does not wish to hear argument on the question whether the provision in the Fourteenth Amendment to the Constitution which forbids a state to deny to any person within its jurisdiction the equal protection of the laws applies to these corporations. We are all of the opinion that it does." 

This opinion gave corporations rights that the Amendment was written to give to former slaves after the Civil War. It is the basis for much corporate law including the Citizens United decision. None of this was intended or even foreseen by the writers of the Constitution or the Amendment. Courts are now being packed with judges who preach Constitutional originalism. They should be made to practice what they preach by applying it to corporations. 

Democrats should shrink the biggest banks and revitalize a strong anti-trust program to reduce market concentrations. They should make major corporate officers and stockholders personally and criminally liable for fraud or other crimes that they allow their corporations to commit. Fines should be related to the size and income of violators to stop their treating the fines as routine business expenses.

3.  Fighting Climate Change with a New Economic Growth Cycle. Damage is increasing from higher temperatures, rising sea levels, storms, floods, land subsidence, droughts and wildfires. Water supplies are shrinking. Fuel, electrical, transportation, communication, and water systems need upgrading or replacing. Democrats should treat these as opportunities to create millions of jobs with adequate pay and benefits that can’t be exported.     

The 20th century economy enjoyed a growth cycle that was largely driven by the petroleum, coal, electric power, steel, aluminum, construction, automotive, aircraft, electronics, and real estate industries. As one driver grew, it created demands for the others in a self-reinforcing cycle that ran for decades. Growth cycles let individuals, companies, and investors see what is happening and find their niches. Each industry was helped by the government, and some still get help.

A new growth cycle is needed that will be driven by sustainable, domestic industries to meet today’s and tomorrow’s needs. The government must use its ability to create dollars to help these industries develop the cycle as it has done since the country began.

4.  Repairing Conservatives’ Damage. Trump and Republicans are dismantling a system of social, business, and environmental polices that took years to develop. But they may be right that some regulations are too detailed and don’t work as intended. 

Democrats should build a new system based more on intent and results than on technical regulations. Laws should say what is intended to happen and give those regulated more latitude in how they comply. The laws should direct courts to ignore defense arguments based on details and concentrate on whether the intent was achieved. 

For example, a major drug company that knew its product was a primary source for opioid addicts was recently let go with a minimal fine because it argued that it had no duty to report what it knew. New product liability laws should reverse that. They should state the intent that companies are to be responsible for any avoidable harm they cause, and the laws should instruct courts to judge companies on what they did after they learned of possible harm. The penalties should be related to company size. Rules on who has standing to appear in court should be widened to include parties that represent those who may be affected like the general public, the environment, and future generations to stop companies from shifting costs to others.    

This would be a fundamental change in how the government operates and limit the roles of conservative judges. With safety regulations, for example, it would speed resolutions and reduce court loads by using mediators and arbitrators who are periodically certified to be impartial and technically qualified. The change would be welcomed by those who agree with the intent of the laws but think they know best how to comply. And it would foster innovation and developing new ways to meet the intent, not beat the details.

5.   Recognizing Democrats’ strategic problem. Democrats should represent most Americans and earn most of their votes, but Republicans have most of the money. Democrats will not prevail until they overcome conservatives’ spending by using the government’s dollar creating power to serve the public’s needs. To do this, they must have a strong explanation of government’s unique role in the money system (discussed above) that they can point to with confidence. Without this, they will continue to suffer from a crippling disadvantage. 

As Democrats develop their strategic view, they must debunk Republican “principles” that are fundamentally flawed. For example, Republicans say the “free market” is one of their key principles, but few large markets are free. Most are dominated by powerful corporations and financial institutions that merge to reduce competition, fight unions to reduce their employees’ share, avoid the costs they impose on the environment, shift customer complaints to arbitration panels which they control, and resist anti-trust enforcement intended to make markets more truly free.

Similarly, “trickle down theory” claims that when money goes to those at the top of the pyramid, they will invest it and create more jobs. But those at the top usually invest to eliminate jobs, move cash out of the country, and reward themselves. Most dollars flow up, not down.

The Republican principle of shifting power down to state and local governments lets the most powerful, like the Koch network and other rich conservatives, dominate those levels by exerting pressure serially, government-by-government, as they did to gain control of state legislatures, and then reduce the rights of employees.   

The principle of reducing government is a way to divert public attention from the reality that most of the problems that conservatives blame on government are actually caused by corporations, the wealthy, and the financial services industry. Democrats must show the intentional deceptions behind these “principles" and slogans.

For decades, conservatives have funded think tanks, university chairs, biased research, public relations campaigns, and other tools to mold public opinion. In contrast, Democrats, who should represent the vast majority of Americans, failed to developed their own principles. They ignored the fact that those who plan ahead and build for the future (Republicans) have major advantages over those who don’t (Democrats). They just left candidates to run largely on their own. They shriveled into the minority as a result. 

The International Side

The international side of the Democrats’ view should recognize two of America’s major limitations. First, the country is better at busting things than fixing them. We spend more than the next eight nations combined on the world’s most powerful military force that is designed to impose our will by destroying quickly—shock and awe. 

But that’s the easy part. Destruction leaves vacuums that others will fill if we don’t, and that’s the hard part. We have not been good at “nation-building” since the Marshal Plan era. Some don’t believe we should be in that business and they may be right. If they are, we should get out of the nation-busting business.

The second limitation is that for every American in the world there are more than nineteen people who are not Americans. “Making America Great Again” can’t change that ratio. There are not enough of us to occupy and enforce our will in places like the Middle East with its religious wars that are older than the United States and whose leaders will only settle for peace on their own terms.

We don’t sustain our own communities when businesses abandon them. We applaud companies that develop “disruptive” technologies but do little to help those who are disrupted. Our domestic and international failures are related. How can we lead other nations to fill the vacuums left by wars if we can’t show that we can build better futures for our own people? This is not a “message” issue, it is a basic capability problem.

Regardless of what may seem like our moral responsibility when other countries do things that we do not like but do not affect us directly, we must remember the two limitations and not bite off more than we can chew. We do more harm than good when we exceed our limitations as we did in the Middle East.  

Conversely, if we learn how to serve all our people by rebuilding and sustaining our own communities rather than abandoning them, we may be able to promote democracy around the world and lead other countries by example instead of busting them. That is the way of greatness. It is a moral view that most Americans would support if it were explained to them.

Conclusion

If Democrats want to be the majority party, they must represent most Americans. They must stop just appealing to groups with specific issues that sometimes pit the groups against each other. And they must stop seeking dollars and votes from the many while primarily serving the few.

They must develop and promote a strategic view of governing to reverse the conservative trend toward increasing concentrations of power, wealth, and incomes. To do this, they should transfer the term “conservative” from those who hoard for themselves to those who preserve America’s foundations. This would follow the examples set by Presidents Lincoln, Wilson, and both Roosevelts. 

The Democrats’ view must be an integrating foundation for policies that will serve and appeal to most voters. But developing it will require more than just cobbling together a platform at a convention. They should be working on it now.

*This article was originally published at OpEdNews.com on Dec. 8, 2017. 

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