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Old Democrats vs. New Democrats

What a recent debate can tell us about the real divide in the party on economic policy.

| Mon Mar. 6, 2006 3:00 AM EST

Jeff Faux and Gene Sperling are two titans of democratic economic policy. Last week (February 23, 2006) they debated the core economic policy differences that define and divide old Democrats from new Democrats.

Jeff Faux is the founder and former President of the progressive Washington think-tank, the Economic Policy Institute. Gene Sperling was the head of President Clinton’s National Economic Council from 1996 to 2000. Both have just published new books. Faux’s book is titled The Global Class War: How America’s Bipartisan Elite Lost Our Future – and What It Will Take to Win It Back. Sperling’s book is titled The Pro-Growth Progressive: An Economic Strategy for Shared Prosperity.

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The two books provide a marvelous window on today’s Democratic Party. Faux is an old labor Democrat, Sperling a new Democrat. It is striking that two leading Democrats could come up with such fundamentally different accounts of the American economy. This suggests that the Democrats are really two parties when it comes to the all-important economic agenda.

Faux is a political economist, and therefore emphasizes politics in his analysis. Political power lies behind economic policy. His core thesis is that America’s elite, drawn from both Republicans and Democrats, has abandoned America and joined a new global political party -- the Party of Davos. Globalization therefore represents a new class war. On one side is a new global uber-capitalist class. On the other side are the rest of us, which is workers everywhere –- not just the United States.

Sperling is a policy economist, and accordingly his outlook emphasizes policy –- fiscal responsibility, policies to help workers adjust to trade related job losses, public investment in education, and tax incentives to help people save and accumulate wealth.

These are the bright eye-catching differences between Sperling and Faux. However, there are deeper analytic differences rooted in competing assessments of today’s economic policy mix. Faux seeks a reconfiguration that is nothing short of paradigm change. Sperling accepts the current paradigm and is content with small adjustments. These foundational economic differences have not been adequately framed. Democrats must come to grips with them, so here is a stab at framing them.

Ron Blackwell, Chief Economist at the AFL-CIO, talks of how working families are boxed in by economic policy. This metaphor can be used to dissect the old (Faux) versus new (Sperling) Democrat debate. Imagine a square whose sides are labeled globalization, less than full employment, privatization and government spending cuts, and labor market flexibility. Standing inside this square are working families who are impacted from all four sides.

The old labor Democrat interpretation of the box sees workers pressured from all four sides. Globalization is more about competition than trade—exerting massive pressure on private sector workers that drives down wages and benefits. Manufacturing has borne the brunt thus far, but the larger service sector is now increasingly in play because services can be provided over the Internet. Globalization brings lower prices, but it does so at the high cost of lower wages and job insecurity. Public sector jobs and wages are threatened by the privatization and government spending cuts side of the box which puts them in competition with private sector workers.

Both private and public workers are pressured from the other two sides. Less than full employment is where the Fed enters. Because the Fed puts a floor to the unemployment rate in the name of price stability, it contributes to weakening workers’ bargaining position. Meanwhile, ‘labor market flexibility’ is code used by conservative business leaders for eroding the minimum wage and employee protections, and attacking unions. This shifts bargaining power to business and lowers wages for all workers, not just union members.

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