New Democrat Update - December 2007
BUSINESS OPPORTUNITY
Schisms are growing between the business community and the Republican Party on a number of very important fronts. For the sake of Colorado’s economic future and their own political prosperity, Democrats should fill the huge vacuum being left behind by the GOP.
Along with eliminating regulations, Republicans simplistically believe that a healthy economy needs across-the-board tax cuts. In Colorado, that narrow and backward-looking governing philosophy and a misguided reluctance to invest in the future were most visibly shown in the 2005 fight over Referendum C - a voter-approved ballot measure that invested in the very priorities businesses need to do well, a skilled workforce, healthy employees and an adequate infrastructure.
The fallout from Referendum C, combined with President Bush’s fiscal irresponsibility at the federal level, are pushing many local business leaders away from the GOP. The CEOs of small and large companies know that today’s Republican agenda does nothing to support the underlying factors that actually propel economic growth these days - technological innovation, alternative energy sources, e-commerce and digital transformation, higher education and skills and a balanced budget.
In addition, the GOP’s right-wing social views have not been helpful. In 1997, about half of Republicans said they were motivated mainly by economic issues, and about half by social and moral concerns. This year, the culturally conservative wing was roughly the same size, but economic conservatives accounted for just one in six.
These tight ideological straitjackets have resulted in a Republican Party incapable of responding to or even talking about taking on many of the economic challenges of our time. Forget about the many high-paying jobs not to mention the medical advances of stem cell research.
Conservatives also have little to say about the soaring health care costs that are increasingly burdening the private sector. In 2005, the United States spent $6,401 per capita on health care, far more than any other country on earth. As a point of comparison, France - which in 2000 was rated by the World Health Organization as having the world's best health care system (the U.S. was 37th) - spent $3,374, a considerably lower percentage of France’s economy than ours.
Increasing numbers of businesspeople are also concerned about global warming, a problem which many Republicans have refused to even acknowledge. Some in the private sector recognize that something will eventually have to be done and that new business opportunities will be part of the solution.
THE DEMOCRATIC CHALLENGE
Nonetheless, many in the business community are not quite ready to jump into the Democratic coalition just yet. Working in an economy that is increasingly entrepreneurial, fast moving, and flexible, they oppose Democrats who advocate increased spending on top-down government programs geared toward income redistribution. Advocacy of old-style command-and-control regulation through slow-moving bureaucratic institutions is not popular either. Finally, businesspeople are concerned with the opposition of “economic populists” within our party to increased open trade and global integration, two forces that hold the most promise to increase the size of the American economy.
Economic populism not only hurts Democrats with businesspeople but also with a large share of middle-class Americans, who do not buy that they are falling behind or that the country is in decline. They, in fact, believe they are struggling to get ahead, not as populists argue, struggling to get by. As demonstrated in a report from the Democratic think thank Third Way, the anxiety of middle-class voters does not come from broad dissatisfaction with the free enterprise system but by the new competitive challenges they face and the increasing irrelevance of outdated government policies.
The middle class, and those trying to become part of it, strongly reject populist pessimism and instead want political leaders who speak to their hopes, not their fears. They dream of getting a better education, climbing the ladder and earning more money. The unemployed want to work again while almost everyone who is working looks forward to getting ahead. They obviously will not embrace leaders who seek to punish or politically demonize the very people they aspire to be.
Of course, Democrats should never ignore the very real problems American workers face every day - such as growing health care costs and retirement security. This new world has resulted in increased competition as hundreds of millions of new workers from low-cost developing countries like China and India enter the job market.
While challenging, Democrats should not be relentlessly grim because globalization is also opening up an abundance of new opportunities - these same countries are producing hundreds of millions of potential middle-class customers. Furthermore, American workers will be more comfortable with this different world if joined with a new, updated social compact that helps them compete including access to continuous and affordable life-long education, portable employee benefits, a state-of-the-art rapid re-employment system and expanded opportunities for capital ownership. Helping people manage change helps them to accept change.
Populists must also come to grips with some basic economic realities. Many of their arguments are rooted in a domestic manufacturing economy which no longer exists and misguided assumptions about globalization.
First of all, the large majority of job losses have been caused by technological change, not outsourcing or open trade policies. Of course, curbing technological innovation is not an option - that would only hurt workers in their quest to be competitive with their counterparts around the world.
Between 1969 and 1995, virtually all the jobs lost in the production or distribution of goods were replaced by office jobs. Today, almost 93 million American workers (which amounts to 80 percent of all jobs) do not spend their days making things - instead, they move things, process or generate information, or provide services to people. As a result, the economic base is way beyond traditional manufacturing - it is high-tech manufacturing, traded services, and increasingly e-businesses that sell all over the world through the Internet.
Globalization has caused greater income inequality but not because the incomes of the middle class and working poor have declined, as populists argue. The incomes of all groups have actually been growing, but those at the upper end have been rising even faster. While that increasing gap should still cause concern, progressives must not get in the way of working families trying to get ahead, merely to penalize those at the upper end.
Democrats should also seek opportunities that promote greater competition because it leads to lower costs, new products, more innovation, greater consumer choice, capital investment and jobs. For example, as detailed in last May’s New Democrat Update, opening up the telecommunications market to competition will generate between $700 million and $1.2 billion of new infrastructure investment in Colorado over the next ten years.
Finally, businesspeople and everyone else want a public sector that can operative effectively in this new world. It should be decentralized, non-bureaucratic, catalytic and results-oriented. For example, when designing solutions to compelling public concerns, such as reducing industrial pollution or delivering world-class public education, government should hold organizations and individuals accountable for meeting goals, while allowing them flexibility to achieve those goals. Government must also get better at using information technologies to fundamentally re-engineer its operations and provide a wide array of services through digital electronic means to increase efficiency, cut costs, and improve service.
The opportunities and challenges are clear for Democrats. If they get it right, voters will richly reward them with majorities for a long time to come.