Why Care about Keynes

Thinking about the presidential campaign makes Fr. Frank dull this morning. A fit of economic nationalism makes Maureed Dowd more interesting. Actually the term economic nationalism just means healthy concern at the blatantly negative effects of the dogma of free trade and the decoupling of the financial sector from national development.

In case anyone thought the Bush Administration would think about the national welfare instead of the welfare of its wealthy core, the president's "stimulus package" wants to make permanent the upper-bracket skew of his tax cuts, which will fail to stimulate. Fail, that is, to stimulate anything except more donations to him from the very rich, who appear to be giving more money than usual to the Democrats.

I'm not sure folks have grasped the philosophy behind the Republican hatred of "Keynesian" economics. Keynes was a major source of the idea that a government-led stimulus could reduce and end a downturn, like the one that in the 1930s was known as the Great Depression. The core concept is that you give money to people who will spend it. They get the goods the money pays for, and the economy is stimulated by their spending on those goods, which increases sales of products and services, which increases investment and hiring, which gets the economy going again.

Republican hatred starts with the association of Keynesian policy with the Democrats, and specifically with their most influential and effective president ever, Franklin Delano Roosevelt. They never stopped hating his New Deal, and here we get beyond the surface partisanship. The people who most immediately and completely spend the extra money they get from a tax rebate or government program are the middle-class and the poor. Keynes offered a solid technical reason for targeting generous, substantial public services at the bottom and the middle of the income ladder rather than at the top.

Even worse for Republicans, Keynesian policy worked. It created a counter-cycle during the Depression. It justified the massive public investment that was the fundamental ingredient of the economic "golden age" after World War II (I've written about this more than once.) It greatly expanded the American middle class (and the British, and the French, and the German . . .) It also, for a time, made a huge number of basically conservative white voters into Democrats. Only Nixon- and Reagan-pioneered campaigns against ungrateful Negroes and hippie students started to peel off the white middle-class from the Democrats (Nixon-Wallace in the 1968 election, Reagan in the 1966 election for governor of California). Good public services remained very popular - as long as their main beneficiaries didn't seem to be "welfare queens" and unAmerican critics of big business or war.

Beneath the political concerns lies a Darwinist disdain for the financial status of ordinary people. The silent assumption is that if ordinary people were any good with money they would already have more of it. If they deserve more money, then they will go out on their own and get more money. Republicans generally deny the economic conditions, discrimination, structural problems, or the sheer mediocrity of the wages nearly all of us earn doing basically useful things like teaching children how to add and subtract or or like nursing hospital patients. There are still some "Main Street" Republicans who don't stick their fingers in their ears or cover their eyes - Kevin Phillips has long been one, and has railed against Wall Street economic concentration better than nearly any Democrat. But the party leaders oppose economic power and broad-based wealth every chance they get.

Sounds a little extreme to say so, but in fact Republicans have spread economic Darwinism, rationalized all inequality booms, and suggested in effect that if schoolteachers don't like their salaries they can always quit and become intellectual property lawyers. They always oppose minimum wage policies,wage increases for the public-sector employees that have been the backbone of the black middle class, and broad-based stimulus packages that give meaningful rebates to regular people. "Free markets" have for a quarter-century been moving wealth and income from the bottom and middle to the top, and Republicans will protect the perimeter that defends around market inequality to their dying breath.

As long as the Democratic candidates don't really attack the inequality perimeter, I will stay bored with them.