Thursday, November 23, 2006

Policy Agreements and Disagreements

The possibility of dissention among Democrats regarding economic policy seems to have been in the news this week. Mark Thoma points us to a commentary by Harold Meyerson on the subject, in which he focuses on the differences between the Hamilton Project and the EPI. And yesterday, Bloomberg had a piece about the disagreements between Robert Rubin and organized labor.
Nov. 22 (Bloomberg) -- Democrats are returning to power on Capitol Hill just as two powerful wings of the party, labor and Wall Street, are colliding over economic issues.

The dispute over trade and budget policies prompted a high- level private meeting earlier this month between AFL-CIO President John Sweeney and former Treasury Secretary Robert Rubin, who is now chairman of the executive committee at New York-based Citigroup Inc.

AFL-CIO leaders, contending Democrats won the midterm elections because of voter concern about job security and stagnant wages, say it's time to set aside the free-trade policies touted by Rubin.

"We need to review the Rubin agenda that's led to millions of lost jobs and declining standard of living for the middle class,'' said United Steelworkers President Leo Girard. "It's an agenda that has been very good for Citigroup and the financial community because they've been able to finance the relocation of jobs and refinance the trade deficits.''
I suppose that it's natural for people to want to revisit this subject in the wake of the Democrats' recent election victory. But is this really news? As Mark pointed out, Democrats from both the Rubin/Hamilton Project crowd and the EPI/organized labor crowd would probably agree, at least in broad terms, on a large number of changes to economic policy. My candidates for areas of general agreement would include:
  • Allowing the tax cuts on the wealthiest to expire, to help with the budget deficit;
  • Restore pay-as-you-go rules to the federal budget process, to at least stop the US's budget problems from getting worse;
  • Reform the Medicare prescription drug benefit to allow the government to reduce the price it pays for prescription drugs;
  • Strive for broader health insurance reform, to increase the availability of health insurance to uninsured Americans;
  • Strengthen the social safety net to help individuals who are lose out in the US economy through no fault of their own (e.g. by providing some form of wage insurance);
  • Increase the minimum wage.
I'm sure I'm leaving something out, but even so, there's clearly a lot here that both camps would agree on, and a lot of work to do.

On the other hand, there is one big thing that the two factions do not agree on: trade policy. So if you boil it all down, it seems that the one significant point of dissention among Democrats is about how to change (if at all) US trade policy.

But the existence of pro-trade and anti-trade groups in the Democratic party is nothing new - they've both been around since at least the 1980s. Furthermore, very vocal anti-trade and pro-trade factions also exist within the Republican party; for example, a dozen Republican Senators voted against CAFTA this past summer, while a dozen Democrats supported it.

Yes, the issue of trade policy is indeed a source of disagreement among Democrats. But it's also a source of disagreement among Republicans, and among independent voters. So while the anti-trade faction may be larger in the Democratic party than in the Republican party (at least if measured by votes in Congress), the divisions over trade policy really seem to often transcend party and ideology. I haven't yet figured out what separates people into the anti-trade and the pro-trade groups, but whatever it is, I don't think that the division is anything new, or unique to Democrats.

UPDATE: Menzie Chinn has additional commentary (thoughtful and informative, as always) about the question "Are the Democrats Truly More Protectionist?" over at Econbrowser. In short, Menzie's answer is no.

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