With all the talk about state and federal budgets lately, I wanted to talk about the progressive approach to economic policy. How can federal and Maine governments ensure a fair economy and society, with strong communities and opportunity for everyone? To answer this, we’ll discuss four areas: spending priorities, monetary policy, fiscal policy and taxation.
I find spending priorities especially important. The government programs with the strongest moral justification also tend to be the wisest and most practical uses of taxpayer dollars. Public education equalizes opportunity for children, preparing them for community contribution. It’s also an investment in the state’s workforce, allowing businesses to provide better-paying jobs while remaining profitable.
Health care for all is a human right, but it also makes our society more productive and lowers costs for business. I like Social Security because, unlike George W. Bush, I don’t want half our senior population eating cat food. Still, even people who hate seniors would agree that economic security allows people to live fulfilling lives, free from fear.
Law enforcement keeps us safe and ensures punishment for wife beaters, insider traders, polluting companies, child molesters and folks who discriminate. Maintaining the public highway system keeps the goods rolling. Strong cases can be made for environmental protection, fire protection, a military focused on keeping America safe (rather than on wars of choice based on lies), public funding for campaigns, and many other programs.
Monetary policy involves how much currency is allowed to circulate in the economy. Effective monetary policy can create jobs, whereas ineffective monetary policy can lead to hyper-inflation, economic stagnation and other ills. There’s some tradeoff between ensuring full employment and allowing inflation and progressive economic policy favors full employment.
Successful monetary policy requires both the right values and a scientific approach to realizing them. Alan Greenspan, former Federal Reserve Chairman, was highly skilled at studying facts to determine what interest rates would produce the economic results he wanted. However, because he wanted a low-inflation economy with unnecessarily high unemployment rates, that’s what we got.
Fiscal policy involves how much money government takes in and spends. A progressive starts by deciding how much money to invest in our communities. It varies how much should come from taxes and how much from borrowing. When the economy is strong, private investment and tax revenues are high, and government can spend less and pay down debts. In a recession, private investment wanes and public need increases, so deficit spending makes more sense.
Whatever money the government takes in comes from taxes, and again, morality and practicality demand the same thing. Fairness requires that those who benefit the most from society should contribute the most to society, so the wealthy should pay higher tax rates than others. This sane arrangement also happens to lead to greater economic growth, as people have the income and economic security to buy companies’ products and services. Decisions made at the federal level have a direct impact on the state budget. Consequently, federal tax cuts for the wealthy result in either reduced services for everyone or pressure to raise local taxes.
It is no surprise that Democratic presidents have produced better economic growth than Republican ones, whether measured by growth in jobs, income, gross national product, stock market or almost anything else. Progressives invest in education instead of nuclear missiles. They consider the needs of workers before the needs of bondholders in monetary policy debates. They balance the budget in good times and invest in the public good in bad times.
Most importantly, they look carefully at what works and what doesn’t, and change direction when they make mistakes.
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