Steve Roth | December 15, 2011 6:37 pm



In my first post here as an official Bear, I want to start by thanking Dan Crawford and the rest of the Clan of the Angry Bear for inviting me to join the party. I’ve been a regular lurker and occasional commenter for years, and have learned a huge amount from the experts here. I’m looking forward to contributing more regularly.

For my inaugural post, I’m going to break with my tradition and rather than inflicting data on you, I’m instead going to frame much of what I write in some big-picture ideology and theory.

I think this thinking does much to explain what Mike Kimel in particular has made so clear here over many years (with occasional help from moi): that based on the long-term historical record, by pretty much any economic measure it’s progressive policies that deliver superior growth, prosperity, fiscal responsibility, opportunity, individual liberty, and a vibrant, robust economy and society.

How can that be? Aren’t Republicans “the party of growth”?

That question cuts straight to the reason I started blogging back in 2004. Back then I generally and rather unthinkingly accepted (at least provisionally) the dominant meme of Reaganomics — that larger government hurts economic growth. But I’ve always been a curious fellow (yes, in both senses…), so I started pulling data and crunching it to see for myself. (I am from Missouri, after all.)

I was pretty astounded at the time to find that the dominant meme just wasn’t true. Run the numbers various ways yourself, or do a review of the professional literature, and you get the same results: in prosperous countries, government size has basically no correlation with long-term economic growth (even though government sizes vary hugely — from well under 30% of GDP up to 50%+). Go figger.

And that means that all the rhetoric, ideology, and theory supporting that meme has a problem. The more I thought about it, the more I realized that it was in fact wrong by a 180 degrees.

That’s how I came to what I’m giving you here — a reprise, revision, and reworking of thinking I wrote up a couple of years ago:



Alternate Title:

The Nine Habits of Highly Efficient Economies

Republican economic policies are widely perceived (especially by Republicans) as being pro-growth and pro-prosperity, even though All. The. Evidence. Demonstrates. The. Opposite. Even the rich get richer under Democrats (except for the very rich) — though not at the expense of the poor and the middle class.

Progressives deliver more prosperity. They deliver it to more people. And they do it without busting the budget.

How do they achieve all that? Through the miracles of economic efficiency — policies that make the markets actually work — and work better — for the greater prosperity of all.

Wisdom of the Crowds. Democrats’ dispersed government spending — education, health care, infrastructure, and social support — puts money (hence power) in the hands of individuals, instead of delivering concentrated streams to big entities like finance, defense, and business. Those individuals’ free choices on where to spend the money allocate resources where they’re needed — to truly productive industries that deliver goods people actually want.





Preventing Government “Capture.” Money that goes to millions of individuals is much less subject to “capture” by powerful players, so it is much less likely to be used to then “capture” government via political donations, sweetheart deals, and crony capitalism. Those bogeyman “welfare queens” don’t have much power or presence on K Street. The Wall Street and Defense Welfare Queens quite decidedly, do.

Economic Stability. The social support programs put in place during and since the New Deal serve as automatic stabilizers for the economy, providing the kind of anticyclical fiscal policy that legislators and monetary authorities cannot — in their infinite discretion — be relied upon to deliver. Just as volatility trashes the returns on your investment portfolio, wild swings in the economy trash collective prosperity and the spectacular potential of compounding growth.





Labor Market Flexibility. When people feel confident that they and their families won’t end up on the streets — they know that their children will have health care, education, a measure of economic security, and a decent safety net if the worst happens — they feel free to move to a different job that better fits their talents — better allocating labor resources. “Labor market flexibility” often suggests the freedom (of employers) to hire and fire, but the freedom of hundreds of millions of employees is far more profound, economically.

Freedom to Innovate. Individuals who are standing on the social springboard that Democratic policies provide — who have that stable platform beneath them — have the economic freedom and security to strike out on their own and develop the kind of innovative, entrepreneurial ventures that are the true engine of long-term growth and prosperity (and personal freedom and satisfaction) — without worrying that their children will suffer terribly if the risk goes wrong. Give twenty, forty, or a hundred million more Americans a place to stand, and they’ll move the world.

Profitable Investments in Long-Term Growth. From education to infrastructure to scientific research, Democratic priorities deliver money to projects that the private market don’t support on their own, and that have been demonstrated to pay off many times over in widespread public prosperity.

Labor and Trade Efficiencies. The social support programs that Democrats champion — if they truly provide an adequate level of support — give policy makers much more freedom to put in place what are otherwise draconian, but efficient, trade and labor policies. If everyone who works is guaranteed a decent income by a program like the Earned Income Tax Credit, we have less need for the economically constricting effects often associated with unions and protectionism.

Power to the Producers. The dispersal of income and wealth under Democratic policies provides the widespread demand (read: sales) that producers need to succeed, to expand, and to take risks on innovative new endeavors. (There aren’t many rich people, so they can’t buy very many iPads.) Rather than assuming that government knows best and giving money directly to businesses and banks, Democratic policies trust the markets — the people — to direct that money to the most productive producers.

Fiscal Prudence. True conservatives pay their bills. From the 35 years of declining debt/GDP after World War II (until 1982) to the years of declining debt under Bill Clinton, to the flattening of the debt runup that’s projected under Obama (after the historic spike that Reaganomics and Bushonomics has delivered), Democratic policies demonstrate which party deserves the name “fiscal conservatives.”