Yes, House Democrats Will Need an Economic Strategy

(Bloomberg Opinion) -- How can House Democrats have an impact on economic policy? Even though the Senate and President Donald Trump can block them, the Democrats will be tempted to propose legislation that has popular support and that challenges the president’s claim to represent the interests of American workers. In particular, should Democrats stop caring about the deficit, which has exploded under Trump? Here, columnists and contributors for Bloomberg Opinion suggest some priorities.  

Noah Smith: With the Senate and presidency in Republican hands, there’s little the House Democrats can do in terms of passing actual legislation. Instead, the focus should be on putting forward legislation that inspires the country, even if it won’t pass. That will also avoid the need to scramble to draft new legislation if and when a Democratic president is elected.

The biggest and most popular ideas are probably a better universal health care system — preferably a public option — and a national minimum wage increase that indexes minimum wage to inflation. Comprehensive immigration reform, providing a path to citizenship for the undocumented while shifting the legal immigration system toward a more skills-focused system like Canada’s, should also be a priority.

Another idea is a big push to fight climate change, including a national carbon tax and big increases in money for alternative energy research, would also be very helpful. And Elizabeth Warren should keep on advancing her bill to address housing shortages. These bills would set a positive agenda for the next decade.
Michael R. Strain: The new Congress should focus on the deficit. Particularly given the strength of the economy, the return of excessively large deficits (fiscal year 2018 saw a $779 billion deficit, and they are projected to grow) is worrisome for all the usual reasons.

Both parties make a lot of political noise about the deficit, but when they are in power they tend to prioritize favored policy goals — such as the Republicans’ recent tax cuts — over deficit reduction.

With Democrats in control of the House and Republicans holding the Senate majority, the Congress as a whole is positioned to tackle the deficit in a manner that holds the most potential for real progress: through bipartisan compromise. Republicans will have to agree to increasing tax revenue’s share of national income, which should come from reducing loopholes and exemptions in the tax code.

As for Democrats, they will have to agree to changes that reduce the future spending on middle-class entitlements like Medicare and Social Security. 

Each party can claim victory and blame the opposition party for the policy changes they had to swallow. And President Trump can take credit, as well.

I know, I know. The odds are long that this will happen. But we’ve seen that the budget problem can get worse under single-party government. Here’s hoping a divided government does better.

Stephanie Kelton: Advice to Democrats: Don’t repeat your biggest policy mistake. Don’t get trapped into thinking that your job is to restore “fiscal responsibility.” Don’t reinstate PAYGO. Don’t worry about the deficit.

Focus on how you would use deficits to build an economy that works for every American and not just those at the top. Be bold and fight for big things. Don’t become a chorus of debt scolds barking, “No, We Can’t,” as the president embraces the fiscal spirit of, “Yes, We Can!” 

Karl W. Smith: We are now facing a divided Congress and a bitterly divided electorate. For Americans of both parties, the booming economy has been a blessing. It is lowering disability rolls and bringing back into the workforce Americans almost everyone had given up on.

To keep it going, there needs to be a bipartisan effort in two main areas: extending the tax cuts for working Americans and investing in a 21st-century infrastructure. We should not allow a protracted debate over how to pay for these policies to stymie this opportunity for cooperation and prosperity.

There will come a time when rising interest rates and an aging population force us to make hard choices about fiscal sustainability. Now is not that time.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Noah Smith is a Bloomberg Opinion columnist. He was an assistant professor of finance at Stony Brook University, and he blogs at Noahpinion.

Michael R. Strain is a Bloomberg Opinion columnist. He is director of economic policy studies and resident scholar at the American Enterprise Institute. He is the editor of “The U.S. Labor Market: Questions and Challenges for Public Policy.”

Stephanie Kelton is a professor of public policy and economics at Stony Brook University. She was the Democrats' chief economist on the staff of the U.S. Senate Budget Committee and an economic adviser to the 2016 presidential campaign of Senator Bernie Sanders.

Karl W. Smith is a senior fellow at the Niskanen Center and founder of the blog Modeled Behavior.

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