What Should Progressives Prioritize Under Biden?

I interview Dean Baker.

See below my interview with Dean Baker about what progressives should prioritize under Biden.

I showed the interview to Noam Chomsky, and he said: “Very good interview.”

1) What should be the biggest progressive priorities under Biden?

There are things that Biden must do and then things that he should do to make people’s lives better.

Politics have to be a big part of the picture, because if he loses control of Congress or the presidency in 2024, we are likely to see the end of progress for a very long time, and possibly the end of democracy.

The first thing that he must do is to get the economy to something close to full employment. This is crucial both because it makes a huge difference in the lives of tens of millions of people and because it is enormously important politically.

If we can get the unemployment rate back under 4.0 percent, and ideally closer to 3.0 percent, it will mean that close to ten million more people have jobs. This is an enormous deal for these people and their families. Disproportionately, the people who will benefit are the most disadvantaged in the labor market: Blacks, Hispanics, people with disabilities, and people with criminal records. We can’t hope to overcome longstanding patterns of discrimination simply by having a tight labor market, but this is a really good start.

In terms of the politics, if the 2022 elections take place in a context where most workers are reasonably happy with their employment situation, and feel good about their prospects if they were to lose or leave their job, then the Democrats are likely to do well in the elections. This will mean that the door will be open for further progressive actions in the next Congress.

The other must-do is serious action to stem climate change. This means hastening the shift to electric cars and more rapid adoptions of solar and wind energy. While a carbon tax would be a great policy to speed this shift, it is probably not politically practical. Biden can take steps to make fossil fuels more expensive, such as restricting drilling on public land and imposing tighter environmental standards on fracking operations—however, the bigger part of the story will be reducing the costs of clean energy.

In both these areas, Biden has the wind at his back. The rescue package that is moving through Congress is likely to create a basis for a strong recovery. He can count on considerable support from the Fed in this effort. (This assumes that Biden is able to successfully bring the pandemic under control.)  

The tide has really shifted on clean energy. It is now a major industry and even the big oil-companies are recognizing that they have to get on board or become irrelevant. The same is true for the auto industry, which is now committing itself to a future of electric cars. With the enormous progress in lowering costs for clean energy and increased efficiency of battery storage, Biden really has an open door here. He will have plenty of industry support for a green agenda, which is clearly going to be a big job-creator in the next decade.

There is a long list of things that Biden should do, but his ability to accomplish them will depend on the politics of his first term. One clear winner is his child tax credit, which has gained support from Mitt Romney and plenty of traditionally conservative intellectuals. This measure can go far towards eliminating child poverty and will make a huge difference in the life prospects of millions of kids.

It would also be great if he could make some serious progress on affordable child care. We are much of the way towards universal pre-kindergarten. Getting the rest of the way there should be a doable lift. There is some money for child care in the rescue package. We will need more and it needs to be an ongoing program. Of course, all the Republicans who are worried the tax credit will cause women to leave the labor force should be very supportive.

On the other side, Biden really should take some steps to improve and extend Medicare. A key issue should be improving the traditional Medicare program. The percentage of people who opt for the private Medicare Advantage keeps rising, and it is now close to 40 percent. One of the big things that would make a huge difference is an out-of-pocket cap on spending in the traditional program. This is already required of the Medicare Advantage plans, so this would just make it symmetric. If we had a figure around $7,000 it would mean that many people in the traditional plan would not also have to buy supplemental insurance.

It would also be good to combine the Medicare Part D drug benefit with the traditional plan. This would save people a lot of pointless paperwork and bureaucratic hassle. The cost of this change, together with the out-of-pocket cap, would be very limited. It would also be great if Medicare could be extended to cover dental care, but this would be more costly.

Biden also proposed dropping the age of Medicare eligibility to 60 and allowing for anyone to buy in. Both of these are good proposals, but may be hard to muster support for. If we can get support for lowering the age to 60 it would be great, but even a drop of one year to 64 would be a big deal. It would be a fantastic precedent, and if it went well, it would create substantial momentum for further reductions in the age of eligibility.

The buy-in proposal will require some work to ensure it’s feasible and there are workable mechanisms to prevent adverse selection, but it is definitely worth doing. Biden also proposes increasing subsidies in the exchanges for middle-income families, which will make a very big deal for the families affected.

There is a long list of other measures that Biden should take. We need a minimum-wage hike. Fifteen dollars is a good target. If he is forced to go lower to pass the legislation, he should take what he can get.

We also need to strengthen the position of unions. Biden can use the power of the federal government with its contractors to try to ensure workers have a fair chance to organize with these companies. He can also make the National Labor Relations Board more worker-friendly, but realistically it will be hard to make too much progress in increasing unionization rates in a single term.

He should also try to get Section 230 protection for internet intermediaries repealed. Republicans ostensibly support this, although they bizarrely think the repeal would prevent Facebook and Twitter from restricting the posting and tweets of Trumpers. (Most likely, the opposite is the case. Repeal would make these companies liable for the lies the Trumpers spread.)

It would be great if Biden could get a foot in the door on publicly-funded prescription-drug development. If he could carve out, say, $3-to-$5 billion of the National Institutes of Health’s $40-billion-plus budget for the actual development and testing of new drugs, this could be a really big deal. If the next great cancer drug was selling for a few hundred dollars a year as a generic, rather than a few hundred thousand dollars, it would be hard to ignore.

It would also be great if Biden could take some steps to limit bloated CEO pay. My favorite is amending the “Say on Pay” provision of Dodd-Frank, so that if shareholders vote down a pay package, the Board of Directors forfeit their own pay. My guess is that if this just happened to one or two boards, you would see directors asking serious questions about if they could pay their CEO less money. And, as I have argued, the bloated pay at the top of the corporate hierarchy is a major factor in the growth of income inequality over the last four decades.

In a similar vein, it would be great if Biden took steps to rein in the bloat in the financial sector. A financial transactions tax would be the biggest single blow to industry bloat, but this will be a huge struggle in Congress. Some steps are more directly under his control. He can restore the Obama rules on financial advisers that would have required them to have fiduciary responsibilities to their clients. He can also do more to highlight the industry fees in 401(k)s and other accounts.

Having a national 401(k)-type system could save workers tens of billions annually in fees, but this would require Congressional action. In the same vein, we could have a national system of digital accounts, run by the Fed, which would save people tens of billions annually in bank fees. Legislation requiring state and local governments to have full disclosure of the contracts their pensions sign with private-equity companies and other fund managers would also be a big step in limiting fees.

There is a much longer list of items that I could include on things Biden should do, but I am trying to stay within the bounds of the politically practical. It would be amazing if Biden could (or would) do half of this list, but if he can sustain the momentum from his first month, and the enormous good will much of the public feels after the liberation from Donald Trump, this should be conceivable.

2) What strategic/tactical things should progressives keep in mind under Biden?

We need to keep our eyes on the ball. Biden will do what he feels pressured to do, but he is not going to stick his neck out on things that could blow up in his face. For example, he is not going to try to push Medicare for All. Whether he would want it or not, in principle, doesn’t matter. He would not be able to get it through and would waste a huge amount of political capital in the effort.

We need to focus on areas where important but incremental changes are possible. And we always have to consider whether any change will open the door to further change or provoke a reaction that is likely to obstruct progress—not just in that area, but more generally.

I believe that everything on my list fits into the category of changes that facilitate future changes. For example, successfully lowering the Medicare age, even if it’s just one year, opens the door to further reductions in the age of eligibility. If we can have public funding of some number of effective drugs, which are then available as cheap generics, it will likely create demand for more funding, with publicly-supported open-source research ideally replacing patent-monopoly financing in the long run.

Anyhow, others may tell different stories about the proposals I have described, but we should always be thinking about how any specific measure fits in with a larger agenda.

A progressive move that creates a big backlash may not be worth the fight.

3) What are the biggest blindspots that progressives have regarding policy?

Progressives too often buy into the idea that we are somehow battling against the market and that we want the government to supplant the market. In my view, we should think of the market as a tool, like the wheel. It is infinitely malleable and can be shaped in different ways to produce different outcomes.

Over the last four decades the leaders of both parties have put in a place a set of rules that had the goal and effect of redistributing a huge amount of income upward. This wasn’t a question of leaving things to the market. Stronger and longer government-granted patent and copyright monopolies is not leaving things to the market. The Wall Street bailout in 2008-2009 was not leaving things to the market. The protectionist barriers that allow our doctors to earn twice as much as their counterparts in Europe and Canada is not the market. Rather, these and other measures are about structuring the market in ways that redistribute income upward.

We should be as smart as the right in crafting our agenda. Instead of trying to have the government do everything, we should seek to impose different rules so that the market works to benefit the bulk of the population instead of a small group of rich people.

4) What will it take for your vision for the Democratic Party (in terms of policy and strategy/tactics) to break through?

I’ve had some success, working with many other individuals and groups, in shifting the agenda in several areas. For example, many states, including California and New York, now sponsor defined-contribution pension systems for private-sector workers in the state. This can save workers large amounts of money in management fees.

There is a growing movement for measures to limit drug prices and to stop imposing stronger patent rules in trade deals. Increasingly, the people pushing these measures recognize that the government is making drugs expensive with patent monopolies—high drug prices are not the result of the free market.

We’ve also had a huge victory in the change in views at the Federal Reserve Board. The current chair, Jerome Powell, is saying pretty much the exact same things about targeting full employment as I and my friends were saying two decades ago. This is an enormously important institution that has been used in prior decades to limit wage growth for low and middle wage-earners. It now may be used to boost pay at the middle and bottom.

Anyhow, I see the best path as taking things issue by issue. Most people are not interested in rethinking their views of the economy and society, so it is not worthwhile trying to have that battle. It makes more sense to focus on the areas where restructuring the market can have the greatest influence.

It’s worth noting that there are some other social scientists that emphasize inequality in before-tax income. The political scientist Jacob Hacker focuses on what he terms “pre-distribution”. Also, Brink Lindsey and Steve Teles—two political scientists affiliated with the Niskanen Center in Washington, DC—also focus on the way we have structured markets to create large economic rents, mostly for those at the top.

5) How can you best effect change now that you no longer live in DC?

I look for openings, just like I did when I was in DC. I suppose there are more opportunities when you are there, but you just see what comes up.

6) What will it take to reach a point where AOC, Sanders, and other major progressive figures sit down with you (and other progressive economists) to have serious conversations about policy?

I’m sure they’ve had conversations with progressive economists. I don’t know what would make them interested in my work. I have in the past spoken with Sanders or his staff on several issues, including Social Security, paid vacation days, and prescription drug prices. All of these people cover lots of ground in their work, so I can’t expect that they will think it’s worth their time to get my take on the structure of the economy.