On Tuesday, Ben Judah of The American Interest penned an article sounding the clarion call: Democrats ought to follow the lead of newly-discovered phenom Alexandria Ocasio-Cortez, defeater of Rep. Joe Crowley (D-NY). She has Ideas, you see. And while the right has been focusing in on the Left’s penchant for identity politics, a new politics of populist solution-making has been rising (never mind that Ocasio-Cortez’s victory might have had something to do with identity politics in a district that is 50% Latino).
Thus, we on the Right ought to be taking stock of the Left’s new policy thoughts. Says Judah:
The shock win of 28 year old socialist Alexandria Ocasio-Cortez should be a wake-up call. Because, whilst the Right was feeling smart watching the Ben Shapiro Show, the Left—the real Left that is, not the confused Democratic establishment—has been living through the most dramatic policy renaissance in decades.
What are these brilliant policy proposals? Judah presents three: a federal jobs guarantee; unending public spending; and the creation of federal bank accounts.
Here’s Judah on the federal jobs guarantee:
This simple idea would see the government guarantee a job to the 13.1 million Americans who are currently unemployed or underemployed. The go-to report on the topic, from the Center on Budget Policy Priorities, suggests a “guaranteed wage” would go with each one of these jobs, to the tune of $32,500. The program would cost $543 billion a year, but the authors suggest a significant chunk of the cost—over $220 billion—is in fact already being spent on public assistance programs that could be nearly eliminated.
The report Judah cites is rife with ridiculous suppositions. The report suggests not that each job would cost $32,500, but $42,500; the pay would be established at $11.83 per hour, and would adjust with the inflation rate. So while everybody else’s pay wouldn’t be affected by inflation, being a federal employee in a make-work job would pay richly. The report brags about establishing “a true floor in the labor market” – by providing the alternative of a government job at a high wage, private market competition would be heavily restricted, in effect creating a massive new minimum wage. This would result in unemployment in the private sphere — which would require more government jobs. Make-work programs would grow; this would double the number of federal employees. We would also see an increase in wage inflation, which the Fed would then have to deal with via interest rate increases, dampening the economy still further. The report further suggests that the cost of the program — an estimated $523 billion per year, which is assuredly too low (Demos puts the number at $750 billion) — would be offset by cuts to other social services. Good luck with pushing such cuts through Leftist legislators.
So, what’s the next big idea? That we can fund all of this through endless deficit spending. Here’s Judah again:
The rise of Stephanie Kelton, the Professor of Public Policy and Economics at Stony Brook University, who advised Bernie Sanders in his 2016 campaign, is mirrored in the rise of her life-long cause: Modern Monetary Theory. According to Kelton, “money doesn’t grow on rich people,” but is in fact a product produced by the government, the only limits on which is inflation.
So actually, the government is just a big ol’ money tree. Now, it may be true that the government operates as a big ol’ money tree, simply injecting money willy nilly into the economy without concern for supporting resources. But that’s not sustainable. MMT has failed in Brazil; it’s failing in Venezuela. Even Paul Krugman thinks this is idiotic:
The point is that there are limits to the amount of real resources that you can extract through seigniorage. When people expect inflation, they become reluctant to hold cash, which drive prices up and means that the government has to print more money to extract a given amount of real resources, which means higher inflation, etc. Do the math, and it becomes clear that any attempt to extract too much from seigniorage — more than a few percent of GDP, probably — leads to an infinite upward spiral in inflation. In effect, the currency is destroyed.
Okay. So we’re now left with Big Idea #3: government bank accounts for everyone. Back to Judah:
In a new report, Treasury veterans Morgan Ricks and Lev Menand argue that every American citizen should be given an account at the Federal Reserve—currently a privilege only banks can enjoy. These “FedAccounts” would revolutionize banking, bringing the 35.5 million Americans with little to no access to the financial system inside, and insulating American citizens from the “too big to fail” curse. Predatory banking practices would be cut dead in one fell swoop.
Central bank accounts grant higher interest rates than normal bank accounts, so everyone would be incentivized to keep their money with the federal government. This, of course, would lead to a tremendous loss of bank deposit balances. And would the government then become a lender to low-income people? If so, this is merely subprime crisis, the revenge; it’s the postal accounts proposal, writ large. It’s just more fiscal irresponsibility sponsored by the federal government.
Judah is right about one thing: the rise of a populist movement focused almost entirely on anger about the “hierarchy” will bring about dangerous solutions.