It was assumed, even only a decade ago, that the Fed could not just print money with abandon. It was assumed that the government could not rack up huge debt without spurring inflation and crippling debt payment costs. Both of these concerns have been thrown out the window by large numbers of thinkers. We’ve seen years of high debt and loose monetary policy, but inflation has not come.
So the restraints have been cast aside. We are now experiencing monetary and fiscal policies that would have been unimaginable a decade ago. This is like the moment when the G.O.P. abandoned fiscal conservatism for the go-go excitement of supply-side economics — which eventually devolved into mindless tax cuts for the rich.
The role of government is being redefined. There is now an assumption that government should step in to reduce economic insecurity and inequality. Even Republicans like Tom Cotton and Mitt Romney, for example, are cooking up a plan to actively boost wages for American workers.
This is not socialism. This is not the federal government taking control of the commanding heights of the economy. This is not a bunch of programs to restrain corporate power. Americans’ trust in government is still low. This is the Transfer State: government redistributing massive amounts of money by cutting checks to people, and having faith that they spend it in the right ways.
Both parties are adjusting to the new paradigm. With the wind at their backs, Democrats are concluding that Biden’s decision to eschew bipartisanship to pass a relief package is better than Barack Obama’s attempts to attract it. I don’t know if the filibuster will go away, but it certainly looks like it will be watered down.
Poor economic conditions pushed the G.O.P. away from Milton Friedman libertarianism and toward Donald Trump populism. Republicans have learned that in this new era it’s foolish to fight Democrats on redistribution policy, but they can win elections by fighting culture wars. As Yuval Levin of the American Enterprise Institute observes, we may see a policy realignment without a partisan realignment because Republicans have found so many cultural ways to attract votes.
I’m worried about a world in which we spend borrowed money with abandon. The skeptical headline on the final preretirement column of the great Washington Post economics columnist Steven Pearlstein resonated with me: “In Democrats’ progressive paradise, borrowing is free, spending pays for itself and interest rates never rise.”
But income inequality, widespread child poverty and economic precarity are the problems of our time. It’s worth taking a risk to tackle all this. At first Biden seemed like the third chapter of the Clinton/Obama center-left era. But this is something new.
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