By NICK HANAUER, politico.com, Aug 14, 2018
America needs a centrist party that actually represents the economic center, not just zillionaires like me.
Every time Democrats lose a presidential election, blue America promptly collapses into civil war—and never more so than in the aftermath of 2016. Progressive Democrats, buoyed by a number of high-profile victories, insist that if the party is to have any hope of fending off Trumpism, it must decisively move to the political left by embracing the populist messaging and agenda of insurgent outsiders like Bernie Sanders and Alexandria Ocasio-Cortez. Establishment Democrats (egged on by eye-rolling pundits and concern-trolling never-Trumpers) dismiss that idea as electoral suicide, contending that now more than ever is the time for the party to reclaim the political center by championing an agenda that pragmatically appeals to voters on both sides of the aisle.
And you know what? They’re absolutely right. All of them. The Democratic Party must reclaim the political center. And the only way to do that is by boldly moving toward the so-called “radical” left.
If this strikes you as counterintuitive, you’re not alone. By respectively attempting to purge the center or marginalize the left, progressive and establishment Democrats alike have displayed a willful ignorance of where and what the center actually is. This is not mere wordplay. Over the past several decades, Democrats have allowed a mistaken and self-destructive definition of centrism to become party orthodoxy. It continues to undermine party unity at a time when a unified Democratic Party is more essential than ever.
In fact, there are two kinds of political centers: There’s the ideological center—the one that Democrats are waging a civil war over. And there’s the majoritarian center—the one where most of the people are. If Democrats hope to be a majority party, it’s the majoritarian center they need to embrace. And to understand the difference between these two strains of centrism, it’s important to understand exactly what the center is measuring.
Imagine lining up every person in America on a yardstick, with the poorest person standing to the far-left edge of the stick (zero inches) and the wealthiest person standing to the far right (36 inches). Assuming that people are equally spaced, and that there is no correlation between wealth and weight—if you could balance that yardstick on the tip of your finger, the fulcrum would fall on the 18-inch mark, the exact center of the yardstick, with exactly half of all Americans standing to the left, and the other half standing to the right. Clustered on and near that 18-inch mark are the median American families—the middle-middle class—the majoritarian center of the American electorate, at least from an economic perspective.
Now imagine that very same yardstick with every American standing in their very same spots—only this time, rather than balancing people, we are balancing their personal wealth, stacked up in $100 bills. [see illustration] But because 2 percent of Americans (of which I am one) own 50 percent of the nation’s wealth, to balance this yardstick you’d now have to slide your finger nearly all the way over, beyond the 35-inch mark, just inside the far-right edge. This fulcrum balances the interests of capital, not people. And unfortunately, this is the yardstick of our current ideological center—a centrism informed by the bad economic theories that have guided the policies of both parties for more than 30 years.
This precarious balancing act helps explain why policies that would clearly benefit the majoritarian center are so often rejected as ideologically “far left;” for a centrism that seeks to balance the interests of capital is a centrism that seeks to balance the interests of the very wealthiest Americans against those of everybody else. It’s this sort of “one dollar, one vote” logic that led to the Citizens United Supreme Court decision—a logic that threatens to subvert American democracy itself. For a system that justifies the wealthiest 2 percent purchasing the same political influence as the other 98 percent, isn’t really a democracy at all. I’m not saying that self-described “centrist” Democrats are any more greedy or corrupt than their progressive colleagues, but if they’re honest with themselves, they should recognize how much they have internalized this orthodox ideological bias. Indeed, this is what they mean by “pragmatic centrism”: an economic policy agenda that necessarily balances the interests of business (the few) versus the interests of labor (the many), in an attempt to best serve the interests of all. Yet as pragmatic as such an approach might at first appear, when viewed from a majoritarian perspective, the ideological center consistently fails to hold.
Take, for example, the minimum wage, a stereotypically lefty policy if there ever were one. But is it really so lefty? In fact, the federal minimum wage is extraordinarily popular, with 71 percent of Americans supporting a raise to at least $10 an hour—even according to a partisan survey conducted by Republican pollster Frank Luntz on behalf of the minimum-wage-hating National Restaurant Association! Ouch. In a country as politically polarized as ours, I’d say that 71 percent support for anything is about as majoritarian centrist a policy as you’re likely to get.
But what about a $15 minimum wage? Surely, the higher we raise the minimum wage the more extremist the policy becomes, right? Again, not from a majoritarian perspective. According to a 2017 Pew Research Center poll, a majority of registered voters—52 percent—favor raising the federal minimum wage from $7.25 to $15 an hour (support far stronger than the 41 percent approval rating currently enjoyed by President Trump). But more importantly, a $15 minimum wage would benefit far more workers. At $7.25 an hour, the current federal minimum wage provides a floor under only 1.3 percent of all wage and salary workers—a cohort one might fairly characterize as occupying the far left of our economic yardstick. By comparison, a hike to $15 an hour would directly or indirectly benefit 29.2 percent of workers. And with half of all American jobs paying less than $18 an hour, a $20 minimum wage would directly cover a majority of workers, while indirectly pushing wages higher for many millions more. From a majoritarian perspective—a perspective that asks, “Who does it benefit?”—the higher you raise the minimum wage, the more centrist the policy becomes!
And the same holds true for many other policies routinely caricatured as “far left.” After 40 years of erosion, the current $23,660 overtime threshold now guarantees time-and-a-half overtime pay to only 8 percent of workers, but a return to a 1970s-level threshold would cover 66 percent. Less than 30 percent of college graduates manage to get through school without accumulating often crushing levels of student debt, but tuition-free public college would offer an affordable higher education to every qualified student. And with an enrollment age of 65, only 15 percent of Americans enjoy the privilege of purchasing affordable health insurance through Medicare, but “Medicare for All” would deliver exactly what its name implies. All three of these proposals enjoy majority support, while directly benefiting the majority of Americans. So to mischaracterize these policies as “lefty” rather than “centrist” would be to abuse those words. Small wonder that “socialists” like Sanders and Ocasio-Cortez have gained so much traction with mainstream voters. “This race is about people versus money,” says Ocasio-Cortez. “We’ve got people, they’ve got money.” That’s as clear a declaration of majoritarian centrism as voters might hope to hear.
You self-described “pragmatic” Democrats who publicly fret that such policies would be far too costly to taxpayers or to employers should remember that there is nothing pragmatic about losing elections. You can’t be the grownup in the room if you’re not in the room. That’s why you never hear Republicans worrying about how to pay for their $1.5 trillion tax cut for the rich: It’s a losing argument. And besides, your trickle-down instincts are wrong! The U.S. economy was never as strong, nor its middle class as secure, as during the three decades when the real minimum wage and the overtime threshold and public subsidies for higher education were at their peak. Medicare for All wouldn’t burden employers; it would relieve them of their costliest employee benefit. And if we do need to raise taxes on the wealthy in order to rebuild the middle class, so what? There is simply no correlation between top tax rates and growth. Stand up for the middle class for a change and you might be rewarded. But there is absolutely nothing to gain—economically or electorally—by aping a trickle-down narrative that just isn’t true. On economic issues, the Democratic Party has long embraced an ideological definition of centrism that simply has nothing to do with the center. And both the party and the nation have suffered as a result.
There once was a time when both parties vied to occupy the majoritarian center, an era when American politics was more a struggle over means than of ends—until, after three decades of unprecedented and broad-based post-war prosperity, the Republican Party lurched violently to the right, and the age of New Deal centrism came to a close. Supply-side tax cuts, attacks on unions, a crusade against “big government” and other tactics of the Reagan revolution helped put us on the road to a new Gilded Age. And while Republicans certainly led the way, we wouldn’t have gotten here as quickly had Democrats not kept driving in the same direction every time we managed to get our hands on the wheel.
Sure, we drove a bit slower and made a few detours before delivering the working class to a neoliberal paradise of billionaires and paupers. And we offered an occasional helping hand to the millions of Americans we left behind in a ditch. But while we tried to strike a more compassionate balance than our GOP counterparts, our deference to the tenets of neoliberal orthodoxy kept our economic agenda firmly tilted toward the interests of the super-rich.
Under Bill Clinton, the wealthy got financial deregulation and capital gains tax cuts worth hundreds of billions of dollars, while our most vulnerable citizens got a higher Earned Income Tax Credit and CHIP—benefits worth just tens of billions. Under Barack Obama, the Wall Street titans who had used their regulatory freedom to crash the global economy got bailouts and bonuses and a monetary policy that inflated their assets, while some in the middle-class got affordable (or, at least, less unaffordable) health insurance, and millions of homeowners were left to drown in their underwater mortgages.
This isn’t to say that the Affordable Care Act and EITC expansion weren’t worthwhile programs. I’m a Democrat for a reason. But “we suck less than the Republicans” just doesn’t cut it, politically or economically. Reagan’s class war left the economic center in ruins. Restoring shared prosperity required nothing less than a Marshall Plan for the middle class. Instead, centrist Democrats let them eat charter schools.
In the golden age of New Deal liberalism, organized labor delivered shared prosperity for the middle class and electoral success for the Democratic Party. A mountain of studies have shown that strong, private-sector unions reduce inequality and raise middle-class wages for workers who belong to them and for those who don’t. Other studies have shown that when unions decline in a state, the Democratic Party’s share of that state’s vote declines along with them. Thus, upon returning to power in 1992, it should have been a no-brainer for Democrats to rewrite the nation’s labor laws to make it easier for workers to organize—and harder for bosses to stop them.
But they didn’t. In the 1980s, as Reaganism was ascendant, “centrist” Democrats started blaming much of their party’s struggles on organized labor: By doing the bidding of that “special interest group,” centrists argued, Democrats had alienated the middle. So, instead of taking its policy cues from a labor movement it dismissed as corrupt, lazy and market-distorting, Bill Clinton’s Democratic Party let Wall Street set its agenda. The Robert Rubin wing of the White House believed that working-class Americans didn’t need collective bargaining rights to force their employers to pay a living wage, or redistributive programs to guarantee them a fair share of after-tax income. No, what the economic center really needed was for government to wage war on the deficits, trade barriers and financial regulations that were holding back economic growth. Labor law reform was out; welfare reform, NAFTA and deregulated derivatives markets were in.
Some of these measures might very well have contributed to the late-1990s growth spurt—but they also set the stage for the 2008 crisis while accelerating the decline of American manufacturing and with it the labor movement. And though median wages did rise during the Clinton expansion, so did economic inequality. And unlike this brief spike in wages, inequality has been relentlessly rising ever since.
Centrist Democrats weren’t blind to this inequality. They just refused to believe that it was a product of the economic rules they helped write. Working people weren’t falling behind because markets were structured to funnel all the rewards of growth to the top, centrists told themselves; the middle class was falling behind because it lacked the skills to compete in the new “knowledge economy.” After all, wages were rising for highly educated Americans—you know, like centrist Democratic politicians—so middle-class Americans just needed to become more like them. Companies said they were desperate to give high-paying jobs to American workers, if only they could find workers who were qualified to do the jobs. None of this meant that centrist Democrats were blaming the middle class for its struggles. They didn’t expect working Americans to “pull themselves up by their bootstraps” without any help from Uncle Sam (they weren’t Republicans, after all.) They just thought that the median worker needed a better education or retraining, not a modicum of bargaining power with her employer. It wasn’t rapacious economic elites who were preventing workers from getting reasonable wages and benefits. It was the damn teachers unions.
Of course, minting more college graduates didn’t reduce inequality; it just produced a new class of extremely well-read baristas with crushing college debt. The “skills gap” was always a lie told by corporations who just wanted to pay less for high-skill labor. Still, the myth survived well into the Obama presidency, when a unified Democratic government once again declined to modernize labor law, while selling education reform as an elixir for inequality.
It’s been three decades since centrist Democrats abandoned the majoritarian economic center, and the consequences for the middle class have been devastating. Since 1980, the bottom 80 percent of American workers have effectively been bypassed by economic growth while absorbing most of the costs of public disinvestment in housing, education and the social safety net. After-tax corporate profits have doubled from approximately 5 percent of GDP to 10 percent—about a trillion dollars a year—while wages as a share of GDP have fallen by about the same amount. Meanwhile, the richest 1 percent of Americans went from collecting 9 percent of personal income to about 22 percent today. Taken together, these changes amount to a shift of more than $2 trillion a year from middle-class paychecks to the bank accounts of corporations and the very rich.
Some of my fellow filthy-rich capitalists would like you to believe the middle class has actually benefited from having us gobbling up more and more of America’s annual income gains. After all, they claim, we “job creators” know best how to productively invest wealth: The more capital we get to control, the more economic growth we’ll be able to produce—and the benefits will trickle down!
Yeah, right. Contrary to popular wisdom, America hasn’t enjoyed drastically higher economic growth since 1980 than more egalitarian Western countries. And a moment’s glance at how the “job creators” are currently investing their windfall illustrates why: Right now, roughly 55 percent of corporate profits (about $1 trillion, or 5 percent GDP) is going into stock buybacks—the signal marker of corporate malfeasance and self-dealing—while an additional 37 percent goes to dividends. This means that 92 percent of the profits that American businesses make this year will be spent on enriching the small, elite fraction of the population that owns significant amounts of corporate stock. Meanwhile, at a time of so-called “full employment,” inflation-adjusted wages for the bottom 80 percent of American workers are actually declining.
After the corporate elite slices off its giant share of the income pie, the median American family—those standing near the 18-inch halfway mark of our majoritarian yardstick—is left with about $59,000 a year. Had inequality held constant since 1980, that figure would be $86,000. Had middle-class incomes grown with productivity (as they had in the previous three decades), the median American family would be earning over $100,000 a year.
Let me underscore this point: America owes the median family a raise of somewhere between $25,000 and $40,000. Per year. This—not the fictional entitlement crisis—is the inconvenient economic truth that elites in both parties lack the political courage to confront. And only by enacting policies that right this wrong can Democrats lay claim to being a truly centrist party.
Of course, Democrats never quite gave up their belief in redistribution. But because they stubbornly stayed beholden to their ideological center, these redistributive measures were always too little, too late—and of little help to the majoritarian center. The Affordable Care Act expanded Medicaid to millions of low-income Americans—but it condemned the median family to complicated, costly and uncertain health insurance exchanges. Similarly, Obama proposed raising the minimum wage, but at first only to $9 an hour, and eventually to $10.10—a change that would have raised the wages of just a small percentage of workers at the very bottom of the income distribution, many of them nonvoters. Attending to the needs of the most vulnerable is a fine thing, of course. But it is impossible to build a winning coalition out of the bottom 20 percent of the income distribution. The rich get tax cuts, the poor get scraps and the middle is left to fend for itself.
Is it any wonder then that so many working- and middle-class voters could see little practical difference between the policies of Democrat Hillary Clinton (one of the more qualified presidential candidates ever to win a major party nomination) and those of a lying, racist, vainglorious, authoritarian, know-nothing like Republican Donald Trump? Clinton was correctly seen as the leader of a Democratic establishment whose “centrist” policies had long served to undermine the legitimate interests of the middle class. So why not take a flyer on Trump? It is in this way that three decades of Democratic ideological centrism helped lead our nation down the neoliberal road to Trumpdom.
All is not lost. Well, not quite yet. There is still an opportunity for a unified Democratic Party to retake Congress in November and remove Trump from office in 2020 (if not sooner). But being anti-Trump is not enough. To build an electoral majority Democrats must come together and embrace an economic policy agenda that boldly and decisively reclaims the majoritarian center. And this will require sacrifices from progressives and centrists alike.
For you centrist Democrats who have long dominated the party establishment, it is time for you to admit that a “pragmatically centrist” agenda that enjoys neither majority support nor serves a majority of voters, is neither pragmatic nor centrist. In fact, it’s suicidal. Indeed, when Starbucks CEO Howard Schultz earnestly insists that Democrats must “go after entitlements” (“Medicare for Fewer” rather than “Medicare for All”), his only real chance of uniting voters is in opposition to Howard Schultz. And don’t you dare think for a moment that you somehow know better than voters what’s good for them, because “Econ 101!” or something. Econ 101 is bullshit—at least in the way that it’s been relentlessly misapplied to public policy these past 40 years. And as for trickle-down economics—“a rising tide lifts all boats” and all that—well, that’s a demonstrable con: Tax cuts for the rich don’t create growth (if they did, Trump’s $1.5 trillion tax giveaway wouldn’t have resulted in declining wages and record stock buybacks). A higher minimum wage doesn’t kill jobs (if it did, the job market wouldn’t be booming in Seattle and San Francisco and New York and in every other city or state that has recently hiked its local wage floor). Deregulation isn’t a magical potion of market efficiency (unless if, by “efficient,” you mean efficiently wiping out the savings of millions of working- and middle-class families through a predatory lending and derivative-fueled economic collapse).
As for progressive Democrats, it’s time for us to stop trashing the very notion of centrism itself. The “centrist” wing of our party (and to be clear, it’s a wing, not the center) isn’t uniformly evil or corrupt. They’re not bad people. They’re just wrong. They believed what economists told them, and then tried to govern accordingly. But they’re still Democrats, and as such, we all broadly share the same inclusive values and goals. Moreover, by relentlessly reviling the center, progressives needlessly cede it. Which is stupid. The Congressional Progressive Caucus is already the largest Democratic caucus in Congress. So you know what that makes them? The center!
Free from the elitist constraints of ideological centrism and refocused on the wants and needs of the majoritarian center, a unified Democratic Party has an opportunity to build an electoral wave strong enough to swamp the gerrymandered seawalls of the Republican-controlled Congress. And what would a truly centrist Democratic agenda look like? A $15 minimum wage, a restored overtime threshold, affordable public college, Medicare for All, paid family leave, crucial infrastructure investments, modern labor laws, and substantially higher taxes on wealthy corporations and individuals would be a good start. If that sounds like the platform of lefties like Ocasio-Cortez, it’s because it is. But when ideologically “lefty” ideas are both broadly popular and broadly economically beneficial, they occupy the majoritarian center from which electoral majorities are built.
Democrats need to stop balancing the economic interests of the top 2 percent against the interests of everyone else and start focusing on the needs of the majoritarian center—the 80 percent of families who have been left behind by 40 years of trickle-down economics. Raise wages now. That’s the kind of pragmatic centrism the majority of Americans truly want, and that our economy needs.
Nick Hanauer is a Seattle-based entrepreneur and venture capitalist, and the founder of Civic Ventures, a public-policy incubator.