The new split in the Democratic Party
Different from past internal battles
Right now, Democrats of all stripes are united. From the most left-wing to the least, all are on the same page and agree on the top priority, which is to beat Trump. That is as it should be. Policy fights can wait until after the election.
Sooner or later, there will be plenty of fights within the Democratic Party as there always are. The same is true for the Republican Party, but that’s for another blog post. This is a country with over 330 million people and only two major parties with each representing close to half the country. A group that big is never going to be very cohesive and is always going to have people with competing goals and interests.
On social issues, almost everyone in the Democratic Party is on the same page. It’s on economic issues where the divisions are now and they will likely increase in the future. The party has long had a center/center-left wing and a left/far-left wing that are sometimes aligned, but often in conflict with each other. In the recent past, the differences have been over how far to go on a particular goal. For example, on healthcare, the more centrist wing was fine with the Affordable Care Act while the leftist wing wanted a public option or to get rid of private health insurance altogether.
Directionally, both wings tended to want to go to the same place, they just differed in how far to take things. Going forward, the differences between those two wings will likely be more fundamental. The macroeconomic conditions we’re in now and the most pressing problems we’re facing are very different from what they were for almost the whole century. For the better part of two decades, interest rates were low, unemployment was elevated and inflation was not a concern. That meant it was important to focus on the demand side of the economy, which is something almost everyone in the Democratic Party is used to doing.
The problems of today are different and the solutions mostly come from the supply side of the economy, which doesn’t come naturally to many people in the Democratic Party. The tension will be mostly between those in the more centrist wing of the party who recognize that we live in a new world and those in the leftist wing who still adhere to taxes, spending and regulation as the solutions to every economic problem.
Translating that into English, the biggest problems the US economy has now are a shortage of things we badly need. That includes housing, transmission lines, medicine, medical providers and nuclear plants, among other things. The biggest barrier to getting the things we need isn’t fiscal, it’s regulatory. To get what we need will require a recognition that, in some areas, there is too much regulation and it needs to be cut down on. That’s not something many in the Democratic Party have spent a lot of time thinking about until recently. The good news is there are many who do recognize that problem and are working on ways to fix it.
When I talk about the Democratic Party here, I’m referring entirely to party elites. Rank-and-file Democratic voters have no idea what the debate even is because they’re normal people who don’t follow politics closely. That will change eventually, but right now the debate is entirely elite driven. For those who want to dive into the weeds regarding the future effects this new debate could have on the Democratic Party’s coalition, this piece is long, but is very good and well worth your time.
The phrase “party elites” includes writers, pundits, commentators, columnists, academics as well as elected officials and candidates. It includes people in the Biden and Obama Administrations and possibly Kamala Harris. Those pushing to focus on the supply side of the economy are advocating for is what often called the “abundance agenda.” As the name says, the goal is to increase the supply of goods and services because that is the most pressing problem facing the economy today.
Those pushing for the abundance agenda are almost all part of the more centrist wing of the party. Some center-left writers who are advocates of it include Matthew Yglesias, Derek Thompson (who first used the phrase “abundance agenda”), Jerusalem Demsas, Noah Smith and Ezra Klein. I am very much a believer in it, too. There are plenty on the center-right who support it, but my focus here is on the Democratic Party.
Elected officials who support the abundance agenda include people on the federal, state and local levels. One of the biggest advocates is Brian Schatz, a senator from Hawaii. You can listen to his interview with Ezra Klein here to get an idea of his thinking.1
Obama is an advocate of it, too. No joke, my favorite moment of the convention was when he talked about the need ”… to build more units and clear away some of the outdated laws and regulations that made it harder to build homes for working people in this country.” Harris’ housing plan has some elements that go well with the abundance agenda.
The abundance agenda is a recognition not only of the need to reduce regulations to get more of what we need, but also of the changed fiscal and economic situation we’re in. Higher interest rates and concerns about inflation are going to make future efforts to create big new programs (and big tax cuts) much harder. Gone are the days when trillions could be spent (or taxes cut) with little worry about inflation and/or high interest rates. Pursuing deregulation in various areas doesn’t require raising/cutting spending or taxes, which makes it more viable. Going forward, I will refer to those pushing for the abundance agenda as being in the abundance wing of the party.
Taxes, spending and regulation are all legitimate tools. All of them have their place. What they’re not is the answer to every single economic problem there is. Sometimes, they can even be the source of problems. In the case of regulation, that is exactly what is going on now in some areas.
The abundance wing isn’t made up of laissez-faire supporters. Don’t ever mistake me for a libertarian! Nobody from that wing wants to eliminate the minimum wage, repeal worker and consumer protection laws or abolish the EPA. None want to slash Medicare, Medicaid, the ACA or Social Security.
Very different views of the economy and its problems
The leftist wing of the Democratic Party is best exemplified by The Squad, Elizabeth Warren and Bernie Sanders. Broadly speaking, the leftist wing is much more statist, distrusting of market forces, favors higher levels of taxation, spending and regulation, and believes, consciously or not, that every economic problem is caused by greedy corporations and/or billionaires. Some organizations representing that wing include The Roosevelt Institute, The American Prospect and The Revolving Door Project.
When it comes to the problem of a lack of affordable housing, the leftist faction generally opposes repealing regulations that make housing expensive. They prefer to spend money on public housing, enact rent control and rail against those with money. That is when they even acknowledge housing costs are a problem. I’m probably being a little unfair in that characterization and there are others who could give a fairer explanation of their stance, but you’ll have to look somewhere else to find it.
Those in the abundance wing, myself included, are center-left, not leftists. The 2020s are very different from the 2010s, the 2000s, the 1990s, etc. What were big problems then are not big problems now. When the world changes, you have to change with it.2 The leftist faction has so far been unwilling to do that. There is no problem in its adherents’ eyes that can’t be solved by spending more money, raising taxes on billionaires and corporations and exerting more state control over the economy, i.e., national rent control, laws against “price gouging.”
The leftist wing, when it comes to the abundance agenda, is either indifferent to or hostile towards it. One recent example of the latter is permitting changes for energy. Right now, there is a permitting reform bill in Congress that has bipartisan support and would do a lot of good for clean energy of all sorts. Almost every well-known environmental group has come out against it. Why? Because it would allow for more fossil fuel projects to go forward.
What those groups are saying is they care more about stopping fossil fuels than about promoting clean energy. What they don’t get is that fossil fuels have all the infrastructure they need. Blocking a pipeline here or an export terminal there won’t change that.
Clean sources of energy don’t have the needed infrastructure in place yet. Blocking permitting reform is the best example there is of cutting off one’s nose to spite one’s face. Clean energy is going to be hobbled without changes to permitting laws. If that happens, fossil fuels will continue to dominate. You don’t have to take my word for it, just ask anyone working in the clean energy industry.
Part of the hostility towards permitting reform and other kinds of deregulation from the leftist wing is their distrust of business. Many of its adherents believe those seeking to make a profit are bad and that business is a force for bad in the world. How they think clean energy will take off without businesses building it is a bit of a mystery. My guess is very few of them have thought things through.
The reality is making clean energy (and everything else) abundant will require the involvement of business. Who is going to build transmission lines, nuclear plants, wind farms and solar farms? Who is going to build housing? There may be a few non-profit developers, but that’s a small exception. Even then, non-profit developers are as hindered by red tape as for-profit developers are.
Those in the abundance camp see business as a vital partner. I don’t think those in the business world are flawless, but they have a lot to offer and bring an important perspective to the table. There is nothing wrong with having people from the public, non-profit and academic sectors around, but they have limits and blind spots. That’s something the leftist wing misses.
On the most fundamental level, those in the abundance wing believe the US economic system is sound and good. It’s not perfect and needs improvement in some areas, but it’s not hopelessly broken. That’s the highest level disagreement between the abundance and leftist wings.
I think of the US economic system as being like a garden. Gardens grow all kinds of food a household eats. Think of the household as all of us. We need the garden and we need it to work.
The garden doesn’t exist naturally. It’s our creation and is supported by institutions we made. Left entirely to its own devices it won’t sustain itself. It can grow excessively and the food can spoil or be inedible. Without enough supervision, that’s a big risk. At the same time, too much supervision can make it not grow enough or even shrink and that’s not good either. Balancing those risks is a never ending challenge.
The garden faces all kinds of dangers. I like to think of those dangers as weeds. If they aren’t addressed, weeds can take over the garden and suffocate it. In the worst case scenario, the garden is ruined and can’t grow anything anymore. That’s not something anyone wants to have happen, no matter what their ideology is. Where the big differences are between the abundance and leftist wings is in how to deal with weeds.
The wings aren’t always in tension. For example, both agreed that in addressing the weed that was the pandemic, major stimulus spending was needed and it was better to err on the side of doing too much than too little. Both also agree that there wasn’t enough stimulus spending done in addressing the weed that was the financial crisis. The difference now is that the leftist wing is still focused on spending measures and the demand side of the economy while the abundance wing is focused on the supply side.3
Today, the biggest weed the garden is facing is red tape. Across whole sectors of the economy, it’s way too hard to build things. That’s true not just for housing and energy, but for infrastructure, too. Getting approval for projects of all kinds takes forever and costs a fortune. On the services front, we need more medicine and medical providers.
The abundance wing believes the garden is not in need of fundamental changes. While the weeds need to be dealt with, the garden itself is fine. What the garden needs is to be allowed to live up to its potential. The solution to weeds is to take care of the weeds, not to rip out the entire garden. The leftist wing tends to disagree with that.
In the leftist wing’s adherents’ eyes, the garden is not working. The food it produces is being hogged by just a few members of the household. Those few have stacked things in their favor. Because of them the garden is not capable of making enough food for everyone in the household. The solution is to exert more monitoring and control over it. The existing plants need to be rooted out and new ones planted in their place.
What new things they would plant, I have no idea and have never heard a cogent explanation. Starting a whole new garden from scratch is no easy task. There are few examples of such efforts succeeding and many examples of it going very wrong, i.e., the French Revolution.
The fight over trade and which side will win
Households and gardens don’t exist in a vacuum. Plenty of other gardens and households are out there. There is no such thing as a household that’s fully self-sufficient and so they need to trade with other households. The abundance wing recognizes that reality and embraces it while the leftist tends to do the opposite. In principle, the leftist wing isn’t anti-trade, but in practice likes to attach all kinds of requirements to trade deals that make them unappealing.
Gardens can’t produce everything by themselves and often have particular focuses. The US economy is great at many things, but doesn’t produce every last thing there is. Trying to make everything here is popular, but it has serious costs. The abundance wing recognizes that and embraces trade with other friendly countries so as to maximize efficiency, resilience and innovation while strengthening alliances.
Currently, unemployment is very low and so the focus has to shift towards having more things at a lower cost. Trading with allied countries is part of how that will be done. Trying to make everything here will cost more and will take a much longer time than if we prioritize getting needed items quickly and at the lowest cost. Buy American requirements aren’t the only reason infrastructure is so expensive and takes forever to build, but they play a role.
Those in the abundance wing recognize two things about trade. The first is that it’s a good thing overall and is something we need more of with allied countries, especially since we’ll need allies to counter China and Russia. The second is that it has limits and there are valid reasons for wanting to produce some things domestically even at a higher cost. National security is a valid reason for that.
Most everyone in the abundance wing recognizes that trading with China hasn’t worked out as hoped and a new course of action is needed. While trade with China should be curtailed some, trade with allies should be increased. That’s a distinction the abundance wing makes that the leftist wing does not.
The leftist wing is big on protectionism. Trade is seen as having outsourced jobs and damaged workers’ livelihoods. Those in the abundance wing don’t deny there is some truth to that, but rightfully ask those in the leftist wing to explain how they’re going to bring back jobs from the days of yore, i.e., pre-globalization. No satisfactory answer is ever given because there isn’t one.
People have jobs now and that’s great. We should all be happy about it. What matters is that those jobs pay well and workers are able to afford a decent living. With unemployment being low, the focus needs to be on reducing the cost of living. Energy, housing and healthcare are all a part of that. Bringing their costs down will entail deregulation in many areas and more trade with allies, both of which the leftist wing doesn’t believe in.
Ultimately, I think the abundance wing will win out. I don’t have a crystal ball and could be wrong, but I think the problems of today are becoming increasingly obvious along with the solutions. It has already become impossible to deny that the problem with housing is a lack of supply and the main culprit is building restrictions. Harris’ housing plan acknowledges that with her stated goal of adding 3 million new units.
On energy, a large majority of Democrats in Congress recognize that permitting reform is crucial for clean energy to take off and for the Inflation Reduction Act to live up to its potential. The key task for those in the abundance wing will be to move the debate from the elite level it’s at now to being something voters know and care about. That’s where elite opinion comes into play. If high profile Democrats like Obama and Harris are vocal about the need for abundance, rank-and-file voters will likely follow suit. Most of them don’t have strongly held views about policy matters, but they have favorable views of Obama and Harris and so will be likely to listen to them.
Other senators who are abundance advocates include Michael Bennet, John Hickenlooper, Martin Heinrich and Chris Murphy. Supportive governors include Jared Polis, Tim Walz and Wes Moore. Supportive congressmen include Scott Peters and Robert Garcia. London Breed, the mayor of San Francisco, is a supporter, too.
While some Democratic elites are guilty of not changing with the times, they have nothing on their Republican counterparts. The only thing most Republican elites understand is tax cuts. No matter what the problem is, their solution is tax cuts. An alien invasion? Cut taxes. A meteor heading straight for earth? Cut taxes. Some Democratic elites are stuck in the past, but just about every Republican elite still lives in 1980.
Supply-side economics has gotten a bad rap over the years, but it’s very misunderstood. It’s become associated with supporting big tax cuts for those at the top, but that’s more of a demand side policy than supply. Taxes have almost nothing to do with supply. Of all the things hindering growth now, taxes don’t make the top trillion. The number of things that can be done to increase the supply side of the economy is the length of a football field. Taxes are maybe one inch of it. At its core, what supply side economics is trying to do is make it easier to provide goods and services. Do you think education is good? If so, congratulations, you’re a supply sider.