February 1, 2024
One of the biggest stories of 2023 is that the U.S. economy grew faster than any other economy in the Group of 7 nations, made up of democratic countries with the world’s largest advanced economies. By a lot. The International Monetary Fund yesterday reported that the U.S. gross domestic product—the way countries estimate their productivity—grew by 2.5%, significantly higher than the GDP of the next country on the list: Japan, at 1.9%.
IMF economists predict U.S. growth next year of 2.1%, again, higher than all the other G7 countries. The Federal Reserve Bank of Atlanta projects growth of 4.2% in the first quarter of 2024.
Every time I write about the booming economy, people accurately point out that these numbers don’t necessarily reflect the experiences of everyone. But they have enormous political implications.
President Joe Biden, Vice President Kamala Harris, Secretary of the Treasury Janet Yellen, and the Democrats embraced the idea that using the government to support ordinary Americans—those on the “demand” side of the economy—would nurture strong economic growth. Republicans have insisted since the 1980s that the way to expand the economy is the opposite: to invest in the “supply side,” investors who use their capital to build businesses.
In the first two years of the Biden-Harris administration, while the Democrats had control of the House and Senate, they passed a range of laws to boost American manufacturing, rebuild infrastructure, protect consumers, and so on. They did so almost entirely with Democratic votes, as Republicans insisted that such investments would destroy growth, in part through inflation.
Now that the laws are beginning to take effect, their results have proved that demand-side economic policies like those in place between 1933 and 1981, when President Ronald Reagan ushered in supply-side economics, work. Even inflation, which ran high, appears to have been driven by supply chain issues, as the administration said, and by “greedflation,” in which corporations raised prices far beyond cost increases, padding payouts for their shareholders.
The demonstration that the Democrats’ policies work has put Republicans in an awkward spot. Projects funded by the Infrastructure Investment and Jobs Act, also known as the Bipartisan Infrastructure Law, are so popular that Republicans are claiming credit for new projects or, as Representative Maria Elvira Salazar (R-FL) did on Sunday, claiming they don’t remember how they voted on the infrastructure measure and other popular bills like the CHIPS and Science Act (she voted no). When the infrastructure measure passed in 2021, just 13 House Republicans supported it.
Today, Medicare sent its initial offers to the drug companies that manufacture the first ten drugs for which the government will negotiate prices under the Inflation Reduction Act, another hugely popular measure that passed without Republican votes. The Republicans have called for repealing this act, but their stance against what they have insisted is “socialized medicine” is showing signs of softening. In Politico yesterday, Megan Messerly noted that in three Republican-dominated states—Alabama, Georgia, and Mississippi—House speakers are saying they are now open to the idea of expanding healthcare through Medicaid expansion.
In another sign that some Republicans recognize that the Democrats’ economic policies are popular, the House last night passed bipartisan tax legislation that expanded the Child Tax Credit, which had expired last year after Senate Republicans refused to extend it. Democrats still provided most of the yea votes—188 to 169—and Republicans most of the nays—47 to 23—but, together with a tax cut for businesses in the bill, the measure was a rare bipartisan victory. If it passes the Senate, it is expected to lift at least half a million children out of poverty and help about 5 million more.
But Republicans have a personnel problem as well as a policy problem. Since the 1980s, party leaders have maintained that the federal government needs to be slashed, and their determination to just say no has elevated lawmakers whose skill set features obstruction rather than the negotiation required to pass bills. Their goal is to stay in power to stop legislation from passing.
Yesterday, for example, Senator Chuck Grassley (R-IA), who sits on the Senate Finance Committee and used to chair it, told a reporter not to have too much faith that the child tax credit measure would pass the Senate, where Republicans can kill it with the filibuster. “Passing a tax bill that makes the president look good…means he could be reelected, and then we won’t extend the 2017 tax cuts,” Grassley said.
At the same time, the rise of right-wing media, which rewards extremism, has upended the relationship between lawmakers and voters. In CNN yesterday, Oliver Darcy explained that “the incentive structure in conservative politics has gone awry. The irresponsible and dishonest stars of the right-wing media kingdom are motivated by vastly different goals than those who are actually trying to advance conservative causes, get Republicans elected, and then ultimately govern in office.”
Right-wing influencers want views and shares, which translate to more money and power, Darcy wrote. So they spread “increasingly outlandish, attention-grabbing junk,” and more established outlets tag along out of fear they will lose their audience. But those influencers and media hosts don’t have to govern, and the anger they generate in the base makes it hard for anyone else to, either.
This dynamic has shown up dramatically in the House Republicans’ refusal to consider a proposed border measure on which a bipartisan group of senators had worked for four months because Trump and his extremist base turned against the idea—one that Republicans initially demanded.
Since they took control of the House in 2023, House Republicans have been able to conduct almost no business as the extremists are essentially refusing to govern unless all their demands are met. Rather than lawmaking, they are passing extremist bills to signal to their base, holding hearings to push their talking points, and trying to find excuses to impeach the president and Secretary of Homeland Security Alejandro Mayorkas.
Yesterday the editorial board of the Wall Street Journal, which is firmly on the right, warned House Republicans that “Impeaching Mayorkas Achieves Nothing” other than “political symbolism,” and urged them to work to get a border bill passed. “Grandstanding is easier than governing, and Republicans have to decide whether to accomplish anything other than impeaching Democrats,” it said.
Today in the Washington Post, Jennifer Rubin called the Republicans’ behavior “nihilism and performative politics.”
On CNN this morning, Representative Dan Goldman (D-NY) identified the increasing isolation of the MAGA Republicans from a democratic government. “Here we are both on immigration and now on this tax bill where President Biden and a bipartisan group of Congress are trying to actually solve problems for the American people,” Goldman said, “and Chuck Grassley, Donald Trump, Mike Johnson—they are trying to kill solutions just for political gain."
Notes:
https://www.axios.com/2024/01/31/us-economy-2024-gdp-g7-nations
https://www.cnn.com/2022/09/09/politics/biden-republicans-infrastructure-law/index.html
https://www.washingtonpost.com/opinions/2024/02/01/gop-blunders-nihilism/
https://www.washingtonpost.com/us-policy/2021/11/05/house-infrastructure-reconciliation-vote/
https://www.nytimes.com/2023/06/15/us/child-tax-credits-pandemic-colorado.html
https://www.cnn.com/2024/01/31/politics/house-vote-tax-bill-child-tax-credit/index.html
https://www.politico.com/news/2024/01/31/southern-republicans-obamacare-00138109
https://www.cnn.com/2024/01/31/media/taylor-swift-travis-kelce-right-wing-media/index.html
https://www.cbsnews.com/news/child-tax-credit-bill-senate-vote/
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“Greedflation” is the most under-reported economic news in years. This is largely because it’s hard to quantify. But it’s an indictment of unfettered capitalism and legions of CEOs.
It’s great that the Biden administration has accomplished so much economically for the country. But the sad reality is that so many basic needs remain obscenely expensive, causing widespread hardship.
It is so important to keep calling these MAGA R’s out on a daily basis. The ancient Grassley…I wonder if he really knew that he was thinking out loud. The border issue was so close to being a done deal until their lord and savior piped in. I view Mike Johnson as a loyal puppy to Leonard Leo and to Trump/Putin. So irritating!
Hoping Jack Smith goes to the 11th Circuit and asks that Cannon be removed so that his trial can proceed before November. We need a nice Blue clean sweep.