Middle Out v. Top Down: Bidenomics v. Reaganomics—a Paradigm Shift in the making
This article critiques the longstanding economic formula advocated by U.S. Representative Cathy McMorris Rodgers and many Republicans, emphasizing tax cuts for the wealthy and reduced regulations as a means to spur economic growth. Tracing the roots of this approach to Reaganomics, the essay highlights its adverse effects on wealth inequality, middle-class erosion, and rising homelessness over the past four decades. The piece introduces the concept of "Middle-out Economics," championed by President Biden, as an alternative paradigm that prioritizes empowering the middle class to drive economic growth. The essay concludes with a call to reconsider economic narratives and choose between the "bottom-up and middle-out" approach or a potential return to the "top-down" model associated with oligarchic authoritarianism.
Written by JERRY LECLAIRE • JAN 10, 2024 • Indivisible—The High Ground
You’ve heard it endlessly from U.S. Representative Cathy McMorris Rodgers (R-CD5-eastern Washington): the formula for economic growth is 1) cut taxes (especially for corporations and the already wealthy) and 2) reduce regulation. According to her (and most other Republicans in the last forty years) this will “unleash the power of the free market”. The underlying theory is this: if you provide businessmen with more capital, they will use that money to produce more goods and services. Then, by the magic of supply and demand, prices will fall due to the greater supply—and the economy will rev up. Providing corporations and the wealthy with more money while reducing regulation was consistently marketed to the average voter as “reducing your tax burden” and increasing your “freedom”. (Remember McMorris Rodger’s endless parroting about “money in your pocket” as she promoted the “Tax Cuts and Jobs Act of 2017”?)
The modern version of this top down formulation of how the economy best works gained ascendance with the election of Ronald Reagan in 1980. Technically (and confusingly) Reagan’s economic formulation is a mix of “neoliberal” economic policies that harken back to the unfettered free market capitalism of the late nineteenth and early twentieth centuries (the “Gilded Age” and the “Roaring Twenties”). Thanks to Paul Harvey, this Reagan’s neoliberal formulation was dubbed “Reaganomics”. According to Wikipedia, “These policies are characterized as supply-side economics, trickle-down economics, or "voodoo economics” by opponents, while Reagan and his advocates preferred to call it free-market economics.” (None of this is new. Older versions of top-down economics were labelled “horse and sparrow economics” by detractors, alluding to the working class feeding off the oats that passed through the horse fed by the plutocrats, the horse and buggy version of “trickle-down”.) Note that the Clinton administration with its banking deregulation at least partly bought into neoliberal economic orthodoxy.
Forty years of neoliberal supply side economics has resulted in pronounced wealth inequality, hollowing out of the middle class (defined as doing better than living paycheck to paycheck), decreased class mobility, and increasing homelessness. All of that produces a sense that the system is rigged, a sense that fuels the rise of an autocrat like Trump (“I alone can fix it.”) or, better, catalyzes a shift in economic paradigm.
We are at a turning point
You’ve all heard President Biden declare that his administration will build the economy “from the bottom up and the middle out”. The term Middle-out Economicscomes by Eric Liu and Nick Hanauer in their book Gardens of Democracy published in 2011. Middle-out Economics is meant to contrast to the Top-Down paradigm that has dominated Republican (and some Democratic) administrations for the last forty years. It is the economic model that underlies every bit of parroted rhetoric about deregulation and cutting taxes that comes from the mouths of people like Rep. McMorris Rodgers. Middle-out Economics, in contrast to Top-Down would once again empower the middle class as the primary driver of the American economy. It is time to change the narrative—a paradigm shift.
Simplistically put, when people possess economic clout beyond the necessities of food and shelter, they use it to pursue (“demand”) goods and services. Business responds to the opportunity to make money by satisfying the demand. In contrast, when corporations and the wealthy have more money they tend to invest in stock buy-backs and stocks that ultimately contribute to the widening wealth gap.
Nick Hanauer, one of the authors of Gardens of Democracy, went on to found Seattle-based Civic Ventures and the associated Podcast series “Pitchfork Economics”. I encourage you to click and spend twenty minutes listening to Hanauer’s January 2, 2024, podcast entitled “Seizing the Middle Out Moment”. Here’s the pitch for the Podcast Series:
Any society that allows itself to become radically unequal eventually collapses into an uprising or a police state—or both.
Join venture capitalist Nick Hanauer and some of the world’s leading economic and political thinkers in an exploration of who gets what and why. Turns out, everything you learned about economics is wrong. And if we don’t do something about rising inequality, the pitchforks are coming.
President Biden’s “growing the economy from the bottom up and the middle out” is a big deal. The Reaganomic, neoliberal polices that are articles of faith with Republicans like McMorris Rodgers have had a forty year test run. They’ve run their course. The financial deregulation piece of Reaganomics brought us the Dot-com bubble and the Great Recession of 2008 as money at the top sought mechanisms of expansion. The Biden administration’s policies, dubbed “Bidenomics”, include a return to public infrastructure investment, a strengthening of union bargaining, advocacy for a rise in the minimum wage, encouragement of industry on our own soil, efforts to rein in monopolistic tendencies, and support for the IRS to collect taxes due. Early successes include job growth, curbing of inflation, and avoidance of a predicted recession.
This year we choose between “bottom-up and middle out” or a return to “top-down” served up with a dose of oligarchic authoritarianism. Choose wisely.
We need to get this right.
Keep to the high ground,
Jerry
