Poliseanism: The unsound economic theory of Congressman Jared Polis
Well, November has come and gone and, as expected in a liberal place like Boulder, Colorado, the Democratic candidate for congress has won. Unfortunately, however, the victor is one Jared Polis, an individual apparently in perfect harmony with the economic ideology of Eisenhower Republicanism.
Before continuing, let’s briefly examine a few empirical facts concerning Polis’s constituents. It’s quite dire, indeed. The inflation adjusted median wage today is actually lower than it was 40 years ago and, as a percentage of per capita GDP, has dropped an incredible 40%! The entire system is operating in service of but a tiny fraction of the population as illustrated by inequality levels worse than any time since the 1920’s. That’s not all. A few decades ago, a sizable fraction of the workforce had pensions, could support a family on one income, worked shorter hours, had full time rather than temporary jobs, and even had some support from the political system – no longer. It’s as if a Hurricane Sandy has hovered over the United States for decades and utterly decimated the American worker.
So what exactly does our congressman propose to do about this? We find a list of economic ideas on his website from which I think we can reasonably identify a general economic theory. Let’s examine, then, the economic theory of Jared Polis, call it Poliseanism, and see if it stands a chance of helping his hard pressed constituents. The bedrock core appears to be summarized in this key paragraph:
A sustainable and successful economic recovery rests on supporting new and small businesses, reforming our bloated tax code, expanding markets for U.S. goods and services, providing every American with a high quality education, and restoring fiscal discipline to the federal budget. Only by taking these steps can we create jobs and continue as the most dynamic economic (sic) in the world.
This is a fairly concise statement and, through it, I think we can reasonably categorize Poliseanism as a traditional right wing supply side theory. It advances the claim that general welfare is maximized through strong support for business (albeit small), low taxes, aggressive expansion of exports, educating workers to meet the demands of business, and a minimal role for fiscal policy enforced by a balanced budget and low taxes. We should note that it’s the exact opposite of a rival theory developed by a British economist, John Maynard Keynes, who identified the essential problem within capitalism as a lack of demand. The demand problem, according to him, is attributable to a chronic systemic lack of sufficient private investment that, except in temporary booms, fails to sustain full employment. His solution was to vastly increase public spending and also to redistribute income from higher incomes to those with a greater “propensity to consume”. Let’s examine Polis’s non-Keynesian economic theory a bit closer.
Supporting small business
There’s a near religious level of support for small business in the US and it undoubtedly harks back to our mythological past before the rise of the great corporations at the end of the 19th century. I support small business myself whenever I can. But it’s beyond absurd to think small business can be the root of widespread prosperity. The major corporations overwhelmingly control all major industries and, within the logic of capitalism, it’s inevitable that they do so. They have access to cheaper capital, take advantage of huge economies of scale, easily sell in global markets, can buy out threatening competitors, and so on and so on. Small businesses may account for a greater share of employment but that’s likely due to the fact larger corporations are so highly productive. Small businesses are unstable, offer lower wages and benefits, and are at far higher risk of going out of business. Their success is always improbable except in the niches ignored by the major players. While it’s fine, even good, to support small business, it clearly can’t be the fundamental basis of a sound economic theory if the goal is achieving widespread prosperity. In this respect, Polisean theory is completely unsound.
Taxes and fiscal policy
Polis’s theory of taxation is tightly linked with his unsound theory of the role of small business. He tells us that:
The success of businesses and workers depends on fundamentally reforming the tax code—which currently undermines competitiveness and hurts job creation—by limiting deduction and eliminating special interest loopholes so we can reduce tax rates. We need a simple and fair tax code that will ensure predictability for businesses, individuals and our federal budget. Our tax system should encourage investments in innovation and support start-ups and small business investment.
Tax rates, of course, haven’t been lower since the Great Depression yet Polis is telling us they need to be reduced even further in order to incent innovation and small business? This is utter nonsense. As is obvious to any small businessman and as noted by Keynes, Kalecki, and a host of other observers, the fundamental problem is demand. Polis’s theory of taxation, like his theory of small business, is unsound.
The role of fiscal policy within Polisean economics is extremely limited and centers around an austere agenda of balanced budgets, reduced retirement security, lower spending, and unspecified new revenues.
Reducing the deficit requires a balanced, bipartisan approach that includes reductions in spending, reforms of entitlements, and new revenues. We also need a constitutional amendment similar to Colorado’s that will restrain Congress from busting the budget.
This is the same austere agenda of depression we see playing out everywhere in Europe today. Polis completely ignores the plain and simple fact that the US has a fiat currency and can create dollars at will to assure full employment. He tells us we must banish the most powerful weapon we have for prosperity and instead put all our faith in the small, desperate, and under-capitalized small businessman. This is lunacy on the grandest of scales.
Trade and exports
I suppose the final rotten leg of Polisean economics is globalization and the standard mercantilist goal of ever expanding exports.
America’s economy grows and creates jobs when Americans can sell their products and services in markets around the globe. Our trade policy must press for open markets across the world, the elimination of tariffs that drive up prices for American families, and agreements that include enforceable workers’ rights and environmental protections.
Of course the problem with export promotion is that every other country is doing the same and exports are offset by imports. Open global markets are good for exporting corporations to the extent they aren’t offset by competing imports (and it’s always a zero sum globally), but we must take into account the hugely negative role played by globalization in depressing worker living standards as each nation competes in a desperate downward spiral to lower wages and benefits. Even if viewed in its most positive light, global trade is clearly not a solution to the dire economic problems faced by workers everywhere on this planet.
That does it for our analysis of Polisean economics, we need go no further. I think it’s clear that Polis is offering us a gigantic serving of pure unadulterated quackery. Should Mr. Polis read this post, I’d strongly recommend he educate himself on political economy, starting with, to name just a few worthy sources, Keynes’s “General Theory of Employment, Interest, and Money” (it’s quite readable), Abba Lerner’s Functional Finance (only 14 pages), the insights of the economists working under the label of Modern Monetary Theory, and the works of Michal Kalecki (I think the greatest economic theorist of the 20th century).
Mr. Polis has a serious moral responsibility to truly fight in congress for the fundamental interests of his constituents. He simply can’t succeed in this task if he continues to base his economic proposals on unsound, regressive theories.