Democratic Economic Policies Overview

Democratic Economic Policies Pros and Cons

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Democrats have historically promoted economic policies that benefit low-income and middle-income families. They believe that reducing income inequality is the best way to foster economic growth because low-income families spend any extra money they have on food, medicine, and shelter. This increases more demand than policies that benefit businesses. 

Democrats define the American Dream as the right to education, a good job, decent housing, and health care. President Roosevelt first outlined the Economic Bill of Rights in his 1944 State of the Union address. President Truman's Fair Deal proposed specific legislation to support this expanded vision of the Dream. In 2010, the Democrats expanded the Dream to include health care with the Affordable Care Act.

But there are pros and cons to all legislation, and no policy pleases everyone.

Pros

  • The 2010 Patient Protection & Affordable Care Act (ACA) provided health insurance companies with revenue to cover those with pre-existing conditions by imposing a tax penalty on Americans who did not carry insurance. 

  • The Omnibus Budget Reconciliation Act of 1993 increased the top corporate income tax from 34 percent to 36 percent as a measure to offset deficit spending. 

  • Democrats place a priority on spending more on social programs and welfare.

  • Democrats want to make sure that trade agreements with other countries protect American workers and they traditionally support fair trade more than protectionism. 

Cons

  • The “Obamacare penalty” provided for under the ACA took away Americans’ freedom to decide whether they want to use their income to pay for insurance and has come under fire for being unconstitutional.

  • Imposing increased taxes for businesses can prompt less hiring and, correspondingly, higher unemployment. 

  • Social welfare has been criticized for increasing dependency among low-income families.

  • Free trade initiatives have prompted American businesses to outsource work to foreign companies. 

Education

Democrats believe that every child should have the opportunity for high-quality education. That's the pathway to economic growth for the individual and the country.

  • President Roosevelt guaranteed the government would pay for education for all veterans when he signed the G.I. Bill of Rights.
  • The Truman Commission Report proposed federal subsidies for higher education that laid the groundwork for the community college system. 
  • President Johnson signed the Elementary and Secondary Education Act to provide federal funds to schools in low-income areas.
  • A little-known provision of the Affordable Care Act eliminated Sallie Mae, making student loans more affordable. 

These initiatives promoted equity in education and focused resources on those at the lowest income levels. It helped to make sure everyone has at least the basic skills to succeed in the labor force.

Health Care

Democrats believe the government should make health care affordable.

  • President Clinton supported the Health Security Act of 1993. "Hillarycare" was a managed competition strategy. The federal government would control doctor bills and insurance premiums. Health insurance companies would compete within this framework. First Lady Hillary Clinton failed to get her initiative passed by Congress.
  • But the Clintons achieved two other health care reform measures. The Health Insurance Portability and Accountability Act of 1996 allows employees to keep their company-sponsored health insurance plan for 18 months after they've lost their jobs.
  • The Children's Health Insurance Program provides subsidized health insurance for children in families that earn too much to qualify for Medicaid. 
  • President Barack Obama’s 2010 Patient Protection & Affordable Care Act sought to lower the cost of health care. It requires everyone to have insurance or pay a penalty. This provides health insurance companies with revenue to cover those with pre-existing conditions. Preventive care reduces expensive emergency room visits.

Taxes

Democrats believe in progressive taxation. This means higher taxes on investments, large businesses, and high-income families. They prefer higher taxes on capital gains and dividends to balance the budget.

  • President Clinton raised taxes with the Omnibus Budget Reconciliation Act of 1993. It raised the top income tax rate from 28% to 36%. It increased the top corporate income tax from 34% to 36%. It taxed Social Security benefits for high-income earners and raised the gas tax by $.043 per gallon. To ease income inequality, it created the earned income tax credit for incomes under $30,000.
  • Obamacare raised taxes on high incomes and investments. Obama also signed an $858 billion tax cut that extended the Bush tax cuts and unemployment benefits through 2011. It cut payroll taxes by 2% and extended a college tuition tax credit. It also included $55 billion in industry-specific tax cuts. But it revived the inheritance tax that had lapsed for a year. 

    Regulations

    Democrats advocate regulations to protect consumers. It's why they're perceived as less business-friendly than Republicans.

    Social Welfare

    Democrats spend more on social programs and welfare.

    • FDR created the Social Security Trust Fund and Administration. This provided income to the elderly, the blind, the disabled, and children in low-income families. 
    • Lyndon B. Johnson created Medicare, Medicaid, and urban renewal initiatives. He championed civil rights and the War on Poverty. LBJ’s Great Society created the National Endowment for the Arts, Public Broadcasting Services, and drivers’ education. It also developed new programs to address crime as well as conservation.
    • Democrats also spend on public infrastructure. During the Great Depression, FDR rallied Americans to support massive government spending. In his first 100 days in office, he increased the debt by $4 billion to create 16 new agencies and laws.
    • A big piece was the Works Progress Administration. It employed 8.5 million people to build bridges, roads, public buildings, parks, and airports. It paid artists to create 2,566 murals and 17,744 pieces of sculpture to decorate the public works. The Public Works Administration built San Francisco's Golden Gate Bridge and New York City's Triborough Bridge.
    • The Civil Works Administration created 4 million construction jobs. The Tennessee Valley Authority Act built power stations in the poorest area in the nation.
    • Democrats support conservation and efforts to stop global warming. FDR created the Civilian Conservation Corps to plant forests, build flood barriers, and maintain roads. The Soil Conservation & Domestic Allotment Act counteracted the Dust Bowl. It paid farmers to plant soil-building crops.
    • Democrats advocate equality. Truman supported the 19th Amendment that gave women the right to vote. He supported the Fair Deal that raised the minimum wage and prohibited hiring discrimination. 

    National Security

    Three Democratic presidents have received Nobel Peace Prizes, but Democratic presidents also fought and won two world wars.

    • President Wilson entered World War I and received a Nobel Peace Prize for brokering the Treaty of Versailles.
    • President Roosevelt began gearing up for World War II even before Pearl Harbor.
    • President Truman ended the war by dropping two nuclear bombs on Japan. The Truman Doctrine pledged the United States to assist any democracy attacked by authoritarian forces. The Doctrine shifted U.S. foreign policy from isolationist to a global policeman. Truman took an active role in the Korean War.
    • President Kennedy supported the Bay of Pigs invasion. He blockaded Cuba to end the Missile Crisis. He also supported the military coup in Vietnam.
    • President Johnson expanded the Vietnam War. He was defeated within his party by pacifist Eugene McCarthy.
    • President Jimmy Carter received the Nobel Peace Prize for his work on the 1978 Camp David Accord. He also negotiated the Strategic Arms Limitation Talks II, also called the SALT II nuclear limitation treaty, with the U.S.S.R. He was seen as weak on defense because he took too long to resolve the Iran hostage crisis.
    • President Obama received the Nobel Peace Prize for his efforts to end the Iraq War. At the same time, his military spending totaled between $700 billion and $800 billion a year.

      National Debt

      Democrats offset deficit spending with tax increases.

      President Obama contributed $8.5 trillion to the national debt, the largest dollar amount. He couldn't raise taxes because of the Great Recession.

      FDR increased the debt by 1,048%, the most percentage-wise. He had to fight the Great Depression and World War II. He introduced Keynesian economic theory, which says that the government should spend its way out of a recession.

      President Wilson was the second-largest contributor to the debt percentage-wise. His large deficit resulted from World War I

      President Bill Clinton signed the Omnibus Budget Reconciliation Act of 1993. It created a $63 billion budget surplus by raising taxes on the wealthy. He had no recessions or wars during his presidency.

      Trade

      Democrats want to make sure trade agreements protect American workers. They traditionally support fair trade more than protectionism. But outsourcing has made them shift against many trade agreements in recent years.

      Climate Change and the Environment

      All Democratic Senators running for president in 2020 score high on the environment. The League of Conservation Voters gave them a perfect score on their voting record on pro-environment issues.

      • In 2007, House Democrats formed the Select Committee on Energy Independence and Global Warming.
      • In 2009, Democrats proposed a cap-and-trade policy. The Waxman-Markey bill was defeated in the Republican-controlled Senate.
      • Also in 2009, the American Clean Energy and Security Act was approved by the House of Representatives. But the bill never passed the Senate.
      • In 2011, the Environmental Protection Agency used its powers under the Clean Air Act to limit carbon as a pollutant.
      • In December 2018, a Green New Deal was launched by Congressional Democrats. The proposal calls for a new House select committee to draft a bill that executes the Green New Deal goals.

        Do Democratic Policies Work?

        Bill Clinton's economic policies fostered a decade of prosperity. He created more jobs than any other president. Home ownership was 67.7%, the highest rate ever recorded. The poverty rate dropped to 11.8%.

        President Roosevelt's policies ended the Great Depression by spending on job creation programs. He created Social Security, the U.S. minimum wage, and child labor laws. The Federal Deposit Insurance Corporation prevents bank runs by insuring deposits. 

        President Obama's policies ended the Great Recession with the Economic Stimulus Act. It spent $224 billion in extended unemployment benefits, education, and health care. It created jobs by allocating $275 billion in federal contracts, grants, and loans. It cut taxes by $288 billion. Obamacare slowed the growth of health care costs