Democratic Views on the Economy

Democratic Economic Views and How They Work in the Real World

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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 or wealthy families that are more likely to invest extra income. 

Democrats define the American Dream as the right to education, a good job, decent housing, and health care. President Franklin D. Roosevelt (FDR) first outlined the Economic Bill of Rights in his 1944 State of the Union address. President Harry 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 (ACA).

Here is a shortlist of the pros and cons of some Democratic economic policies.

Pros
  • The ACA provided health insurance companies with revenue to cover those with pre-existing conditions by imposing a tax on those without insurance

  • The Omnibus Budget Reconciliation Act of 1993 increased the top corporate income tax from 34% to 36% to offset deficit spending

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

  • Democrats want trade agreements to protect American workers. They don't support protectionism. 

Cons
  • The ACA tax took away Americans’ freedom to choose health insurance

  • Increasing business taxes can reduce hiring and increase unemployment 

  • Social welfare has been criticized for increasing dependency on the government 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.

  • FDR 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 Lyndon B. Johnson (LBJ) signed the Elementary and Secondary Education Act (ESEA) to provide federal funds to schools in low-income areas
  • The ACA allowed the Department of Education to make loans directly, eliminating the middle-man 

These initiatives focused resources on those at the lowest income levels. They 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 Bill 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 in this framework. First Lady Hillary Clinton failed to get her initiative passed by Congress.

Clinton was successful with 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 ACA sought to lower the cost of health care. It required everyone to have insurance or pay a penalty. This provided 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. This includes taxes on capital gains and dividends.

  • 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. It also 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. 
  • LBJ 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 15 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. Wilson supported the 19th Amendment that gave women the right to vote. Truman's Fair Deal raised the minimum wage and prohibited hiring discrimination. 

National Security

Three Democratic presidents and one vice president have received Nobel Peace Prizes. Democratic presidents also fought and won two world wars.

  • Wilson entered World War I and received a Nobel Peace Prize for brokering the Treaty of Versailles.
  • FDR began gearing up for World War II even before Pearl Harbor.
  • Truman ended World War II in the Pacific 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 John F. Kennedy supported the Bay of Pigs invasion. He blockaded Cuba to end the Missile Crisis. He also supported the military coup in Vietnam.
  • LBJ expanded the Vietnam War. He was defeated within his party by pacifist Eugene McCarthy in the 1968 presidential campaign.
  • 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.
  • 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.

Obama contributed almost $8.6 trillion to the national debt, the largest dollar amount. He couldn't raise taxes because of the 2008 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 the Keynesian economic theory, which says that the government should spend its way out of a recession.

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

Clinton's Omnibus Budget Reconciliation Act created a $63 billion budget surplus by raising taxes on the wealthy. Clinton 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.

  • Wilson signed the Underwood-Simmons Act in 1913. It reduced tariffs on manufactured goods and raw materials.
  • In 1993, Clinton signed the North American Free Trade Agreement into law. It's the world's largest trade agreement.
  • Obama signed four bilateral agreements during his administration: Colombia, Korea, Panama, and Peru.

Climate Change and the Environment

Democrats are committed to curbing the effects of climate change, protecting America’s natural resources, and ensuring air, water, and land quality.

  • In 1997, Vice President Al Gore proposed solutions to climate change in the Kyoto Protocol international agreement. He received the Nobel Peace Prize for his lifetime work fighting climate change.
  • 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, the Green New Deal was launched by Congressional Democrats. It would cut U.S. greenhouse gas emissions in half by 2030.

Do Democratic Policies Work?

Clinton's policies fostered a decade of prosperity. He created more jobs than any other president. Homeownership was 67.7%, a record surpassed only by the 2005 housing bubble. The poverty rate dropped to 11.3%.

FDR'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 (FDIC) prevents bank runs by insuring deposits. 

Obama's policies ended the 2008 recession with the American Recovery and Reinvestment 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

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