Progressive Democrats and populists are political siblings. Both political movements want to undermine the foundations of our great country. Both express dissatisfaction with free market capitalism, even though the founding document and capitalism have delivered unprecedented growth, prosperity, and general well-being to the United States and the world.
Consider some examples.
Progressive Democrats and populists want to manage the economy through industrial policy, be that Bidenomics or Trumpism. They believe they have economic wisdom superior to Adam Smith’s invisible hand. Progressive Democrats and populists want to emasculate one of the core tenets of the Constitution, free speech, including free expression. Most importantly, both right-wing populists and left-wing progressives promote statism against the basic purpose of the Constitution and the nation: liberty.
Just over 40 years ago, Ronald Reagan became president. It was a period of hard times. Marginal tax rates, unemployment, and interest rates were elevated, and the nation’s spirit was low. Reagan responded with reduced government regulation, lower taxes, and a recommitment to free market capitalism. It worked. The U.S. economy has been growing faster than the economies of Europe and Japan for almost two decades. The U.S. economy has largely maintained its share of global GDP in spite of the very rapid growth rates of emerging economies.
Both progressive Democrats and populists are trying to fix something that is not broken.
Progressive Democrats embrace modern monetary theory. They like to print money. Yes, unemployment is low, inflation is falling, and the economy is growing at a reasonable pace. However, interest rates are very high, and the net deficit to GDP ratio is right around 100%. The bill is coming due for excessive spending. Interest payments on the federal debt are crowding out private investment, which drives productivity growth. Supposedly, right-wing populists also embrace modern monetary theory. They support increasing the welfare state and lowering taxes at a time of unprecedented federal deficits.
Progressive Democrats, through regulatory overreach, are also attempting to destroy the U.S.’s comparative advantage in carbon-based fuels. And they’re strangling the banking industry, which is opening the door to non-bank lending, increasing risk in the market. Through regulatory overreach, the Biden administration is trying to compel people to drive electric vehicles.
Most disturbingly, the Biden administration is now trying to regulate artificial intelligence, which is increasingly the high ground for economic prosperity and national security. China is pushing forward on AI regulation. Regulating AI helps China, a deadly adversary. But right-wing populists are no different. They, too, want to regulate AI. They ignore the threat posed by China. Beijing is on the verge of announcing the implementation of 5-nanometer semiconductor fabrication technology. Regulating AI would enable China to catch up, or perhaps surpass, the U.S.
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Economic history teaches that free trade, in which each nation produces according to its comparative advantage, increases both national and global wealth. Free trade works. Protectionism through tariffs or quotas does not. The policies of the Biden administration and the proposed policies of populists on trade are sowing the seeds for a global trade war. Protectionism in the early 1930s exacerbated the Great Depression. Tariffs, save for trade barriers against enemies such as China, are folly.
The country needs to pivot back to the policies of Reagan: low taxes, small government, free market capitalism and the full embrace of liberty.
James Rogan is a former U.S. foreign service officer who later worked in finance and law for 30 years. He writes a daily note.
