The Center Moves Left

After the election, there will no doubt be a feisty debate about whether or to what extent the new president needs to “govern from the center.” And of course you sort of do need to govern from the center. But it’s noteworthy that “the center” is in a very different place than it was in 1993. Lawrence Summers, for example, writes:

The crisis has also reminded us of the lessons of the technology bubble, Japan’s experience in the 1990s and of the US Great Depression – that finance-led growth is problematic. The wealth and income gains from the easy availability of credit were highly concentrated in the hands of a fortunate few. The benefits also proved temporary. In retrospect, the fact that 40 per cent of American corporate profits in 2006 went to the financial sector, and the closely related outcome – a doubling of the share of income going to the top 1 per cent of the population – should have been signs something was amiss.

Therefore we need to reform tax incentives that encourage financial risk taking, regulate leverage and prevent government policies that give rise to a toxic combination of privatised gains and socialised losses. This offers the prospect of a prosperity that is more firmly grounded and more inclusive. More fundamentally, short and longer-term imperatives come together with respect to policies that seek to ensure that any future prosperity is inclusive. The policies that are most effective in helping to support demand are those that help households struggling either because of low incomes or because they have recently lost part of their income. Recent events also remind us that individuals can become impoverished or lose health insurance through no fault of their own. This reinforces the need for people to have basic health and retirement security protection regardless of what happens to their employers.

There’s been some talk that Summers, who was only Treasury Secretary fairly briefly at the end of the Clinton administration, might be brought back for a second tour of duty. That would certainly be a centrist choice that many populists and liberals would deem disappointing. But he’s writing about the need for the government to provide a universal guarantee of health and retirement security, to build inclusive prosperity and to fight inequality. Eight years ago, you’d say that’s what populist critics of late-Clintonian centrism were saying. But of course that was before Republicans started nationalizing banks and insurance firms.