Deal Breakers

Deal Breakers

Two new books seek to galvanize progressives at a key political moment: Paul Krugman’s The Conscience of a Liberal and Jonathan Chait’s The Big Con.


In the spring of 1960, several months before the presidential election of that year, a small, slim volume by the junior senator from Arizona, Barry Goldwater, hit the bookstores. The brief manifesto, appropriately titled The Conscience of a Conservative, tried to reclaim the idea of conservatism from the disrepute into which it had fallen ever since the victories of the New Deal. Conservatism was not, Goldwater insisted, a “narrow, mechanistic economic theory.” Its adherents were not greedy businessmen, eager to protect their own privileges. Rather, conservatism was a political philosophy determined to stave off the intrusions of the state and expand the boundaries of freedom. Far from being preoccupied with wealth, conservatism, wrote Goldwater, “puts material things in their proper place.”

Many ironies surrounded the publication of The Conscience of a Conservative. Despite Goldwater’s claim that conservatism had nothing to do with wealth or privilege, the book’s publication had been financed by a small group of intensely antiunion businessmen who hoped to publicize their political views and encourage Goldwater to seek the presidency. They even connected him with National Review editor L. Brent Bozell (brother-in-law of the magazine’s editor in chief, William F. Buckley Jr.), who ghost-wrote the book. In the end, Conscience became a surprising success, hitting the bestseller lists two months after publication and helping conservatism shed its image as the stingy, small-minded politics of businessmen opposed to labor unions and the welfare state. Rarely has a book played as critical a role in building a movement.

Two new books seek to have the galvanizing impact on liberals and progressives that Goldwater’s did on conservatives in 1960. The Conscience of a Liberal, by Princeton economist and New York Times op-ed columnist Paul Krugman, puts forward a vision of liberalism as a populist politics of opposition to economic inequality, not the foppish, sentimental cultural elitism mocked by the right. The Big Con, by New Republic senior editor Jonathan Chait, seeks to demonstrate that for all its posturing, conservatism really is the politics of business and wealth, and that its truest believers are more obsessed with tax cuts than abortion or gay marriage. Most Americans, Krugman and Chait say, don’t really support the conservative economic agenda; they would like the government to do more, not less. Nor are they duped into voting for that agenda by their fanatical hatred of feminism and gay rights (although Krugman, especially, does emphasize the role of racism in winning popular support for an elitist economic agenda). Rather, the real reason for the strength of the right in American politics is its connection to a small group of businessmen, and their intellectual allies, who want to undo the New Deal and restore the laissez-faire, nonunion economy of the late nineteenth century. These “economic royalists” have captured the Grand Old Party and driven out the moderate Republicans of yesteryear. Unlike Thomas Frank, Krugman and Chait don’t think that the crucial problems of contemporary politics can be traced to culture wars in Kansas. They focus instead on the conservative business lobby and its enablers in Washington.

Krugman and Chait offer passionate and persuasive critiques of the ways economic inequality corrodes American politics and life. They are willing to take on the conservative movement with a ferocity that most mainstream liberals shied away from only a couple of years ago. And because their interpretation of the rise of the conservative movement shifts attention away from cultural conflict to struggles over economic power, their books offer a welcome change from the portrayal of America as divided between the traditionalism of the heartland and the soulless tolerance of the coasts.

But at the same time, the books seem written for a political constituency that does not yet exist. They seek to reinvigorate the liberalism of the mid-twentieth century, yet they do not fully appreciate the exceptional circumstances that brought it about. Although their books are trenchant and incisive, their anger seems born more of desperation than of strength. After all, they are trying to defend the remnants of liberalism, an old political order, more than seeking to create a new one. Their books seem radical only because the institutions and the ideas that made the New Deal and the liberal politics of the mid-twentieth century possible have been so significantly weakened. There is, of course, a certain rhetorical power in claiming the mantle of history. But what’s missing from their wish to revive the economic policies of the New Deal and the liberal consensus of the mid-twentieth century are the kind of calls for a true break from the past that sparked those policies to life.

Paul Krugman has a confession to make: he’s nostalgic for the 1950s. Yes, the 1950s–the decade of Joseph McCarthy, the cold war and the segregated South–and despite the Vietnam War, he misses the ’60s too. Back in the day, Krugman “railed against the very real injustices of our society” and even “marched against the bombing of Cambodia.” But the liberal order that he criticized then now looks like a “paradise lost.”

What does Krugman miss? Well, for one thing, in the ’50s the nation’s wealthiest people weren’t casually purchasing multimillion-dollar apartments in New York City and planning to spend millions more on renovations before they even moved in. They weren’t hosting birthday parties for their children at $120,000 a pop, hiring personal nutritionists to evaluate the menus of restaurants around town or filling their hours with many of the other gold-plated entertainments breathlessly catalogued in a recent issue of The New York Times Magazine about the new Gilded Age.

In the last Gilded Age, tycoons like Andrew Carnegie believed that the wealthy were the winners in a great cosmic race and that they, not the state, were best able to determine the right ways to spend their fortunes. The impotence of the business class during the economic free-fall of the 1930s destroyed this vision of the omnipotent rich. By the ’50s, top income tax rates were 91 percent, while estate taxes were near 80 percent. Krugman estimates that the result of these tax rates was that the income of the richest 1 percent of the country was 20 to 30 percent lower in the mid-’50s than it had been a generation before. Yet the “compression” of incomes did not destroy incentives or halt economic growth, as conservatives often warn. On the contrary, family incomes rose regularly throughout the period, climbing about 2.7 percent each year from 1947 to 1973, compared with an annual 0.7 percent increase in median family income since 1980. There was, of course, still much poverty in 1950s America, especially among black Southerners living under Jim Crow. But the gap between the rich and the poor was not widening rapidly the way it is today.

In recent years, of course, the situation has reversed itself. The wealthiest 0.1 percent of Americans were five times richer in 2005 than they were in 1973. Median household income over the same thirty-five-year period had grown 16 percent–mostly as a result of more women entering the labor force; male wages fell over the same period. The result is that the wealthiest people in our society live in a world markedly different–in its daily texture and its horizons of possibility–from the world inhabited by everyone else. Most economists explain this rising income inequality in terms of market forces: the rise of international trade, globalization and an influx of immigrants have all hurt the bargaining power of working-class people while enhancing returns to the educated and skilled.

But Krugman, while assessing the relative impact of immigration and trade on the wages of working-class people, bucks the norms of his profession and argues instead that the primary reasons for the decline of the more egalitarian society of mid-twentieth-century America are political. There was nothing inevitable about the rise of that “middle-class” suburban, mass-consumption economy in the postwar period; it was made possible only by high income taxes and strong labor unions. Today, we are returning to the economic institutions of the last Gilded Age. The tax system is now less progressive than it has been in decades, and the proportion of the private-sector labor force represented by unions has declined to its lowest level since before the New Deal. It should be no surprise, therefore, that our society is becoming as divided by class as it was then.

Krugman argues that the conservative movement is in large part responsible for this rise in economic inequality. The legislation that had seemed so radical in the 1930s–like Social Security and the National Labor Relations Act–had by the ’50s become “the very definition of political moderation,” accepted by Republicans and Democrats alike. The sole Republican President between 1932 and 1968 was Dwight Eisenhower, who expanded Social Security and the minimum wage and wrote to his conservative brother Edgar that anyone who wanted to cut back labor laws and unemployment insurance was “stupid” and politically suicidal. But a small number of conservative activists, backed by antiunion businesses, sought to undermine this consensus by supporting candidates and legislation that would dismantle the welfare state, labor unions and the New Deal. And that group was able to prevail, Krugman argues, because the power of the right is historically different from that of the left. Where the civil rights movement and the labor movement depended on the active participation of millions of people, the strength and longevity of the conservative movement have come from the small number of wealthy activists like Joseph Coors and Richard Mellon Scaife who have contributed to its support over the years. Its electoral victories have not reflected popular support for the laissez-faire program as much as the cynical willingness of Republican campaign operatives to win votes by exploiting racism–such as when Ronald Reagan attacked “welfare queens” in 1976 and gave a 1980 campaign speech about states’ rights near Philadelphia, Mississippi, where three young civil rights workers were murdered in 1964. “The legacy of slavery, America’s original sin, is the reason we’re the only advanced economy that doesn’t guarantee health care to our citizens,” Krugman writes.

The Conscience of a Liberal excels when Krugman is giving his trademark crisp, clear surveys of the economic literature. He isn’t really writing history, and as a result, his sketch of the evolution of the conservative movement sometimes seems offhand and overly schematic. But his argument that inequality has political causes nonetheless resonates throughout the book. We can, he insists, make collective choices about how unequal we want our society to be. He calls for the revival of an “unabashedly liberal program of expanding the social safety net and reducing inequality–a new New Deal.” Although he advocates universal healthcare (especially single-payer)–in part on the grounds that it would be far more effective than our current system of private insurance, in which Americans pay more than people in other developed countries for healthcare that is far worse–his underlying reasons for wanting to revive the New Deal go beyond the economist’s questions about growth or efficiency. Universal healthcare, labor unions and policies that reduce inequality all cut against the idea that some people deserve one way of living–elite universities, million-dollar cars, Hamptons mansions, medical concierges when traveling the world–and others the opposite: crumbling schools, decrepit subways, crowded apartments, no healthcare at all. Rather than generating baroque myths about the superhuman greatness of CEOs alongside morality tales about the character failings of the poor, minimum wages and progressive taxes create a society capable of honoring the truth that people really are created equal.

Krugman writes in the tone of a mild-mannered, reasonable professor, rarely getting flustered as he goes about calmly disarming his intellectual opposition. Jonathan Chait, by contrast, opens his book with an apology for sounding a bit like an “unhinged conspiracy theorist.” You can imagine him shaking his fist or slamming his computer keyboard as he denounces the “tiny coterie of right-wing economic extremists,” some of whom are “ideological zealots, others merely greedy, a few of them possibly insane.” But in truth, Chait explains, he isn’t a radical at all. He’s just a displaced moderate (he gets a little sentimental about the “modern Republicans” of the Eisenhower era) who has found the center pulled out from under him.

The Big Con is at its best whenever Chait skewers the conservative intellectuals who popularized supply-side economics, which he sees as the obsession of today’s Republican Party. The basic idea of supply-side theory is that economic growth is determined almost entirely by the incentives entrepreneurs and investors have to create wealth, especially tax rates. But there is no academic consensus around the idea that there really is a close correlation between tax cuts and growth. The theory owes its popularity, Chait argues, to its promotion by a few economic cranks.

George Gilder, for example, in his 1981 classic, Wealth and Poverty, celebrated the generosity and altruism of entrepreneurs, whom he described as creative geniuses eager to share their gifts with humankind rather than as selfish capitalists driven by economic gain. He also believed in ESP, and took special pride in his ability to locate the queen of spades in a deck of cards without looking. Jude Wanniski, another leader of the movement, saw tax rates as the prime mover of history. In his magnum opus, The Way the World Works, he wrote that even sobbing infants were actually learning about supply and demand: “When the baby screams all the time demanding attention, even when fed and dry, he discovers that mother also remains in the other room and perhaps even closes the nursery door. The tax rate is 100 percent, also yielding zero attentiveness.” Over the years, Wanniski swung further away from respectable politics, meeting with Louis Farrakhan of the Nation of Islam (he approved of Farrakhan’s advocacy of black enterprise), comparing Slobodan Milosevic to Abraham Lincoln and defending Saddam Hussein in the run-up to the Iraq War. He hired the disciples of Lyndon LaRouche at his economic consulting firm, arguing–rightly–that they were not “trained in demand-model economics.” Eventually even the movement institutions disowned him. But they continued to profess the supply-side faith, right up to the Bush tax cuts.

So how did the ideas of these characters come to be the governing wisdom of the Republican Party? Chait suggests that during the 1970s, their ideas resonated with the business lobby at a moment when corporations were organizing to defend themselves against the criticisms of the counterculture and the consumer movement, which accused business of creating faulty and dangerous products, profiting from the Vietnam War and polluting the country’s air and water. Since that time, the political significance of the business community has only grown, and Chait argues that it is the real constituency for the Republican Party. Occasionally, lobbyists organize populist pageants to claim a broader base for the program. Chait tells of a memo that circulated before a 2001 rally in support of the Bush tax cuts: “If people want to participate–AND WE DO NEED BODIES–they must be DRESSED DOWN, appear to be REAL WORKER types, etc.” Hard hats were passed out to the lobbyists who came. But such antics aside, it’s clear who benefits.

To understand the ascendancy of the right, Chait suggests we go back to the 1950s, when intellectuals like Richard Hofstadter and Daniel Bell dismissed conservatives as “crackpots” and paranoiacs, displaced small businessmen suffering from “status anxiety” who lashed out against a new world of technological modernity and bureaucratic organization. Recent scholars working on the conservative movement have rejected the psychological turn of the “radical right” thesis of the 1950s, trying instead to get inside the minds of conservative activists and treat them with respect, if not always sympathy. But Chait argues that “the Hofstadters and Bells were on to something”–the right really is radical, Manichean, ideological and paranoid. The real problem of modern America is the loss of the reasonable, moderate center embodied by the 1950s intellectuals. In a sense, both Chait and Krugman identify with the liberals of that earlier era, scandalized by the perversions of the radical right, with the difference that today the radicals have escaped from the farm and are running the country. Restoring the New Deal is a project of political conservation, a defense of how things used to be before the country was derailed by a nutty conservative cabal.

The problem with this pastoral tale is that it makes the New Deal seem too easy and too natural, as though it was the norm and recent history the aberration. In fact, the reforms of the New Deal–the passage of legislation giving workers the right to organize unions, the creation of a public system of social insurance for the elderly, the introduction of regulation of the stock exchanges, the national minimum wage, the expansion of progressive taxation (although this truly broadened only during World War II)–were won at a moment when capitalism faced the most prolonged, pronounced crisis in its history. The business class of the United States was at its nadir in terms of public prestige during the 1930s, challenged by a militant labor movement, the alternative model of the Soviet Union and the spread of radicalism of various stripes at home. The New Deal was partial and incomplete, a fragmentary welfare state, and yet it could be created only when it seemed capitalism was on the verge of collapse.

Moreover, even though it is true that the parties did not clash openly over the political economy during the 1950s, the economic order eulogized by Krugman never elicited a genuine or complete consensus. Southern and Southwestern states partly exempted themselves from the high-tax, high-wage economy of postwar liberalism, passing right-to-work laws to limit union strength and keeping state and local taxes low to lure capital from the North. Many companies in the North and Northeast tried to find ways to resist labor and the state even at the height of postwar liberal power, doing their best to weaken their unions and funding conservative think tanks. In short, the central institutions of the New Deal were under attack throughout the postwar period, and in fact had eroded substantially by the 1970s. The difficulty of creating the New Deal in the 1930s, and the conflict that it caused even in the ’50s and ’60s, suggests that it will not be easy to return to it today.

Chait’s and Krugman’s sense of themselves as the moderates fighting back a wave of radical libertarians also obscures just how far the center has shifted. After all, the right has no monopoly on love for the market model. The esoteric philosophies of Wanniski and Gilder gained credibility at a time when rational choice theory and Chicago School economics were winning converts in academia. The Democratic Party may not have pursued cutting income tax rates with the zeal of the Republicans, but under Clinton in the ’90s the Democrats enthusiastically embraced the free market, passed welfare reform and debated the privatization of Social Security years before Bush brought it up. The business mobilization that Krugman and Chait decry has shaped the modern Democratic Party, too–and may do so especially in 2008, if the recent shift of corporate donations from the Republicans to the Democrats continues. (In late October the New York Times reported that healthcare companies have donated $6.5 million to the Democratic presidential candidates, compared with $4.8 million to the Republicans.) In 1946 Harry Truman proposed a national healthcare system resembling Canada’s; the resistance of the American Medical Association and Southern Democrats doomed it to failure. But today, even Krugman–who believes that “in purely economic terms, single-payer is the way to go”–has joined the Democratic presidential candidates in advocating the more “politically feasible” solution of mandated coverage, or “a universal health care system run through private insurance companies.”

Moreover, if conservatives aren’t the only politicians to have embraced the free market, the victories of free-market economics can’t be explained solely in terms of the opportunistic attempts of leaders to link conservative economic and social agendas. The beliefs of social scientists to the contrary, there is nothing simple or automatic about how people come to define their economic interests. Especially in the absence of organizations like labor unions, which can offer an alternative understanding of how the economy operates, it should not be surprising that the vision of the marketplace itself exercises a certain deep appeal, even for people who do not benefit from the policies it prescribes. After all, the market model suggests that individuals exercise tremendous power over their own destinies. It argues that people can determine their economic fates. It provides a way of connecting one’s actions to the larger outcome of social and historical processes. These ideas have their own logic and their own attraction, quite aside from the politics of cultural backlash with which they are frequently joined.

Indeed, perhaps the most striking difference between the conservative activists and intellectuals who built the right and modern-day liberals like Krugman and Chait is how tentative the latter are when it comes to offering a new vision of how to go about “putting material things in their proper place” and fashioning a relationship between the individual and the state that can foster liberty and equality. When Goldwater (OK, Bozell) wrote The Conscience of a Conservative, he knew he was calling for a dramatic change in the country’s direction. Ronald Reagan in 1980 also claimed to want to break with history. But these contemporary liberals insist that they are not calling for anything particularly far-reaching; their politics are to be found in the past, in the moderate consensus, in the New Deal. They want to move forward but only by moving back. The internal weaknesses and flaws of the New Deal, or of postwar liberalism, which might seem manifest in the ease with which it was ultimately dismantled, seem to trouble them not at all. Yet if the conservative movement has any political lesson to teach to those who disagree with its motives and goals, it should be that sometimes only a willingness to be radical really brings about change.

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