Should bold ideas drown out old ideas?

World
Europe

Editor's note: Jeffrey Frankel is a professor of capital formation and growth at Harvard University. The article reflects the author's opinion, and not necessarily the views of CGTN.

America's Democratic Party is moving to the left, we are told.

It is not yet clear whether this applies to the median American voter or the median member of Congress who was elected last November.

But it is clear that many of the candidates for the 2020 Democratic presidential nomination are experimenting with "bold new ideas." They seem to receive a disproportionate amount of attention for doing so. If interpreted literally, many of these policy proposals are not entirely practical, either economically or politically.

Fortunately, few of the current or prospective Democratic candidates have yet committed irrevocably to extreme policies. Any of them could still build a campaign on solid practical proposals to address inequality and other pressing problems, without sacrificing economic growth or fiscal sustainability.

Former U.S. Vice President Joe Biden. /VCG Photo

Such ideas are perhaps most likely to come from moderates such as former Vice President Joe Biden, former Colorado Governor John Hickenlooper, former U.S. Representative Beto O'Rourke, or former New York City Mayor Michael Bloomberg.

Other prominent Democrats, including former President Barack Obama and U.S. House of Representatives Speaker Nancy Pelosi, share this emphasis on the double.

They made important progress with practical policies in areas such as health insurance, financial regulation, and progressive taxation, although Republicans often blocked or reversed these advances.

There is no reason why other new faces in the presidential field, such as U.S. Senator Amy Klobuchar, cannot follow in the sensible Democratic tradition of Obama and Pelosi. The same applies to fellow senators Cory Booker, Kirsten Gillibrand, Kamala Harris, and Elizabeth Warren, who are often seen as being on the left of the party.

Beto O'Rourke speaks during a rally before the March for Truth in protest of President Donald Trump's proposed border wall, El Paso, Texas, February 11, 2019. /VCG Photo

But for now, the bolder, less practical Democratic ideas are getting the airtime. Five, in particular, stand out, and there exist more practical alternatives to each of them.

First is the proposal for a marginal income-tax rate of 70 percent on the super-rich.

Former New York Mayor Michael Bloomberg. /VCG Photo

There are more efficient and enforceable ways to improve income distribution in the United States.

For starters, the carried-interest loopholes could be abolished, the Earned Income Tax Credit could be expanded, and the payroll tax could be made more progressive.

Further suggestions include restoring the inheritance tax on all estates worth more than, say, 10 million dollars, and eliminating the “step-up” of estates' valuation that allows generations to pass on capital gains without ever paying tax on them. Other substantial Republican tax cuts for the rich could be reversed, too.

Second is that the government pays for a universal four-year college education. But this would be expensive, and not the best way to help the children of families that have been left behind by U.S. economic growth. Universal, quality pre-school might be a more effective way of working toward equality of educational opportunity.

To be sure, it makes sense to expand student grants for higher education and increase support for public institutions.

This should cover two-year programs and vocational training as well as four-year degrees.

But the most urgent higher-education policy priority is pushing back against the scams perpetrated by some for-profit colleges. The worst of these leave vulnerable students – veterans have been frequent targets – with high taxpayer-funded debts, low graduation rates, and poor post-graduation employment prospects.

A third idea is universal health-care coverage through "Medicare for All.” If this meant adding a public option for those who can't get private health insurance, it would be a worthy initiative.

But U.S. Senator Bernie Sanders – not a Democrat, but running for the party's nomination – has been clear that he favors the elimination of private health insurance.

Most Americans do not respond positively when they realize that “Medicare for All” would force the many who are currently happy with their employer-paid plans to give them up, and saddle taxpayers with an enormous fiscal burden.

A more practical Democratic health-care policy would be to resume the expansion of coverage rates that the 2010 Affordable Care Act (“Obamacare”) achieved.

This means, as a first step, reversing the damage that Republicans have done to it.

Fourth, several candidates support a government-led “Green New Deal” that would radically change U.S. energy use. True, when the U.S. unemployment rate exceeded eight percent between 2009 and 2012, the country could have used a larger and longer increase in government spending on environmental projects than Obama was able to get past Congress.

But, with unemployment currently around four percent, now is not a good time to be expanding the budget deficit.

If the Green New Deal were interpreted as simply a rallying cry to mobilize support for strong action on climate change, it would be a welcome development.

But the impracticality of so many of the Green New Deal's components is worrisome, such as its goal of expanding renewable energy to 100 percent of electric power, not to mention some of the package's extraneous parts.

The efficient way to achieve climate-change goals is not via a truly massive expansion of government, but rather by using the price mechanism, meaning either a carbon tax or tradable emission permits.

Finally, Sanders and Senate Minority Leader Chuck Schumer (who is not seeking the presidency) recently proposed preventing firms from buying back their shares.

It is true that corporations have spent more of their big gains from the December 2017 tax cut on share buybacks and dividends than on investment or workers. But the proper remedy is to broaden the corporate tax base. Banning buybacks would just divert firms' extra profits into Treasury bills or other companies' shares.

Radical proposals are not unusual in the early stages of a presidential election campaign.

But just because a new idea seems more exciting does not make it better than an older, more practical one. The Democratic contenders for 2020 would be wise to remember this as they chase their presidential dreams.

(If you want to contribute and have specific expertise, please contact us at opinions@cgtn.com.)