Redburn Reads, Dec. 3, 2023 (Charlie Peters edition)
Friends,
The presidential election is less than a year from today. I have no idea who will win – and nobody else does, either. We will have to live through almost all of 2024 in a state of uncertainty, and its historical significance will only be apparent in retrospect.
Will Donald Trump prove to be a one-term president and, I hope, an aberration? Or will it turn out that we are living through a political era largely defined by his malign impulses? Again, none of us really know. So, since most predictions are worthless, I’m going to try my best to avoid making forecasts about the outcome of an unknowable future.
But we can hazard some thoughts about the consequences of the election, particularly as it applies to the national economy. As it stands now, most Americans say the economy is in bad shape when, compared to our experience over recent decades, it is actually doing quite well, particularly for those at the bottom of the income ladder.
But there are understandable reasons for these negative attitudes. First, inflation was so quiescent for so long that the rise in prices in the past few years freaked out almost everyone, particularly the middle class. Second, the generous government support during the pandemic left most people with plenty of extra savings and a comfortable financial cushion that has been gradually eroded in the last couple of years. And third, the Federal Reserve’s response to higher inflation was to push up interest rates, exacerbating the cost of buying a home, a car and other goods. Finally, President Biden was forced by the Supreme Court and Republicans in Congress to scale back his efforts to relieve the student loan burden and provide assistance to lower income families with children.
Despite all the setbacks, though, Biden has managed to initiate a fundamental overhaul in the American economy that is only beginning to play out. If it is allowed to continue, we are likely to see prosperity continue to spread more widely and an economy built for the long term around investment in clean energy, manufacturing and improved infrastructure. It is doubtful, however, that people will recognize the improvement before the election. And if he loses to Trump – or any Republican, for that matter -- then most of the gains are likely to disappear. Rana Foroohar, a columnist and editor at the Financial Times, has written one of the best explanations of this new approach to economic policy, in a excerpt from her new book, headlined The Great Reordering in The Washington Monthly.
“The conventional wisdom was, ‘We don’t need to make T-shirts here,’” remembers Beth Baltzan, a career trade staffer who has served under several administrations and is now senior adviser to U.S. Trade Representative Katherine Tai, one of the numerous Biden appointees who are taking a fundamentally different economic tack than Democrats of the past. There was, of course, almost no air between this view and the Republican take that it doesn’t matter for national competitiveness whether a country makes “computer chips or potato chips,” as an economic adviser to George H. W. Bush once quipped.
The pandemic, the war in Ukraine, and the U.S.-China conflict have changed all that, of course. But so has Biden, who has led a kind of stealth revolution, the depth and profundity of which have yet to be fully understood by the media, the public, or, indeed, many elites in Washington, D.C. This is perhaps because we haven’t had a true economic paradigm shift in nearly half a century, since the era of Ronald Reagan and Margaret Thatcher overturned the New Deal/Keynesian paradigm that had reigned in the United States and much of the Western world for decades before. As Franklin Foer writes in his recent Biden biography, The Last Politician, “Where the past generation of Democratic presidents was deferential to markets, reluctant to challenge monopoly, indifferent to unions, and generally encouraging of globalization, Biden went in a different direction.” Rather than speaking to Goldman Sachs, Biden spoke to autoworkers.
While paradigm shifts take years, indeed decades, to play out, there’s no question that one is underway: A massive boom in manufacturing engineered with federal dollars. Aggressive antitrust lawsuits brought against the biggest tech behemoths. (See “Winning the Anti-monopoly Game” by Will Norris.) International agreements on corporate tax evasion, and an even tougher stance on Chinese mercantilism than we saw during the Trump administration. Beyond this, the White House has begun laying out a powerful new post-neoliberal narrative. From Biden’s July 2021 address to Congress announcing the end of trickle-down economics, through to National Security Council Director Jake Sullivan’s April 2023 speech on building back better abroad and the call from USTR Tai last May for a “postcolonial” trade paradigm, a new political economy in America is taking shape. You can call it Bidenomics. You can call it a post-neoliberal world. You can call it “the new economics,” as some progressives who want to separate the changes that are afoot from a single president are inclined to do. But whatever you call it, it’s an epochal shift in how America—and possibly the world—works.
By contrast, though you don’t hear much about it in the campaign rhetoric, Republicans are still touting the same old nostroms: tax cuts for corporations and the wealthy; business deregulation; incentives for fossil fuels rather than clean energy. On top of that, Trump has added some new twists to the GOP agenda, including restrictions on immigration and higher tariffs on imported goods.
These policies have failed to bring about widespread prosperity in the past but things could get a lot worse in a second Trump term. That’s because, as Matthew Yglesias explains in a smart piece for his Substack column Slow Boring, what Trump is promising looks a lot like what Juan Peron introduced in the 1940s to Argentina, a protectionist, inflationary gambit that wrecked what was once one of the most prosperous nations on earth. It wanders a little but this excerpt is well worth your time.
The press still largely covers Trump as an amusing sideshow, as if the world were stuck in a perpetual 2015, and the loudest critiques of this I hear call for more alarmist coverage of his authoritarian leanings. But I think the single most under covered story in American politics is about what you might call the “boring” stakes of the 2024 election. If the country elects Trump and a Republican congress and they implement their ideas on tax policy, trade, and immigration, what’s going to happen to the big economic variables that everyone cares about?
Because it seems to me that either they will make inflation and interest rates a lot higher, or else they’re going to be forced into the kind of draconian Social Security and Medicare cuts they claim not to want.
Keep in mind that due to population aging, each and every year the cost of Social Security, Medicare, and Medicaid rises as a share of the overall American economy. So if Trump is elected again, we’re talking about piling new policies that tend to raise interest rates on top of an underlying dynamic that pushes rates higher.
That’s bad news.
It’s also why George W. Bush was so keen to cut Social Security, and why Paul Ryan was desperate to cut Medicare. It’s not like those guys didn’t realize that these were politically dicey ideas. They didn’t propose them just for fun, they proposed them because it’s the only way to make the GOP tax cut agenda work. Trump says he doesn’t want to do political risky cuts, but he’s outlined an agenda that’s going to push the country into an interest rate crisis where pressure to enact severe cuts will be enormous. And that’s because it’s not just his fiscal policies — his overall policy approach is highly inflationary.
Inflation is back under control, but it’s still above the two percent target level. And to get inflation back under control, interest rates came up a lot. They came up high enough that it’s a real problem in the housing market, and also high enough that rising interest expenses are an issue for the federal government. In this environment, the centerpiece of the GOP economic agenda is an extension of the 2017 Tax Cuts and Jobs Act (TCJA) that will cost trillions of dollars and primarily benefit rich people.
According to the Committee for a Responsible Federal Budget, we are looking at $3.3 trillion in additional deficits from the direct loss of revenue and another $500 billion in increased interest costs. Trump would partially offset this with about $2 trillion in additional revenue raised by imposing an across-the-board tariff of 10 percent.So we’d end up with somewhere between $1.3 and $1.8 trillion in higher deficits.
Tariffs, of course, are highly regressive, so despite the enormous tax cuts, lower-income families will end up paying higher taxes on net. And beyond that, tariffs have a distinct inflationary impact. You could raise $2 trillion with a relatively small across-the-board Value Added Tax that would make the price of almost everything a little bit higher. Alternatively, you can do it Trump’s way with a much higher 10 percent tax that’s only levied on foreign-made stuff.
To understand the impact of this on prices, consider a more specific policy, like a 10 percent tax on imported olive oil. That makes imported olive oil more expensive, and also raises some revenue. But it’s also going to raise the price of domestic olive oil, because price competition from foreigners has diminished. A portion of the higher consumer prices flows to the government as revenue, but another huge chunk of money is transferred from consumers to domestic olive oil producers as windfall profits. If investors are convinced that the tariffs are likely to last for a while, those windfall profits will attract capital investment into American olive oil, workers will transition into the field, and we’ll have a booming olive oil industry.
So now imagine doing this across the economy. The price of everything goes up. A fraction of those higher consumer prices flow to the government, and the rest goes as windfall profits to people who own American businesses. But you can’t attract new workers into producing everything simultaneously. That would just be inflation on top of inflation. And with the deficit soaring due to regressive tax cuts, interest are going to go up up up.
I ended up a newspaper reporter and editor largely because of Charlie Peters, the legendary, lovable and curmudgeonly founder and editor of The Washington Monthly. Charlie hired young people (mostly guys) right out of college (mostly from the Harvard Crimson) and trained multiple generations of brilliant, well-known journalists, among them Jim Fallows, Taylor Branch, Suzannah Lessard, Polly Toynbee, Nick Lemann, David Ignatius, Walter Shapiro, Jonathan Alter, Michael Kinsley, Timothy Noah, and more.
I was not one of those. When I was hired in 1974 as an editor after a summer internship, I was unprepared for the challenges of the job, which was to help produce the magazine but mainly to come up with a worthy article every couple of months or so. Within a short time I was fired because Charlie couldn’t justify the expense of paying my salary of $7,000 a year (about $45,000 in today’s dollars) on his shoestring budget.
But Charlie’s gamble spared me from going to law school that fall. He allowed me to continue to come to the office while Lisa and I were living in a basement apartment near Cleveland Circle on unemployment and on Lisa's modest pay as a nursery school teacher. Eventually, I learned enough from Charlie and the other mentors in the office to write a TWM-quality piece about how Nick Zapple, then a top staff member on the Senate Commerce Committee, managed to live a high life on his government salary while doing more from his position to promote the interests of the communications industry over the public interest.
That piece turned into my chief calling card as I went on to jobs in Washington working for Environmental Action magazine and a short-lived local alternative newspaper, Washington Newsworks, before being hired in 1977 as a business reporter for the Los Angeles Times. Eventually I managed to figure out how to be a real journalist, focused primarily on economics rather than politics, and, I hope, ultimately justified Charlie’s farfetched faith in me.
Among Washington Monthly alums, Jim Fallows probably stayed the closest to Charlie over his lifetime, which ended, perhaps appropriately, on Thanksgiving Day at the age of 96. Here’s Jim's tribute to Charlie.
Washington Monthly founding editor Charles Peters in 2008. Credit: Gunes Kocatepe/Wikimedia Commons
Charlie, as he was universally known, had been in declining physical health for several years, mainly from congestive heart failure. His mind, wit, encyclopedic recall, passion, curiosity, and sense of humor were undiminished until his last days. Charlie frequently said that his partnership with his beloved wife, Beth, who had been a ballet dancer before their marriage, was the greatest good fortune in his long and eventful life. Charlie and Beth celebrated their 66th wedding anniversary last summer. She had been caring for him, with hospice support, in the same modest house in Washington where they had lived since coming to the city in 1961 as part of John F. Kennedy’s new administration. They had jointly determined that, if possible, Charlie would remain at home, with Beth, and in familiar settings until the end. Thanks to Beth’s strength, constant presence, and their hospice support, he could do so. My wife, Deb, and I join the vast network of Peters family friends in sending condolences and love to Beth, their son Chris, and all of their family.
Through his work and force of personality, Charlie directly influenced several generations of journalists and people in government and public life. It’s been more than 20 years since the American Society of Magazine Editors elected him to its Hall of Fame for the example he had set and the forms of journalism he championed during his tenure as founding editor of The Washington Monthly, from 1969 to 2000. In the days to come, you’ll hear in this space from many people who have learned from, worked for, or in other ways have been shaped by Charlie’s enormous presence in our field. Most of them will have laughed with Charlie and argued with him—perhaps both at the same time. They will have loved him and been exasperated by him, marveled at his insights and resented his quirky or imperious demands, rolled their eyes during his animated editorial-guidance pep talks known as “rain dances” but then been motivated or chastened by what he said. All of them have become more aware with the passing years how deeply grateful we are to have been part of his world.
This brief post is meant as a notice of Charlie’s death and an introduction to the appreciations to come.
For a few samples of earlier reflections on Charlie’s work and effect, please see this by Matt Cooper, on the occasion of Charlie’s 95th birthday and this by Paul Glastris, Charlie’s worthy successor for the past 20-plus years as editor-in-chief of the Monthly. Paul’s piece was framed as a review of Charlie’s lastingly important final book, We Do Our Part: Toward a Fairer and More Equal America, which came out when Charlie was 90 and drew on his lessons as a young man during the Great Depression and World War II. I wrote an appreciation of the book as well. Judy Woodruff of the PBS NewsHour did a special segment on Charlie and that book; Jonathan Martin wrote about it in The New York Times. Fifteen years ago, Ezra Klein, then of Vox and now of the Times, did a revealing Q-and-A with Charlie in the Monthly. Early this year, Paul Glastris explained why the “neoliberal” outlook Charlie was proud to have pioneered in the 1980s was entirely different from the crass and heartless market-mindedness that goes by that name now. Together, these pieces offer a very useful guide to the through-lines in Charlie’s thinking about patriotism, about justice, about kindness, and decency, about ways to recreate an American sense of idealism and fellow-feeling. I hope you’ll read and watch them all, read and think about We Do Our Part, and join in the reflections on Charlie and his influence that will be appearing on this site. . .
Charlie Peters matters in the example he has given us for journalism: For reporting that is hard-headed but not hard-hearted, that rides on stories but is anchored in data and fact, that calls out the evil and failures in people and institutions but also recognizes their possibility for good.
He matters in the ideals he has set for his country: That it should be patriotic but not jingoistic, that it can respect the military without being pro-war, that it can celebrate ambition and entrepreneurship without forgetting those left behind, that it should be skeptical of government failures precisely because effective government is so crucial to America’s success.
He matters as a person: Showing that one can be flawed but triumphant, that awareness of one’s flaws can be the greatest strength, and that an open mind and a ready laugh are gifts to all. He fully enjoyed life’s pleasures, including, for many decades, season tickets to what was then a good local NFL team. And he was delighted to have lived long enough to see that team freed from the clutches of its previous evil owner! But in what he said, and more importantly in the way he lived, he warned against the Marie Antoinette effects of big money, lavish spending, and conspicuous consumption. Charlie believed that cheap could be fun.
Charlie Peters matters. Many who have known him will explain why he matters to them. In lieu of flowers, Beth Peters suggests that donations be made to The Washington Monthly, as the truest tribute to Charlie’s memory and ongoing example.
We will miss Charlie tremendously even while his example remains with us.
Amen. And in that spirit, I encourage you to read and support independent journalism wherever you find it. I'm working with the new Plymouth Independent, which just launched the week of Thanksgiving and is already having an impact on the community where I live. We could use your support, too. It matters.
Take care,
Tom