The Two Liberals

The recent introspection about “reformist conservatism” hasn’t provoked anything of the sort among liberals. Current policy failures and existence of conservative opposition masks an emerging rift between the “two liberals”. On the infinite horizon, to the extent current philosophies are not murdered by revolutionary technology, this rift is more important than any ferment in the conservative camp. As capital share of income rises, most of America will become either of these two liberals. (Note: please forgive the liberal, for wont of a another word, generalizing in this post, I do my best to capture the spirit of my perceptions).

The first liberal is broadly typified by writers like Matt Yglesias, Josh Barro, (usually myself) and, in some odd form, Tyler Cowen. The first liberal believes the West is at and beyond the economic end of history. He believes that in this ahistoric world, economic tensions are a problem of calculation, and hence redistribution. His primary economic weapon is tax-and-transfer. He is liberal because he sees an inevitable, and perhaps even preferable, growth in government.

The second liberal is broadly typified by brilliant writers like Dean Baker, Steve Randy Waldman, Dani Rodrik, Mike Konczal (I feel like I’m drifting over, sometimes). This liberal is a full-blooded believer in liberal democracy and, hence, capitalism. But he still sees the world as a tension between labor and capital. He sees smart government regulation and protection as its key weapon (though he is always happy to raise the tax rate). It would be tragic for him to accept that this is the end of history; there is so much farther to go for the American worker.

A rift between these two liberals can already be seen with regard to immigration. Matt Yglesias (rightly) doubts low-skilled immigrants will decrease native wages. But, even if it did, it doesn’t matter, because we can just tax land and capital more than we do. The second liberal (rightly) believes free and open immigration weakens the position of American labor, and competition. He is more likely to discuss high-skilled immigration in terms of bringing down a doctor’s wage (as it ought to be) than innovation and growth.

The first and second liberal also battle it out on the Federal Reserve. Both are quick to agree that today’s disinflationary policies are a disaster, and support easy money. Both will also jump at Scott Sumner for saying that “NGDPLT is the end of macroeconomic history”. But the second liberal is more skeptical of market monetarism, and even quantitative easing (though, for the record, not Dean Baker). As a principle, he wants more inflationary policies because he sees the tension between debtor and creditor through the same lens as that between labor and capital. In his gut, he feels there is something status-preserving about the Federal Reserve.

Both liberals broadly agree that some form of single-payer healthcare system is optimal. But the first sees healthcare as a brutal failure of markets with opaque information and asymmetric hospital power. The second sees the failure of America’s market healthcare system as a broader vindication of a government-centric ideology.

This core battle does not map well onto our party landscape. The first liberal isn’t really more conservative than the second (as I’ve certainly made it sound), but sees his progressive mandate through a different prism. Unlike Republicans, Democrats are not a party defined by ideology. Indeed, the second liberal might resent Bob Rubin’s globalist policy as an extension of the broken Washington Consensus. But the second liberal also lies to the right of the first when it comes to TARP. Like me, he believes saving Wall Street squandered a golden opportunity to save both American finance and capitalism. But the two liberals can become one.

The future of liberal consensus will find its answer from the past, in the work of John Rawls and Karl Marx. Indeed, from each according to his ability to each according to his need must become the masterpiece of redistribution. Rawlsian thinking will be slow to manifest for no other reason than the sheer brilliance of the two liberals. Ivy League graduates, generally far to the American left, are happy to pay more in taxes and cede they are lucky by nurture. But they are allergic to the idea of luck by nature. That work ethic, intelligence, and genetic code itself is not fundamentally theirs is a foreign thought.

The first liberal moves to his counterpart as the myth of meritocracy evaporates. The second liberal moves to his as the consumer surplus from a technological world – to worker and owner – becomes self-evident. Politically, today the two are aligned against needless austerity and worry about the rapidly growing inequality.

Ideally, if America was rich enough, the two liberals would reach consensus for a generous, universal basic income. As it stands under today’s tax code, any non-negligible universal income would cripple our welfare state and military obligations. Rather, policy framework in the near, postindustrial future should rely on limiting transfers but guaranteeing employment. This strikes a balance between the redistributionist and labor protectionist by expanding labor supply and encouraging flexible labor markets.

With conditionally-guaranteed employment, all liberals will be free to advocate broad immigration reform and employers will feel free to hire and fire at will (as it ought to be). This can be effectively achieved through a labor market auction program on a state-by-state basis under federal subsidy.

The details behind this are tricky, but express the point that the two liberals will not necessarily be far apart. Indeed, as long as the non-reformist conservatives who desire draconian cuts to government are forceful – as it is – the interliberal tensions will remain asphyxiated. However, recognizing this rift as it becomes evermore evident is a potent predictor for future debate among the Democrats. It remains to be seen the extent to which the two liberal wonks are divided at the political level.

Know this, the last liberal will live and die by John Steinbeck:

 “The last clear definite function of men — muscles aching to work, minds aching to create beyond the single need — this is man. For man, unlike anything in the universe, grows beyond his work, walks up the stairs of his concepts, emerges ahead of his accomplishments. This you say is man — when theories change and crash man reaches, stumbles forward, painfully, mistakenly sometimes. This you may know when the bombs plummet out of the black planes on the marketplace, when prisoners are stuck like pigs, and the crushed bodies drain filthily in the dust. If the step were not being taken, if the stumbling forward ache were not alive, the bombs would not fall, the throats would not be cut. Fear the time when the bombs stop falling while the bombers live — for every bomb is proof that the spirit has not died. And fear the time when the strikes stop while the great owners live — for every little beaten strike is proof that the step is being taken. In this you can know — fear the time when manself will not suffer and die for a concept, for this one quality is the foundation of man self, in this one quality is man, distinctive in the universe.

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