How We Fuel a NM Recovery: Evidence from 80 Years of US Economic Policy, a Revealing Picture in Just Two Charts

After our regular Legislative Update, we provide two charts from a NY Times piece that triggers an analysis of how economic policies advanced by Democrats and the GOP have elicited stunningly different results, and how this should offer NM a lesson in how we tax, invest, and implement our own statewide recovery.

Legislative Update: A Lot Is Brewing & It’s a Big Deal

SB 155 Energy Transition Authority Changes hits a roadblock. ETA Amendment supporters were stunned to find SB 155 assigned to three committees by Senate Leader Peter Wirth. Normally a three committee assignment is a signal that leadership does not favor the bill. I was puzzled, as in conversations with Senator Wirth he seemed to have an open mind to the bill and has clearly stated his strong view that the PRC needed to have its authority to regulate restored. So I reached out to Sen. Wirth and he called back yesterday to explain. He said that he assigned one of the bills he has introduced, SB 8, the Local Government Air Quality Act, to three committees, and that this is a bill that he has advanced for years. Assignments can be a signal, but they may also represent a need for differing perspectives to weigh in.

Senator Wirth also noted that one of SB 155’s committee assignments, Senate Conservation, is chaired by Senator Stefanics, an SB 155 sponsor. He stated that she could put SB 155 on the top of her agenda on Thursday, which would move it along to Judiciary and its two other Senate Committees. He insisted that in a 60-day session, there is time to move the bill through these committees. Senator Wirth has always been a straight shooter, so supporters of the ETA Amendment need to forge on and encourage Sen. Stefanics to put the bill on the Sen. Conservation Committee calendar ASAP.

SJR 1 Funds for Teacher Salaries and Instruction was introduced. This bill is similar to HJR 1, which calls for 1% allocation of the Permanent Fund to go to Early Childhood Education, however with one significant difference. SJR 1 would ask the voters to approve a 1% allocation to K-12 instruction. We comment more on this bill below within the context of our piece today on economic stimulus policies in the US and NM.

Omnibus Tax Bill Is Coming. HB 98 is named the Omnibus Tax Bill but, for the most part, the bill is comprised of a large number of technical fixes and doesn’t really contain groundbreaking policies that close loopholes and inject more progressivity into the tax code and more revenue into the budget. I am told that the new tax bill is coming from Rep. Javier Martinez. This may be the bill around which we organize our larger “umbrella” Transformational Bill, Tax and Revenue Reform.

Closing Legislative Comment. We keep hearing how we need to be cautious in these perilous economic times. As our feature piece below outlines, caution is precisely the opposite of what is needed right now. It is time for bold, decisive action, and the 20 Transformational Bills supported by Retake are an excellent outline for the kind of bold action needed.

News in Brief

We offer three NIBs today, with the third launching a broad discussion of the impact on most Americans of the very different economic policies of the Republican Party and the Democratic Party, and especially the pre-1980 Democratic Party. Read on!

How Americans Fare Under Democratic &
GOP Administrations & Why

A picture is worth 1000 words. These two charts stunningly depict why it matters who is in the White House. Today, we use these charts to launch an analysis of the reasons why Democratic presidents, especially pre-1980 Democratic presidents, have fostered economic and job growth while GOP administrations have not.

The six presidents who presided over the most growth in jobs are Democrats, while the bottom four presidents are all Republicans (left chart). On the right, The Times examines Gross Domestic Product increases. Again, Democrats hold the top five slots, while Republicans maintain six of the bottom eight slots in GDP growth. There is actually another tale in the two charts, but we will address that later.

The Times then projects how the average American is impacted by the differences in leadership approach to governing and fostering economic prosperity.

“The average income of Americans would be more than double its current level if the economy had somehow grown at the Democratic rate for all of the past nine decades. If anything, that period (which is based on data availability) is too kind to Republicans, because it excludes the portion of the Great Depression that happened on Herbert Hoover’s watch.”

The New York Times: The Economy Does Much Better Under Democrats. Why?”

The Times then anticipates objections to the data and acknowledges that many factors outside the power of the President also impact economic growth, but then concludes that the trend is too strong to be a coincidence.

“Part of the answer surely involves coincidence. Some presidents, like Barack Obama and George W. Bush, take office when the economy is in a downturn, while others, like Harry Truman and Donald Trump, inherit a boom. Some, like Lyndon Johnson and Ronald Reagan, preside over military buildups; others, like Dwight Eisenhower and Bill Clinton, drawdowns. More broadly, the economy’s performance stems from millions of decisions made every day by businesses and consumers, many of which have little relation to government policy.

Still, the pattern is so strong and long-lasting that coincidence alone is unlikely to be the only explanation.”

The New York Times: The Economy Does Much Better Under Democrats. Why?”

The article also dismisses some possible explanations for the trends reflected in the charts above.

  • The trends above hold regardless of which party holds power in Congress;
  • It is not the case that the trends in the charts are created by Democratic Presidents driving job growth by generating huge deficits. Indeed, the reverse is true: Republicans have generated greater deficits

The Times goes on to point to the one common thread: a willingness of Democrats to try different economic strategies, while since the 1980s the Republicans have had one tool in their toolkit — supply-side, trickle-down tax cuts for corporations and the wealthy. Republicans have varied not a whit from that approach, no matter the decade. The other Republican mantra for decades has been that the proper role of government is to stay out of the way of business and let the market work its magic.

Here is where I’d like to point out something from the charts above that was not noted by The Times. The top five ranking Presidents in the chart on the left are Roosevelt, Johnson, Truman, Carter, and Kennedy, all Democrats who held office before the party became enamored with neo-liberal policies that benefit Wall St. far more than Main St. In essence, from about 1980 forward, Americans have alternatively lived under either Democratic neoliberal economic policy or Republican policies driven by a failed trickle-down model and a minimized role of government. The result?

As the chart below so graphically depicts, these forty years of regressive economic policy have created the greatest wealth gap in human history, thanks in large part to GOP tax cuts, a massive deficit, and Democratic neoliberalism and compromise.

On the other hand, Democrats have been far more likely to respond to an emergency with a government response, with an infusion of investments to jump start business and provide relief to workers and small business operators. Witness this in play today, with Biden offering a $1.9 trillion relief bill and the moderates among GOP offering a compromise of less than one-third that amount.

In reference to this differing view of the proper role of government, the Times points to our current COVID crisis. Trump and the GOP controlled Senate did absolutely nothing to develop a federal plan, leaving cash strapped states to compete with each other for PPEs, tests, and now vaccines. Under Trump there was no federal direction whatsoever, extending even to the simplest gesture, requiring face masks in public spaces. We are seeing a dramatic difference in approach since the inauguration.

How is this relevant to NM?

I don’t bring up this issue randomly. The NM State Legislature and our Governor are in a clear economic crisis. Revenues are down while the need for support and investment is great. Unlike the Federal government, New Mexico can not borrow $2 billion and invest those funds in infrastructure. But NM does have both short-term and long-term options. We can:

  • Close a myriad of tax giveaways that forfeit $1 billion in revenue annually to corporations and the wealthiest New Mexicans, $1 billion that could otherwise shore up our budget and allow provision of services and supports so desperately needed by low-income New Mexicans. Let’s describe them as they are: our essential workers, those we depend upon to stock our shelves, care for our kids, change our bandages, and keep us aliv., Click here to read Retake’s summary explaining how Tax & Revenue Reform could generate over $1 billion in new, sustainable revenue.
  • Invest the Permanent Fund in Early Childhood education (HJR 1) and, with the introduction of SJR 1, in K-12. The permanent fund had $8 billion dollars in value 11 years ago; its value now is $22 billion. If ever there were a time to invest a portion of that fund, this is the time. We could merge the two bills and ask the voters for 1% for Early Childhood and 1/2% for K-12. When the state last asked for an increase in Permanent Funds it was for K-12 and voters very narrowly passed it, despite bipartisan support. Early childhood investment however, polls at 70% approval of the voters. By combining the bills with more funds going to early childhood, we would have a very popular combination on the ballot in 2022.
  • Significantly expand investment of the $4-5 billion in the State’s Severance Tax fund in an array of infrastructure, job growth, small business development initiatives, and economic transition strategies.
  • And, over the long term, repudiate misinformation about a public bank, create a state public bank, and utilize its powers to magnify state and local investment capacity to rebuild our failing infrastructure and stimulate industries that diversify our economy and revenue base.

Together, these NM policies would vastly expand New Mexico government’s response to a crisis. It would operationalize FDR’s call to advance “bold, persistent experimentation.” And it would be doing what any government should do in time of crisis: respond to the needs of constituents.

We have an opportunity to get a great many things done in the 2021 legislative session. We hope that an increasing number of you take advantage of the tools Retake has developed to make it easier for you to effectively raise your voice in support of progressive legislation.

In solidarity & hope,

Paul & Roxanne

Inspiring Video on the Green Amendment

The Green Amendment is being heard today in Senate Rules. Well-organized constituent advocacy led by a coalition of organizations assembled by The Green Amendment for the Generations has been changing minds and votes on key Senate committees. Today at 9 a.m., SJR 3, the Environmental Rights Act (AKA The Green Amendment) will be heard in Senate Rules. This morning’s alert has the information on how you can contact Rules Committee members to weigh in. Meanwhile, to inspire you over coffee, a video on how the Green Amendment could benefit New Mexico, from The Green Amendment for the Generations.

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2 replies

  1. Why focus on growth? There are far more useful economic metrics to determine how well we are doing.

  2. One thing that the most prosperous administrations, as illustrated by your charts, had in common was that they were before many of the “Trade” agreements that we’ve entered into that have sent good paying union jobs overseas. We have lost our middle class by not pressuring corporations to keep good paying jobs here in the US. It feels like we’ve lost our manufacturing edge to other countries and are now more of a “service industry” country. We get the parts, made in other countries, and put them together rather than doing the whole job here. And why? Because labor is much cheaper in Taiwan, Indonesia, China and India. We’ve allowed our best paying jobs to walk out the door in the name of profit for the corporations.

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