In Tuesday night’s first Democratic presidential debate, contenders gave their views on how the government can ensure that the benefits from economic growth are broadly shared, so that ordinary workers see rising living standards. In the debate and prior campaign comments, both of the two leading contenders, former Secretary of State Hillary Clinton and Vermont Sen. Bernie Sanders put forward proposals that would have the government reduce the cost to families of health care and college education. They also promised measures to give workers more control over their time in the form of paid family leave and paid vacation in the case of Sanders.
In these areas, the Democratic contenders are following in a long tradition of the party’s leaders. In the case of health care, it was of course Lyndon Johnson who pushed the Medicare legislation that provided insurance for the country’s seniors, along with Medicaid that provided health care to the poor. This safety net was expanded with the State Children’s Health Insurance Program under President Clinton and the Affordable Care Act (ACA) under President Obama. Now Clinton is proposing to fill some of the gaps in coverage left by the ACA, while Sanders wants to expand Medicare to cover the whole population.
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The commitment to making college affordable to children from poor and moderate income families historically had bipartisan support, with the National Direct (originally “Defense”) Student Loan program initiated in the Eisenhower administration. The Johnson administration supplemented these subsidized loans with the Pell Grant program. More recently, the Obama administration has expanded the loan program, reducing costs by providing loans directly rather than through private lenders. It also has allowed income-based repayments to protect graduates who have difficulty finding jobs or earn low pay. Clinton promises to make all loan repayments income based, while Sanders proposes to have free tuition at public universities.
Both Clinton and Sanders want to mandate paid family leave to ensure that workers can take time off to care for a newborn baby or sick family member. Sanders also wants to ensure that all workers have at least two weeks a year of paid vacation. The effort to ensure workers enjoy some amount of leisure dates back to the Fair Labor Standards Act (FLSA) passed in the Roosevelt administration. The FLSA institutionalized the 40-hour workweek, requiring employers to pay an overtime premium if their workers put in more than forty hours a week.
The FLSA also put in place the first nation-wide minimum wage. Both Clinton and Sanders propose raising the minimum wage. Sanders has chosen a target of $15 an hour by 2020. Clinton has not yet indicated what her target would be for the minimum wage.
Both candidates also promised a tighter rein on Wall Street. Both urge stronger regulation of banks, with Sanders proposing a financial transactions tax that will provide a harsh penalty for excessive trading. This again follows in the tradition of the New Deal regulation of the financial sector. Bill Clinton’s administration provided a major break from this tradition, as it joined a push toward deregulation of the sector.
If the Democratic candidates are sticking to party traditions, the same is true of the Republican candidates as well. Most of the leading candidates have put forward proposals for major tax cuts, as had President George W. Bush and President Reagan. Their tax cuts would give the largest breaks to high- income taxpayers. This is justified by the fact that they pay the most in taxes so that an across the board tax cut will give them the most money.
Like their predecessors, the Republican candidates seem little concerned about the budgetary impact of these tax cuts. They claim, like prior Republican presidents, that the faster economic growth induced by their tax cuts will largely make up for lost revenue. This has not proved be the case in the past. As far as paying for the Democratic initiatives, Sanders has been clear about his desire to raise taxes on the wealthy, although it will be necessary to see both the programs and tax proposals spelled out in more detail to determine if and how they balance out.
While the party nominations are still far from settled, it seems clear that there will be some real differences on economic issues in the election next fall. The differences are likely to have noticeable consequences for most of the public.
Dean Baker is a macroeconomist and co-director of the Center for Economic and Policy Research in Washington, DC. He previously worked as a senior economist at the Economic Policy Institute and an assistant professor at Bucknell University.