The Case for a New Deal 3.0: An Interview with David Riemer
In his new book “Putting Government in its Place: The Case for a New Deal 3.0,” David Riemer first looks backwards in order to imagine a better future. Riemer sees the New Deal (and the subsequent polices built on top of it) as enormous political accomplishments, but also argues that changes in our economy and flaws in the original design have created a series of policies unable to properly meet the economic realities Americans are facing.
Riemer proposes a new vision that draws on lessons from history, building on certain past successes while also charting a new direction for American policy. Spotlight recently spoke with Riemer about his book and his proposed solutions for addressing poverty and creating opportunity. The conversation has been lightly edited for length and clarity.
Your book frames the New Deal as an enormous change in the way the government interacted with the economy and society. Can you start by describing the nature of these changes and how you categorize them?
Prior to the New Deal, the federal government didn’t do very much to provide economic security or regulate the markets. Then the Great Depression hit and the magnitude of the damage done was extraordinary.
As I write in the book, when FDR took office, “nearly 25% of U.S. workers were unemployed” and from 1929 to 1933, national income dropped by roughly 50% and real GDP by more than 45%.
When FDR was campaigning, the New Deal was just an abstract slogan. Despite a lack of planning and details, after he took office law after law and program after program were instituted putting the federal government in a position it never had been before.
Even if there wasn’t a clear plan in place before he took office, there ended up being a coherent structure of the New Deal which I divide into four main clusters.
First, are broad-based economic security programs where benefits are available regardless of income to people through programs like unemployment insurance and Social Security. Second are means-tested welfare programs designed to catch people who fall through the cracks of more broad-based programs and where people have to be poor or near poor to qualify. The third cluster is market regulations designed to create stability within markets and prevent businesses and others from imposing costs on society. The idea here is not about picking winners and losers but setting up rules of the road for sectors like banking or utilities. And the final cluster is market manipulation where you subsidize or incentivize certain types of activities such as trying to ensure farmers got good prices on products.
And your thesis is that these clusters shaped not only the New Deal but subsequent policymaking.
The original New Deal largely stopped after 1938 as Washington focused on international affairs, but the house that FDR built served as the framework for expansion beginning again in the 1950’s and all the way through to Obamacare as part of what I call the New Deal 2.0.
You had new broad-based economic programs like disability insurance and Medicare; new means-tested programs like food stamps and Medicaid; new market regulations like the Clean Air Act and Dodd Frank; and an increasingly complex series of subsidies through the tax code.
The system worked pretty well up through the 1970s as more people got jobs and poverty continued to fall dramatically. Unfortunately, since then we have more or less plateaued or in some cases gone backwards.
So what changed?
The economy that the New Deal was interacting with from WWII until 1970s was an abnormal economy. You had America controlling an enormous portion of the world’s GDP, consumption, income, and wealth. It’s an overstatement but not a big one to say America owned the world economy. Europe and Japan were still in recovery, China wasn’t producing goods.
Now the economy has returned to a kind of normalcy where Europe has roared back and other countries that always had significant potential are now major players on the world stage.
Policy clusters initially created during the New Deal and subsequently expanded a lot haven’t fundamentally changed. It’s a structure capable of producing good results when we ruled the world, but not in a world where technology is highly disruptive and competition is much stronger. The structures are not capable of dealing with the hazards and risks of this new world we are a part of.
We can either keep tinkering with house that FDR built, or we can, as FDR put it, have a complete change of concept of the functions and limits of the federal government. My argument is we need to do again what FDR did in what I refer to as the New Deal 3.0
What does this New Deal 3.0 consist of?
First, we should greatly improve our broad-based economic supports to ensure greater security. We should do this to such a great extent that we can wind down means-tested programs. One policy cluster gets bigger and stronger and better while the other shrinks and perhaps disappears.
Then, we need to improve the market regulatory system to address harm to the environment and mitigate climate change, protect workers from the epidemic of wage theft, and better guard against another Great Recession. We want a system where people succeed not from exploitation or forming cartels, but where producers make money because they make products that are efficient. This would also involve a move away from picking winners and losers and winding down policies that promote market manipulation.
In essence, you have four clusters of polices wound down to two with broad-based security guarantees and market regulations getting bigger and stronger.
Can you talk a little more about the specific polices around poverty and opportunity that you have in mind?
The improvements related to poverty are mostly within the first cluster and are derived through empirical research. Back in the 1990s, I and others worked with the Urban Institute and MDRC to pilot a program in Milwaukee called New Hope that looked at what would happen if you guaranteed participants access to a wage-paying community service job, a larger EITC, health insurance and subsidized childcare. Those four things led to enormous improvements across the board for participants including a nearly twofold increase in marriage rates.
In my book I lay out an even broader restructuring of economic security programs with fourteen key elements including a 40-hour per week wage-paying job; raising the minimum wage and then adjusting it for inflation; guaranteed paid leave and childcare; and strengthening collective bargaining.
If we do all that, I think we can push the poverty rate down to a residual 2-3%.
Do you see the specific policies you lay out as realistic in the near-term or more as something to aspire towards?
What I’m trying to do in this book is say let’s not just throw pieces of the puzzle down on the table and think they will come together. Let’s have a vision of where we want to get to and head towards it.
The history of our country is one of incremental pragmatism. On the other hand, it’s clear that big fundamental changes in our system are possible at key points in history. I think we can move towards a bold vision but recognize pragmatic steps for getting there.
We’re in the middle of a campaign with lots of new policy proposals being presented. Do you see examples of candidates or politician’s writ large advocating for the kind of vision you outline here?
I do. I think there are a lot of good ideas even in cases where I don’t agree with all the details. There was a discussion at the last debate around a federal jobs guarantee (which is not the language I’d use since I think it should be a guarantee of 40 hours of paid work rather than a specific job) but they were focused around a proposal that is central to my vision.
And even on the Republican side, I’m not a big fan of the recent tax bill, but the idea of expanding the child tax credit is very close to what I’ve bene pushing for with the EITC.
So a lot of these things are in the wind, in the works, and in the debates—and that’s exactly what I’m urging.
David Riemer has worked on creating public policy change at both the state and national level. A graduate of Harvard Law School, he has held legal, budget, and policymaking positions with a former Mayor of Milwaukee, two former governors of Wisconsin, and the late Senator Edward Kennedy. His new book Putting Government in Its Place: The Case for a New Deal 3.0 is available through HenschelHAUS Books.