This is, in theory, a very good week for Democrats and liberals, starting with the Kansas abortion referendum and ending with Kirsten Sinema's agreement to what is left of the Build Back Better package. Yet two stories on the front page of today's New York Times show just how hard--and perhaps impossible--it is to reverse the economic and political trends of the last 40 years, beginning with Ronald Reagan's direct attack on the principles of the New Deal and continuing through three subsequent Democratic and three subsequent Republican administrations.
The first of these stories, by Sheryl Gay Stolberg and Rebecca Robbins, deals with the measure allowing Medicare to negotiate the prices of prescription drugs. It explains that Democrats have been pushing for this measure, without success, since the Clinton era. Now this measure, it reports, does include one critical provision: it will limit what Medicare patients (presumably those under Medicare part D), have to pay out of pocket for drugs to just $2000 a year. It does not make clear where the rest of the price of their drugs will come from. Far down the story, however, I found some fine print about the negotiation provision which casts some very real doubt on how much it is going to mean. First of all, no negotiated prices will take effect for four years from now, in 2026--by which time we might easily have a Republican Congress and a Republican president who aren't interested in implementing the change. That's four years for the massive drug industry lobbying army (which, the story informs us, has cost about $250 million a year since 1998) to find ways around the measure. Even then, in 2026, only a maximum of ten drugs can be selected for negotiation, with more to follow later. And Medicare won't be able to negotiate the prices of new drugs--only those that have been on the market for a certain (unstated) period of time, but whose patents have not yet expired. The new law will do nothing about what I regard as the biggest problem with our drug industry: the incentive to develop drugs that alleviate chronic conditions, rather than desperately needed new antibiotics, for instance, which don't offer much profit opportunity. In short, this new provision will have no impact for four years, and, it looks to me, only a marginal impact--at best--after that.
The second story, by Jeanna Smialek and Jim Tankersley, is even more depressing to me. Yesterday's remarkable jobs report--showing that unemployment is down to a 53-year low of 3.5 percent, with pay up 5.2 percent in a year--is, it explains, bad news from the standpoint of the Federal Reserve's fight against inflation. It explains this very clearly in two paragraphs:
"Fed officials have been waiting for signs that the economy, and particularly the job market, is slowing. They hope that employers’ voracious need for workers will come into balance with the supply of available applicants, because that would take pressure off wages, in turn paving the way for businesses like restaurants, hotels and retailers to temper their price increases.
"The moderation has remained elusive, and that could keep central bankers raising interest rates rapidly in an effort to cool down the economy and restrain the fastest inflation in four decades. As the Fed adjusts policy aggressively, it could increase the risk that the economy tips into a recession, instead of slowing gently into the so-called soft landing that central bankers have been trying to engineer."
For 50 years the United States has had a big, increasing problem in inequality. While the real wages of the lower half of the population have grown very little or not at all, the rich have gotten much richer. The obvious solution, and the one that the nation tried with great success from the late 1930s until the 1980s, is to pay low-wage workers much more. That means that those of us who already have money will indeed have to pay a little more for goods and services. That's the simplest way for the nation to redistribute some income and undo some inequality. Yet the story makes clear that the Fed will indeed plunge us into a recession--as it did under Reagan in 1981--if that turns out to be necessary to halt increases in wages and prices. Our economic system, it appears, depends on cheap labor, which is another way of saying that it depends on maintaining, not lessening, inequality. Nor is it even clear that higher wages are principally to blame for our very high inflation. While wages have risen 5%, inflation is at 9%, much of it fueled by much higher energy prices and housing costs which have nothing to do with the price of labor.
On another front, I did not realize, and I am very surprised to learn, that the bill the Democrats have been working on would actually have closed the "carried interest" loophole that so sharply reduces the tax burden of those who work in hedge funds and private equity firms. Chuck Schumer, whose constituency includes Wall Street, has loyally defended it for decades. But have no fear--Kristen Sinema of Arizona insisted that that change be dropped to gain her support for the whole measure. That guarantees more economic and political power for our financial interests. [Update, August 8]: And today the Times describes, in great detail, how Joe Manchin insisted not only on the immediate issuance of leases for more drilling for fossil fuel both offshore and on public lands, but secured fast-track approval for a new gas pipeline through West Virginia. Pipeline interests have donated large sums both to Manchin's campaign and to Chuck Schumer's. How we are going to expand and reduce fossil fuel usage at the same time is not clear.
I am an historian who believes that the historian's task is to lay out what happened--not what should have happened, and not the best spin we can put on what happened from a particular point of view. That should also be the job of journalists--and the four journalists who wrote these stories actually did a pretty good job for anyone who takes the trouble to read what they said to the end. When I began writing these pieces 18 years ago, I still believed things might fundamentally change. That belief peaked in the late fall of 2008--but by mid-2010, as the archive shows, I realized that they would not. I did not realize that six years later, the election of Donald Trump would signal the collapse of the US political system as I had known it--and Trump, I just discovered, is leading both Biden and Harris by several percentage points in almost every major poll. Democratic administrations now take two whole sessions of Congress to put through reforms that sound good but have only marginal impact. Meanwhile, the basic rhythm of American politics periodically returns the Republicans to power, and even marginal progress comes to a halt. I think I will enjoy the rest of my life more if I can truly accept that, and all the grief that goes with it.