Capitol Idea: The Better Path to Prosperity

Republican Rep. Paul Ryan calls his budget plan “A Path To Prosperity.” Ryan’s proposal calls for big cuts to Medicare, Medicaid, and other key federal programs, all while carving out more room for even deeper tax cuts for the wealthiest Americans.

Last week, as House Republicans were gearing up to approve taking the nation down this “Path To Prosperity,” a top official elsewhere in Washington was busy mapping out his own path. He says that on this alternate path, “decent unemployment benefits are foundational.” He also calls for “strong social safety nets” and progressive taxation. Moreover, “collective bargaining … is very important, especially in an environment of stagnation of real wages.” You can see that on this road we’re going in an entirely opposite direction than the one the Washington GOP would have us travel.

Just who is proposing this other path? Is it Nancy Pelosi? Harry Reid? Dennis Kucinich? Some other “socialist” Democrat?

None of the above. The proponent of this other plan isn’t even an American. He is Dominique Strauss-Kahn, and as the executive director of the International Monetary Fund (IMF), he’s not exactly your typical liberal. As the head of the IMF, Strauss-Kahn is the world’s banker-in-chief. He spoke recently at a session on the global unemployment crisis at the Brookings Institution in Washington.

“Just as we managed to tame inflation in the ’80s, this decade should be the decade of employment,” Strauss-Kahn says. “What must be done for this? We all know what has to be done. It’s politically difficult, it’s costly, but we know what’s on the agenda.”

Nowhere on that agenda are tax cuts, especially for the wealthiest taxpayers, privatization of basic programs like Medicare or Social Security, or any of the economic prescriptions favored by Republicans in Washington.

Indeed, one of the biggest problems that Strauss-Kahn sees is that of income inequality. “So, there is no ambiguity. We need policy to reduce inequality, and to ensure a fairer distribution of opportunity and resources,” he says. Economic growth, so hallowed by American conservatives, “alone is not enough,” Strauss-Kahn declares.

So why would Strauss-Kahn, whose job it is to look out for the world’s biggest financial and banking interests, say such a thing? When it comes to this, he is no bleeding heart. It’s all in self-interest, and he admits it. “IMF research suggests that inequality can make countries more prone to financial crisis,” he says. “We have some very interesting results on this. At the same time, some other IMF research shows that sustainable growth, over time, is associated with more equal income distribution.”

Nations should establish policies, Strauss-Kahn says, that “allows fair sharing of both the gains and the pains.” A government could establish these policies out of a sense of fair play, or compassion, what Strauss-Kahn calls the “philosophical question,” but from “the IMF’s point of view, that’s not the point,” he says. “We need it because it’s conditioned to the sustainability of growth.”

At its core, the Strauss-Kahn/IMF plan isn’t based on some technical theory, or macroeconomic strategy. “A few thousand years ago, Aristotle wrote that the best partnership in the state is the one which operates through the middle people,” Strauss-Kahn says. “Those states where the middle element is large have every chance of having a well-run constitution, he said. That was true at the time of Aristotle, it was true at the time of Keynes, it’s true today. Stability depends a lot on a strong middle class that can propel demand.”

Unlike the American GOP, Strauss-Kahn hasn’t forgotten that over the long haul, the economy needs a strong middle class to continue to grow. If given a choice, I’ll follow the Strauss-Kahn path to prosperity, thank you very much.
Scott Nance has covered Congress and the federal government for more than a decade. Capitol Idea is his regular column from Washington. This article was first published as The Better Path to Prosperity on Blogcritics.

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