March 11, 2021

There is no question that democrats and republicans share the Build Back Better objectives. Yet, they do not necessarily agree on what the best way is to achieve these objectives. In fact ,our discussion of the three episodes that at different points in times, even administrations from the same political party have adopted vastly different economic policies as depicted by the incentive structure their policies generated. The 1993-2000 period triangulation strategy was a brilliant strategy. The administration coopted some of the elements of the economic proposals of the opposition party. However , in these partisan times that will be difficult to do. It is exceedingly difficult to admit that sometimes the other side may have a good idea. It is even more difficult to incorporate the other side good ideas into their own policy initiatives. This is too bad ; all the markets care for is good policies that lead to an expanding pie. Sadly, politics seems to be getting on the way of adopting the other side good policies. The ideal way to improve the distribution of income is enact polices that increase incomes rise faster than wealth , all parties are better off with labor gaining the most and the distribution of income improves. Although it is hard to admit, sometimes the other side has good ideas and crossing the isle or plagiarizing or coopting their policies makes a lot of sense. Sadly, in this age of hyper partisanship we do not see this happening. The unemployment rate peaked during the fourth quarter of 2009 and began to decline from that point onward. The rate of decline paused around the 2015-16 period. Either by serendipity or because of the change in economic policies, the unemployment rate in 2017 resumed its secular descend to 3.5%, a level not seen in decades. More importantly , the decline was not accompanied by an overheating economy and or rising inflationary pressures as the Phillips Curve predicted. Instead, something that had not been seen in decades happened, the low unemployment rate environment created a range of benefits that broadened prosperity, i.e., reduced income inequality: Poverty declined, and wages rose as businesses competed to hire scarce workers. Minorites benefitted greatly. Something similar happened during triangulation and workfare period of the late 1990’s. The unemployment rate was low, the economy expanded at a rapid clip and people were being lifted out of poverty. . The 2010-16 period was the mirror image of the 1983-89 period as far as tax rates and regulation goes. Yet, in spite of all the redistribution policies , the inequality worsened and all we got was the “New Normal”. Which according to the data presented here that is not the way to go.

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