Why the Left Stopped Caring About Production and What That Costs America

The Democratic Party increasingly assumes the economy runs on autopilot, weakening its ability to articulate a serious vision for American economic strength.

I recently read 107 Days, former Vice President Kamala Harris’s memoir about her 2024 presidential campaign. It is a fascinating book that I would recommend everyone read.

One thing that struck me was the Harris campaign’s overarching focus on the consumption side of the economy rather than the production side. To be sure, there should be no question about Harris’s deep commitment to and concern for the most vulnerable among us. And that concern leads her to lay out a laundry list, much of it now standard in the Democratic playbook, of consumption-oriented and redistributive policies, including subsidies for housing, transit, college, and food; expanded social insurance; and, of course, breaking up companies to lower prices. Even her discussion of the need for more U.S. manufacturing was framed primarily in terms of helping disadvantaged people secure better jobs closer to home.

By now, it should be clear that the Democratic Party has quietly adopted one of the most consequential assumptions in modern politics: The economy runs on autopilot. It generates increased production more or less automatically. The government’s job is not to build it, strengthen it, or make it more competitive globally, but to redistribute what it generates and regulate how it behaves. Growth is assumed. Distribution is the question.

Democrats Once Cared About Production

But it wasn’t always this way. The Democratic Party has a long and proud tradition of championing economic growth and the production system while also advancing the interests of average working Americans.

In 1938, a group of Harvard and Tufts economics graduate students published a book titled An Economic Program for American Democracy. They wrote, “The essence of prosperity, whether it be privately or publicly induced, is an increasing volume of expenditure followed by an enlarged output of real goods and services.” FDR called the book “a bible of the New Dealers.”

JFK championed a tax credit for business investments in machinery and equipment and accelerated depreciation rules to spur capital investment. He also proposed across-the-board income tax cuts, arguing that lower rates would boost growth. James Tobin, a member of Kennedy’s Council of Economic Advisers, recalled that “growth was a good word, indeed the good word.”

Jimmy Carter led major deregulation of airlines, trucking, railroads, banking, and natural gas to spur competition and growth. He also signed a capital gains tax cut in 1978. And with America’s competitive position slipping relative to Japan, Carter launched a Domestic Policy Review on Industrial Innovation in 1978. The review concluded in 1979 with a series of Industrial Innovation Initiatives to increase knowledge transfer, strengthen the patent system, improve regulation to support innovation, and maintain a federal climate conducive to technological strength. It was one of the earlier explicit federal acknowledgments that U.S. industrial competitiveness was eroding.

Bill Clinton pushed deficit reduction to lower real interest rates and free up capital, signed a capital gains tax cut, and supported increased federal R&D funding to promote growth and competitiveness. Under the leadership of White House adviser Ira Magaziner, the Clinton administration also promoted the Internet as a growth engine.

President Obama supported increased R&D funding for the National Institutes of Health and the Department of Energy, provided ARPA-E’s first funding, and established the Advanced Manufacturing Partnership. He also pushed repeatedly to make the R&D tax credit permanent. And, of course, his administration launched the National Network for Manufacturing Innovation, based on an ITIF proposal.

I doubt any of these presidents could win a Democratic primary today with these positions. To see the change, consider the evolution of two leading Democratic economic policy thinkers.

In 1988, Robert Reich, who later served as Clinton’s secretary of labor, argued that “the only becoming-richer strategy is to invest in our future productivity.” But by 2020, in his book The System, he was counseling America’s leaders to “forget the standard economic goals of higher growth and greater efficiency. The issue is who benefits from more growth and efficiency.”

Gene Sperling, the first person to serve as director of the National Economic Council under two presidents—Bill Clinton and Barack Obama—underwent a similar conversion. When Sperling was director of economic policy for the Clinton campaign in 1992, he advocated a bold investment agenda to increase the economic growth rate. By 2005, he was arguing that “economic dignity should be seen as one of three defining progressive values underlying our policy agenda.” Growth, however, remained the main objective—until 2020, when he determined that economic dignity “should be the central organizing goal of economic policy” and that GDP should not be the “main end goal of economic policy.”

This shift from prioritizing production to ignoring it in favor of consumption and distribution was not limited to two former administration officials. It describes the trajectory of many Democratic elected officials and pundits.

How Growth Became Someone Else’s Problem

So what happened?

One reason is that the postwar neoclassical synthesis “solved” economic growth theoretically, essentially making growth look self-propelling. In this standard model, capital accumulates, labor and capital combine, and exogenous technological progress boosts productivity. Markets allocate resources. The economy expands. Government manages demand at the margins through fiscal and monetary policy. This framework became so deeply embedded in mainstream economics—and in the educated class that absorbed it—that it stopped being recognized as an assumption at all. Democrats absorbed this framework and built their politics on top of it. The pie gets made automatically. Government decides how it’s sliced. That becomes nearly the entire program, except for a nod to Keynesian stimulus when the economy enters a recession.

But while that helps explain the broader lack of a growth agenda in American politics, it cannot fully explain the Democrats’ radical shift toward consumption-side economics over the past decade. That shift stems partly from the left’s critique of neoliberal economics, which it rightly attacks for its excesses—tax cuts for the rich, the financialization of the economy, and opposition to higher minimum wages, among other things. But rather than adopt a new production-oriented growth framework, much of the left has rejected growth as a central goal altogether and defaulted to consumption economics.

Underpinning this turn away from production is the widely held belief that productivity gains no longer benefit workers.

It is a commonly accepted myth. Robert Reich argued, “Most people’s incomes haven’t risen for four decades,” and “corporate profits reached record levels.” In 2019, Nobel Prize–winning economist Joseph Stiglitz claimed, “The bottom 90 percent has basically seen their incomes stagnate.” Biden economic adviser Heather Boushey has written, “A rising tide no longer lifts all—or even most—boats.”

These assertions are treated as fact.

If it were true that economic growth no longer benefited most workers, it would indeed be a serious charge against production economics. But the categorical claim that most Americans’ incomes have not risen is dead wrong. It rests heavily on studies purporting to show a vast divergence between productivity growth and labor income growth.

These studies are flawed in several important ways. First, given the increased share of labor income consisting of nonwage compensation, including health care and retirement benefits, the more accurate measure is total compensation, not just wages. The Federal Reserve Bank of St. Louis found that, when total compensation was adjusted using personal consumption expenditures (PCE) measures of inflation, real compensation growth tracked productivity growth very closely from 1995 to 2006. The Congressional Budget Office has also found that real average household income rose substantially across the income distribution between 1979 and 2018.

Once Democrats bought into that, it made sense to abandon the production side of the economy. After all, more production just helped the rich. Of course, this was always wrong and always based on faulty analysis, as the CBO, ITIF, and many others have pointed out.

When the consumptionists need to put a patina of growth around their economic agenda, they claim that simply spending money on non-wealthy Americans spurs growth. No, it doesn’t. It primarily spurs consumption. During a recession, that additional spending may temporarily boost growth, but it is not a long-term growth strategy.

The Coalition Changed, Too

Policy shifts usually stem from changes in ideas and politics. The shift in the Democratic coalition also plays a role. As Michael Lind and Ruy Teixeira have documented extensively, the Democratic Party is no longer primarily a working-class party. Many working-class voters now support Donald Trump. It is increasingly the party of the credentialed professional-managerial class: academics, lawyers, nonprofit professionals, government administrators, social workers, health care bureaucrats, and so on.

This class has a distinctive relationship to the economy. Its members do not, by and large, make things. They generally do not work in industries that compete internationally. Their income flows from institutions, such as universities, hospitals, law firms, and government agencies, that are largely insulated from international competition and the production of physical goods. Many benefit quite directly from increased government spending.

So naturally, they don’t think about growth, productivity, and industrial capacity as urgent political priorities. Those priorities feel distant, or even threatening, associated with the corporations and developers they regulate rather than with the public goods they manage. Their material interests are served by redistribution, regulation, and the expansion of the administrative state. Not by a more dynamic production system.

Economic growth has become associated with the interests of those they regulate. Factories pollute. Developers displace. Corporations exploit. Growth has become a problem to be managed, regulated, and even reversed rather than a goal to be pursued. The very concept of national economic competitiveness has begun to sound vaguely right-wing, something that trades the interests of disadvantaged groups for corporate profits.

The Cost of Economic Autopilot

This has produced an intellectual tragedy that threatens America’s future. It has left the Democratic Party unable to articulate a serious affirmative vision for American economic strength. The costs are not abstract: A country that underinvests in innovation, capital equipment, infrastructure, workforce skills, and trade-exposed industries risks slower productivity and wage growth, greater import dependence, a weaker defense industrial base, and a diminished ability to compete with China. Say what you want about Trump; there’s plenty to say. But he at least says he wants America to have the strongest economy in the world. When was the last time you heard a Democratic leader say this?

After a long and noble tradition stretching from the New Deal through Obama, the party of national economic development became the party of government services and subsidies. Both have their place. But only one of them keeps the lights on.

The uncomfortable truth is this: The Hamiltonian tradition—using state power to build national productive capacity, invest in strategic industries, and compete seriously with rival powers—has been largely abandoned by the party that believes in active government. Alas, that tradition now has no natural political home. The Trump administration has also gutted a wide array of growth policies, further weakening America’s position in the contest that will define this century.

Democrats don’t have to choose between fairness and production. They need an agenda that treats investment and productivity as the foundation of broadly shared prosperity. The autopilot assumption was always intellectually lazy. It is now actively dangerous.