A historian’s advice to the Democrats trying to build stuff

These days, political leaders and commentators talk often about “industrial policy” and stimulating supply in the economy, rather than just demand. Whether it’s to spur new construction to tackle the nation’s affordable housing crisis, or decarbonize the country through clean energy tax credits, or pour subsidies into a nascent US microchip sector, policymakers have paid a lot more attention to the idea of government playing a more proactive role in private-sector development.

But central to the debate over this idea known as “supply-side liberalism” is whether the government should attempt to do more on top of these efforts to stimulate businesses, like leveraging public subsidies to strengthen unions and environmental protections, or helping women and people of color access new jobs and opportunities.

Critics of this latter approach say a government that tries to do too much at once will inevitably do nothing at all, and that if we want a public sector that can actually deliver at scale, we’ll need to cut red tape, stay laser-focused on production, and resist pressure from clamoring interest groups. Others say bringing interest groups along and fighting for progressive goals while boosting industrial production is essential. “The answer is not a liberalism that builds, but a liberalism that builds power,” argued American Prospect editor David Dayen earlier this year, in an essay defending a more multifaceted approach, calling them “mutually reinforcing.” Brent Cebul, a professor of history at the University of Pennsylvania, offers some new perspective to this often intractable-seeming debate. The author of Illusions of Progress, a book that traces earlier iterations of “supply-side liberalism” throughout the 20th century, Cebul argues that a government hoping to march forward on economic objectives under the belief it can circle back later to tackle social problems should expect to find those social problems in much worse shape. He thinks the key to doing both at once involves ensuring everyone can claim some semblance of victory.

Senior policy reporter Rachel Cohen talked with Cebul about his research and how Democrats interested in leveraging markets might avoid some of the mistakes of the past. Their conversation has been lightly edited and condensed for clarity.

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Rachel Cohen: Your book focuses on something you call “supply-side liberalism” — an idea you trace back to the 1930s. Can you briefly explain what you mean by the term?

Brent Cebul: So “supply-side conservatism” is about cutting taxes and regulations in hopes that economic growth will trickle down. In broad strokes what I mean by “supply-side liberalism” is structuring markets to deliver social goods rather than the state delivering them directly itself. In the book, I walk through a handful of different ways in which, beginning in the New Deal, liberals sought to stimulate markets to ensure market activity.

Rachel Cohen: Is that the same thing as “neoliberalism,” which people typically trace back to the 1970s? Or is it an earlier descendant?

Brent Cebul: So the way I think about its relationship to neoliberalism is the supply-side liberalism I write about was always embedded in a broader set of social aspirations that New Dealers and mid-century liberals pursued, that contained some more universal-style benefits, like Social Security. Eventually, in the 1960s, we get Medicare and Medicaid. Part of what I try to show in the book is that by the 1970s and 1980s, in the wake of the 1970s’ fiscal and political crises, a new generation of Democrats start using some of these same supply-side ideas to basically shear off some of the more progressive universal direct budget items.

The case that I use in the 1990s, in particular, is welfare. Bill Clinton replaces Aid to Families with Dependent Children, and takes the same money that would have gone to support mothers to instead subsidize businesses that hire people who are coming off welfare rolls. Part of what I try to show is that the logic and tools of Clinton’s policy are similar to the supply-side liberalism of the earlier 20th century, but the tools are turned back on the liberal state itself in an effort to drain the politics out of welfare.

Rachel Cohen: Today we have an emergent intellectual movement calling themselves supply-side liberals, or supply-side progressives, organizing around what they call an “abundance agenda.” Led by people like Vox co-founder Ezra Klein, they’re calling for more housing, transit, more stuff in general, and say they want to help make democratic governments more effective and nimble. Do you see this movement as part of the same supply-side lineage you trace?

Brent Cebul: I do think that they see a similar sort of market-sculpting role for government to play, and I think there’s a similar developmental pragmatism that defines both of these periods, which is making the best of what the constitutional federal structure will offer.

I think in both cases, there’s much to commend that outlook for in terms of recognizing the ways in which the government can actually play a remarkably innovative role in creating new markets. And what I think they recognize is that there are vast sectors of business that, despite all the ideological pronunciations against government and regulation, are absolutely happy to take subsidies. I think that’s actually a really crucial insight for liberalism in general, and just the rediscovery of the potential for partnerships between the liberal state and business is really promising.

Rachel Cohen: What lessons or historical advice would you give to this modern-day supply-side liberal movement? Are there any mistakes you think they should work to avoid or be mindful of?

Brent Cebul: Where they risk repeating the same kinds of mistakes as liberals going back to the New Deal is if they are less willing to impose certain types of progressive regulations along with those subsidies. The classic case recently is the resistance to using green subsidies, electric car subsidies, to stimulate union employment. My historical assumption is basically that if the subsidies are good enough, businesses will go along with that. And I think there’s a liberal tendency to sort of negotiate down before you’ve even had the hard conversation with the businesspeople or your opposition. And so the historical lesson from this is there’s been in the past an unwillingness to really include protections for minority constituencies in communities all across the country.

I think liberals sell themselves short if they don’t demand more. One example I talk about at the end of my book is the number of businesses like Steris that received venture capital startup funds from the federal government and have now done things like tax inversions.

Rachel Cohen: Can you say more about what you mean by demanding more?

Brent Cebul: One of the things that you often saw in the 1980s and ’90s with the neoliberal generation of Democrats is this sort of hard-nosed language around economic growth, that it’s more important than social values at the moment, and once we get our economic house in order then we’ll be able to deal with these downstream social issues. And surprise, it turns out they’re completely inextricable from each other. And if you only focus on the economic, then you’re largely going to entrench and worsen the social issues.

So they just have to be dealt with at the same time, and what I would say is that subsidizing economic growth actually gives the state leverage to pursue some of the social goals if they choose to take advantage of it. I think that’s precisely one of the things that the Roosevelt administration bumbled its way into. I don’t think it’s an accident that they were able to get a whole lot of their social programs through in the 1930s at a moment when all of these local Chambers of Commerce were also feeding at the trough of federal subsidies.

Rachel Cohen: Your book is called Illusions of Progress. Can you talk about the title?

Brent Cebul: The illusion is that by putting businesspeople in the cockpit of momentous federal programs that you’re going to be able to deliver broader gains for the poor and the racially and socially marginalized.

Rachel Cohen: You describe how Black Americans started to demand “administrative enfranchisement” in new federal programs. Can you talk briefly about what happened?

Brent Cebul: Cities are so dependent on property values for property taxation, which is their lifeblood. So very early in the New Deal, urban governments started using the Public Works Administration, the Works Progress Administration, and the housing programs as an excuse to clear out what they viewed as “decadent communities” — meaning Black communities that didn’t have very high property values and were perceived as being a sort of net drain on city services. So under the aegis of the New Deal, and its subsidized labor programs, all these local governments started clearing Black neighborhoods, and as early as 1937 the NAACP and local Black political leaders are calling for a seat at the table to help determine how these really momentous federal programs are being handled at the local level.

What I tried to show is that protesting urban renewal was central to what the civil rights movement was up to, no matter where you look.

Rachel Cohen: So how do we go from that pursuit of “administrative enfranchisement” to where we are today, where it feels like powerful interests and lobbyists so often monopolize this community input process?

Brent Cebul: What happens in the 1960s is totally fascinating, because the community action programs in the War on Poverty had this incredibly radical idea, which is what they call “maximum feasible participation” — that they’re going to allow local community groups to apply for federal community development funds, to do a whole range of things from opening community centers, to job training programs, to even, you know, opening a McDonald’s franchise in one case. But then marginalized community members start using it to protest local business, and people’s domination of the local political scene, and almost immediately the Lyndon Johnson administration moves to bring local businesspeople back in to lead these very programs. And so what I tried to show in the book is that the actual maximum feasible participation principle gets kneecapped really quickly.

But the participatory principle itself sort of retains this sort of curious half-life, really up until today, where the federal government, local governments, and businesspeople learn that they need to have something that looks and feels like participation for marginalized people, but by the 1980s it’s really about managing their participation — getting them to buy in on various austerity measures by choosing where the cuts are going to be made, that sort of thing. So to your point, more mobilized interests have since been able to capitalize on those same practices and to actually implement their vision or block programs that they might otherwise not have been able to do without this “participation.”

Rachel Cohen: After studying these periods, do you have any thoughts on how we can better bring in community participation or administrative enfranchisement without getting ensnared in the kind of co-optive politics and NIMBYism we see today?

Brent Cebul: One of the things that I think Lyndon Johnson failed to do in the 1960s was to anticipate the blowback he was going to get for the community action program. As a result, he didn’t realize that it would have benefited him to buy off the local businesspeople by having a commensurate program for them. So one of the things I would urge modern-day supply-side liberals to do is to have as capacious a range of potential beneficiaries of any given program as possible, and to make sure that you’re being careful that there isn’t, you know, jealousy structured by the programs.

There’s obviously going to be competition and jealousy anyway, and there are going to be normative claims about who should and shouldn’t be getting federal aid and there are going to be scandals, but I think you could turn the temperature down on that if you’re willing to build a big enough bill and a big enough boat.