Beginning in the Carter years, the Democrats later called neoliberals supported the deregulation of infrastructure industries that the New Deal had regulated, like airlines, trucking and electricity, a sector in which deregulation resulted in California blackouts and the Enron scandal. Neoliberals teamed up with conservatives to persuade Bill Clinton to go along with the Republican Congress’s dismantling of New Deal-era financial regulations, a move that contributed to the cancerous growth of Wall Street and the resulting global economic collapse. As Asian mercantilist nations like Japan and then China rigged their domestic markets while enjoying free access to the U.S. market, neoliberal Democrats either turned a blind eye to the foreign mercantilist assault on American manufacturing or claimed that it marked the beneficial transition from an industrial economy to a “knowledge economy.” While Congress allowed inflation to slash the minimum wage and while corporations smashed unions, neoliberals chattered about sending everybody to college so they could work in the high-wage “knowledge jobs” of the future. Finally, many (not all) neoliberals agreed with conservatives that entitlements like Social Security were too expensive, and that it was more efficient to cut benefits for the middle class in order to expand benefits for the very poor. […]
Instead of the updated Rooseveltonomics that America needs, Obama’s team offers warmed-over Rubinomics from the 1990s. Consider the priorities of the Obama administration: the environment, healthcare and education. Why these priorities, as opposed to others, like employment, high wages and manufacturing? The answer is that these three goals co-opt the activist left while fitting neatly into a neoliberal narrative that could as easily have been told in 1999 as in 2009. The story is this: New Dealers and Keynesians are wrong to think that industrial capitalism is permanently and inherently prone to self-destruction, if left to itself. Except in hundred-year disasters, the market economy is basically sound and self-correcting. Government can, however, help the market indirectly, by providing these three public goods, which, thanks to “market failures,” the private sector will not provide.