Lessons in liberalism from New York's left turn

New York's new mayor, Bill de Blasio, promises to tackle the city's growing inequality by taxing the ultra-rich. Australian politicians should take note of the huge support for his liberal agenda.

Bill de Blasio is the first Democrat to be elected Mayor of New York since 1994. But what is most significant about his election is that de Blasio is an unashamed progressive – or in the old lexicon, a liberal.

To be described as a liberal in American politics is an insult.  For most of his presidency, Barack Obama has been called many things. But the most persistent accusation against him by Republicans – especially Tea Party supporters – has been that he is a liberal with a secret plan to transform America into a socialist republic.

Obama has, of course, rejected the 'closet socialist' nonsense. But he has also disavowed the dreaded liberal label as Bill Clinton did before him. The Democratic Party has been a centrist party for decades. In American terms, that means it has been a party of small government.

Not since Lyndon Johnson’s presidency has the party supported programs designed to tackle inequality and poverty. Johnson’s war on poverty, for instance, has long been forgotten.

The fact is that apart from Obama’s troubled healthcare reforms, there is nothing in his record to support the view that he is anything more than a centrist Democrat.

During his presidency, inequality in America has become more pronounced. The number of Americans living in poverty has increased. And while that in part is due to the GFC and its recessionary aftermath, that’s not the whole story.

In the four years of the Obama presidency, 95 per cent of the wealth created has gone to the wealthiest one per cent of Americans. They now own 33 per cent of stocks and they have therefore been the major beneficiaries of the 2013 stockmarket boom.

Meanwhile, unemployment, while falling gradually, is still around the 7 per cent mark. Millions of Americans have joined what Barack Obama has described as the ‘working poor’.

Few economists believe the US will return to low unemployment levels any time soon. Fewer still believe that real incomes for America’s lower middle classes are going to go anywhere but backwards in the foreseeable future.

Into this environment comes Bill de Blasio with an agenda for his city that would have made old Lyndon Johnson proud. De Blasio, for instance, intends to significantly increase city taxes on earnings of more than $500,000 to fund a universal pre-kindergarten program.

He says he will force private developers to include affordable housing in their projects and he says he will stop the trend towards charter schools and stop the closure of so-called failing schools.

There’s more. But most importantly, de Blasio believes and consistently proclaims government has a crucial role to play in meeting the challenge of increasing inequality. In that sense, he is the first liberal Democrat to be elected to a major office in decades.

Of course, New York is not America – and no New York Mayor has gone on to hold a major national office for a century or more. But De Blasio has arrived at a crucial time in American politics when the Republican Party is a battleground between Tea Party extremists and moderates, who believe the Tea Party crowd are seriously damaging the party’s chances of winning control of both the House and the Senate at this year’s mid-term elections.

At the same time, de Blasio is having an impact on the Democratic Party. Barack Obama has recently pledged that the number one challenge for the rest of his presidency will be to tackle America’s growing inequality, though it remains unclear how he intends to do that.

But at least the debate in America is happening. Moderate Republicans as well as Democrats are starting to recognise that inequality is a threat to America’s social and economic well-being. 

The possibility of tax increases on the wealthy is no longer a taboo subject, although this is not to say that Republicans and even some Democrats are suddenly open to the idea of tax increases to fund government programs that might try and tackle inequality and poverty.

Are there echoes of all this in Australia? The Abbott government is sticking to its election promise to create a million jobs in the next five years, though there are economists who reckon this is a promise that can’t be kept  given the state of the economy and Treasury’s forward estimates.

Still, it is likely that just as in America, the economic debate in Australia will move away from an argument about deficits and which party is best placed to get the budget back into the black. Both agree that won’t happen anytime soon. The focus will be on tax reform, welfare reform and, most importantly, the employment prospects for not only the unemployed, but the under-employed and those Australians in jobs that are likely to go in the near future.

Like America, Australia has an inequality problem that is growing more acute, though it has some way to go before it reaches American levels. According to John Martin, the former OECD director of employment, labor and social affairs, the richest 10 per cent of Australians gained almost 50 per cent of income growth since 1980.

Unemployment is set to rise this year according to most forecasts, and that will exacerbate the gap between those at the top of the wealth table and those in the middle and below.

For two decades or more, Australian governments have promised tax cuts – sometimes just to get re-elected – when cuts were not really a great idea.  That time is most probably over, though we are not yet at the point where a debate about tax increases is acceptable.

That time is coming. And in that context, tax breaks that favour those who don’t need them and welfare programs that are not means-tested and generous maternity leave programs will have to be up for debate.

These are some of the major foreseeable challenges facing the Abbott government and the Labor opposition, for that matter.  It is not entirely impossible that Bill de Blasio will have an impact on Australian politics – that’s if he represents a real resurgence of liberalism in American politics.