Friday, December 16, 2011

The Big Dog Tells Us How To Get "Back To Work"

The timing on the publication of the latest meme on liberal discontent, Jonathan Chait's  November 28, 2011 New York magazine article, The Self-Loathing of Liberals, was fortuitous, because former President Bill Clinton's latest book, Back To Work, is an excellent rejoinder to the idea that liberals cannot be satisfied and also shows what smart, progressive government can do.

Back To Work should remind Mr. Chait, and Democrats in general, of not only what a progressive agenda can look like, but what can be accomplished when Democrats put forward, forcefully, and factually, good ideas to move the country forward.  Indeed, while Chait cites President Clinton's failure to get a modest stimulus through Congress in 1993 to disprove the thought that he (or Hillary) would have had more success than Obama did in getting the American Recovery and Reinvestment Act passed, Chait ignores the signature piece of legislation that launched the Clinton presidency - the 1993 budget bill that raised taxes on the wealthiest and corporations, while putting in spending caps that, with the growth of the economy, led to unprecedented peacetime expansion.  He even derides the crime bill, which not only put 100,000 more police officers on the street, but gave local departments access to matching funds for equipment like bulletproof vests and new technology to more effectively fight crime.  In the balance, the idea that Democrats were "soft on crime," disappeared.  Policy and political wins, what a concept.

I recommend that Chait and others who deride the professional (or amateur) left take a peek at President Clinton's 192-page book.  In clear language that flows easily, the former President not only weaves an effective tale of how government can work with the private and non-profit sectors to encourage economic growth, but cites examples from his time both in and out of office of people and organizations who are engaged in this type of partnership. In doing so, the former President makes a compelling case for the thoughtful and judicious use of government resources to spur improvements throughout our economy.    

The President first traces the economic trajectory of our nation from the time Ronald Reagan took the oath of office in 1981.  The large budget deficits and exploding debt that ensued resulted in higher interest rates, lower rates of investment, fewer manufacturing jobs and stagnant wages.  As the President notes, anti-government's true victory was not reducing the size of government, it was to stop paying for government by borrowing enormous sums of money.  The credit binge that animated the twelve years of Republican leadership prior to his election was stanched through higher taxes on the rich, spending caps (some of which were put in place by the much derided 1990 “no new taxes” budget agreement) and improving job conditions.  Indeed, the irony of Clinton's presidency is that he delivered the government Republicans fetishize but never actually deliver - a small government work force[1], more than 22 million new jobs[2], and nearly 8 million people lifted out of poverty (as compared to less than 800,000 during Ronald Reagan's presidency).  I almost forgot, he also balanced the budget, expanded access to college for high school students, improved educational standards, broadened access to health care for children, passed an assault weapons ban and had us on a glide path to pay off *all* of our debt by 2015, the first time that would have happened since 1824.

Clinton's book is not just a victory lap for a successful presidency, it also serves to debunk some of the common tropes around anti-government talking points, particularly as they relate to budget deficits and the national debt.  For example, the President uses a handy graph to show that of the $14.3 trillion in debt we accumulated as of early 2011, even with the ARRA and extension of the Bush tax cuts, Obama's debt contribution of $2.4 trillion paled next to George W. Bush's $6.1 trillion[3]. Further, he notes that by the time the Republicans took over Congress in 1995 and a balanced budget bill was enacted two years later, 90 percent of the deficit had already been eliminated due to the passage of the 1993 budget and improved job growth.  He even digs deeply into the past to show that the common myth of Reagan's fiscal conservatism is undermined by the fact that Democratic Congresses approved less in spending than Reagan requested overall.  He also discredits common Republican orthodoxy about the evils of government by pointing out that pointing out that his Republican predecessors launched enormous public works projects[4] and created now-loathed federal agencies[5].

In fast forwarding to the political battles President Obama is facing, Mr. Clinton discredits the Republican talking point that the Affordable Care Act cut $500 billion from Medicare.  What the ACA did was lower the rate of increase in reimbursements to providers under Medicare, and particularly for those providers paid through Medicare Advantage, a private "add on" seniors are not compelled to purchase or use. He further points out that those advocating full privatization of Medicare by citing lower costs to Medicare D fail to note that the ubiquity of generic drugs has kept costs low and because there are now many more seniors with greater access to medications, manufacturer costs are lower because they are producing more pills.  Neither of those two quirks in the prescription drug benefit are applicable to Medicare overall.  Moreover, he notes that when anti-government types mention the explosion in health care costs for Medicare, they fail to note that private insurance costs have accelerated even more, a 400 percent increase since 1970 for the former, 700 percent, for the latter.  While neither number is good, the idea that we should shift from the lower cost alternative to the more expensive (by almost a 2:1 margin!) choice is foolish[6]. 

The President also effectively illustrates and compares how our country has competed and grown in the past 30 years by looking at those years when the White House was under Republican versus Democratic control.  As he shows, job growth was not only better under Democratic administrations, but wages improved across the board, not only benefiting the wealthy (who do well regardless of who is President) but lifting the real incomes of middle and lower class Americans.  Further, when job growth is combined with a growing economy that balances its budget through fair taxation, we avoid the traps of deficit spending, high interest rates and the need for people to borrow just to keep pace, all hallmarks of the economic side effects of "supply side" economics.  Moreover, and most damning, is the backward slide that took place under President George W. Bush on a host of metrics, from income inequality to life expectancy, from high school and college graduation rates to middle of the pack testing results for our high school students when compared to those from other countries.  Of course, mediocre educational outcomes saddle kids with lower future earnings and, by extension, drag down our country's competitiveness in an ever more integrated world. 

In other places too, we have fallen behind, as money that could have gone to upgrade our decaying roads and bridges or funded research and development went instead to Iraq and Afghanistan.  In years past, those investments would have led to massive breakthroughs in science and technology but dried up as hundreds of billions were diverted to the rich and our war commitments.  Even in basic areas like Internet connectivity, which is essential in our 21st Century economy, we lag well behind countries like South Korea, Japan and Denmark, among others.  As the President succinctly notes, these things matter because they are precisely the places where we can create jobs, restore our competitiveness, innovate in ways that leverage our technology, and create efficiencies that make our businesses more profitable. Finally, as Mr. Clinton says, our weakening competitive position gives lie to the anti-government trope that low taxation and minimal regulation is necessary to foster growth because countries in Europe and South America that are growing faster and spending less per capita on things like health care all tax their citizens at higher levels than we do and impose stiffer regulations.  As the President notes, if increased revenue is re-invested wisely, in places like funding education, offering incentives for businesses to re-locate and expanding research and development, they yield enormous societal dividends, not just financial gain for the very wealthy. 

But the real strength of the President's book is the dizzying number of recommendations and ideas he puts forward to show not only where money can be saved in our system, but why (and how) government can encourage and spur growth.  He notes that low hanging fruit like improved tax collection and making more government contracts competitively bid instead of no-bid, could save the government $100 billion a year.  Other improvements, like streamlining paperwork, introducing uniform medical equipment sterilization in hospitals[7] and targeting the $150 billion a year we spend treating diabetes and obesity-related illness through better nutrition and dietary habits would make a further dent in our budget deficit woes. 

On tax policy, I was pleased to see the President give attention to the budget proposal put forth by the House Progressive Caucus.  That group, unlike both President Obama and the so-called "Ryan Plan," actually balances the budget, largely through dramatic reductions in defense and a variety of tax increases.  And while the President throws some cold water on that proposal, he also lauds it for investing money back into the American economy through greater expenditures on infrastructure, a "smart" electrical grid, expanding broadband access, and providing greater funding for job training and education, all of which are precisely the types of investments that yield significant dividends down the road. 

The last 80 or so pages of the book are littered with proposals both great and small for how to get the country moving again.  The former President rightly identifies the need for resolving the continued mortgage overhang as a top priority, though I think his ideas, primarily tied to encouraging principal write downs, offering equity stakes to banks in distressed homes in exchange for reducing payments and accelerating rental of foreclosed upon homes are a good start, do not go far enough.  What I would have like to have seen the President advocate is giving bankruptcy judges more authority to reduce principal amounts and to waive re-financing fees entirely for homeowners who are current but want to take advantage of low rates.  Principal reduction should have been mandated as a requirement for receiving federal assistance through TARP or via the Federal Reserve, but that does not mean the government cannot revisit those types of obligations, as they should, particularly for those who are current on their payments and were not profligate.  Having literally spent trillions to save the banking system, the amorality of what is happening to millions of homeowners in comparison is a stain on society. 

Another enormous (and informative) block is spent discussing energy independence, not only for how it can benefit our national security but also in job creation.  This is particularly important when a government investment like the one we made in Solyndra blows up.  It's important to show that investing in green energy is a net positive for our economy but that not every investment is going to succeed.  Whether it is the return we get on investing in solar, wind or retrofitting, all of which create more employment than coal-fired plants do, the fact that clean energy employment grew by 8 percent in the 2000s while many other industries stagnated (more than 50,000 new jobs tied to geothermal capacity have been created in just the last two years), and the jobs tend to pay better too, weigh in favor of continued investment in green technology.  He also suggests coming up with creative partnerships to get utility companies to upgrade residential services while offsetting the cost by billing homeowners each month instead of asking the homeowner to pay a large up front fee for something like solar panels, encouraging pension fund investment in infrastructure banks and energy retrofitting and reinstating tax credits for green tech investment.  The President notes that one part of government aggressively looking at renewable energy projects is the U.S. Army, who has no less than 126 projects underway and has invested more than $7 billion in these initiatives because the armed forces understand that improving energy efficiency, particularly when soldiers are in the field, is an essential way to protect them and reduce the risk for those transporting supplies across the war zone. 

Finally, the former President encourages greater partnerships for expanding state exports, broadening the manufacturing base and putting greater resources into infrastructure spending, all of which will, in his view, help get people back to work, improve our global competitiveness (while opening new trading opportunities via free trade agreements), and invest in the needs of the country for decades to come.  It’s hard to argue with any of these ideas, particularly since, at least until the last few years, many of them were embraced by politicians across the spectrum and through administrations starting before World War II and stretching through post-9/11 America. 

My one quibble with the President’s tone is that he can, on the one hand, forcefully dissect the failure of Republican fiscal orthodoxy, but on the other, fall back on passive “we should try that” suggestions when it comes to implementing policy.  Indeed, part of the failure of the current Administration was (and is) its failure to be more full-throated in its support/defense of precisely the types of investments that are needed to, as they put it, “win the future.” The difficult balancing act of shish kebobing the opposition while also lobbying for reasonable and sensible government investment is a difficult one to maintain, and both the former and current Presidents seem to fall into that trap.  But this is nibbling at the edges, the overarching policy prescriptions that President Clinton advocates for are, in the main, both sensible and (I’m guessing) palatable to the broad swath of the electorate who supported him with sky high job approval ratings even as his less savory personal conduct was largely reproached. 

After reading Back To Work, I hope people like Jonathan Chait understand the difference between the faux "hope and change" that Obama has peddled and the “points on the scoreboard” that Clinton can not only brag about, but place him in a unique position to offer solutions to our country’s woes.  Obama’s continual backslides in the face of Republican opposition, almost reflexive unwillingness to truly “punish” Wall Street for its sins, the most recent example being the SEC's decision to appeal Judge Rakoff's denial of its pathetic settlement with Citigroup, and right-leaning tax policy, that has seen both an extension of all Bush tax cuts and an extension of the estate tax that was even more generous than Republicans asked for, are not progressive, and not the change people believed in when they voted for him.  Contrast those decisions with tough choices made early in the Clinton years to raise taxes, set spending caps and clearly define areas that were off limits from cuts and/or received significant new investment, and one can see what progressive change starts to look like. 

Perhaps Clinton ended up being, to some degree, a victim of his own success, that is, by raising, in a meaningful way, the incomes of all Americans, not just the wealthy, those still in need became an ever shrinking pool. Maybe they would have been aided in a Gore Administration, but we will never know.  Was Clinton’s presidency perfect?  Of course not.  He didn't get health care passed, he got a blow job from an intern, and he walked away from a couple of nominees who weren't properly vetted.  But a man who presided over a robust economy that lifted millions out of poverty, dramatically reduced crime, invested heavily in education, protected millions of acres of land, and took assault weapons off our streets has little to apologize for.  That the inheritance he left his immediate successor was largely squandered is without question, but then again, neither is the fact that Bill Clinton still h

[1]   Under Clinton, the federal work force, in real numbers, was the smallest it had been since the Eisenhower Administration and as a percentage of the total work force, the smallest since FDR.
[2]     More than 22 million new jobs were created during Clinton’s two terms, 92 percent of which were in the private sector.  By contrast, fewer than 1 million new jobs were created under George W. Bush and most of those were in the public sector.
[3]   Amazingly, we are still paying off roughly $3.4 trillion in debt accumulated during the presidencies of Ronald Reagan and George H.W. Bush.  Clinton’s contribution is less than $1.5 trillion.
[4]   President Eisenhower launched the Interstate highway system in the mid 1950s, which resulted in the construction of more than 41,000 miles of roads – the largest peacetime public works project of its kind in our country’s history.
[5]   President Nixon signed legislation creating, among other things, the Environmental Protection Agency and the Occupational Safety and Health Administration.
[6]  This is something even Rep. Ryan appears to have acknowledged based on a recent compromise proposal he put forward with Senator Ron Wyden (D-OR), that would maintain the traditional Medicare option in a revised proposal that would also open the program up to private competition.
[7]   The Department of Veterans Affairs has instituted these standards in its hospitals to great success and cost savings.

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