Beyond Gotcha: In Search of Democratic Economics

In the aftermath of the now famous "bitter" remarks by Presidential candidate Barack Obama, an observer of the Democratic primary season might have hoped for a renewed interest in proposals for making the US economy work better and fairer for working class and middle income Americans. Unfortunately, media interest remains focused on the trivial. The Huffington Post rightly called this week's Philadelphia debate moderated by ABC "The Gotcha Debate". Neither Obama nor Clinton seems able to rise above the din and remind voters of what is actually at stake in this election. John McCain did weigh in on April 15 with his most detailed economic speech --and it will have to serve as an indicator of what matters.

It is the economy, stupid-- once again. Too bad that McCain is not the maverick in domestic policy that he claims to be. His prescription is little more than rehashed Reaganomics -- tax cuts, and insufficient or nonexistent regulation, cloaked in lukewarm populist language. As the New York Times economics columnist David Leonhardt notes, incomes for middle income families in the US have remained stagnant for the entire Bush Presidency. Coupled with the threat of losing health care benefits and declining or absent pensions, facts on the ground underscore the growing economic anxiety and "bitterness" felt by many American workers and their families.Voters are looking to the Democratic candidates to speak to their economic insecurity and to their financial futures. The time is ripe for some kind of new New Deal -- but where will it come from?

What is needed are both compelling language and a serious reform program.

My closest friends and colleagues know that I feel a bit jaded about such calls for progressive campaign programs. I have been through this before, and had my hopes dashed or at least severely tempered by political reality.

In 1983, I co-authored a book optimistically titled A New Social Contract: The Economy and Government After Reagan. The book analyzed the appeal and contradictions of Reaganomics and proposed a detailed Democratic alternative that we labeled a "new social contract." I worked as an advisor on Gary Hart's unsuccessful primary campaigns trying to promote these ideas, and then supported Mondale and Dukakis. Instead of a new social contract, we first got four more years of Reagan, and then four years of the George Bush Presidency, and more Reaganomics.

I had a bit more luck during the 1992 campaign when I was a senior advisor to Bill Clinton, and co-authored the campaign program Putting People First. It was, admittedly, a compromise document, but many progressive policy proposals were contained in it. During the campaign, the Wall Street Journal criticized me in a front page article and in subsequent opinion pieces as "The Liberal On the Clinton Bus ". Partly because of these attacks, President-elect Clinton chose not to include me in his economics team, and like my mentor John Kenneth Galbraith, I got sent abroad as an ambassador. The story of the Clinton administration's political inability to pursue a significant reform agenda is well known -- and is recounted in John F. Harris' book, The Survivor: Bill Clinton in the White House, and in Clinton: The President They Deserve by Martin Walker.

After almost eight years of Bush's neo-conservative foreign policy and warmed over Reaganomics, one doesn't want to be too cynical. The damage to the country at home and abroad has been serious and requires much repair. I like to think that I am a political realist, and that I understand what kind of political reforms are genuinely needed (see the Huffington Post article, Change That Really Matters). The economic reforms that would bring a more equal and fairer economy have not changed too much from what was proposed in A New Social Contract or what Robert Reich, Ira Magaziner and I and a few others wrote in Putting People First back in 1992. What is needed are political vision and political skill, as well as a mobilized base of support for real change.

I wish that Barack Obama had read our work -- or that Mark Penn, the lately departed campaign consultant for Senator Clinton's campaign, had consulted them before deciding on his primary strategy. Neither campaign has produced anything close to the far reaching reforms offered to the public in Putting People First.

I don't expect Presidential candidates to endorse any one set of progressive reforms --but I would like to hear the Democratic candidates talking about an Economic Bill of Rights for the 21st Century, not just technocratic neo-liberal policies or cant about changing the atmosphere in Washington, DC and bringing us together.

Blame does not fall only on the candidates and the media's Gotcha game. The major labor unions have split their endorsements between Clinton and Obama, focusing time and money on the primary states rather than on promoting a new economic program for the party and the country. Progressive groups such as MoveOn.Org have endorsed candidates and mobilized members around the primaries while neglecting to engage them in a debate on what economic and social reforms the next president and administration might advocate.

The Democratic Party needs to remember its own history.

In his 1944 State of Union message, FDR told the nation:

"We have come to a clear realization of the fact that true individual freedom cannot exist without economic security...

"We have accepted, so to speak a second bill of rights under which a new basis of security and prosperity can be established for all, regardless of station, race or creed..."

Roosevelt went on to enumerate such economic rights as the right to a decent home, to adequate health care, to a job, and to a fair and competitive economy. His speech was based on research done by the National Resources Planning Board headed by economist Gardiner Means. FDR did not live to see his commitment to an Economic Bill of Rights enacted into law. . The progressive programs that he and his Democratic successors Truman, Kennedy and Johnson did pass were attacked by the Reagan administration, and many aspects of the social contract between labor and capital and between citizens and their government were weakened or torn to shreds. Both Bush administrations continued these assaults on the programs and policies that served as the foundation of the New Deal and the Great Society -- and the first Clinton interim did little to rebuild them or to construct a new political economic strategy for Democrats.

The era of globalization ushered in at the end of the Cold War requires a new social contract -- at home and abroad -- if America is to rebuild and to prosper as a democratic society.

It is no surprise that a huge majority of the American people believe the country is on the wrong track. They are looking to the Democratic Party both to rebuild our economic foundations, and to provide a policy road map for the 21st century. Are the party and its leadership, as well as party activists, up to the challenge?

One way to jump start the process would be for the Democratic Congress to pass a sense of the House and Senate resolution calling for an Economic Bill of Rights (The 1983 draft of such a resolution in A New Social Contract is available to be copied or updated.) At the Democratic National Convention in Denver this summer, the party should call for the next President to introduce economic and social policies that would make such an Economic Bill of Rights a reality for all Americans. And the party's Presidential candidate should pledge him or herself to making this the overriding domestic priority of the next Democratic administration. The party, its candidates and its leading grassroots groups should pledge to support the Economic Bill of Rights and aggressively campaign on it in the fall. In this way, we might have a serious debate about economic philosophy and the chance of enacting change that improved people's lives as the New Deal and the Great Society did in years past.

Comments

[dadw5boys]

Democratic economic plan is simple.

ROLL BACK ALL CHANGES IN LAWS TO BEFORE REGEAN.

GIVE THE PEOPLE BACK THE POWER THEY HAD IN THE ECONOMY.

[tjfxh]

1. Financialization. Earned income is profit from real production. This should be allocated fairly over the means of production and distribution: capital investment, management, labor, and distribution channels. Financial intermediation contributes nothing real to the economy, but the financial sector is now 40% of the economy less government. The amount of real earnings that the financial sector captures is way beyond its contribution of "greasing the wheels" as a middleman.

2. Military Keynesianism. Keynesianism is based on the idea of stimulating economic weakness through government spending. The foundation of the US economy is military spending of present tax dollars and future tax dollars through present indebtedness. The result is a policy of never-ending war and preparation for war that transfers huge amounts of wealth, both present and future, to the "defense" industry.

3. Corporatism. The US is no longer a liberal democracy but a corporatist state managed by the ruling elite through the military-industrial-financial-governmental revolving door. The policy is to privatize the profits, as well as the commons, and to socialize the losses, while externalizing negatives like pollution. Large and influential interests have become parasitic on the society.

4. Legalized bribery. This all is made possible by the legalized bribery of campaign finance and lobbying.

[DHFabian]

Clinton's legacy is that of taking the first ax-chop to the New Deal.. This "welfare reform" created a massive bottom-wage workforce, often used to replace laid-off workers, at a fraction of the wages. This has a profound impact on suppressing wages, increasing corporate profits, and breaking unions.

Aid to poor families used 3% to 6% of the budget. Contrast this with the cost (to taxpayers) of the past 30 years of tax "relief" for the rich.. Did welfare create a "culture of dependency"? Over 80% of welfare recipients voluntarily quit aid in under 5 years. The New Deal in whole created and maintained our once-massive middle class, and brought our economic disparities to historic lows.

How does welfare reform measure up in terms of human rights? The infant mortality rate among our poor now exceeds that of most Third World nations, and the life expectancy of our poor has been falling. By contrast, the New Deal (until the first reforms) dramatically reduced economic disparities by providing minimal financial aid and access to health care, education and job skills training.

When "government gets out of the way", a corporate free-for-all leads to the increased hardships of American workers that we see today---and then the collapsing of the economy. America was at its strongest when government focused on the common good. Damaging the New Deal resulted in the socioeconomic disaster we have today.

[ShamusDaedal]

The notion that the billions taken from the funds they manage or the corporations they lead is "hard earned" money is just too absurd for anyone to accept.

A factory worker or a tradesman or a professional charging fee for service IS working hard.

Paper shufflers just take what the laws they helped write allow them. They steal with a pen what the mob takes at the point of a gun. They are both thieves and they run this administration and you know it!

How hard did Cheney work for his Halliburton money today?

[swift goat pet for truth]

Actually, Cheney worked pretty hard for his Halliburton money. Before Cheney, Halliburton paid US tax on its profits. Cheney increased the number of off-shore companies by many times, booked all the profits overseas, booked all the losses in the US. Now Halliburton has an annual loss on doing business and claims tax rebates from the American people.

It is legal, and endorsed by our bought politicians. War profiteering is not illegal, either. All the liberals want to do is blame America first. All the conservatives want to do is loot the public treasury.

[PerryWhite]

You, Robert Reich and Ira Magaziner - not an economist in the bunch. This Economic Bill of Rights is just a plan to implement socialism on the sly.

[swift goat pet for truth]

So, what is wrong with socialism?
Name one country in the world that is totally capitalist.
Name one country in the world that is totally socialist.

Name one successful, industrialized nation that has NO socialist programs.
Name one corrupt, undeveloped country that has ANY successful socialized programs.

You can't. There isn't any.
Most countries are a blend. The difference is where the line is drawn.

And the most corrupt, poor and backward countries are closest to the pure capitalist ideal.

[EddieWillers]

(cont. Pt II)

In short, your misguided praise of FDR, and subsequent endorsement of his policies in today's crisis, is an endorsement of future economic misery. It is a rarely understood fact that we did not recover from our Great Depression until the late 1940's, when many of the New Deal policies were repealed. When government got out of the way, Americans began to produce again...taxes were lowered, unemployment shrunk, and quality of life improved.

The real cause of our present crisis (as well as the Great Depression) is the value of the dollar, and no amount of government meddling, promises, "Reaganomics," or contracts will improve our present crisis. If you want to improve our present situation, press for policies that will strengthen the value of the dollar, such as ending our needless occupation of foreign countries, ridiculous government involvement in managed trade, health care, and industry. No new global economic bill of rights will ensure prosperity. Prosperity and freedom go hand-in-hand, and your proposed solution(s) severely curtail freedom.

[UnbiasView]

Agreed, on this site I always see people asking for more and more government and then complain when there is so much that they F' everything up. Time and time again no matter who is President unproductive people will fail and those that work hard/smart will succeed.

[BillLumbergh]

"and those that work hard/smart will succeed."
Really?
So the vast majority of Americans that think the economy is ripping them off, are all lazy and stupid?
You don't have a clue.

[BillLumbergh]

Thanks for the long-winded post.
It's really too bad that the knee-jerk Friedmanites don't have the cranial horsepower to put history in context, and look beyond their own narrow experience. Frankly, repeating tired anti-FDR spin makes one sound like a fool.
BTW, the revolution will come when people realize that hacks like to throw around the word 'freedom' as if it is a commodity that's being somehow stolen from us by the government. We are the government. The economic prosperity we've lost hasn't been stolen or given away by the government, it's been stolen by the amoral, elitist scum who really don't care what happens to the other 90% of the world's population, as long as they 'get theirs'. The fact that 28% of the population of the U.S. are idiots is what allows our government to be co-opted by the neo-fascist scum who could care less about freedom, or any other evolved concept.
The free-marketeers have sold the average American a bill of goods, and those goods are rotten. It's time to take back the power from these disgusting liars and thieves.

[EddieWillers]

Absolutely, positively incorrect Mr. Shearer.

I suggest a re-reading of history, particularly in the area concerning FDR and his New Deal. See Murray Rothbard's book, "The Great Depression" or any FDR criticism by Henry Hazlitt or Garet Garrett. No American president, aside from perhaps Lincoln, enjoys more immunity from criticism than FDR. FDR's New Deal prolonged the agony of millions of Americans. Examples:

- Unemployment increased as a result of the New Deal. Unemployment was at about 7% in 1930, ballooned to 28% in 1933, and never improved above 14% under FDR.

- Along those lines, FDR's minimum wage laws contributed to unemployment, effectively "pricing out" a large portion of the population from the workforce. Among the hardest hit were African Americans.

- FDR's economic advisor's believed low prices were the cause of the depression, and so they sought to raise prices by curtailing supply. In the midst of massive starvation, FDR actually approved programs that slaughtered pigs and cows (not using them for food) and plowing under valuable crops...even going so far as to pay farmers NOT to grow crops!

(cont.)

[joedel]

You wrote:
- FDR's economic advisor's believed low prices were the cause of the depression, and so they sought to raise prices by curtailing supply. In the midst of massive starvation, FDR actually approved programs that slaughtered pigs and cows (not using them for food) and plowing under valuable crops...even going so far as to pay farmers NOT to grow crops!

Whenever I see a comment like this I wonder if the author is serious or not. If serious then there appears to be a fundamental misunderstanding. While on the surface it may appear that FDR's actions didn't make sense they actually made a lot of sense at the time. Yes, low prices were a problem but they were caused by overproduction to the point that prices were driven down below the cost of production. Now food is a special case. Who would argue for food shortages just to bring prices up to a level where farming is profitable? So it made sense to subsidize farmers NOT to grow crops. You might argue that crop subsidies today have been distorted and I would agree. On the other hand, one can only hope that farmers today have the necessary incentives and ability to produce more in the face of global food shortages.

[CTmom13]

Be sure to sign the moveon.org petition¦¦¦..It was also mentioned on ABC"s Good Morning America

Maybe if there is enough backlash the news networks will think twice about the distractions issues in the GE

http://www.moveon.org/

[Yosser]

"I worked as an advisor on Gary Hart's unsuccessful primary campaigns trying to promote these ideas, and then supported Mondale and Dukakis. Instead of a new social contract, we first got four more years of Reagan, and then four years of the George Bush Presidency, and more Reaganomics."

I'm wondering why the writing of this passage did not stay your hand. If my advice to Hart, Mondale and Dukakis had contributed to 8 years of 'more Reaganomics', I'd feel a bit reticent about handing out advice to Obama and Clinton.

[Torus34]

The author was doing fine until near the end, where he suggested a 'Sense of Congress' resolution. Reading through past resolutions is far and away much funnier than the very best of SNL.

[RichLiberal]

"It is the economy, stupid-- once again. "

Well, duh.

An "It is the Clinton's, stupid, whom you should once again elect to straighten out the mess."

Or, we could elect Senator Zero, who has no economic experience, no White House experience, and not even any Senate experience since he spent the whole time since he's been there running for President.

Fortunately, the Convention is in the hands of the SuperDelegates who can correct the 20 to 1 distortion that the caucus pledged delegates have brought to fore.

Some simple math: Texas: Hillary 1.4 million votes 65 delegates; Obama 1.3 million votes 61 delegates. Texas caucus: Obama 25,000 votes, 38 delegates, Hillary 19,000 votes, 29 delegates.

Any fool can see the problem here. Since the SDs can do whatever they want, it is necessary that they make this "caucus correction" to the pledged delegate count as a basis for evaluating the state of the primary. They will find that Hillary is out in front and deserves the nomination.

[jsarets]

Heh, you start your comment with "it's the economy, stupid!", but then you argue, "it's the process, stupid!". Clinton is better on the economy because of her... inevitability?

[indalay]

120,000 Republicans did their mischief in the voting booth, but didn't have the gall to show up at a caucus to continue it publicly. I worked our precinct voting location and our caucus, and I know they were there, following their leader. The popular vote totals in Texas were distorted by their dishonesty.
Also, you lose a lot of credibility when you call people names, however clever you may think you are. Don't you see you would make your position stronger if you could do it by pointing out your candidate's merits instead of making assinine criticisms of the others?

[UnbiasView]

"120,000 Republicans did their mischief in the voting booth"

So what, the Democrats allow open voting and you can't stop them. The DailyKos promoted the same thing in Michigan for Romney, I guess what goes around comes around.

[RichLiberal]

You are WRONG about the Republicans. They have supported Obama from the start, just as Ted Kennedy and his political machine have. They have done this for one reason only and that is to stop Hillary.

53% of the Republicans voted for Obama in Texas
All Republicans (9%) 46% 53%
http://www.cnn.com/ELECTION/2008/primaries/results/epolls/#TXDEM go to page 4

72% of the Republicans voted for Obama in Wisconsin.
All Republicans (9%) 28% 72%
http://www.cnn.com/ELECTION/2008/primaries/results/epolls/#WIDEM go to page 3

I have pointed out my candidate's strength many times, but since you are interested:

- 1992-2000 strongest economy in US History, largest growth, no recessions.
- The Clintons turned half trillion Rep deficits to half trillion Clinton surplus.
- The Clintons added 22.7 million jobs to US Economy. Still with us today.

What has Senator O done by comparison? That's why I call him Senator Zero.

As for the name-calling: I see your classy candidate has resorted to giving Hillary the finger. Hillary should not hesitate one second in continuing the pounding of Obama. Obama will find that Hillary is not Gore/Kerry/Dukakis. Oh, that's Obama.

[RussT]

In a debate forum, the candidates do not dictate the questions to be asked nor do they format the debate as a whole. I applaud ABC for asking the questions that the candidates don't want to answer. I already know where Barack and Hillary stand on the economy, Iraq and Iran. I want to know how they address problems within their own campaigns.

[lboucher]

Charlie Gibson reminded Obama of a March 27th statement he made to Maria Bartiromo on CNBC's Closing Bell that he'd return the rate to the 28 percent it was under Bill Clinton. Said Gibson: [emphasis added throughout]

"It's now 15 percent. That's almost a doubling if you went to 28 percent. But actually Bill Clinton in 1997 signed legislation that dropped the capital gains tax to 20 percent .... And George Bush has taken it down to 15 percent.

[Bobzmcishl]

Why in the world would you even talk about capital gains taxation - that is a ho hummer to most Americans who have their investments in tax sheltered ira's and 401k's. That question must have been fed to Gibson by neocon Larry Kudlow. And why hammer Obama because he wants to up the cap on Social Security taxes. That makes perfect sense and would be the least onerous way to fix Social Security. No one else had a better idea. If they don't raise the cap then they better think about raising the retirement age to 70. I would rather pay more than wait longer to retire.

[UnbiasView]

Actually it does, anyone who owns stock is hurt by this. Maybe you should do some research on on the capital gains tax.

[lifterus]

You're never going to sell neo-socialism in this generation. Roosevelt got away with it because people were truly suffering. That is no the case now despite all the semantics. People are slowly bleeding, but there haven't exactly been massive shanty-town communities popping up everywhere.

The message must be simple. "With our policies, you will have more money left in your pocket at the end of the year, every year. That is a promise." That's all they need to say.

They must also put the stupid "Lowering taxes increases revenue" nonsense to death. Every Democrat must spend the next 5 years attacking that nonsense. Too many idiots believe it. All three tax cuts (Kennedy, Reagan, Bush II) have been followed by the slowest rate of revenue growth when compared to every other decade since the Great Depression. Even then none of this is empirical evidence. These kinds of things always ignore billions of other factors going on while trying to credit the rooster for making the sun rise.

The easiest way to kill the "Lowering taxes increases revenue myth" is simply "Why the fuck would anyone in government want to raise taxes then if it means they get less money?"

[MilwaukeeDan]

Mr. Shearer, good post, lifterus, Herrington, great comments, thanks.

[swift goat pet for truth]

Clinton raised taxes, right on top of Bush I's tax hikes (the "read my lips" tax hike).
(And let us recall Reagan raised taxes 3 times after his tax cuts- Google it)

OMG, what a catastrophe that was. The US economy was nearly destroyed, just like McCain economic guru ex-Sen. Phil Gramm and ex-Rep Dick Armey predicted.

We certainly don't want anything like the economic conditions of the 1990's back again.

[Herrington]

Neither Democratic candidate can dare to propose anything with a faint whiff of socialism. The programs will have to wait, because the public is about 75% misled as to what it is that is needed.

As repugnant as it may seem, driving an idea deep into the hind brain of the public is what is needed. The Republicans have done it for thirty years or so, and have created a public consciousness that while recognizing discomfort, seems to have no idea why or how they got that way.

We need to show the right wing some actual left wing media bias.

[joebhed]

Amen.