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Gene Sperling

Gene Sperling

Posted: November 14, 2005 04:30 PM

A Pro-Growth Progressive Economic Strategy

Last week, as my book hit the streets (and the blogs) the first thing I learned was that was that even my title – the Pro-Growth Progressive – drew some criticism from all sides. Some on the left said the title implied that some progressives were anti-growth while one conservative blog suggested the title was an oxymoron. Nonetheless, I still feel passionately that too many in the policy arena are either too resistant to embracing the power and inevitability of markets or, on the other hand, too dug into the ideological view that smaller government is always pro-growth. What our nation needs is an economic strategy that does more to both strive for market-led growth and use smart government policies to ensure we realize not just growth, but shared prosperity. Make no mistake about it: the aspiration of a pro-growth progressive is not economic growth for its own sake, but growth that raises all boats.

Let me start by laying out a couple of crucial pro-growth progressive planks:

One, Democrats need both an economic dignity agenda and a wealth creation agenda, and they should be equally passionate about both. We should absolutely support raising the minimum wage, extending unemployment assistance when needed, strengthening the EITC and expanding health care. But why can’t we also be as passionate about a wealth creation agenda that promotes economic mobility, increases savings and reduces wealth inequality? We were right to oppose partial privatization of Social Security because Social Security should remain the risk-free leg of our retirement system and because Bush’s plan was designed to be the first step in a slippery slope to undermining this progressive compact between the generations. Yet, if the only time people hear us talking about investing in the stock market is in a negative light, why should we be surprised when too few see us as the party that cares about their upward aspirations and desire to have a nest egg? We should always be the party that stands up for those who are economically disadvantaged, powerless or experiencing temporary hardship. But we can not afford to just be the party that is there for you when something bad happens in your life.. We also need to be the ones who fight to help working families achieve their dreams and upward aspirations.

This is not just about connecting with voters – it is about confronting head-on the fact that we have an upside-down system for encouraging savings and wealth creation that gives the greatest incentives and deductions to those who need the least help saving, and does virtually nothing to help those with lower incomes to save more. As a result, while the well off are triple winners – with a multitude of tax-preferred savings vehicles, employer-provided pensions with matching incentives, and a 35% deduction, those at the bottom lose three times. About 85% of those in the lowest quintile have no employer-provided pension. These workers have no other real options for savings and only get a 10% deduction if they do manage to put something away. This is a disgrace. Amongst those closest to retirement—workers between 55-59 year old -- half have less than $10,000 in an IRA or 401K. President Bush talks a good game with his ownership society, but does virtually nothing to help anyone but the top 5% of existing savers do better. Democrats need to not only embrace ideas like the Universal 401K and 30% Flat Tax Incentive that I have proposed—they need to put them near the top of our economic agenda so we are actually heard.

Second, we need a new consensus on globalization and trade. This first means breaking out of the completely adversarial habit of each side marshalling facts for or against certain Clinton trade agreements while refusing to admit any weakness or ambiguity in their positions. Progressives like me, who supported Clinton trade policies and would like to see a successful conclusion to the Doha Round, have to be willing to acknowledge where we exaggerated claims or where our critics were right. We should for instance recognize that parts of NAFTA were weak (e.g., protections for corn farmers, and side labor agreements) and that accelerated market opening in nations with weak safety nets and poor labor rights can at least temporarily exacerbate inequity. On the other side, those who opposed these trade agreements should be willing to admit that higher trade barriers can operate like a regressive tax that hurts poor families four times more than the well-off, that open markets done right can reduce poverty in poor nations and that even the much vilified NAFTA helped Mexico recover quicker from the 1995 peso crisis. Finding such balance is not meant to paper over real differences in our ranks – just at least enable us to have a constructive dialogue in search of some common ground.

I think the answer is to find a new compact – where open markets are combined with a bolder effort to do far more for those hurt by change at home and more to ensure that workers in our trading partners see rising living standards and not a race to the bottom. In the international context, this means both understanding that strong labor standards like those in the Jordan agreement are important, but also that even strong standards will do little to protect US workers from low-wage competition, nor help millions of workers in the non-formal economies of poor nations. Rather than downplaying strong labor standards – which I support -- it means looking for other tools – including monitoring, labeling (like Fair Trade Coffee, Clean Diamonds), free, universal basic education (especially for girls), and more positive– as opposed to punitive -- incentive programs like the textiles provisions in our trade agreement with Cambodia.

At home, this new compact would mean a more aggressive effort to encourage job creation and fight for jobs – in non-protectionist ways – and a greatly expanded adjustment system that offers easy access to expanded wage, health and mortgage assistance for the dislocated no matter how or when they lost a job. When proposing such an expanded system in the past, I have been mocked for only supporting help to the workers hurt by the callous trade policies of the Clinton era. Yet, even those who opposed every Clinton trade measure should be willing to acknowledge that even if you repealed NAFTA, it would not greatly reduce the degree of job dislocation due to many forms of fast-paced global competition (e.g., outsourcing to India) or technological change.

Let me stress that I believe a pro-growth progressive agenda goes far beyond the two areas discussed above. I will discuss other crucial elements in future posts.

Finally, rather than being an oxymoron, if we are smart, policies that are both pro-growth and progressive can go together, as Mary Wells would say, like birds of a feather.