Dick Gephardt, the esteemed former House Leader, often said that "elections have consequences" and always "carry messages."
The consequence of the elections just past is pretty obvious. Despite a staggering $6 billion having been spent on all of the federal races ("Consider the Source," Center for Public Integrity, 11-05-12), and all those speeches and all those political ads, we still have the makings of further partisan gridlock.
Yet the message to the new Congress from the electorate is nonetheless quite precise: Get on with it! And coming as this message appears to out of the expressed anxiety of millions of voters regarding their prolonged un- or under- employment, their stagnant wages and their economic insecurity, "it" is an immediate comprehensive effort aimed at rebuilding our middle class economy.
While everyone is understandably focused on the first-rate skills of the Obama campaign's field operatives and on how demographics helped to decide the election, it was every bit as much about policy and how that policy was messaged to voters. And a thoughtful look in particular at Ohio -- the state that largely gave President Obama his reelection victory and reelected Sherrod Brown as Senator -- suggests what that new economic agenda for Congress should look like specifically.
There, a majority of the voters understood the imperative of bailing out the auto industry and committed themselves to a future that still includes manufacturing as a cornerstone of a balanced economy. And in doing so, they and a majority of voters throughout the country rejected the philosophy that government plays no constructive role in our economy, clearly preferring instead that, when needed, it help protect and foster high quality jobs which meet the diverse needs of our society.
Of course, they also rejected the Governor Romney's belief that there is nothing fundamentally wrong with offshoring jobs to China, which he did repeatedly when he ran Bain. And they also rejected his jobs policy which largely consisted of more tax cuts for the wealthy rather than meaningful investment in our middle class and resuscitation of our manufacturing sector.If Congress listens to this message, it will develop and pursue an agenda based on the core economic premises that:
- Near-term large-scale job creation through government stimulus efforts, on the one hand, and long-term deficit cutting, on the other, are not mutually exclusive;
- Government does create good jobs, millions of them in fact; and
- Government cannot continue to gut the principle of progressive individual taxation without further eviscerating the middle class.
Well-conceived employment stimulus efforts are, because of their very large multiplier effects, at least deficit neutral in the medium term and, most likely, substantially deficit reducing. Thus Congress doesn't have to choose between stimulus and austerity -- it just has to get each challenge's priority and timing right. And when it does it will also be able to find responsible pathways to resolving the recommendations of the National Commission on Fiscal Responsibility and Reform (i.e., 'Simpson-Bowles'), major entitlement reform and the pending 'fiscal cliff'.
Implicit in achieving this balance, however, must be immediately resuscitating and then materially growing our depleted manufacturing sector.
Over the past 12 years, U.S. manufacturers have cut 31 percent of their workforce, or nearly 6 million workers, and manufacturers' contribution to GDP has fallen to just 12.2 percent, from 22.7 percent in 1970. Yet despite this, the sector still has by the largest multiplier of all sectors of the economy, its productivity and jobs-producing R&D consistently outpace all other sectors, and it more effectively and respectfully employs workers of all skill and education levels.In order for the American manufacturing sector to again have an employment base of 20 percent or more of total U.S. employment and contribute a fairly similar percent of the nation's GDP - which is what's required to stop our economy from lurching from one consumer-credit-driven bubble to another -- we need:
- An American manufacturing policy that integrates government policies related to access to financing, R&D and investment tax credits, taxation, trade and subsidies, and domestic procurement;
- An all-of-government effort to make the new abundant reserves of lower-cost natural gas and alternative energy sources quickly available to the nation's manufacturers;
- An independent National Infrastructure Bank, with a capitalization of at least1 trillion, to invest in the large-scale rebuilding and upgrading of our country's much depleted infrastructure;
- Fundamental corporate tax reform that changes the provisions of the tax code which currently discourage some American manufacturers from expanding domestically and eliminates the incentives which encourage other manufacturers to close plants here and ship jobs overseas; and
- Reformed trade with China.
Regarding the second premise, of course government creates good jobs, right now 22 million of them that the private sector can't fill, including teachers, police officers, firefighters, soldiers, epidemiologists and antiterrorism agents ("The Myth of Job Creation," New York Times, 10-21-12). We are already far past the point where further cuts of these jobs are appropriate by any measure, and preserving the ones remaining must be a priority of any new stimulus initiatives. This said, however, when it comes to these jobs, we must much more responsibly and sensitively address the related pension burdens which already exist and any new ones that might be created.
Finally, there is the reality of our broken individual income tax system, with its resultant extreme income inequality which, according to recent research by economists at the IMF, indisputably slows economic growth, causes financial crises and weakens business demand. Just since 1980, the share of national income going to the richest 1 percent of Americans has doubled, from 10 percent to 20 percent, and more recently, more than 90 percent of all of the income gains since the Great Recession began have gone to the top 1 percent ("The rich and the rest," The Economist, 10-13-12).
We need to bury once and for all the thoroughly discredited 'trickle down' philosophy, and three perfect places to start would be to treat "carried interest" as the ordinary income which it indisputably is, increase capital gains tax rates for the extremely wealthy back to the levels they were under President Reagan, and bring fairness and fair tax treatment back to executive compensation which today is on average the most extreme in the developed world.
The recent elections clearly showed that in the minds of the electorate it's past time to restore vibrancy to the middle class and restore for all citizens the American Dream of equal opportunity, economic advance and fair employment. What the elections also clearly showed was that the American people want a government that, when appropriate, will intervene in the economy to protect jobs and promote job creation.
Leo Hindery, Jr. is chair of the U.S. Economy/Smart Globalization Initiative at the New America Foundation, co-chair (with USW President Leo Gerard) of the Task Force on Jobs Creation, founder of Jobs First 2012, and a member of the Council on Foreign Relations. He is the former CEO of AT&T Broadband and its predecessors, Tele-Communications, Inc. (TCI) and Liberty Media, and is currently a private equity investor in media companies.