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Leo Hindery, Jr.

Leo Hindery, Jr.

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Past New Years' Resolutions Run Amok -- Here's Hoping for Better in 2011

Posted: 01/ 4/11 09:30 AM ET

This is the time each year when new resolutions are in everyone's mind.

I'm especially struck this year, however, by how sad it is that so many of the Democratic Congress' and administration's resolutions for 2010 -- and for 2009 -- went for naught, in whole or in part. Of course Republican recalcitrance had a lot to do with this outcome; however, had these resolutions been kept, they would have made our ongoing job-less economic recovery more jobs-full. They would have started to correct the income inequality that plagues our country like never before, with 90% of American workers having had, on average, no real wage increase for 20 years. And they would have brought some balance to our unprecedented trade deficit, which is mostly with China and always on the backs of America's workers.

Let's look at these New Years' resolutions, 2009's first and then 2010's.

When Lehman Brothers failed in mid September 2008, the legislative agenda for 2009 was preordained for whoever won a federal election in November. Put simply, it was FIX THE ECONOMY AND GET THE UNEMPLOYED BACK WORKING. Implicit in this re-employment agenda was reforming whichever of our trade policies and practices contributed to bringing our economy to its knees.

So, what the heck happened to these two efforts following the Inauguration?

First, the President seemed, at least to most Americans, to immediately put health care and energy reform far ahead of job creation, while over relying on Treasury's bailout of the large financial institutions as the primary stimulus tool. And by changing the dialogue from jobs and the economy, he took over ownership, so to speak, of the miserable economy he had just inherited from President Bush, and let the Republicans off the hook in a big way.

Even when the administration did speak about the state of the economy, the President allowed his key economic advisors -- Larry Summers, Tim Geithner, Cristina Romer and Rahm Emanuel -- to declare that the Great Recession of 2007 would be "over" the minute there was again growth in GDP, regardless of what was happening to real unemployment. Summers went so far as to give an authorized speech in June 2009 in which he said that essentially 'a job is a job' and that America's loss of manufacturing exports and jobs would be made up with exports of "software, movies, medicine, university degrees, and management consulting and law firm services." This speech further let the Republicans off the hook, this time by not enacting an American Manufacturing and Industrial Policy to mirror the mercantilist policies of our major trading partners.

The administration also repeatedly fell into the trap of saying that "the combination of green energy technologies, exported services, and new free trade agreements or FTAs will sufficiently revitalize the American economy", even though such efforts, while of course important, could never fill more than a small amount of the current 22-million "jobs gap."

The irony -- and the tragedy -- of all of this is that back in September 2008 and November 2008, most voters, including most Republicans, were anxious to see meaningful job creation and stimulus initiatives and trade reform (and tough finance reform).

Thus almost overnight, the country had a too-small and misdirected stimulus package -- yet one which no Republican would take credit for. Notably, it was also a package which promised that with its passage the official unemployment rate wouldn't get any higher than 8% even though the real unemployment rate was already around 20%, and whose success would be measured on GDP growth only and an equally flawed concept of employment (a job is a job).

So much for fixing the economy and getting the unemployed back working. In fact, as voters quickly came to observe and in many cases experience firsthand, in 2009 the number of real unemployed Americans increased substantially, from 24.7 million on 12-31-08 to 30.4 million on 12-31-09 (up 5.7 million!).

Trade reform was similarly largely left unattended. The administration continued to ignore China's massive illegal subsidies and its abusive labor and environmental practices, and it wasn't until June 2010 that the administration got China to commit to a meager 5% annual revaluation of the yuan, which still hasn't occurred. And since the yuan is a staggering 40% or so undervalued vis-à-vis the dollar, this wasn't, as our kids would say, much of a 'get' anyway.

In fact, the only meaningful trade concession America did get in 2009 was, per Mr. Obama, China's reopening of "their market to American pork and pork products." Only this from a nation which is responsible for 75% of America's trade deficit in manufactured goods and 55% of our overall trade deficit - and which continues to manufacture and export high-value Apple iPads to the U.S. while we now get to ship more pork rinds to Beijing.

After a pretty dismal 2009, achievements-wise, the Obama administration's major domestic economic resolutions in 2010 were, it looks like, three in number: (1) complete finance regulatory reform; (2) introduce a policy of "doubling U.S. gross exports within five years" time as a major stimulus initiative; and (3) reform the tax code by ending tax cuts for the wealthy and, as he promised the United Steelworkers in July 2008, "tax breaks for companies that ship jobs overseas."

Well, complete finance reform the administration did, but only, as the economist James Galbraith has written, after the Obama presidency's "original sin of assign[ing] economic policy to a closed circle of bank-friendly economists and Bush carryovers...who had no personal commitment to the goal of an early recovery, no stake in the Democratic Party, and no interest in the larger success of Barack Obama." As I wrote previously, Treasury Secretary Tim Geithner resisted and argued against virtually every tough amendment to the proposed financial reform legislation. Behind his back and sometimes to his face, he sabotaged the recommendations of the esteemed Paul Volcker, especially Volcker's important ideas of ceasing "too big to fail" and barring commercial banks from indulging in heavy risk taking and proprietary trading. And by letting his economic team win against Volcker and the likes of Rob Johnson and the Roosevelt Institute, and by pigeonholing the indomitable Elizabeth Warren for most of the reform process, President Obama lost his capacity to harness the justified anger of voters that was pervasive on the day he was elected.

Concerning "doubling U.S. gross exports within five years", which according to the President's own analysis may create at most 2 million jobs over those five years, as the United States Business and Industry Council (USBIC) has repeatedly identified, merely increasing U.S. gross exports will accomplish no economic good per se. Growth and employment can only result from increasing U.S. net exports.

Finally, as it relates to taxes, Candidate Obama had it absolutely right in 2008 when he pushed back on the Bush tax cuts for the extremely wealthy and on those loopholes, deductions and credits that allow businesses to avoid paying many taxes, the biggest of which being the one that currently allows American companies to each day hold $400 billion or so in cash in foreign jurisdictions, removed from the 25% to 35% taxes which they would have to pay the U.S. Treasury otherwise. Yet once the Business Roundtable and the U.S. Chamber of Commerce began taking exception to any efforts to derail their gravy train, President Obama abandoned all corporate tax reform initiatives. And then just last month, he rolled over and allowed the Bush tax cuts for the wealthy to be extended for another two years or, if Mitch McConnell has his way, permanently.

So, after watching two years of resolutions go by the wayside, let's hope that the Obama administration and Members of Congress can be persuaded to make -- and then follow through on -- at least the following three resolutions for 2011:

First, since our nation is undeniably in the midst of a protracted jobless recovery, is facing in raw number an unprecedented "jobs gap", and is confronting the high likelihood of what's called a "low growth/high unemployment trap", resolve to declare a full-scale jobs emergency and then pursue this issue with the same priority, urgency and follow-through that characterized the administration's approach to health care reform.

Second, resolve to seek agreement with Congress on a renewable energy standard for the country that requires utilities to provide escalating amounts of power from renewable sources like wind and solar energy. Also resolve to pick the 'low hanging fruit' from the energy reform tree, which are home-efficiency retrofits, high-efficiency home appliances, natural gas-powered commercial trucks, and medium-cost electric vehicles. (While I would love to see this resolution extended to a much broader 'green economy', I'm not optimistic about seeing something meaningful anytime soon.)

Third, with 40% of U.S. exports being to countries with which we have bilateral trade agreements that we often fail to fully enforce and the other 60% being to countries with substantial trade barriers, resolve to:

i. encourage Congress to hold hearings on the strategic and economic differences (a) between a manufacturing and industrial 'strategy' and a 'policy', and (b) between "doubling gross exports" and "increasing net exports." (Even though every other major developed nation plus China and India has a formal "manufacturing and industrial policy", the administration continues to say that we only need a "strategy". It's time to hear from Congress and the people on these issues.)

ii. (a) more fully enforce our trade agreements, better protect our domestic manufacturers and better preserve hard-gained intellectual property and (b) consider moving trade enforcement to a fully enabled and funded office in the Justice Department, since enforcement best belongs with 'enforcers', not with those who negotiate the agreements.


With a divided Congress and heightened partisanship as the 2012 elections already get underway, seeing any resolutions fulfilled any time soon will require a rare combination of political diplomacy and political force. But if you look at these resolutions and their focus on job creation and fair trade, they really are among the few promising bipartisan agenda items for 2011.

Leo Hindery, Jr. is Chairman of the US Economy/Smart Globalization Initiative at the New America Foundation and a member of the Council on Foreign Relations. Currently an investor in media companies, he is the former CEO of Tele-Communications, Inc. (TCI), Liberty Media and their successor AT&T Broadband. He also serves on the Board of the Huffington Post Investigative Fund.

 

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