Bill Clinton seems the perfect validator for Barack Obama -- which is why the president is utilizing the former president for selling his tax deal. After all, the economy boomed when Clinton was president and 22 million net new jobs were created. From a more narrow political perspective -- and this is important to Democrats in Washington -- Bill Clinton was reelected, even though he lost both houses of Congress in the 1994 midterms.
But the analogy falls apart as soon as you realize Clinton's economy was vastly different from Obama's. The recession Clinton inherited was relatively small, and caused by the Fed raising interest rates too high to ward off inflation. So it could be reversed by the Fed lowering interest rates -- as the Fed did in 1994. By 1995, the so-called "jobless recovery" had morphed into a full-blown jobs recovery. By 1996, at pollster Dick Morris's urging, Clinton could proclaim to the American people "you've never had it so good, and you ain't seen nothing yet."
The Great Recession has been far larger, caused not by the Fed raising interest rates but by the bursting of a giant housing bubble. In 2008, the biggest asset of most middle-class people, upon which they borrowed and that they assumed would be their nest eggs for retirement, collapsed. Housing prices continue to fall in most parts of the country. The Fed has lowered interest rates all it can, and unemployment remains sky high.
Bill Clinton presided over an economic boom engineered by Fed chair Alan Greenspan, who felt confident he could drop interest rates far lower than anyone expected without risking inflation. The result was 4 percent unemployment in many parts of America, as well as the best jobs recovery in history.
The price Greenspan exacted from Clinton -- and a resurgent Republican congress demanded -- was a balanced budget. As a result, Clinton had to give up much of his "investment agenda" in education, infrastructure, and other long-neglected means of building the productivity of average working Americans. The economy enjoyed a huge cyclical recovery.
But the economy's underlying structure remained as it had been before, including stagnant wages for most Americans. Within a few years the middle and working class was treating their homes as ATMs, borrowing trillions of dollars in order to maintain their standard of living, and at the same time demand enough goods and services to keep almost everyone in jobs.
Those days are over. The Democratic Party can no longer ignore critical investments in the productivity of average workers. Nor can it ignore the increasing concentration of income and wealth at the very top, and the inability of America's middle and working class to get the economy moving again.
The GOP hasn't changed their story or their strategy since the 1990s. It's the fault of big government. That was false then, and it's false now. The structural problems are now much worse, and the cyclical recovery from the Great Recession pathetically anemic.
If the Democratic Party has stood for anything over the years it is to maintain and restore upward mobility for the majority of working Americans, ensure that the playing field isn't tilted in the direction of the privileged, and limit the power of the richest among us to entrench themselves and their heirs into a semi-permanent plutocracy.
Continuing the Bush tax cuts of 2001 and 2003, including a sharp cut in the estate tax, violates these core principles. Doing so in the midst of an economic emergency that demands bold measures to rescue America's vast middle and working class adds further insult. For President Obama and former President Clinton to tell America there's "no other choice" or that "this is the best we can do" -- when Democrats remain putatively in control of the House, Senate, and the presidency -- is misleading.
I admire Barack Obama and Bill Clinton. I advised the former and worked for the latter. They are good men. But they have either been outwitted by the privileged and powerful of America, or seduced by those on Wall Street and the executive suites of America into believing that the Republican nostrums are necessary, or succumbed Democratic advisors who think in terms of small-bore tactics rather than large and principled strategies.
I urge congressional Democrats to remember the larger principles -- not in order to be purist or make the perfect the enemy of the better, but to move toward an economy and a society that we believe in, that reflects the needs of the vast majority of Americans at this difficult time.
Robert Reich is the author of Aftershock: The Next Economy and America's Future, now in bookstores. This post originally appeared at RobertReich.org.
I just got a letter from the Social Security Administration saying that the Department of Labor's Consumer Index (CPI) has determined that our cost of living has not risen since the last cost of living increase in 2008 and as a result our Social Security benefits will not increase in 2011.
A friend told that they don't include food when they determine the cost of living..do they eat? My check and millions of other's Social Security checks will have NO increase of benefits (money) while it looks like the wealthy will be richer - if Congress does not let the BUSH tax cuts on the wealthy expire. ARE WE TAKING FROM THE POOR AND GIVING IT TO THE RICH???
And Obama's proposed payroll tax cut for workers doesn't just reduce funding for SS and Medicare at the very time it needs to be increased; it opens the Pandora's Box for a free-for-all raid on the funding source for these retirement programs that WE'VE ALREADY PAID FOR. The GOP has lusted for years at the prospect of cutting or eliminating the EMPLOYER contribution. Obama's given them the green light now with this first step.
Even if it seems hopeless to you, please write or call your Senators and MC to express your concerns, and ask that they vote to reject the Obama-GOP agreement. We must try to stop this.
Question just sent in
I am so confused about this tax cut extension and this legislation that is quickly moving through both houses. Obama and Clinton both say this is the best the Dems could get. Dr. Robert Reich in his latest piece at Huffington Post as well as my hard core blue collar Dem mother of 84 says " Obama and the Dems should draw the line in the sand on this issue."
Dr. Reich "f the Democratic Party has stood for anything over the years it is to maintain and restore upward mobility for the majority of working Americans, ensure that the playing field isn't tilted in the direction of the privileged, and limit the power of the richest among us to entrench themselves and their heirs into a semi-permanent plutocracy. Continuing the Bush tax cuts of 2001 and 2003, including a sharp cut in the estate tax, violates these core principles. Doing so in the midst of an economic emergency that demands bold measures to rescue America's vast middle and working class adds further insult. For President Obama and former President Clinton to tell America there's "no other choice" or that "this is the best we can do" -- when Democrats remain putatively in control of the House, Senate, and the presidency -- is misleading."
Who should the working class out here believe?
Any middle-level manager can pretend to be a hero by cutting salaries and benefits. It works, for a while. There is no way to compete with India or China and maintain a healthy middle class. No way. Either we get protection or we devolve into a corrugated tin and tarpaper society. If we aren't willing to, they know people who are. It IS class warfare. It always has been and always will be.