Here’s one thing I’m sure of about the economic speech Hillary Clinton gave Monday morning at the New School: If a relatively unknown Democratic governor of Illinois or Michigan were running for president, and he gave the speech Hillary Clinton gave Monday morning at the New School, rank-and-file liberals would be turning rapturous cartwheels. She correctly identified the central economic problem of our time; she talked very clearly about the kinds of solutions she’d pursue to address it; she even tossed a few threats in Wall Street’s direction.
The problem is the wages of middle-class workers. The solutions are varied but boil down to a range of policies that would do two things: one, give corporations incentives to share profits and think less about short-term profit-maximization; two, help middle-class families meet the life expenses (college tuition, day care, etc.) that have increased greatly over the last 20 years while wages have remained stagnant. And as to Wall Streeters who gamble with middle-class people’s money, she said, “We will prosecute individuals and firms” who do so. She used the word “criminal” in this context more than once.
My hypothetical governor giving exactly this speech would be showered with liberal praise. But Clinton says it, and it’s like so what. She faces too much distrust from liberals over her past centrism; and for the moment everybody’s all Bernie Bernie Bernie. And that’s all fine. Sanders is fun and sometimes exhilarating, and a primary contest needs a candidate who can speak the unvarnished truth.
But it’s the speakers of varnished truth who usually win presidential nominations, and Clinton is at least 90 percent likely to win this one. And as varnished truths go in Democratic presidential politics, Clinton’s are about as liberal as any liberal could reasonably hope for. There’s an art to taking it right up to line, but not an inch past, and she’s doing that.
One way of testing whether proposals have any ideological bite to them is to imagine whether anyone from the other party could put them forward. Everyone can and will say they want to help the middle class. But how? Jeb Bush says with 4 percent growth into infinity. First of all this is a big fat lie of a promise, and he’s surely smart enough to know he’s lying. From 1975 to 2014 (for 40 years), annual GDP growth in the United States averaged 2.79 percent, according to World Bank data (the stuff I used came in the form of an Excel spreadsheet, so there’s no URL, but Google something like “Real Historical Gross Domestic Product” and you’ll find it). So it doesn’t happen. The best years of sustained GDP growth we’ve ever had were under—yep—Bill Clinton, but even in the late 1990s, we had only four straight years of plus-4-percent growth, and that’s a modern record (there was a three-year run under Ronald Reagan from 1983-1985).
So it’s a lie, number one, but more importantly, it means nothing as a measure. No, actually, it means something, and what it means is toxic: It means that if we actually do experience growth at 4 percent but without taking any of the ameliorative measures Clinton is talking about, the main impact of that growth will be to give us more inequality, more wage stagnation, more corporate profit-hoarding, more stock buybacks, and more roulette-wheel banking. Bush’s is a flawed way of looking at the economy, and this is a very old point of contention between right and left; As Robert Kennedy once said, GDP “measures everything, in short, except that which makes life worthwhile.”
Clinton is talking about growth too, but she’s emphasizing equitable growth. And she puts forward numerous proposals that no Republican would touch, from raising the minimum wage—remember, Bush wants no federal minimum wage—to strengthening unions to offering paid family leave to cracking down on employers who misclassify workers as contractors to expanding on Dodd-Frank to endorsing the Buffett Rule, which applies a minimum effective tax rate of 30 percent on earners north of $1 million.
She left a lot of the details for later, and she was fuzzy here and there—she was noncommittal on trade, and it will be interesting to hear what “defending and enhancing” Social Security actually means.
But for now, it’s enough that she’s linking the concepts of fairness and growth and that she’s making that link the centerpiece of her economic agenda. This is important because until very recently, the economics profession hasn’t regarded fairness as anything it should care about. But that has begun to change. This was the big question in my mind last year as I contemplated Clinton’s candidacy last year. Believe me, I had no small amount of doubt about how aggressively she’d embrace the equitable growth proposition. I’d say she’s answered my questions. Last year, on her book tour, she pooh-poohed paid family leave. Now it’s a centerpiece of her platform.
It’s still going to take time for liberals to believe this, and of course some never will. This is where Clinton still has some work to do. When it comes to economics, liberals don’t really want to hear policy proposals. They want to hear FDR-style attacks on the economic royalists. This is not something Clinton is known for, to put it mildly. I don’t think anyone expects her to be Elizabeth Warren, but in her own way, she has to go there, especially when you consider that she might become the wealthiest president in modern times.
This, from the speech, started moving in that direction, and it’s the first time I recall her talking like this: “And while institutions have paid large fines and in some cases admitted guilt, too often it has seemed that the human beings responsible get off with limited consequences—or none at all, even when they’ve already pocketed the gains. This is wrong and, on my watch, it will change.”
Maybe if she keeps this up and the royalists start attacking her, and she stands her ground, the Warrenites will finally come around. In the meantime, liberals ought at least to recognize that the old cautious Hillary they have in their minds would never have gone this far this fast.
By: Michael Tomasky, The Daily Beast, July 14, 2015
“Greece’s Economy Is A Lesson For Republicans In The U.S.”: The Toxic Combination Of Austerity With Hard Money
Greece is a faraway country with an economy roughly the size of greater Miami, so America has very little direct stake in its ongoing disaster. To the extent that Greece matters to us, it’s mainly about geopolitics: By poisoning relations among Europe’s democracies, the Greek crisis risks depriving the United States of crucial allies.
But Greece has nonetheless played an outsized role in U.S. political debate, as a symbol of the terrible things that will supposedly happen — any day now — unless we stop helping the less fortunate and printing money to fight unemployment. And Greece does indeed offer important lessons to the rest of us. But they’re not the lessons you think, and the people most likely to deliver a Greek-style economic disaster here in America are the very people who love to use Greece as a boogeyman.
To understand the real lessons of Greece, you need to be aware of two crucial points.
The first is that the “We’re Greece!” crowd has a truly remarkable track record when it comes to economic forecasting: They’ve been wrong about everything, year after year, but refuse to learn from their mistakes. The people now saying that Greece offers an object lesson in the dangers of government debt, and that America is headed down the same road, are the same people who predicted soaring interest rates and runaway inflation in 2010; then, when it didn’t happen, they predicted soaring rates and runaway inflation in 2011; then, well, you get the picture.
The second is that the story you’ve heard about Greece — that it borrowed too much, and its excessive debt led to the current crisis — is seriously incomplete. Greece did indeed run up too much debt (with a lot of help from irresponsible lenders). But its debt, while high, wasn’t that high by historical standards. What turned Greek debt troubles into catastrophe was Greece’s inability, thanks to the euro, to do what countries with large debts usually do: impose fiscal austerity, yes, but offset it with easy money.
Consider Greece’s situation at the end of 2009, when its debt crisis burst into the open. At that point Greek government debt was near 130 percent of gross domestic product, which is definitely a big number. But it’s by no means unprecedented. As it happens, Greece’s debt ratio in 2009 was about the same as America’s in 1946, just after the war. And Britain’s debt ratio in 1946 was twice as high.
Today, however, Greek debt is over 170 percent of G.D.P. and still rising. Is that because Greece just kept on borrowing? Actually, no — Greek debt is up only 6 percent since 2009, although that’s partly because it received some debt relief in 2012. The main point, however, is that the ratio of debt to G.D.P. is up because G.D.P. is down by more than 20 percent. And why is GDP down? Largely because of the austerity measures Greece’s creditors forced it to impose.
Does this mean that austerity is always self-defeating? No, there are cases — for example, Canada in the 1990s — of countries that slashed their debt while maintaining growth and reducing unemployment. But if you look at how they managed this, it involved combining fiscal austerity with easy money: Canada in the ’90s drastically reduced interest rates, encouraging private spending, while allowing its currency to depreciate, encouraging exports.
Greece, unfortunately, no longer had its own currency when it was forced into drastic fiscal retrenchment. The result was an economic implosion that ended up making the debt problem even worse. Greece’s formula for disaster, in other words, didn’t just involve austerity; it involved the toxic combination of austerity with hard money.
So who wants to impose that kind of toxic policy mix on America? The answer is, most of the Republican Party.
On one side, just about everyone in the G.O.P. demands that we reduce government spending, especially aid to lower-income families. (They also, of course, want to reduce taxes on the rich — but that wouldn’t do much to boost demand for U.S. products.)
On the other side, leading Republicans like Representative Paul Ryan incessantly attack the Federal Reserve for its efforts to boost the economy, delivering solemn lectures on the evils of “debasing” the dollar — when the main difference between the effects of austerity in Canada and in Greece was precisely that Canada could “debase” its currency, while Greece couldn’t. Oh, and many Republicans hanker for a return to the gold standard, which would effectively put us into a euro-like straitjacket.
The point is that if you really worry that the U.S. might turn into Greece, you should focus your concern on America’s right. Because if the right gets its way on economic policy — slashing spending while blocking any offsetting monetary easing — it will, in effect, bring the policies behind the Greek disaster to America.
By: Paul Krugman, Op-Ed Columnist, The New York Times, July 10, 2015
“Revealing A Truth He Didn’t Intend To Reveal”: Jeb Bush Wants You To Work More, Whether You Like It Or Not
Jeb Bush’s instantly controversial argument to the editorial board of the New Hampshire Union Leader—that “people need to work longer hours” if the U.S. economy is to attain perpetually high economic growth—has created a great deal of confusion, when the real implications of his view are clear and troubling.
Part of the confusion stems from the fact that it’s politically dumb to suggest, even unintentionally, that voters don’t work hard enough. Democrats and the political press are treating Bush’s statement as a gaffe, because his words can be plausibly construed to mean just that. The rest stems from the muddled context of his remarks, and his equally muddled attempt to clarify them. Both sets of comments betray a shaky grasp of basic economic terms. But the key difference between them is that in round one, Bush said people “need” to work more, whereas in round two he said people should be given “a chance” to work more. This is a real and crucial distinction—a true walkback, rather than some weaselly attempt to say the same thing using softer language. The problem is that there are plenty of reasons to suspect Bush was being more forthright in the first instance. It’s quite clear, when you examine Bush’s past statements and conservative orthodoxy more generally that Bush doesn’t merely want to use carrots to encourage work—he wants to use sticks as well.
Bush’s improbable goal is to make four percent annual economic growth normal rather than extraordinary. Both sets of comments speak to meeting that objective, and he reasons, quite sensibly, that it won’t happen unless people who aren’t currently working begin to work, and people who are currently working begin to work more.
The real controversy arises not from the bloodlessness of the words he chose, but from the tactics he would use to extract the necessary labor.
One way to increase hours worked is to eliminate laws and regulations that make it difficult for people to work as much as they’d like. If the government effectively penalizes employers for giving their workers more hours, or if workers face steep marginal tax penalties when they climb the income scale, then removing those obstacles would give people so inclined “a chance” to work more.
Another way to increase hours worked is to eliminate laws that give workers leverage over their employers. Supplement people’s incomes, and they have less incentive to work. Take away their benefits, and they’ll have little choice but to work more. They will “need” to.
The Affordable Care Act creates both kinds of work disincentives. Under the ACA, workers with subsidized insurance stand to lose hundreds and hundreds of dollars in premium subsidies when their incomes climb from 199 percent of the poverty line to 201 percent of the poverty line. But the ACA also creates a coverage guarantee, which means people no longer need to be so reliant on their employers for health insurance. This is a good thing. It will allow hundreds of thousands of people to leave jobs they don’t want to pursue other interests (startups, full-time parenting, retirement, leisure) without assuming the terrifying risk of medical bankruptcy. But conservatives, including Jeb Bush, think it’s terrible.
Bush doesn’t just support removing burdens that hinder people who want to work more. He supports steepening the costs and risks for people who don’t. If Bush can use economic policy as a cattle prod to hasten four percent growth, he will. When he said “people need to work longer hours” he meant our policies should leave people little choice but to do so. If Bush suffers politically for this, it will be because his words can be made to seem condescending. Workers don’t feel like they “need” to work more, and don’t like being told otherwise by a rich and powerful politician. That’s what political commentators are getting at when they call this a gaffe, but it was only a gaffe in that it revealed a truth he didn’t intend to reveal. The real reason his remarks are troubling isn’t that he meant to call workers lazy—he probably didn’t—but that he wants to make workers feel like working more is their only option.
By: Brian Beutler, Senior Editor, The New Republic, July 9, 2015
“From ‘Lame Duck’ To ‘Fourth Quarter'”: One For The History Books, As President Obama Plays Through To The End Of The Game
It seems to me that the job of political scientists is to identify patterns in political history as a way to predict the future. One of those patterns that has been pretty generally accepted is that once a presidential campaign begins to replace a second-termer, the White House occupant goes into “lame duck” status. That is certainly what everyone was expecting from President Obama after the huge losses Democrats suffered in the 2014 midterms.
But as we all know by now, the President decided he’d start a new pattern…one that saw his remaining two years as a “fourth quarter” in which he vowed to play to the end. His success in being able to do that hinged on several factors.
1. A scandal-free presidency
During my lifetime, no two-term president has managed to escape the drag of either scandal or terribly flawed policies at the end of their second term. Johnson had Vietnam. Nixon had Watergate. Reagan had Iran/Contra. Clinton had impeachment. Bush had the war in Iraq and the Great Recession.
Recently David Brooks noted that the current administration is the exception to that pattern.
I have my disagreements, say, with President Obama, but President Obama has run an amazingly scandal-free administration, not only he himself, but the people around him. He’s chosen people who have been pretty scandal-free.
That means that not only does the President maintain the good will of most Americans, but he doesn’t have to devote an inordinate amount of time to defending himself or attempting to fix policy failures.
2. Previous work is bearing fruit
Last December President Obama sat down for an interview with NPR’s Steve Inskeep. In response to questions about some of the bold moves he’d already taken since the 2014 midterms, the President said this:
But at the end of 2014, I could look back and say we are as well-positioned today as we have been in quite some time economically, that American leadership is more needed around the world than ever before — and that is liberating in the sense that a lot of the work that we’ve done is now beginning to bear fruit. And it gives me an opportunity then to start focusing on some of the other hard challenges that I didn’t always have the time or the capacity to get to earlier in my presidency.
The major things he is referring to are that the economy was recovering, healthcare reform was working and ground troops were out of both Iraq and Afghanistan. But in addition to all that, diplomacy had opened the doors in Cuba, brought Iran to the negotiating table and led to an agreement with China about climate change.
3. Pen and phone strategy
A lot of the assumption about President Obama’s pending lame duckness had to do with the intransigence of Congress that was only bolstered by the 2014 midterms. But in January of 2014, the President instructed his Cabinet to bring him ideas he could implement via executive order or through persuasion with business leaders and local/state governments. Thus began his “pen and phone” strategy that led to everything from DAPA to new rules for overtime pay to working with local governments to provide paid sick/family leave.
4. Big events
Political pundits are often guilty of assuming that whatever is happening today will be a permanent narrative. But national/international events have a way of changing the current dynamic. Nowhere has that been more evident than the handwringing over President Obama’s assumed irrelevance when House Democrats handed him a “humiliating” defeat on TPA a couple of weeks ago. We all know how that one turned out. Just as the House and Senate re-grouped to pass TPA, the events in Charleston, SC were unfolding and the Supreme Court was preparing to hand down rulings affirming Obamacare, marriage equality and disparate impact. As Michael Cohen wrote, we’ve recently been witness to ten days that turned America Into a better place. From an affirmation of his policies to his Amazing Grace eulogy, President Obama has been front and center on it all.
But big events can help or hurt a presidency. The lesson we should all learn from their recent trajectory is that things can change in a heartbeat. President Obama still has a year and a half to go. There are a few things we know are coming up, like whether or not he is able to work with Iran and P5+1 to reach a deal on nuclear weapons. This December we’ll learn whether or not the agreements the Obama administration has crafted with countries like China, India and now Brazil will lead to an international agreement on climate change at the UN Conference in Paris. Both of those would be historic achievements. And then, of course, there are the unknown events that could be on the horizon.
This may very well be the first time in the modern era that a sitting president has as much influence on a presidential campaign as any of the candidates who are running for office. The increasing size of the clown car on the Republican side means that it might be months before any one candidate is able to break through all the noise. That leaves the stage pretty wide open for a Democratic message. And Hillary Clinton has wisely chosen to run with President Obama and his record rather than against it. That means she’s looking pretty good right about now.
Whatever happens, this will be one for the history books as lame duckness is tossed aside and President Obama plays through to the end of the fourth quarter.
By: Nancy LeTourneau, Political Animal Blog, The Washington Monthly, July 1, 2015
“The ‘Depends’ Defense”: Republicans Will Hate Obama’s New Overtime Rule, But They Can’t Do Anything About It
Last night President Obama announced — in an article on the Huffington Post — that he will raise the threshold for overtime pay in American workplaces. The new regulations are substantively important for the millions of workers who will be affected, and they’re politically important as well. Republicans are going to squawk, saying that this change will cost jobs and is another example of Obama’s tyrannical rule. But they can’t stop it, and they’re going to lose the argument as well.
Under the Fair Labor Standards Act, employers have to provide overtime pay (usually time and a half) to employees who work more than 40 hours a week, but executives and managers are exempt from the requirement, as are those who make higher salaries. The trouble is that the rules don’t account for inflation, and so over time, what constituted a higher salary became absurdly low. The threshold has been raised only once since 1975, when it covered nearly half of U.S. workers; today it stands at less than $24,000, or lower than the poverty level for a family of four. (This document from the Economic Policy Institute offers some background on the regulation if you’re interested.) Here’s how Obama described the change he will be making:
We’ve got to keep making sure hard work is rewarded. Right now, too many Americans are working long days for less pay than they deserve. That’s partly because we’ve failed to update overtime regulations for years — and an exemption meant for highly paid, white collar employees now leaves out workers making as little as $23,660 a year — no matter how many hours they work.
This week, I’ll head to Wisconsin to discuss my plan to extend overtime protections to nearly 5 million workers in 2016, covering all salaried workers making up to about $50,400 next year. That’s good for workers who want fair pay, and it’s good for business owners who are already paying their employees what they deserve — since those who are doing right by their employees are undercut by competitors who aren’t.
That’s how America should do business. In this country, a hard day’s work deserves a fair day’s pay. That’s at the heart of what it means to be middle class in America.
We should note that Obama could have gone higher than $50,400. Earlier this year, some Democrats on Capitol Hill worried that the administration was going to propose a lower overtime threshold, something like $42,000 a year. A group of liberal senators urged Obama to set the threshold at $54,000. They also argued that it should be pegged to increase with inflation going forward, an absolutely critical provision that would give the measure lasting effect. So Obama didn’t raise the threshold as far as they wanted, but he is accounting for future inflation, by pegging the overtime threshold to the 40th percentile of incomes.
As much as Republicans will object, they can’t expect that their next president will undo this action. There are some regulations that we can expect to change whenever the White House changes hands. For instance, the Mexico City Policy, also known as the “global gag rule,” prohibits the funding of any organization anywhere in the world that even discusses abortion with a woman; when a Republican president takes office, he institutes it, and when a Democratic president takes office, he revokes it. But rules such as this one almost certainly won’t fall into that category. Try to imagine a President Rubio or Walker announcing that he was taking overtime pay away from millions of lower-middle-class U.S. workers. It won’t happen. They may argue against the rule when it is proposed, but once it’s in place, undoing it becomes politically impossible.
The more immediate political impact of this rule change lies in its place among a constellation of proposals Democrats will be offering on things such as the minimum wage and paid sick leave, proposals that are aimed at arresting the growing cruelty of the American workplace. As I’ve argued before, one way to think about the contrast between what Republicans and Democrats offer on the economy is that Republicans say they’ll get you as far as your employer’s door, while Democrats want to walk inside with you. Republicans argue that their preferred policies, mostly tax cuts and light regulation on businesses, will accelerate growth so that new jobs will be created. But once you’ve got the job, you’re on your own. The Democratic argument is that government has to come inside the workplace, to make sure people are being treated fairly. So they want to increase pay, provide family and sick leave, allow workers to bargain collectively, make sure no one is discriminated against and generally establish a structure that guarantees that people are treated well and can maintain some measure of dignity.
The Republican counter, of course, is that all those things increase costs to employers and therefore cost jobs. But their argument presumes that there’s nothing fundamentally wrong with the American workplace, which most of us know just isn’t true. Yes, many employers already treat their employers well. But millions of others don’t and would treat their workers even worse if they could get away with it.
As for this measure, we know exactly what employers will say: This will cost us money, which means fewer jobs. We know that’s what they will say, because that’s what they say about every marginal improvement in working conditions, benefits or pay. And in the short term, they’re right: It will cost them some money.
But let’s turn it around. What if employers said, “We could save money by removing the employee bathrooms and just telling our workers to wear Depends to the job. And that would mean we’d be able to hire more people.” Would we respond, “Well, if it would save you money and produce a few more jobs, then that sounds great”? Of course not. The short-term cost to employers of a regulation is certainly something to consider, but it’s not the only thing to consider.
The change to overtime regulations isn’t some kind of dramatic transformation. Like increasing the minimum wage, it’s nothing more than taking an existing rule and updating it for inflation. But it’s built on the assumption that the government should come into the workplace and make sure that what happens there is fair. Republicans don’t believe that’s government’s job. But it isn’t going to be easy for them to make that case to a population that feels increasingly insecure at work. And even if they could win the argument, they won’t be able to change the policy.
By: Paul Waldman, Senior Writer, The American Prospect; Contributor, The Plum Line Blog, The Washington Post, June 30, 2015