fresh voices from the front lines of change







Democrats now delight in watching Republicans flounder as they try to free themselves from the failures of President George W. Bush and the extremes of the Tea Party. But the GOP’s tribulations should not blind Democrats to their own challenge. The party must free itself from the legacy of former President Bill Clinton and the centrism of his New Democrats.

Clinton’s successes in office have little relevance for Democrats today. The 1990s were a very different time both politically and economically. In fact, many of Clinton’s policies led to the travails now facing Americans. They are part of the problem, not part of the solution. And Clinton’s strategy of co-opting conservative themes offers no way out.

The Clinton Temptation

Democrats understandably feast on the comparison between the salad days of the Clinton presidency and the Bush debacle. Twenty-two million new jobs under Clinton; the worst jobs record since the Great Depression under Bush. The longest period of growth in U.S. history under Clinton; the weakest recovery and biggest bust under Bush. Budget surpluses under Clinton; deficits as far as the eye could see under Bush. No wonder President Barack Obama called on Clinton to make his case for re-election at the 2012 Democratic convention.

As leader of the New Democrats, Clinton tacked to the prevailing winds of that conservative time. His first presidential campaign in 1992 combined a populist economic focus on jobs – “It’s the economy, stupid” – with transparent efforts to disarm explosive Republican wedge issues. He promised to “end welfare as we know it”; embraced the death penalty and harsh “three strikes and you’re out” mandatory sentencing; and gained editorial approval by blindsiding Rev. Jesse Jackson with his “Sister Souljah” gambit.

On the economy, Clinton’s New Democrats scorned old “tax and spend” liberals. They boasted that they understood markets, were skeptical of big government and disdained the outmoded social welfare policies of the New Deal and Great Society. The promise of America, they argued, was “equal opportunity, not equal outcomes.”

After taking office, Clinton shelved most of his populist promises. He made Robert Rubin, the Goldman Sachs co-chairman, his economic czar and embraced deficit reduction as the key to wooing Federal Reserve Chairman Alan Greenspan to lower interest rates and fuel growth.

After Republicans took Congress in 1994, Clinton famously declared that “the era of big government is over.” He championed deregulation, particularly in telecommunications and finance, which culminated in the repeal of the New Deal’s Glass-Steagall Act boundaries on banks and the torpedoing of efforts to regulate derivatives.

Clinton did reverse some of President Ronald Reagan’s top-end tax breaks, but he also lowered capital-gains taxes, and his reforms encouraged the explosion of stock options for high-level executives. He embraced House Speaker Newt Gingrich’s welfare repeal and even flirted with carving private accounts out of Social Security.

Clinton’s trade policy was defined by and for multinational corporations and banks. His major trade accords protected the rights of investors but not workers. China was accorded most-favored-nation status despite its mercantilist policies. A strong dollar favored investment abroad but hindered exports.

In today’s political environment, Clinton’s retreats and concessions on social issues are embarrassing anachronisms. The Republican social wedge issues of the 1990s – including gay rights, women’s and minority issues – are now sources of Democratic strength. State budget constraints, meanwhile, have pushed even Republican governors to turn against extreme sentencing and capital punishment policies.

Obama’s nomination and election put a stake in the New Democrat’s’ “Southern White Hope” strategy. Democrats no longer worry about being a “new coalition increasingly dominated by minority groups and white elites,” as William Galston, a former Clinton adviser, and Elaine Kamarck decried in “The Politics of Evasion,” a New Democrat manifesto. It is the GOP that now struggles to escape being a whites-only minority party.

On economic issues, Clinton’s Rubinomics contributed directly to digging the hole we are in. Deregulation helped unleash the “financial wilding” that eventually blew up the economy. The celebration of deficit reduction bolstered the illusory belief in “expansionary austerity” that has driven Europe back into recession and sabotaged any chance of getting a sufficient stimulus here at home.

Clinton’s budget surpluses were devoted to paying down the debt, even as public investments vital to a modern economy were starved. Trade policies rewarded multinationals for shipping jobs abroad, creating the imbalances in trade and financial flows that were unsustainable, while hollowing out American manufacturing and the well-paid, middle-class union jobs it traditionally provided.

The perverse corporate CEO compensation policies, top-end tax breaks and continued assault on labor unions led to what historian Godfrey Hodgson concluded was the most significant characteristic of the American economy in the 1990s – “its persistent and growing inequality.” Senior executive pay rose by 442 percent during Clinton’s eight years in the White House, according to Nobel prize-winning economist Joseph Stiglitz, the first head of Clinton’s Council of Economic Advisors. This was completely out of line with middle management – to say nothing of workers struggling with stagnant wages.

In 1999, average wages, discounted for inflation, had still not caught up with their 1973 level. By the mid-1990s wealth distribution in the United States was already more unequal than in supposedly class-ridden Europe, and getting worse.

Obama Succumbs

Early in his first term, Obama delivered what became known as his “economic sermon on the mount” at Georgetown University. The United States could not recover the old economy and should not want to, he stated. That economy was built on debt and speculation. It featured ever more extreme inequality, and a sinking middle class.

Obama argued that we “cannot rebuild this economy on the same pile of sand. We must build our house upon a rock. We must lay a new foundation for growth and prosperity – a foundation that will move us from an era of borrow and spend to one where we save and invest; where we consume less at home and send more exports abroad.”

But Obama is himself a Rubin protégé. He staffed his administration with Rubin acolytes and disciples – including Timothy Geithner as Treasury secretary, Lawrence Summers as chief economist, Peter Orzag as director of the Office of Management and Budget, Jack Lew, Michael Froman, Gene Sperling and more.

The result was a revival of the old gospel. The Obama administration rescued the banks without restructuring them. No one has yet been held accountable for what the FBI called the “epidemic of fraud” that inflated the housing bubble.

When Germany and China spurned the global consensus to move to more balanced trade, Washington chose not to react. Instead the administration pursued more of the old-style trade accords, notably with South Korea and now with much of Asia.

The president has espoused progressive tax reforms but has gained little ground in battles with Republicans. After passing the Recovery Act to save an economy in free fall, he turned prematurely to deficit reduction, undermining any chance of more spending to get the economy going and leaving Americans saddled with continued mass unemployment.

The sad fact is that the old economy is coming back. Austerity continues to starve public investments vital to our future. The banks emerged from the crisis bigger and more concentrated than ever. Despite the domestic natural gas explosion, the trade deficit is still more than $1 billion a day, with the deficit with China setting records.

Extreme inequality is getting worse. The wealthiest 1 percent of Americans captured a stunning 121 percent of the income growth in the first two years after the economic collapse. Everyone else, on average, lost ground. The jobs being created offer less pay and fewer benefits than those that were lost. More than 20 million people still need full-time work.

Obama and Democrats didn’t inherit the economy that Clinton enjoyed – one buoyed by the dot-com resurgence and inflated by the bubble. Rather, they confront an economy struggling to recover from the Great Recession, still scarred by mass unemployment, falling wages and a declining middle class. The old conservative policies – even in their tempered Clinton form – offer no answers.

Nor can Democrats consolidate their potential reform majority with Clinton policies. Obama built his electoral majority on the “rising American electorate” – the young, people of color, single women. But these constituencies were hardest hit in the Great Recession and have fared poorly in the recovery. No matter how repellant Republicans may look to these voters, they are unlikely to turn out in large numbers for a party whose policies have failed them.

Democrats and the country have to move beyond the old economy and the old arguments. Obama had it right: We need a new foundation for growth – one that embraces the need for dynamic and activist government.

That agenda would include investment in infrastructure, research and education – areas vital to our future; a manufacturing policy to secure leadership in the green industrial revolution that will inevitably sweep the world; a trade policy that ends destabilizing imbalances that can’t be sustained; controls on the financial industry so it serves the real economy; and a far greater focus on ensuring that workers capture a fair share of the productivity and profit they help to generate. This would include a higher minimum wage, equal pay for women, empowered workers, curbs on perverse CEO compensation schemes and progressive tax reform.

None of this can be done in the face of the Republican Tea Party-fueled obstruction. Even a politician of Clinton’s guile would have a hard time reaching a “grand bargain” with this crowd. Change can’t be achieved by co-opting conservative themes or championing Wall Street priorities.

Democrats have to stake out their course clearly, show who is standing in the way, offer the country a clear choice and mobilize the emerging majority for change.

Moving beyond the Clinton legacy may seem unlikely – particularly because another Clinton looms so large in the party’s future. But Hillary Clinton may be exactly the leader to make the break. She was blindsided in 2008, when she assumed she was headed to a coronation rather than a contest, and ignored how much the emerging American electorate had turned against the war and the old politics. She isn’t likely to make that mistake again.

Just as Bill Clinton argued that he had to challenge the old Democrats on social issues to get elected president, Hillary Clinton will have to challenge the new Democrats on economic issues to be a successful one.

This could prove to be the real capstone of the Clintons’ extraordinary political journey. They may well have the opportunity to demonstrate that they are not only agile enough to succeed in a conservative era of reaction but bold enough to lead a new progressive era of reform.

This commentary was originally published by Reuters.

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