Sunday, January 31, 2010
Every week CUIP’s president Jacqueline Salit and strategist/philosopher Fred Newman watch the political talk shows and discuss them. Here are excerpts from their dialogues compiled on Sunday, January 31, 2010 after watching selections from âThe Charlie Rose Show,â CNNâs âRickâs List,â âThe Chris Matthews Showâ and âThe McLaughlin Group.â
Salit: The Charlie Rose panel with John Podesta, Chrystia Freeland, David Brooks, Al Hunt and Jim Fallows discussed the State of the Union late into the night. Charlie was in London. It was 4:00 a.m. there while he was doing the show.
Newman: He looked a bit tired.
Salit: Yes. And it was an interesting discussion. It focused on two interconnected issues. (1)The contradictory nature of the problems that have to be fixed on the economic side and (2)the inability of our government, as itâs currently â not just operating, but designed â to meet that challenge. To begin, the basic problem for the Obama White House: unemployment is at 10%, joblessness is looking dangerously incurable, even more so because the economy âis recovering,â but the jobless picture isnât. Government has to act. Government has to take initiative. Government has to spend money to address that problem.
Newman: So sayeth the Democrats.
Salit: So sayeth the Democrats, yes. Other side of the problem: We have to stop spending money because the deficit and the debt are so gigantic. There isnât a word in our language that seems big enough to describe the deficit and the debt.
Newman: Thatâs not an uninteresting formulation because itâs only a small slip-slide between that formulation and saying the deficit doesnât matter, which some economists â left and right â say and I rather lean towards. Thatâs why you canât find a word for it.
Salit: I hear that. And there are economic advisors who are telling Obama that very thing.
Newman: What?
Salit: The deficit doesnât matter.
Newman: Yes. But, other things do matter, of a more political nature, namely our position relative to the rest of the world in terms of economic power. But the deficit, per se, is not the issue.
Salit: Alright. But these discussants seem to all agree that this may be an insurmountable contradiction, meaning the imperative for government to act and spend money to deal with joblessness combined with the size of the deficit and, at least, the perception on the part of the American people that the deficit is way out of hand. Add to that, the risk that the global economic community reacts to Americaâs deficit spending and accumulated debt by being less and less inclined to loan money to the United States.
Newman: Put them together and what do they imply?
Salit: What?
Newman: A presidential ticket of Ron Paul and Ross Perot.
Salit: How so?
Newman: No single political figure has emphasized and spent more money railing against the deficit than Perot. And Ron Paul, with his history as an independent, as a Libertarian, who favors structural changes in the political process, could get us working on the government breakdown side of it. Put the two together and, if the American people were rational and there was enough money behind them, they might be the team that would come to Washington and start working to solve the twin problems: economic instability and political dysfunction. The team on Charlie Rose had no solution because they didnât even consider reforms of the political process. As long as you donât do that, there is no solution to this problem.
Salit: I take it part of your point is that the contradiction on the economic policy front is one of the things that is being politicized by the partisans. So, the deficit becomes a popular issueâŚ
Newman: Itâs not quite a popular issue. Itâs a usable issue in this context. When Perot raised it, in 1992, the government laughed hysterically.
Salit: Itâs usable because itâs a battering ram against government spending, against the Democratic paradigm of government intervention into the economy?
Newman: Yes, you can use it to make political points against the Democrats. When Perot raised it, they laughed at him and said that he was a silly guy from Texas who didnât understand anything. Which he was. But, thatâs neither here nor there.
Salit: So, the Rose panel pointed to the inability of the government to act in response to this. David Brooks says, âThe government is institutionally weak.â His account of why the government is institutionally weak is because the size of the entitlement budget is so huge and so fixed that, essentially, Obamaâs hand is stayed. He canât do anything without a combination of raising taxes and cutting costs. You raise taxes, you piss off the 50% of the country that doesnât want taxes raised. You cut the budget, you piss off the 50% of the country that doesnât want entitlements cut. And Brooks says, âI donât see a way out of it.â
Newman: Right.
Salit: And even Obamaâs seems to be saying: Given our system of government, I have a big majority in Congress and I still canât get any big changes.
Newman: Well, the system of government requires a super majority in the Senate.
Salit: So, whatâs the way out?
Newman: There isnât any. Thatâs the point.
Salit: When you boil it down, the Democrats and Republicans, regardless of their approach, are saying this: If the global economy recovers, then we can make this work out, because the economic situation will be healthier. Thereâll be a bigger tax base. Thereâll be more revenues. And more jobs. There will be less unemployment. And weâll grow our way out of this problem.
Newman: Right. The way out therefore, is largely out of their control. But, what about this? What if the economy grows and the deficit grows along with it?
Salit: Because weâre always going to spend more than we have. And paying down the debt is not going to be high on the list of what the government is going to do, presumably.
Newman: Well, we paid down the debt in the 1990s. And then we started borrowing again. Americans love credit.
Salit: We do indeed. So, if youâre on a steady growth trajectory and things are looking fairly stable and growing, then thereâs no problem with the deficit and thereâs no problem with the debt. But, when Clinton took office, he brought Bob Rubin of Citigroup in and made a series of profound structural changes in the regulatory system, in trade policy, etc. That grew the economy. The deficit shrunk and when he left office, there was a surplus. Then, surplus in hand, a new administrationâŚ
Newman: âŚbut the same countryâŚ
Salit: Yes, the same country. The Democrats say the problems occurred because of a new administration, but who knows what would have happened if a Democrat had been elected at that point. The de-regulation of the financial industry that took place in the 1980s and â90s flung open the door to the current financial crisis. That de-regulation had bipartisan support under Bill Clinton and continued under President Bush.
Newman: It doesnât make a difference whether itâs Democrats or Republicans.
Salit: No. The Democrats opened the door and the Republicans rushed through it. They cut taxes. They took us to war. Twice. We put both wars on a credit card and now we have these huge deficits.
Newman: Well, yes. But on the business side, the government cut taxes and said to the private sector, Do what you do best. Go make money.
Salit: Make money.
Newman: Make money. So, they cheat and swindle, âlegally.â They extend credit like crazy. Every once in awhile, they make a product.
Salit: Then this bad stuff happens.
Newman: Itâs not âthisâ bad stuff. Itâs the same bad stuff. Thatâs how the country works.
Salit: OK. But thereâs an underlying process at work here. Maybe that word is a silly word.
Newman: What? âUnderlying?â
Salit: Yes.
Newman: It is. Thereâs nothing underlying about it.
Salit: Let me put it another way. Thereâs a non-viable situation developing in the midst of all of this.
Newman: Which is?
Salit: Which is that in order to recover, the economy has to grow in certain kinds of ways. And itâs not. So, government has to intervene. But it canât.
Newman: Right.
Salit: And thatâs where we are.
Newman: Well, not quite. There is a rest of the world. And the rest of the world, recognizing all of that â theyâve read Keynes, too â sees this as an opportunity to change the order of things in the world. So the United States gets incrementally more unstable and loses its position at the top of the heap.
Salit: True.
Newman: That has an impact on everything, including on the U.S.
Salit: The U.S. is no longer a lender. Itâs a borrower.
Newman: And nations, like China, can say to the U.S., Youâre more dependent on us than ever. That impacts on lots of other things.
Salit: Lots of other things from the standard of living, to the kinds of foreign policy you can execute, and so forth. Interestingly, in his speech Obama made a point of saying, âAmerica is #1. I will not let this country become #2.â
Newman: Well, thatâs a great speech. But that moment has come.
Salit: Maybe itâs more accurate to say that heâs now the president of a #2 country, not the #1 country. Rich, powerful, huge military, infrastructure all around the world. USA, USA, USA, all of that. But, itâs just not the same USA.
Newman: The U.S. has always been richer than its competitors â letâs leave out whatever China is these days â because even in the best of times, the business sector has been less generous to working class people. The United States has allowed higher levels of unemploymentâŚ
Salit: âŚand a smaller safety netâŚ
Newman: âŚthan the European countries. During the best of times. Now is not the best of times. The normal unemployment rate in this country is about 6.0%. Today itâs 10%. Thatâs just not tolerable in a lot of European countries. I really wish I could be a fly on the wall of some of the discussions going on, maybe behind closed doors in Davos. I think what Iâd hear from some people is, Well, 10% sounds like a terrible number and the Republicans can really nail the Democrats with that number. But I donât know if 10% is all that bad. It depends on what 10%.
Salit: Which 10%. Meaning, what level of voice they have?
Newman: No, who cares about voice? Voice doesnât mean anything to these people. Obama just got into office with the loudest voice behind him and he canât do anything. What means something is: Is this 10% due to our being in a transition from one version of the American economy to another version? Is it a change of design of the U.S. economy and the jobs are shifting to new industries? If thatâs the case, then itâs just a transition and you have to put up with the Republicansâ form of opportunism, as opposed to the Democratsâ form of opportunism, while you wait it out. Some people are saying that, or hoping that, because you canât go back to the old jobs. If you listen to Pat Buchanan, he wants to return to our old manufacturing base. But what if we canât return? And what if itâs not even good for us to return? What if thatâs not, from capitalâs point of view, where the real wealth creation lies? What if the real money lies in these new fangled green, techno service jobs and it just takes time to capitalize them and get people in a position where they can be employed in them? Otherwise, the capitalists say, Weâd be paying people for âbusy work.â And we will not pay people for busy work. Let the Democrats pay people for busy work. Then, the Republicans will attack that âbusy workâ approach. And thereâs something to that argument. Yes, you can make the claim that the countryâs highway system was constructed during times of depression. But what if we donât need superhighways? What if the communications structure of this culture and society are so transformed that we donât even care that the automobile industry is crippled? Because there are new industries that are going to make up for that job loss three times over or ten times over. There are no traffic jams, at least that I know of, right now in virtual space.
Salit: Exactly.
Newman: Is that being talked about? It must be, by some of those people.
Salit: Hereâs another conversation. Government leaders are right now meeting with business leaders who are saying, Look, this economic crisis is the best thing that happened to us. It pushed the productivity issue. Weâve had to shrink our work force and make it two or three times more productive. Weâve done that. Now youâre coming to us and youâre saying you want us to start hiring again. Well, guess what? We donât need to.
Newman: We donât need to and, therefore, we wonât.
Salit: Exactly. Our bottom line is getting better.
Newman: We are not a social work agency.
Salit: Weâre not. Weâre private enterprise, remember?
Newman: If you in government want to function as a social work agency, feel free. But donât come to us. Which is what Obama is doing.
Salit: They have a case because it is private enterprise. They do have their bottom line.
Newman: They have a very strong case. Exactement!
Salit: I didnât know you spoke French! John Podesta, who was White House chief of staff for Bill Clinton, a Beltway aficionado, says, âHereâs the deal. Obama tried to play an inside game on healthcare. That was his strategy on this.â Podesta says: âHe looked at the picture. He looked at his majority. He looked at the political dynamics and said, Alright, we can do this.â
Newman: And he looked at the Democratic Party, who he thought controlled those 60 votes in the Senate, cold.
Salit: Exactly. And he said, We can do this as an inside game.
Newman: Right. Forget the independents. Forget the people who got him elected. We can do this.
Salit: Yes. Forget the coalition.
Newman: Right. This is our shot.
Salit: Yes.
Newman: Iâm not even saying this harshly. It just didnât work.
Salit: So, is he ready to talk to us now?
Newman: I donât hear the phone ringing off the hook.
Salit: No.
Newman: But thatâs not the issue. Thatâs the wrong conclusion.
Salit: Whatâs the right conclusion?
Newman: The issue is what we have to do to accelerate our effort to talk to him. Heâs not going to come to us.
Salit: We are accelerating our efforts.
Newman: I think weâve grown sufficiently â although itâs not as much as Iâd like â such that we have some plays to make that have a slightly better chance of being heard, given the circumstances, in a slightly different way than is ânormal.â Thatâs a lot of âslightly.â
Salit: Yes. Hereâs one example of the kind of development weâre seeing. Right now weâre in a fight in Kentucky. We, the independents, just elected a new Republican state senator. Independent Kentucky, led by Michael Lewis, made it happen. So newly-elected State Senator Jimmy Higdon goes to the legislature with an open primary bill that Michael asked him to sponsor. And the DemocratsâŚ
Newman: Maybe, hereâs where we differ. I think this is important. I think all the work in the states is important work. But I think itâs work for the long run. I think our road to Obama right now is more directly to Obama, not through the states, per se. I donât see any way in which those things that youâre talking about can happen fast enough to impact on the current situation.
Salit: You might be right about that. But, what I was going to say is that the Democrats stood up in the legislature and accused Independent Kentucky of using this issue to build the independent movement.
Newman: Theyâre right.
Salit: Absolutely. And theyâre trying to block the bill. Their position is, Hey, weâre fighting the Republicans for hegemony in Kentucky. We donât want you in here muddying the waters.
Newman: Thatâs who our fight is with.
Salit: With the Democrats.
Newman: With the Democrats. Thatâs where it is. Theyâre aware of that. And, I think theyâre somewhat frightened of our growth. But, I donât think thatâs going to impact on the immediacy of the situation. I think theyâre afraid of it in the long haul and justifiably so. Thatâs why I think we have to keep that up intensely. But I think we have to do some other things if we want to intervene relative to whatâs happening in Washington. You might be saying, Forget about taking a shot at whatâs going on now. Thatâs out of the question anyhow. I donât think thatâs true.
Salit: I wouldnât say that.
Newman: I think we have to do both.
Salit: I agree, Fred.