Paul Krugman’s Derp op-ed didn’t materialize out of nowhere and, while it may have sprung from its author’s inner diva, there are definitely a lot of valid issues to contemplate stemming from the work and evolving views of both Professors Krugman and Stiglitz, when evaluating the platforms of what appear to be the main Democratic contenders.
I’ll state, at the outset, that I have zero interest in either Martin O’Malley or Lincoln Chaffee as candidates in the Democratic primary. The former is a wannabe and the latter past his time. With that out of the way, let’s look at a trio of pieces on the provenance of policy proposals from the main contenders one Nobel laureate economist, Joseph Stiglitz.
Hillary Will Run Against The 1980s — What Were The 1980s Again?
Hillary Clinton and her conceivable Democratic opponents—Bernie Sanders, Elizabeth Warren—all seem to be attending to one economic sage. Not Paul Krugman, in a twist, but fellow economics Nobelist Joseph Stiglitz.
Stiglitz is chief economist at a think tank called the Roosevelt Institute. Earlier this month, as Ralph Benko just pointed out in these pages, Roosevelt put out Stiglitz’s manifesto, “Rewriting the Rules of the American Economy.” The report “will likely influence Mrs. Clinton’s agenda,” noted the New York Times.
The policy prescriptions in the Stiglitz report are progressive taxation and an expansion of government programs—as if the Barack Obama presidency were not a failure. Perhaps more curious is the diagnosis of the problem. The history of the last generation and a half is the problem. “The past 40 years,” says Stiglitz. The point before the trouble started is a base year referred to several times in his report: 1979.
Its follower, 1980, is one of Thomas Piketty’s base years in Capital in the 21st Century. 1979-80: that’s right before things went bad. The last breath of a golden age.
The inflation rate in 1979 was 11 percent. In 1980, it was 14 percent. There was a recession in 1980, the year of 14 percent inflation. What if in our torpid conditions today, everything cost 25 percent more every two years, and each of these periods was inclusive of a recession? Blame might even stick to Teflon Obama. The nostalgia in the progressive left for the economic conditions faced by Ronald Reagan, as he mounted his successful run for president, is mighty odd.
Hillary Clinton, for her part, has always been more a member of that clique, the progressive left, than her husband. Bill was the one who would rather not wash his mitt after he shook John F. Kennedy’s hand as a teen in the summer of 1963, that season when JFK was flogging Congress to pass his 30-percent tax cut. Hillary more closely fits the mold of the Seven Sisters 1960s radical, the type sketched by Susan Braudy in her indispensible history of the Bryn Mawr origins of the Weathermen,Family Circle.
Hillary is not going to run on the 1990s—peace and prosperity under the aegis of Clinton. She tried this in the Democratic primary in 2008. Newbie snuck up on her and destroyed her.
Rather, she is going to attack the 1980s. The far-off 1980s, about which memories are fading so quickly that you can get away with a lot in terms of mischaracterization. The holding up of 1979 and 1980 as paragons of economic performance and classical American prosperity is the leading indicator.
Read the rest of this article on Forbes.com
While I could never agree with any of Professor Domitrovic’s analyses or policy prescriptions, he’s one of those Laffer Curve guys, I do agree with him that Hillary Clinton will most definitely not run on 1990’s economic policy. She can’t and the conditions are completely different. More to the point, the aftermath of the Great Recession has brought out a heightened public awareness and understanding of the policies that brought about the near-collapse of the financial sector. What is interesting, however, is that Clinton’s pivot to the left is being done while continuing to employ virtually the same entourage as before, through the use of current economic thinking of Professor Joseph E. Stiglitz showcased in this Roosevelt Institute report, Rewriting The Rules.
The next piece focuses on how Clinton plans on developing policy in today’s current populist environment, based on Stiglitz’ model, while still adhering to her sensibilities.
“Clinton’s big speech will be a rare opportunity to change that narrative. It will be held at New York’s Roosevelt Island—a none-to-subtle signal that she’s aligning herself with FDR, the boldest of Democratic presidents and the one who established the deepest personal connection with voters—something Clinton has struggled to do throughout her three-decade career. And she’ll do so with a broad progressive agenda, her advisers told me, studded with policy proposals to be unveiled in greater depth in a series of speeches this summer, starting with an ambitious plan to cut student debt and lower tuition and a program to coax corporations into paying their workers more. Clinton’s staff believes this is where the campaign will be won or lost—it will signal to voters, and to ideologically driven Obama donors, that she’s every bit as committed to their cause as Elizabeth Warren or Bernie Sanders—or the Hillary Clinton of 1993 for that matter.
This isn’t some pro forma exercise for Clinton, who started her professional career working on child welfare programs and sits, poolside, with briefing books when she’s on vacation. Policy is what Hillary Clinton lives for, and her team is committed to portray her as a wonk warrior, which has the added virtue of being true. In 2008, the candidate emphasized her inevitability and her toughness (she was obsessed with the idea that male voters would view a woman as a weak potential commander-in-chief), but for 2016, she’s building her strategy around a series of domestic policy rollouts.
How she’s doing this is equally telling: Advisers told me it was an elaborate, even West Wing-style policy process, with concentric circles of advisers and pollsters who are cooking up a comprehensive economic policy, some of which will be for public consumption, some of which will be employed if she’s elected. Over the past year, Clinton has quietly met with a rotating—and sharp-elbowed—cast of Democratic economic experts, pollsters, staffers and advocates to craft a just-so economic program to attack wage stagnation and economic inequality. The very explicit goal has been political: to invent a program for Clinton that captures the popular imagination—and, to no small extent, redefines a candidate with a trustworthiness problem.
“We’re talking about three- and four-hour meetings, briefing papers, weeks of back-and-forth,” says Clinton’s communications director Jennifer Palmieri, who says the candidate will unveil pieces of her agenda, one by one, in a series of events starting in July and stretching to the fall. “This is the foundational work of the election. She’s a wonk. This is stuff she loves to do.”
What’s emerging—and her staff maintains she’s made no big decisions on the stickiest subjects, such as whether to propose tax increases and Wall Street regulation—are classic Clinton thread-the-needle proposals, albeit with a slightly sharper needle, pointing unmistakably to the left.
Nobel Laureate Joseph Stiglitz had a one-on-one meeting with Clinton last December to discuss his aggressive progressive agenda, pushing for deep tax cuts against the wealthy and pay cuts for CEOs. She already knew the subject inside out, he told me, and probed him for details on how some of his proposals could be implemented. Like most of the economists and advocates she’s met with recently, Stiglitz left satisfied he’d gotten a fair hearing, but with no concrete commitment.
“I would be surprised at this point that she would want to make it clear where she is going on the specifics, so I wouldn’t expect to hear that from her anytime soon,” said Stiglitz, who worked on Bill Clinton’s economic team—then went on to become one of the country’s most influential champions of economic equality. “My sense was that she was very responsive to the overall agenda. … It’s important for her to get elected, but we want to make sure that she understands that we have to deal with the failure of the system overall, and not just make small changes.”
The goal, according to a dozen people close to the process who spoke to POLITICO, is to find the “sweet spot”—bold solutions that aren’t too bold. She has tasked her small in-house policy team led by former State Department aide Jake Sullivan with a pragmatic mission: Attack the biggest problems—higher education debt, a tax system that encourages short-term gain over long-tern investments, out-of-control CEO pay, crumbling infrastructure, the non-job-security “gig” economy, women’s pay equity—in a way that satisfies a restive left wing of the party. But do it without needlessly alienating general election voters, or potential donors.
“She wants to do just enough,” is how one New York-based Clinton donor who speaks to both Clintons regularly put it.
Read the rest of this article on Politico.com
The very last sentence is the most important, once you understand the depth of our economic problems, their origin, and the philosophy behind Clinton’s approach. The Politico piece is about how far left Clinton is willing to go in order to net voters, with a winking eye to her patrons.
The first piece was about how far back a Clinton presidency would go to revert policy to pre-Reaganite times. That much, I agree with. Where I disagree with Domitrovic is why. The purpose isn’t to erase Ronald Reagan’s policy achievements, although it wouldn’t hurt. The aim is to correct the grave social policy mistakes of Clinton I and II, made as knee-jerk reactions to Reagan policy (welfare is a major one) without fessing up to them. The Clintons probably decided that confessing to regretting and, therefore, disavowing the criminal justice policies of Bill’s presidency is a small price to pay- how could they not with the resultant incarceration rates and police to citizen ratios and it sounds great to Black voters – but there can’t be another disavowal, this time on the thing that is Bill’s main claim to success: fixing economies broken by Republican predecessors. That cow is sacred.
So far, the intent doesn’t clash with what Stiglitz is trying to achieve, in earnest, through policy. The problem with someone like Clinton is that her goals and Stiglitz’ aren’t necessarily one and the same. Whereas Stiglitz wants to fix the economy on a fundamental level in order to restore balance, Clinton would like to achieve that, but only up to a point – that point being not completely undoing what Bill Clinton achieved and not raising the ire of her Wall Street patrons.
This is precisely the kind of ethically-flawed compromises Democratic politicians have engaged in since the first Clinton presidency, and what gave rise to the repeal of Glass-Steagall, the passage of NAFTA, and a slew of tweaks here and there that, together with the Bush-era deregulation, brought us to the Great Recession. This isn’t about purity in policy. It’s about neoliberal short-cuts that appease moneyed interests on one side, and keep the voters satisfied on the other.
We are worse off economically, today, as a nation, than we were when Bill Clinton first took over. When Bill Clinton fist became president, we still had a robust middle class. We no longer do. When Bill Clinton first became president, we still had robust manufacturing and the blue collar jobs to go with it. We’ve gone from bubble to bubble since Bill Clinton’s first term. With each cycle of bubble and corresponding recession , there has been an exponential worsening, or secular stagnation. We were reminded of that phenomenon by none other than Lawrence Summers, about whom I’ve written a bit on this blog.
Are we nuts? Why in the world would we want to re-elect the Clintons and agree to the triangulation of conflicting interests and ideas all over again?
Next week: My analysis of Senator Bernie Sanders and Stiglitz’ economic prescriptions.
Related materials and links:
This piece is centered on the economic plan formulated by Nobel economist Joseph E. Stiglitz, which both Hillary Clinton and Senator Bernie Sanders are basing their economic policies on. The Roosevelt Institute created a special website especially for this plan, Rewriting the Rules. You can download Stiglitz’ report there.
Robert Reich’s Facebook post on Robert Rubin, Michael Froman and the TPP
You can read about Senator Sanders’ comments on the TPP and Hillary Clinton’s lack of commitment to defeat it, and also watch Hillary Clinton’s speech on economic policy here