Bush's economic quagmire

Sen. Hillary Clinton says acute job losses, "reckless" tax cuts, and record trade and budget deficits prove that Bush is "woefully missing in action" on the U.S. economy.

By Salon Staff
Published March 5, 2004 9:24PM (EST)

Good morning, and thank you so much, John [Podesta], not only for that introduction, which is more generous than deserved, but because of the leadership that you are now providing through the Center [for American Progress], on behalf of issues that are critical to America's long-term prosperity and values ...

At issue is whether we are willing to make the investments and, frankly, the mid-course corrections, to ensure that the strength of three words, "made in America," continues to stand for something here at home and around the globe. And this debate is not just about other countries, or even just about multinational corporations. The debate ... is really about whether or not this administration has any economic policy, any strategy for sustaining and growing jobs, and any clue about what it takes to have a manufacturing sector in the 21st century ...

What I regret deeply in the current climate, in this administration, is the air of fatalism, of defeatism, that I hear all too often. It is one thing to say outsourcing is a good thing, which I don't agree with, and I believe Mr. Mankiw was appropriately criticized for -- it's another thing to have no ideas, to come with no new strategies. The only idea -- and I don't think it can be called a strategy -- that we've heard from this president is to create a position in the Department of Commerce, which has yet to be filled, so it was merely a line in a speech on Labor Day. It wasn't an idea, it wasn't a strategy, and it wasn't even serious. So that idea that we're not pulling everybody together, that team America is not on the field, ready to compete, with a good offense and a good defense, that I think is out of keeping with the history of how America has risen to economic challenges in the past.

Now we know that countries like China and India are creating jobs by the tens of millions, they're improving their education system, they are joining the global economic community. I don't think we can, in good conscience, fault them, or criticize them, or begrudge them the opportunity to put to work tens of millions of people who are, for the first time, making, by their standards, a living wage, are moving into a small but growing middle class, are sending children to school, are doing what we have done, and which we model so successfully. I don't fault anyone for competing with us. I fault us for not being smart enough to know how to compete effectively, and that's what I want to talk about today.

Because I don't think our country has an economic strategy. It certainly is very well hidden, if it exists anywhere. And yet we know we are in the midst of an American job crisis. Some have accepted that as inevitable. The unavoidable result of free trade, the unavoidable result of lower standards for labor or the environment, the inevitable result of what happens when others get access to technology that we may have innovated, but that certainly we can't keep behind closed doors or throw up fences around our borders to prevent others from enjoying.

And the Bush administration's answer to do nothing is worse than a failed policy, it really is no policy at all. So how could we, then, proceed? And how can we take these statistics ... with the loss of jobs that we've experienced in the past three years, and begin to turn that around? ... Today's record low levels of manufacturing employment, although there were some signs in just the last few days that maybe there's a turnaround, but the decline has been so stark, coincides with our largest trade deficits ever recorded, and of course our largest budget deficits as well.

So while demand continues to rise for manufactured goods that are made by American companies, increasingly those products are being manufactured elsewhere. And the Bush administration's fiscal policies actually exacerbate this problem. The fiscally reckless tax cuts are not only a cause of alarm because of our movement from budget surplus to budget deficit, but we are moving also to a projected $4 trillion increased debt, from a point in January, 2001 of a $5.6 trillion projected surplus. This matters. This is bad economic policy, as well as reckless fiscal policy. It will provide, inevitably, fewer resources for both public and private investments. It stands for an overall steady decline in America's position in global markets. It makes us dependent on foreign lenders, and it is troubling that in just the last week, some of those foreign lenders, whom we are so dependent upon, have begun to signal that they might diversifying their portfolios, and no longer be such ready supporters of America's debt.

If we look down the road, whether it is next year or two years from now, I think it is absolutely clear that we will see private capital crowded out of the capital markets because of the increasing need to feed the government debt. We will see interest rates rise, which we know has effects not only on private sector borrowing, but on consumer borrowing as well, and we will be on a path to even further economic decline and more difficult decisions before we can reverse our situation.

Now how do we address this? Well, we're going to do several things. On April 27th, the Democratic leaders of the House and Senate will jointly host a summit on manufacturing, similar to what my husband held after his election, before he took office as president, the Economic Summit in Little Rock, Arkansas, where I think not only did we get people from a broad cross-section of experience in the economy come together, but we actually helped to educate all of us about what the options really were. I think that is long overdue. We are getting very little good information out of this administration about what the consequences of their policies are for the average American and for the average American's job. We will invite a range of leaders to this summit, and be able to discuss a variety of solutions that we hope can serve as a basis for debate in this upcoming election.

I also think there are some actions that we could take even now, and I care desperately about the outcome of the election in November, and believe that four more years of this administration would not be in the best interest of our country on many grounds, but I would like to see, for the sake of our country, some of these actions and these midcourse corrections taken ...

One area that is going without adequate attention from this administration is what's called "alternative energy," what I like to call "smart energy." There is no reason that the United States cannot and should not be the leader in smart energy technology ... it should be as important a commitment by our government as any issue you can imagine right now. Because the payoff would be tremendous. As we speak, both Japan and the European Union are making those investments in smart energy. Japan is going so far as to begin the construction of model hydrogen stations, so that even though we're a long way from the fuel cell technology being commercially applicable for auto use, they want to be ready. And to invest more now in that kind of thinking and that kind of spin-off would pay great dividends ...

There's also a particular problem that I'm concerned about, and that is with the outsourcing of so much information about Americans to countries that have no privacy laws. Our efforts to try to protect vital, confidential information over the last several years, to guard against identity theft, for example, are really being undercut, because we are outsourcing so much of this information. Let me just give you two quick examples.

When you ask an accounting firm to do your income taxes, it's increasingly likely, because the numbers have just skyrocketed astronomically, that both for corporations, and increasingly for individuals, those taxes may well be done by someone in another country. In fact the numbers for tax returns, starting at about 1,000 in 2001 that were done in India are now at 250,000 and growing. That information is being sent into an environment for which there are no established legal protections.

Similarly with medical information that is increasingly being outsourced. We saw an example of what this could mean last year when a woman in Pakistan, who'd been hired by a companies that had gotten the contract for a medical practice here in our country, was transcribing medical records, and in a dispute with her employer, threatened to put the medical records on the World Wide Web in order to extract the money that she either rightly or wrongly was owed. And in order to show how serious she was, she posted somebody's medical information on the Web. There are no laws against her doing that in Pakistan.

Now, we have some protection in financial services, but we don't have protections when it comes to accounting information, medical information, and I will be introducing an amendment that will try to plug that hole. Because it's one thing for an American corporation to outsource a product. It's something entirely different, in my view, to outsource the most confidential, personal information in order to make a higher profit, without any regard for how that information might be misused, because there are no legal impediments to doing so. I will mandate that medical institutions be held liable under U.S. privacy laws for the mishandling and lack of safety measure by a foreign subcontractor, and also, I'll support similar measures for accounting information, to close these privacy law loopholes. And I hope that I'll be able to get bipartisan support on that because I think, like all of you, this is a brave new world that none of us had foreseen.

Trade has been a hot topic in our nominating process, and I think it will be, and continue to remain a difficult issue in the political environment. And I think it should be an issue for debate, and it should be part of the political calculus that Americans take to the polls in November. Because it's clear that many foreign governments and companies that they basically protect are using some very old methods to block their competition from American workers. Fixing exchange rates, dumping products, banning our goods on the slightest pretext is not the way we should be thinking about a global, free market. And I do believe it is fair, for many of us who are in favor of free trade, to say look, again, we want smart trade, and we want trade that has agreements that are enforceable, and that is not happening now. This administration has been woefully missing in action when it comes to enforcing trade agreements, and at least sending signals to a lot of our bilateral and multilateral trading partners that a lot of these tactics that they have used are no longer going to be tolerated.

We have to have a concerted effort to send a message to the rest of the world: We are your biggest market; the entire global economy rests on the American consumer. Just think about it, it's like an inverse triangle. You know, if the average American woman stopped buying, the entire global economy would fall apart. And therefore, we need to treat these people with the respect they deserve, for keeping the global economy moving under some very difficult circumstances. In order to do that, we need to send a signal to the rest of the world that we need to have fair and smart trading rules that are not only to the benefit in the short term to the United States, but in the long term, to the global economy as well ...

It is essential that we get back on the track, and I would argue not only to invest, even in this difficult economic climate, and to pay for those investments by postponing those tax cuts for the upper income, and being honest about our budgeting, which means including the costs, the real costs of Iraq and Afghanistan going forward and not keeping them off budget, but also thinking of some big signature projects that could go into this manufacturing research agency that I referenced before. I think we've missed a big bet, not completing broadband access in our entire country, making sure that the information highway was as ubiquitous as the interstate highway system or the railroad system of the 19th century. I have offered legislation to do that year after year, I've got bipartisan support, it's not something that the administration thinks is the role of government to do. I think that is a mistake ...

There's a lot that I think can be done, with the right attitude. And I end where I started, with attitude, with the feeling that somehow team America is not on the playing field, because we don't have leadership that is really calling us to be as creative and competitive as possible. That has a fatalistic kind of attitude that has one-size-fits-all answers to every economic problem, which are huge tax cuts for wealthy people. And I never thought I'd be so well taken care of by President Bush in the post-Clinton years. But I think it's a mistake, and it's not likely to give the impetus to the job creation and investment that we need in order to look toward the future with the same confidence that we historically have had. It is just not the case that what makes America unique is that we have rich people. You can find rich people anywhere, literally, just pick a place, pick a continent. What has made America unique and so successful is the way we have invested in, and created, the vast American middle class, to which people aspired and from which people sprang. And that is what's at risk today. And it's as much about attitude as it is about stagnant wages, lost health care benefits, uncertain pensions.

If we ever believed in this country that we did not have a positive future awaiting us, that we could not, by dint of hard work, get ourselves into a better economic position than where we had started, we would undermine the very foundation of this nation. And what I hear from the administration is not hope, but fear. And it is something that is un-American. During the debate on climate change, that we finally got onto the floor thanks to Senators McCain and Lieberman, although we were only given three hours to debate climate change, I was struck by the pessimism and the fatalism from the other side. This was a problem that they either didn't believe existed, or if it existed, would somehow fix itself at the appropriate time, somewhere in the future. That has never been America's attitude. And when I was speaking on the floor that day, I said, you know, I can't believe what I'm hearing. There are, I suppose, still a few people left somewhere who believe that climate change is not a problem, but the vast scientific established opinion is that it is, and we should go about dealing with it now. And guess what? We can make money and create jobs if we do. That's the kind of can-do spirit that I was raised with, that I believe in. And it's that loss of spirit, as much as the loss of jobs, that deeply troubles me ...

We need to do better than that, we're capable of doing better, we have the tools that we need, all we lack is the will. And once again we can not only make the American dream strong, but restore the strength to the words "made in America," put the American team back on the field, demonstrate that we can out-compete anybody, and that we're open for business for the 21st century. Thank you very much.

Salon Staff

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