Tuesday's Tom Daschle news stepped all over President Obama's stimulus sales campaign. Likewise, it kept me from writing about Robert Reich's excellent Salon piece on the larger issues at stake in the stimulus battle, but I want to take it up today.
Reich said something Democrats almost never say: The so-called fundamentals of our economy didn't start weakening in 2007 or 2008 with the housing and credit crisis; they haven't been strong for most American workers since wages began stagnating in the 1970s.
I'm going to quote Reich in a major way in a minute. But I'm writing because I'm concerned about how Obama is and isn't selling his crucial stimulus/recovery bill. I'm wondering about what he'd say about it in an FDR-style "fireside chat." On YouTube, or wherever. Even though I'm an Obama admirer, and also, I'm paid to know these things, I'm not sure I do know how he'd make the case for why this bill will solve our economy's problems, and why it must pass. And soon, because new poll numbers now show that public support for it is already dropping fast. A Rasmussen poll says 43 percent oppose it, and 37 support it, an 8-point slide in two weeks. Nate Silver thinks that poll overstates the bill's troubles. "There is some evidence -- the trendline in the Rasmussen poll -- that he stimulus has become less popular. There is no evidence, on the other hand, that the stimulus has become unpopular; on the contrary, the preponderance of polling evidence suggests it remains a course of action that most of the public likes." Still, the Washington Post reported today that Senate Democrats don't think they have the votes to pass it right now.
Obama is the Democrats' Great Communicator, our Ronald Reagan. It's fitting that his highest priority will be reversing the tax and spending priorities Reagan enshrined as a new American compact almost 30 years ago, and reviving the notion of government as an engine of capitalist growth -- not merely the safety net provider, but the catalyst for organizing our public resources around what makes the economy strong. We've been arguing at the margins during these last two years of pain: Government should regulate more, or less. Tax rates should be higher, or lower. But there's a dangerous civic illiteracy in our country about what the larger role of government in a modern economy is, or should be, and I don't think Obama will ultimately prevail if he doesn't start to take it on.
Obama is the most remarkable Democratic communicator of my lifetime, I think, and even he's not rising to the task, yet. He needs to lay out his priorities, clearly; he needs to simplify his pitch, yet he also needs to add some depth to his and our understanding of how we got here. This economic crisis is not just about bad mortgages and/or the housing bubble bursting, and it won't be solved by reinflating that bubble, the Republicans' latest dumb idea. These problems have been building since at least the 1970s. Here's how Reich laid it out on Salon:
The bursting of the housing bubble caused the current crisis, but the underlying problem began much earlier -- in the late 1970s, when median U.S. incomes began to stall. Because wages got hit then by the double-whammy of global competition and new technologies, the typical American family was able to maintain its living standard only if women went into the workforce in larger numbers, and later, only if everyone worked longer hours.
When even these coping mechanisms were exhausted, families went into debt -- a strategy that was viable as long as home values continued to rise. But when the housing bubble burst, families were no longer able to easily refinance and take out home-equity loans. The result: Americans no longer have the money to keep consuming. When you consider that consumers make up 70 percent of the economy, the magnitude of the problem becomes apparent.
What happened to the money? According to researchers Thomas Piketty and Emmanuel Saez, since the late 1970s, a greater and greater share of national income has gone to people at the top of the earnings ladder. As late as 1976, the richest 1 percent of the country took home about 9 percent of the total national income. By 2006, they were pocketing more than 20 percent. But the rich don't spend as much of their income as the middle class and the poor do -- after all, being rich means that you already have most of what you need. That's why the concentration of income at the top can lead to a big shortfall in overall demand and send the economy into a tailspin. (It's not coincidental that 1928 was the last time that the top 1 percent took home more than 20 percent of the nation's income.)
Now, honestly, I'm not sure how President Obama makes this point, roughly hourly, for the next four (and I hope eight) years. But this point has to be made, as often as possible, by anyone with an audience. We've had a deliberate shift of resources from middle- and working-class Americans and the poor, to the very rich, supported by our tax codes, twisted political values and the "winner-take-all" ethic that's prevailed at the highest levels of business and government for the last 30 years. Now, unbelievably, Republicans are saying we need even more tax cuts. (What part of tax-cutter George W. Bush's economic catastrophe, and his 22 percent approval rating, do they not understand?) They also back measures to reinflate the housing bubble that let Americans ignore their stagnating wages, as long as they worked more hours as a family and could also use their homes as an ATM. Their plans to reinflate the housing bubble seem as delusional, frankly, as their backing tax cuts, and even more irresponsible. Tax cuts won't work, but reinflating the housing bubble might work -- to encourage more consumption and less savings, and roll this problem a few more years down the road.
Democrats know the Republicans are wrong. Little children know they're wrong. Cats and dogs know they're wrong. But somehow this week, unbelievably, Obama and the Democrats seem to be losing the spin war. There are the worrying poll numbers. And there is the Washington Post report that Senate Democrats don't have the votes to pass a stimulus bill yet, at least not with the 60 votes that would rule out a filibuster. In this economic crisis, with 2.6 million jobs lost last year and thousands more lost in every news cycle, what does it take to create the urgency and responsibility to get this done?
I'd like everyone in charge of selling the stimulus to take a deep breath, and then, in an extended sound bite, articulate the long view (I know, I ask a lot). Along with Reich, Jeff Madrick goes into all the larger issues in greater detail in his excellent book "The Case for Big Government," and winds up in the same place (even though, remarkably, the book was written before the current economic collapse and attendant debate over what the stimulus should do). I hope Obama and his team are reading Madrick and Reich. Because they're really just talking common sense: Public spending priorities need to catch up to 21st-century economic life. The long and lamentable Republican revolution of 1980 through 2008 aimed, and partly succeeded, in sending us back to the 19th century -- and we are all suffering for it. We will continue to suffer unless Democrats grab the political momentum voters gave them in November.
Of course, the 19th century wasn't all bad, but in our current political environment, we've forgotten what was good: Eventually government (thanks to political, religious and labor agitation) came to see its role as providing K-12 education, building roads, canals, bridges and railroads (after private sector efforts faltered), and the slow budding of certain health and safety regulations. In the 20th century, that public mandate expanded into Social Security, Medicaid, unemployment insurance and other safety net programs, thanks to the New Deal and the Great Society. Today, profound economic change likewise requires new government initiatives, but they are many years overdue, for a lot of depressing political and economic reasons. The years since the early 1970s have been hard for middle- and low-income workers. Real wages became stagnant -- the average weekly earnings of non-supervisory workers actually fell between 1973 and 2005. The late '60s and early '70s also marked the exodus of manufacturing jobs in the central cities, which William Julius Wilson and others persuasively argue played a huge role in creating the so-called underclass in many once-vital African-American neighborhoods.
Madrick lays out a few new-economy political priorities; you may have more, add them in comments:
Why, when post-secondary education is essential in this economy, are most families on their own when it comes to paying for college? Secondary education is awesome, isn't it? Can you imagine this country without it? But isn't it time to think beyond that? Why isn't K-16 or so an American entitlement?
A chart published a year ago by Moody's Economy.com shows that the types of measures in the Democrats' stimulus plan actually put money into the economy, fast. For example, according to Economy.com's model, every dollar lost to the Treasury from increased infrastructure spending would add $1.59 to the gross domestic product in a year. Every dollar lost to a cut in the corporate tax rate would add 30 cents to the GDP in a year.
And why, when most women work, is there so little support for childcare, family leave and other family friendly social policies?
Also: Why, when the cost of health insurance is tacking thousands of dollars onto the cost of every American-made car, and threatening to capsize many small businesses, is there so little serious progress on healthcare and insurance reform in our public realm? Where are the capitalist visionaries of yesteryear, trying to shape public spending by driving it toward what businesses need to thrive?
Oh, and climate change: If that continues, we're all screwed, college grads and high school dropouts, moms, dads, auto execs, small-business owners, capitalist pigs and visionaries alike. But we've gotten no real movement on climate change these last eight years (though I'm grateful to Obama for deferring to my GOP Gov. Arnold Schwarzenegger at least a little bit on this one). Again: why?
The Democrats' stimulus plan has funding to deal with all of those enormous unmet needs (although probably not enough). The bigger question is, why isn't the country clamoring for support for such capitalism-bolstering programs, especially at this time of economic crisis and political optimism ushered in by the election of Obama, which was, paradoxically, motivated by enormous voter pessimism about that same crisis?
The answer is not merely that American workers and voters and unions and Democrats mysteriously stopped agitating for progressive change in the 1960s (although many did, and the weakness of unions is part of the story, but it's as much an effect as a cause of these political and economic sea-changes). The fact is, there was a massive organized political campaign against the egalitarian and economy-growing reforms of the 1930s and the 1960s, one that ran from Barry Goldwater to Ronald Reagan to John McCain, a very well-run and well-funded and sadly effective backlash. And it's one that nobody wants to talk about, in our convivial, bipartisan, cable-news-dominated, partisan-blog-loving, newspaper-shrinking, amnesia-promoting political and media-freakshow entertainment economy.
But we have to.
It's clear from the stimulus debate that some conservatives never stopped fighting the New Deal, as empty as their arguments were then and now. Andrew Leonard is brilliant, in my opinion, but he's only one guy, and he alone takes down multiple well-funded think tanks dedicated to anti-New Deal idiocy. The stupid, it burns, but the stupid is relentless.
Then there's the whole legacy of the Great Society. A lot of the opposition to government spending suddenly, opportunistically became (overtly or covertly) racial in the 1960s and '70s, as the social and political and economic change inspired by the civil rights movement intersected with new social programs, some of them awesome, a few of them wasteful, all of them only partly effective. The bottom line for Republicans became: The government is helping those other people with your tax dollars, they're not helping you. And some Democrats agreed.
Now, many if not most of us need help from our own tax dollars, and the Democrats seem ill-equipped to make the arguments to make that happen, despite Obama's overwhelming win in November. This really makes no political sense to me.
Here's how I think Obama should sell the stimulus. Long version here, short version below.
First, he should make it unapologetically clear that we are putting money in the hands of people who will spend it, fast, when no one else is spending: Working-class and low-income people, the employed and the recently unemployed. Food stamps, extended unemployment insurance, help with health insurance, the earned income tax credit, payroll tax relief. (Stunningly, Ronald Reagan lowered taxes on the rich but raised payroll taxes, an unforgivably regressive wealth transfer.) All those measures get money in the hands of people who can't afford to hoard it, and it goes back into the economy immediately. Democrats think such spending is justified by the principles of fairness and equity, but whatever your political beliefs, you should know that these priorities mean that money will be spent in the real world quickly, and that's what the economy needs.
Almost as quickly, we are funding so-called shovel-ready infrastructure programs, which will get money into the economy ASAP, funding jobs while also doing the things American business and government needs to catch up with the rest of the world. We can't afford more levies breaking in New Orleans or bridges collapsing in Minneapolis -- or anywhere else.
We're also putting money into not-quite shovel-ready but crucial programs, especially mass transit that links our suburbs and exurbs with our central cities, and creates opportunity for everyone, and programs that reduce climate change and move us to a future driven by green jobs and industry.
Finally, we are belatedly making down payments on our 21st-century economy that, sadly, nobody was wise enough to make in the last century. Head Start and education funding, college programs, healthcare reform, green job creation, energy efficiency and climate change spending: We can't catch up with the rest of the world if we don't spend on those things, belatedly, right now. It's not a matter of if, it's when, and I believe the time is now. That's what you elected me to do. These programs will stimulate the kind of recovery that will make sure our children don't face the same kind of crisis in another generation.
Obama can no doubt improve on my language. He can probably improve the taxonomy of spending. He may even have different priorities. The point is, he has to lay them out.
He made a start today. Here's what he said when introducing limits on executive compensation for firms getting TARP money:
That’s why I feel such a sense of urgency about the Economic Recovery and Reinvestment Plan that is before Congress today. With it, we can save or create more than three million jobs, doing things that will strengthen our country for generations to come. It is not merely a prescription for short-term spending – it’s a strategy for long-term economic growth in areas like renewable energy, health care, and education.
Now, in the past few days I’ve heard criticisms of this plan that echo the very same failed theories that helped lead us into this crisis -- the notion that tax cuts alone will solve all our problems; that we can ignore fundamental challenges like energy independence and the high cost of health care and still expect our economy and our country to thrive.
I reject that theory, and so did the American people when they went to the polls in November and voted resoundingly for change. So I urge members of Congress to act without delay. No plan is perfect, and we should work to make it stronger. But let’s not make the perfect the enemy of the essential. Let’s show people all over our country who are looking for leadership in this difficult time that we are equal to the task.
It's better, but it's not enough. He needs bigger and simpler themes: Put money in the hands of those who need it most -- and will spend it fastest. Create jobs and rebuild infrastructure so we see no more levees fail, bridges collapse and school buildings crumble. Invest in new, future-facing job-creating projects like new transit and green industry. Finally, do what our brave ancestors did, and make government again the engine of economic development, by providing the support 21st century employers and workers require: from Head Start and early education programs through college funding; new health insurance programs; lifetime worker retraining, investments in broadband infrastructure and green technologies.
It could be inspiring; it's certainly necessary. If Obama fights on big themes of rights and responsibilities and how we get through this crisis together, he wins. If he lets the debate remain on the level of "Why is there contraception funding in the bill? How is furniture for the Department of Homeland Security stimulative? We've just got to reinflate the housing bubble!" he loses, and we lose. It shouldn't be this hard.
Here's how Madrick summed up the Reagan revolution. It's depressing: "A life of family strain, inequality and insecurity has become accepted as inevitable. It is even thought to be a strength of America. This was Ronald Reagan's Trojan horse, disguised as optimism." But now it's Morning in America, for the rest of us. Obama needs to take his sales pitch to a new level. People want to believe he can make a difference, but time's a wasting.