December 2010, Week 2


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Sat, 11 Dec 2010 15:22:30 -0500
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Why Bill Clinton's Favorable View of Obama's Tax Deal
Should Be Disregarded

By Robert Reich
December 11, 2010


Bill Clinton seems the perfect validator for Barack
Obama - which is why the President is utilizing the
former president for selling his tax deal. After all,
the economy boomed when Clinton was president and 22
million net new jobs were created. From a more narrow
political perspective - and this is important to
Democrats in Washington - Bill Clinton was reelected,
even though he lost both houses of Congress in the 1994

But the analogy falls apart as soon as you realize
Clinton's economy was vastly different from Obama's.
The recession Clinton inherited was relatively small,
and caused by the Fed raising interest rates too high
to ward off inflation. So it could be reversed by the
Fed lowering interest rates - as the Fed did in 1994.
By 1995, the so-called "jobless recovery" had morphed
into a full-blown jobs recovery. By 1996, at pollster
Dick Morris's urging, Clinton could proclaim to the
American people "you've never had it so good, and you
ain't seen nothing yet."

The Great Recession has been far larger, caused not by
the Fed raising interest rates but by the bursting of a
giant housing bubble. In 2008, the biggest asset of
most middle-class people, upon which they borrowed and
that they assumed would be their nest eggs for
retirmenet, collapsed. Housing prices continue to fall
in most parts of the country. The Fed has lowered
interest rates all it can, and unemployment remains sky

Bill Clinton presided over an economic boom engineered
by Fed chair Alan Greenspan, who felt confident he
could drop interest rates far lower than anyone
expected without risking inflation. The result was 4
percent unemployment in many parts of America, as well
as the best jobs recovery in history.

The price Greenspan exacted from Clinton - and a
resurgent Republican congress demanded - was a balanced
budget. As a result, Clinton had to give up much of his
"investment agenda" in education, infrastructure, and
other long-neglected means of building the productivity
of average working Americans. The economy enjoyed a
huge cyclical recovery.

But the economy's underlying structure remained as it
had been before, including stagnant wages for most
Americans. Within a few years the middle and working
class was treating their homes as ATMs, borrowing
trillions of dollars in order to maintain their
standard of living, and at the same time demand enough
goods and services to keep almost everyone in jobs.

Those days are over. The Democratic Party can no longer
ignore critical investments in the productivity of
average workers. Nor can it ignore the increasing
concentration of income and wealth at the very top, and
the inability of America's middle and working class to
get the economy moving again.

The GOP hasn't changed their story or their strategy
since the 1990s. It's the fault of big government. That
was false then, and it's false now. The structural
problems are now much worse, and the cyclical recovery
from the Great Recession pathetically anemic.

If the Democratic Party has stood for anything over the
years it is to maintain and restore upward mobility for
the majority of working Americans, ensure that the
playing field isn't tilted in the direction of the
privileged, and limit the power of the richest among us
to entrench themselves and their heirs into a semi-
permanent plutocracy.

Continuing the Bush tax cuts of 2001 and 2003,
including a sharp cut in the estate tax, violates these
core principles. Doing so in the midst of an economic
emergency that demands bold measures to rescue
America's vast middle and working class adds further
insult. For President Obama and former President
Clinton to tell America there's "no other choice" or
that "this is the best we can do" - when Democrats
remain putatively in control of the House, Senate, and
the presidency - is misleading.

I admire Barack Obama and Bill Clinton. I advised the
former and worked for the latter. They are good men.
But they have either been outwitted by the privileged
and powerful of America, or seduced by those on Wall
Street and the executive suites of America into
believing that the Republican nostrums are necessary,
or succumbed Democratic advisors who think in terms of
small-bore tactics rather than large and principled

I urge congressional Democrats to remember the larger
principles - not in order to be purist or make the
perfect the enemy of the better, but to move toward an
economy and a society that we believe in, that reflects
the needs of the vast majority of Americans at this
difficult time.


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