Bill Clinton On 'Back To Work,' His New Vision For Saving The American Dream
In advance of today’s publication of Back To Work: Why We Need Strong Government For A Strong Economy, Bill Clinton talked with The National Memo about his new book — a stinging rebuttal of the anti-government backlash promoted by the Tea Party movement and Congressional Republicans.
As the president who once told America that “the era of big government is over,” is he now saying that the era of defending government has now begun?
“Yes, well, you know, I tried to defend government, too,” he replied in a telephone interview from Florida, as he prepared to return to New York to begin his book tour. “The confidence in government was way up when I left office (which is why President George W. Bush had to run on that ‘compassionate conservative’ thing, plus he actually wanted to do some things). I think that it’s really important that we defend government, and the idea that there are some things we have to do through government, because we’re not big enough or otherwise organized enough to do them on our own. A lot of this sort of Tea Party rhetoric, being hardened into ideological positions, is just the latest example of 30 years of obscuring what the real choices are instead of clarifying them.”
Those three decades of right-wing ideology, he said, have “gotten us in a lot of trouble. There’s a lot of areas where you could have a liberal or conservative debate over how to do different things, including how to fund infrastructure. But whether to do it is a foolish debate, borne of the notion that giving people like me another tax cut is more important than fixing our roads and bridges or catching up to South Korea in broadband download speeds.”
Likewise, Clinton berated the current right-wing assault on government employees and their unions at the state level — such as Ohio’s Senate Bill 5, subject to referendum today — which he said will only make a bad economy worse. While he sympathizes with governors, like New York’s Andrew Cuomo, who are seeking to reduce future pension obligations, he said, “But you don’t have to break the unions to deal with that, you just have to negotiate a different settlement.” In many places, he added, “These are the best middle-class jobs available. … The main thing I’m concerned about is their annual incomes, and extending the anti-union movement to the public sector is only gonna give us more people who don’t have money. I’m very worried about it.”
The former president’s book opens by examining the history of modern anti-government politics back to when Ronald Reagan declared that government was the problem — and cut taxes drastically to make his point. While his policies delighted the right, which still venerates the late president, Clinton argues that the Reagan tax cuts were far less “conservative” than they seemed.
“Reagan came in with his theory that government was the problem, and he passed these huge tax cuts,” Clinton said. Although the 1986 tax and Social Security reforms restored some revenue, the remaining cuts and increased budgets meant that government spending grew rapidly even as taxes shrank. “And so it was the first time in history we’d ever actually run a large structural deficit in peacetime — a 10-year Keynesian stimulus, which by Reagan’s second term began to work pretty well. …
“We were pumping all this money into the economy, and it helped to create jobs and it helped to get the recovery going again, but it was not the best way to do it, because we had to borrow increasing amounts of money from overseas, and payments on the debt began to consume a larger share of the budget. By the time President [George H.W.] Bush took office, we had a recession brought on, I believe, largely by the fact that we had a jobs engine that ground to a halt in the face of the erosion of our manufacturing sector, because the high dollar made us less and less competitive — and by this high structural deficit. … It helped President Reagan, but it had a short half-life.”
To put it less politely, today’s anti-government movement had an illegitimate birth, in what was actually a bastardized stimulus program.
Yet while “Back To Work” reviews his own administration’s success in restoring fiscal balance while creating 22 million new jobs, Clinton accepts responsibility for at least one decision that fostered the eventual crash, more than six years after he left office. He argues, however, that the real problem was not the often-blamed repeal of the Glass-Steagall Act, a Depression-era law that forbid banks from engaging in certain kinds of investments.
“When I signed that repeal, if you go back and read the bill, it gave the government clear authority to watch the new [banking] entities. But the main thing that the banks got out of that was the ability to underwrite insurance, because various rulings even before I took office had virtually abolished the traditional dividing line between investment and commercial banks. The key was preventing either side from becoming over-leveraged, which required regulatory oversight, and that’s what was missing. I don’t believe repeal of Glass Steagall, if Al Gore had been elected president, would have had anything to do with what would or would not have happened later.”
Where he went wrong, Clinton said, was in failing to seek stronger restrictions on the derivatives market, where millions of home mortgages were eventually transformed into unregulated, highly leveraged, and almost incomprehensible paper investments, ultimately sinking major banks and the housing market. Brooksley Born, Clinton’s own chair of the Commodity Futures Trading Commission, fought for regulation back then, only to be isolated by Federal Reserve Bank chairman Alan Greenspan, White House economic czar Larrry Summers, Treasury Secretary Robert Rubin, and Wall Street economists — as well as Republican congressional leaders who threatened to defund her agency.
“I do believe I made a mistake in not speaking out more when Brooksley Born got slapped down by Mr. Greenpsan and later by the Congress for saying that the derivatives market should be regulated. At the time, the market was relatively small but highly leveraged, worldwide — it was about $100 trillion but it increased about sevenfold by the time I left office; by the time the recession started in 2007 it was involved in the mortgage crisis, but it wasn’t subject to any regulation until the 2010 financial reform passed, when Blanche Lincoln got an amendment passed, saying essentially that financial derivatives should be regulated the way agricultural derivatives area, traded in a transparent way, and that those who took the risks should have the capital necessary to cover their losses. … I think if we’d raised the red flag, maybe everybody would have noticed [the derivatives explosion] more when it started, and I feel badly about that.”
The true aim of his book, however, is not to re-argue the past, but to “get America back into the future business,” and renew the nation’s capacity to fulfill its people’s aspirations — a program for which he offers 46 specific ideas, although he says that he could have given “56 or 66.” While all are interesting, especially to the wonkish among us, he would describe some as more important or urgent than others.
Restoring the full employment economy of the 1990s will require, first, the passage of President Obama’s jobs bill, which Clinton believes will provide a badly needed short-term lift.
Next, “we’ve got to get bank lending going again, and it can’t happen unless we accelerate the resolution of the housing crisis.” To achieve that, said the former president, we should “aggressively allow more people to stay in their homes by writing down the principal of the 20-25 percent of homes that are now worth less than their mortgages.”
Where that isn’t possible for any reason, Clinton would encourage a massive refinancing at current low interest rates and extending mortgage terms — especially for more than 22 million homes now owned by Fannie Mae and Freddie Mac. “That would put $25 billion into the economy right away and save $2,500 per family.” For families who still couldn’t make their mortgage payments, he would allow them to take a low-cost rental lease that could be resumed as a mortgage when conditions improve. “Or do what [Harvard economist] Ken Rogoff recommends and allow the bank to convert the mortgage debt into an equity investment in the home, which would allow them to split the profit when the home is sold. That way you wouldn’t unjustly enrich the homeowner, the bank would get their share.” Everyone else should be subject to expedited foreclosure proceedings, and offered rental residences in properties that have already been foreclosed. “That will stop the deterioration of the properties and the plummeting of the home prices.”
Finally, he urged the nation to adopt a “serious” job creation plan that is revised every five years or so. At present, “The best strategy is retrofitting every building we can possibly retrofit in America for maximum energy efficiency, beginning with every school, every college, every state, county, and federal building, every municipal auditorium, and every commercial building with reasonable amounts of debt so they’re not encumbered, and I offer a lot of different ways to do that.”
Although early news accounts of “Back To Work” emphasized Clinton’s mild criticisms of the Obama administration, he said that section of the book includes an error. Having written that the president and congressional Democrats should have sought a debt limit increase long before last summer’s crisis, because they could have done so without facing Republican obstruction, he has since learned the debt ceiling is subject to a filibuster — and that Senate Republican leader Mitch McConnell threatened to do so when the Democrats tried to lift the ceiling in 2010.
Obama couldn’t risk the consequences of calling the Republican bluff on the debt ceiling, said Clinton, as he did when they confronted him in the 1990s.
“I get a little peeved when people compare him unfavorably to me, ’cause they’re thinking about my last three years, when we had changed the rules. Even in the midst of all that impeachment and everything else, we were making deals and doing things and moving forward … but it was only because of the government shutdown and the public reaction to it. … The Republicans then decided they wanted to stay in office, and they had to produce something for the American people. By the time I left, we had very strong approval ratings for government, the best in decades.”
What President Obama needs is a fresh debate that underlines the irresponsible character of the congressional opposition. With a renewed struggle over the budget on the horizon, Clinton predicted, “I think he’ll get that chance before too long.”