Bo Cutter

Roosevelt Institute Senior Fellow and Director of the Next American Economy Project
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Recent Posts by Bo Cutter

  • More on the Crisis of 2018

    Mar 17, 2010Bo Cutter

    idea 150Shaping the future with today's choices

    idea 150Shaping the future with today's choices

    As I have said in other posts, the Roosevelt Institute is starting a project we are calling "The Next American Economy: Nation-Building for our own Nation." I will be writing about aspects of the next American economy more and more. This is a small road sign on the impending fiscal crisis.

    Moody's has just reconfirmed the U.S. government AAA bond rating, but it also said, "In light of the muted recovery, discretionary fiscal adjustment is now the principal means of repairing the damage the global crisis has inflicted on government balance sheets. [ed. note: This is finance talk for saying we can't grow our way out of the box we are in.] A key issue is whether governments are able and willing to implement such unprecedented adjustments."

    As my friend, Joe Minarik of the CED, has observed, Allan Greenspan backed the Bush tax cuts in 2001 because he felt we should get rid of the impending budget surplus in order to maintain a U.S. government bond market. He was worried there would be no risk free securities. So the combination of the tax cuts, the out of control spending in the second Bush term, the financial crisis, the steps we had to take to deal with the crisis have brought us to the point at which there are no risk free securities anyway. But we reached this point by making the Treasury bond risky -- not a policy we want to continue to pursue.

    Roosevelt Institute Senior Fellow and Braintruster Bo Cutter is formerly a managing partner of Warburg Pincus, a major global private equity firm. Recently, he served as the leader of President Obama’s Office of Management and Budget (OMB) transition team.

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  • Unemployment as a Moral Issue

    Feb 18, 2010Bo Cutter

    jobs-letters-150Shaping the future with today's choices.

    jobs-letters-150Shaping the future with today's choices.

    I am not claiming credentials here: I am not a labor economist, and I have never been unemployed. I come to my horror of unemployment genetically. I suspect that I am considerably older than most of the readers of this blog, and unlike you, the readers, I am the child of depression era parents. After the depression, my father was scared the rest of his life; he never afterwards dared even think about a job change, and he never made an on the job decision without the spectre of losing his job bearing down on him. My mother never thought that things would turn out all right, right up to the moment she died. I have worried in a more diluted way my whole life as a consequence of my parents' terror. I cite Don Peck's Atlantic article below, but I should also say that his piece allowed me to cut both of my parents more slack about the way they were, even if only in memory.

    But it was with this admittedly unauthentic background that I read David Brooks' recent column on how high and long term unemployment will affect America and Don Peck's much longer piece on the same topic in The Atlantic. We are not going to see a rerun of the 1930's; but we are going to see a long period - of several years - during which unemployment is much higher than we are accustomed to, and long term structural unemployment is a much higher component of overall unemployment. This will, in turn, have enormous effects on the shape and morale of our society.

    Our society is based on work; work is a moral matter. The good man and woman "works hard and plays by the rules." We see work as the way we get ahead, the way we gain respect, and the way we define who we are. At any meeting of strangers "what do you do" is the first question. One of the traumas of retirement is figuring out how to answer that question. Unemployment, therefore, is not just one of many regrettable aspects of the major recession of the last 2 years. In an endless list of important issues, it has to force its way to the top as an issue a government must deal with to maintain real legitimacy.

    What seems to me to be missing in the current unemployment crisis is the sense of outrage, of moral wrongness about unemployment that would bring it to the top of that list. The President, rightly, began to turn to this issue; but the jobs summit didn't add up to much; the congressional efforts seem to me to be about zero; and I have seen little evidence of an on-going effort. I wonder if some of this has to do with the youth of almost all of the White House? If you and your parents lived your entire life in an economy in which unemployment was never much of an issue, how could you have a sense of outrage about a condition you barely know exists?

    But we have to confront this issue in a way that is different than we are now. The President made a good start in his budget but there needs to be a lot more done. First of all, unemployment has to be consistently presented by the President as a national tragedy - this issue cannot disappear into the White House's check list. Second, we are going to have to spend some more and alter more priorities: we should start getting rid of taxes on employment (payroll taxes) in favor of taxes that focus on consumption, I am for an immediate payroll tax cut now, and an effort to put consumption taxation at the center of tax reform if we ever get around to it. As an aspect of this, we should not be raising taxes right now on businesses and on capital. We want more capital employed not less. We should offer extensive education credits so that the millions of men and women who will need to retrain for entirely new jobs can do so. And, third, we should reprogram the stimulus of 2009 so that the spending occurs more rapidly. I suggested this a couple of months ago and re-suggest it now. Last year's stimulus program included a large amount of new policy that was never going to spend fast enough to matter much to today's unemployed. It was all part of never wasting a crisis. I would re-look at all of it asking whether or not we wouldn't get more bang out of the expenditures by increasing unemployment payments, cutting payroll taxes, and helping with state budgets.

    Don Peck makes clear in his article that it is already certain our society will be different over the next generation because of the protracted unemployment we know will occur. We should acknowledge this and make certain that we do whatever a government can do sensibly to alter the course of the problem.

    Roosevelt Institute Senior Fellow and Braintruster Bo Cutter is formerly a managing partner of Warburg Pincus, a major global private equity firm. Recently, he served as the leader of President Obama's Office of Management and Budget (OMB) transition team.

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  • Health Care: How a Summit Can Work

    Feb 17, 2010Bo Cutter

    funny-doctor-150Shaping the future with today's choices.

    funny-doctor-150Shaping the future with today's choices.

    My first view of the summit was that it was a bad idea; one in which the risks were disproportionately being taken by President Obama. But the general gridlock in the Congress, and particularly the polls that came out at the end of last week have changed my thinking.

    Just to be clear, a deep skepticism continues to be a strong minor chord in how I think about summit meetings in general, and this one in particular. Summits work best when the conclusions are reached before the summit begins, and the role of the attendees is to put an approval stamp on them. Summits are terrible vehicles for the discussion of major open issues; and it is hard for me even to imagine how a televised summit can possibly work.

    But... This reasoning is only correct if you think that the situation and position of the Administration is just fine and will stay that way; and more melodramatically if you think the country is in fine shape. If, however, you believe the situation is precarious, that some kind of change of strategy is essential, and on the minor question of the substance, even a start at real health care reform is unlikely without a game-changer -- then the situation looks different. That's where I think we are. I found two recent columns quite convincing. Ruth Marcus, writing in the Washington Post on Feb 10, argues that while the path to a summit may not have been particularly orderly, it may be that if the President is willing to "ladle some meat into the bowl" -- that is, by making a real move away from the current non-starting health care legislation on the Hill, he might actually move some Republican Senate votes. I think so also, and I think the recent polls suggest why.

    In Friday's New York Times, David Brooks argued that "the original Obama project, the third Democratic wave (of domestic transformation), is dead." He then goes on to say that the Obama project that can still be successful ought to be to show that the nation is governable once again, and that people can reach across the aisle and come to real agreements. I don't think that the substantive Obama agenda is "dead," but I do think it can only happen with major modifications. I also think it can only happen if the President does indeed show that our nation is governable again. The only way the President can begin to restore trust on the part of the American people in government is to show that the system can produce something.

    Finally, the newest polls say that while Obama remains somewhat below the 50% mark in terms of popularity, the Congress hits new lows by the day. Democrats are marginally more popular than Republicans but both sides in Congress are in trouble. Fewer than 10% of Americans believe that members of Congress deserve reelection. At the same time, President Obama is about 5 times more popular than the Congress. He is seen by Americans as less likely to favor special interests, and as someone who understands their needs and problems and has made more of an effort to be bipartisan. Congress really does have to show that it can do something, and its only available partner is President Obama, who is much more popular. This is particularly true for Republicans. Their barely disguised effort to take the president down by making sure nothing works may hurt Obama, but it will hurt the Republicans more.

    This Summit could be productive. There remains a shot at real health care reform, and President Obama could come out of a productive summit in quite good shape. It all depends on what he has in mind, and how he plans to proceed. So lets look at that.

    The White House has announced that it will put its own health care proposal on line a few days before the summit. I hope that proposal (1) steps away from the current bills in the House; (2) is clearly bipartisan in the sense of adopting some important proposals that some Republicans have put forward; (3) does not try a total all at one time transformation but rather proposes some actions for now and offers a roadmap for the future; and (4) shows a more balanced concern for costs of as well as increased access to health care. I think you can do all of this including adopting some key Republican proposals.

    If I were writing the policy proposal, I would go in the following broad general directions.

    (1) In terms of exchanges acting as a basic mechanism for long run cost control, we do not now have any general mechanism that permits and requires the cost conscious exercise of true choice by consumers. Most employees have their choices made by a human resource bureaucrat in their company. The remaining "market" is a small rump market which is balkanized between the states so there is no conceivable way it can function. Both the House and Senate bills put exchanges forward unenthusiastically; the bipartisan Wyden-Bennett bill had exchanges as its centerpiece; and it is a market mechanism the Republicans should love. Lets strengthen the exchanges, take away the antitrust exemption of insurance companies, but at the same time allow them to compete nationally.

    (2) We need a major commitment to access to health care for all kids under 18, including pre-natal care; coupled with a road map for the future.  I've written on this topic within the last week and will not repeat myself, but this has to be a direction that would be attractive for both parties. But at the same time lets make a move toward broader access, and fairness -- even if we can't afford to do everything now. Let's agree with the Republicans on medical savings accounts and provide a tax shetered way for the self-employed to pay for health care. Some Republicans suggest providing federal money to states "to establish high-risk pools, for people with chronic illnesses who cannot find private insurance at an affordable price; I think the Summit should take this idea seriously.

    (3) Tort Reform - This is a central cause for Republicans, President Obama has spoken favorably about it; it should be a central part of the Administration's proposals.

    (4) We need to adopt the "cadillac" tax. The complete tax sheltering of all employer provided health insurance is bad policy: it is unfair, and it makes cost conscious individual choice impossible. I would rather turn the current exemption into a credit available to everyone but the tax is what is possible today.

    My point is simple. As soon as you step away from the debate we have been mired in for a year that focuses entirely on the current House and Senate bills -- as soon as you allow other ideas to enter in -- a large number of feasible directions emerge that Republicans will have to think long and hard about before they turn on and oppose. I like the picture of President Obama presiding over a summit in which he has put forward a truly bipartisan proposal. I think he comes out of such a summit either with a health care direction that can work; or with the Republicans pushed into a corner they will have trouble getting out of.

    There is just one problem with all of this I do not understand. Simultaneously, on a completely different track, in a universe far away, the House and Senate leadership is preparing to go forward with the existing Senate health care bill and with reconciliation legislation that will be jammed through the Senate. There is probably a level of political tactics here so deep, so subtle, so devious that ordinary humans will never understand it. But this would seem to me to blow up any chance that the summit could be successful.

    Roosevelt Institute Senior Fellow and Braintruster Bo Cutter is formerly a managing partner of Warburg Pincus, a major global private equity firm. Recently, he served as the leader of President Obama's Office of Management and Budget (OMB) transition team.

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  • Sarah Palin and the Tea Party Convention: Another Sign of the End of Civilization as We Know it?

    Feb 16, 2010Bo Cutter

    tea-party-150Bo Cutter on the allure of Tea Party sweetheart Sarah Palin.

    tea-party-150Bo Cutter on the allure of Tea Party sweetheart Sarah Palin.

    The talk shows on Sunday all concluded she was unelectable, wasn't running, and would be stopped by the Republican powers that be anyway. (I don't know anything about these Republican powers, but the Democratic powers that be haven't stopped anyone, or started anyone, in decades.) Frank Rich is just generally offended that she has a weak grasp on the truth. My own sense is a lot closer to David Broder writing briefly in the Washington Post last week. Former governor Palin has a capacity to twist the emotional and psychological dials of an apparently sizeable part of the electorate that exceeds anything I have seen for a long time. If the electorate stays angry over the next two years; if Washington continues in gridlock; if the two parties continue to talk completely past each other; she is going and just who on the Republican side is going to stop her?

    Roosevelt Institute Senior Fellow and Braintruster Bo Cutter is formerly a managing partner of Warburg Pincus, a major global private equity firm. Recently, he served as the leader of President Obama's Office of Management and Budget (OMB) transition team.

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  • On Not Wasting a Crisis: How Obama Must Govern

    Feb 2, 2010Bo Cutter

    idea 150Shaping the future with today's choices.

    idea 150Shaping the future with today's choices.

    Rahm Emanuel is famous for saying that a crisis is a terrible thing to waste, and then the Administration wasted one. The reason for raising this is not to look back and play whack-a-mole with Rahm or the White House, but to underline a couple of points about the future.

    The Administration interpreted "not wasting a crisis" as attempting to do everything at the same time; and to move multiple very large initiatives simultaneously. I know how White House cultures work. Once the President and the Chief of Staff decide on this as the direction, no one is really allowed to question it, and by extension no one is allowed to question accelerating all movement in all directions. As a different kind of example, it was quite clear a while ago that Copenhagen was not going to amount to much. So why keep insisting that it would be a huge success until the moment the cliff was clearly in sight? Because it was decided to move everything at once.

    The result of this basic strategic orientation to doing everything meant that the White House, lacking the substantive capacity to lead everywhere, had to outsource to the Congress. It also mean that communications were murky and unfocused. And it led inevitably to a failure to emphasize the topic that was central and critical, but which seemed easy and done - the economy, the financial system, and jobs.

    There was available another whole approach to "not wasting a crisis" that would have involved the following components. First, focus on something and stay with it -- the economy was obvious. Second, take advantage of the style and tone of President Obama, which is a huge strength, and build it more into how the president is presented to the American people. Third, make a real effort to grab the center politically and pose much harder choices to the Republicans -- make it hard for them not to engage. Since the prevailing wisdom is that they have simply refused to play at all and no tactic of cooperation or bipartisanship would have ever worked, this point requires some explanation and defense. Starting with the stimulus package, the Administration - driven in my view by the Congressional leadership -- posed choice after choice to the Republicans that offered them nothing. So blind opposition was costless to them. Fourth, develop and present a clear strategy and road map for governing - say what you are about.

    All of this is harder or seems harder than just doing everything. But it is fairly obvious now that this approach to the crisis would have yielded better results than the road we chose. The transition from political campaigning to governing a year or so ago looked at every issue under the sun but the important one -- how did the Obama Administration plan to govern? As so often happens in cases like this, the Obama Administration backed into the riskiest course of all.

    Roosevelt Institute Senior Fellow and Braintruster Bo Cutter is formerly a managing partner of Warburg Pincus, a major global private equity firm. Recently, he served as the leader of President Obama's Office of Management and Budget (OMB) transition team.

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