Jeff Madrick

Roosevelt Institute Senior Fellow and Director of the Rediscovering Government Initiative
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Recent Posts by Jeff Madrick

  • Rediscovering Government

    Central Banks Are Saving Democracy From Itself

    Sep 17, 2012Jeff Madrick

    We may want more democratic control over the Federal Reserve, but its independence is allowing it to push back against austerity.

    We may want more democratic control over the Federal Reserve, but its independence is allowing it to push back against austerity.

    The Federal Reserve's recent announcement of aggressive new policies is more than a little welcome. It involved a new round of quantitative easing focused on mortgage-backed securities, but more importantly, a statement that the Fed would keep rates low for a long time, even if the unemployment rate begins to fall markedly. In other words, the Fed will be more tolerant of rising inflation. A couple of points are clear and have been widely discussed:
     
    First, more inflation is what this economy needs. It will reduce “real” interest rates down the road. It will also reduce the level of debt, which will now be paid off in somewhat inflated dollars. Lenders will pay the price; borrowers will benefit.
     
    Second, the Fed is at last accepting its dual mandate, which is not only to keep inflation in check but also to keep unemployment in check as well. Inflation got almost all the focus since Paul Volcker’s reign in the early 1980s.
     
    Third, inflation targeting as almost the sole purpose of any government policy is now either not applicable to current circumstances or never really was the answer to our prayers. The main claimant on the uses of either hard or soft inflation targeting was none other than Ben Bernanke himself. He was the champion of the Great Moderation, which held that less GDP volatility and low inflation were admirable ends in themselves -- proof of a nearly perfectly managed economy.  
     
    Never mind that growth in the late 1990s was supported by high-tech speculation in the stock market, or that growth in the early 2000s was supported by a housing bubble and crazy, risky practices on Wall Street. And forget that job growth was the worst of the postwar period under George W. Bush, even before the 2008 recession, and wages had been performing poorly for 30 years. It was all really great, said Bernanke, and only a few mainstream economists disagreed.
     
    But there is another point that needs emphasis and is being passed over. This one is about democracy. Bernanke is acting aggressively because the American Congress and president are locked in an austerity embrace. Fiscal stimulus is now turning into de-stimulus. Even the president’s budget calls for fiscal restraint. The deficit bugaboo is strangling the world.   
     
    Those who want to make the Fed more subject to democratic control – and to a degree, I am sympathetic -- should heed a lesson here. Democracy -- that is, a democratically elected Congress and president -- is choosing a damaging course of austerity. In Europe, it is far worse. 
     
    Needed policies are coming from America’s central bank, which was deliberately created as an independent entity. Note that it is Romney who is saying he wants Bernanke out of there and crying wolf about inflation. Bernanke, not subject to the whims of democracy, has had the courage to change his own thinking. He knows the consequences of tight policy now.
     
    So what do we do? We should be a little modest about the universal benefits of democracy. For example, I think democracy may yet work to end the severest levels of austerity in Europe. People are mad. Governments are changing for the better. Demoracy in America is the only answer to an ever-richer and more powerful oligarchic class in the U.S., which wants to lower taxes, limit regulations, and cut government into ever smaller pieces.
     
    But we must also deal with the disturbing fact that one of the least democratic of our institutions, the Fed, is the only one saving the day now. The same is true in Europe, where the European Central Bank is now acting intelligently, in contrast to the fiscal hawks dominated by the German policymakers and apparently supported by a majority of the German people. This issue is not simple.
     

    Roosevelt Institute Senior Fellow Jeff Madrick is the Director of the Roosevelt Institute’s Rediscovering Government initiative and author of Age of Greed.

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  • Rediscovering Government

    What Does Obama Really Stand For: Community or Small Government?

    Sep 10, 2012Jeff Madrick

    The president's convention speech focused on the power of community, but the details of his future policies remain sketchy at best.

    The president’s acceptance speech in Charlotte last week emphasized his new theme of community and "being in this together." For all its mushy sentiment, this is a major victory for those like us at Rediscovering Government who have been talking about the need to revitalize the discourse about government for quite some time.

    The president's convention speech focused on the power of community, but the details of his future policies remain sketchy at best.

    The president’s acceptance speech in Charlotte last week emphasized his new theme of community and "being in this together." For all its mushy sentiment, this is a major victory for those like us at Rediscovering Government who have been talking about the need to revitalize the discourse about government for quite some time.

    Obama hesitated to sound such a theme in the past. He seemed to run from potential charges of class warfare or favoring big government. He failed to boast about his stimulus plan and some of his investment programs. He hardly talked about his health care program. The conversation in America has changed, of course, partly because of the vice presidential nomination of an extremist, Paul Ryan, who wants to cut government spending to 16 percent of GDP. That’s about the 1950s level. 

    But Obama has been moving in this direction for quite a while now. He still avoids the word "government," preferring "community." But he also nicely introduced the word "citizenship." Among Ronald Reagan’s most damaging legacies was, I think, that he undermined the meaning of being a citizen in America. To him, we did not belong to a nation. We belonged only to ourselves. It would be nice to bring the concept of citizen back.

    I can’t overemphasize how useful it was for Obama to lay out this old but now new vision. Bill Clinton, who had proudly proclaimed the end of big government in 1996, also said similar things. There is now a distinct us versus them as the election season begins. “Us” is those who want to work together. "Them” is those who treat community as a drug we'll become dependent on. It is probably no accident that the Republican ticket is composed of men descended from rich parents. Lots of rich kids become effective leaders, but many don’t understand how tough it can be to have no one to lean on, to borrow from (as Mitt now famously suggested), or even to be taught by.

    But having listened closely to the Obama speech, I am still hungry for more candor. Even a few days later, I have no idea what Obama plans to do over the next four years. We know he will care, and we know he will not take a pound of flesh from the poor or strivers to the middle class if he can help it, but what do we know about his future programs?

    He was about as careful as Romney and Ryan were in Tampa to avoid any specifics. Will he propose a new stimulus if the economy teeters, or will he remain dedicated to a narrow deficit-cutting plan even during a weak economy? Does he think there is anything truly commendable about the Simpson-Bowles deficit-cutting plan he had sponsored (if then mostly ignored)? The plan disastrously aims to limit federal spending to 21 percent of GDP, its 40 year- average, even as the population ages, health costs rise, and we know pre-K education is urgently needed. It would cut Social Security sharply. But Obama mentioned it in his speech, and it has become the widely cited “bipartisan” model for fiscal responsibility. The public relations program in its favor is a stunner. It is not really bipartisan at all, of course. Both the Democrat Bowles and the Republican Simpson are devoted and extreme deficit hawks.

    What line will Obama hold on Social Security? Will he significantly upgrade his proposals to invest in infrastructure? How about a higher minimum wage? Better labor laws? Is there a potential jobs program in the works? Serious education reform? Will he encourage a lower dollar to help manufacturing and propose ways to create a more level playing field in global trade? Will he propose a serious tax increase to pay for needed public investment and buttress entitlements programs once the economy is righted?

    I can’t say it’s bad politics to ignore the details for now. The best case for Obama is that as his health reform law helps more people, he will build American confidence in government. Mitt Romney has already conceded as much, saying he will retain some of Obamacare. With some proof that governmnet helps under his belt, perhaps Obama can move forward. He can add to his health care program with a true public option and perhaps expansion of Medicaid reimbursements to providers, which are too low. He can also adopt more rigid cost controls, drug negotiating procedures, and firmer preventive medicine incentives. A more positive attitude toward government might awaken fresh ideas about educational reform. Perhaps we can put art and music programs back into schools and tackle universal access to the web. Maybe we can even build a universal pre-K system that is cheap and good, one of our most important needs.

    I know Romney has only one major idea in his head: tax cuts. If at first they don’t succeed, try again. But of course, tax cuts did succeed for the wealthy, just not for the “community” of America.

    What’s really in Obama’s head? Is he a limited government man at bottom, just another Third Way New Democrat? Or is he really a community government man? I don’t know, and that bugs me. Moreover, I am not sure we will find out before Election Day.

    Roosevelt Institute Senior Fellow Jeff Madrick is the Director of the Roosevelt Institute’s Rediscovering Government initiative and author of Age of Greed.

     

    Barack Obama image via Shutterstock.com.

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  • Rediscovering Government

    Yesterday's Wind? Paul Ryan's Speech Was Full of Hot Air.

    Aug 30, 2012Jeff Madrick

    Paul Ryan may have a reputation as a truth-teller, but his convention speech was far from the truth.

    Paul Ryan may have a reputation as a truth-teller, but his convention speech was far from the truth.

    Honest? Intellectual? Neither quality was on display last night when Paul Ryan gave his first major national speech to America and provided red meat to his fellow Republican conventioneers. Profoundly sarcastic about Barack Obama, taking one rhetorical swing after another about how the administration failed, he promised in soaring language that Mitt Romney and he would do far better, put America back to work, and save Medicare. How? Not a word. No mention of a plan, not even in broad strokes.

    Perhaps Ryan was told to leave the plan to Romney during his acceptance speech. But of course, neither Romney nor Ryan has told us much about their plan at all. They will cut taxes, but will they close the deficit they so deplore and blame on Obama? The CBO says Ryan’s plan won’t do that for decades, and even that forecast relies on spending cuts and the closing of tax loopholes neither Ryan nor Romney will specify. This is honesty?

    At the very least, Ryan could have told us why he believes in small government, not simply that he believes in it. He could have tried to present some evidence, theory, or even conjecture about how it limits growth. He could have sought a historical example or two of a better America. Of course, this would have been difficult. The facts don’t back him up.

    Ryan said Obama was trying to sail on “yesterday’s wind.” The Republican chant about making the poor personally responsible for their own good is truly “yesterday’s wind.” Before Social Security, when workers were largely “responsible” for their own retirement, about half the elderly lived below the poverty rate. American policymakers paid too little attention to poverty until Michael Harrington wrote his book, The Other America, documenting how many poor there were. In the 1950s, before Lyndon Johnson’s War on Poverty, the poor had to get by on their own, as Republicans would have it today. The poverty rate then was 22 or 23 percent, but now America’s official poverty line is lower compared to median incomes than in most other rich countries.

    If Ryan is what passes for intellectual in Republican circles, the party is in serious trouble. He is an ideologue. He espouses faith in a small government dogma, not theory or evidence. And we have heard this chorus for a century or two. Good thing the nation ignored it and built a set of social programs that were central to the development of a middle class -- civil rights for black people and women, free education, major transportation systems, and protection from workplace abuses, old age, and the scourge of being born into poverty.

    As Ryan said about Obama, his facts are merely true because he states them. Last night, Ryan took two big cheap shots. He had the audacity to suggest Obama was to blame for an auto plant that GM closed before he took office, when in fact Romney was opposed to the Obama bailout of GM. And of course there was Obama's $700 billion “raid” on Medicare in order to provide coverage for others, mainly the poor and the young. Obama is cutting back reimbursements to providers and a subsidy for Medicare advantage. It won’t affect senior benefits. But the honest and intellectual Ryan did not explain this to us.

    The Ryan charade is about to end. Ryan showed himself last night to be a politician willing to distort the facts and cynical enough about his audience’s intellectual capacity to provide no evidence, theory, or history to support his points even if he had them at his disposal. The Republicans’ rising star turned out to be a breath of stale air. 

    Roosevelt Institute Senior Fellow Jeff Madrick is the Director of the Roosevelt Institute’s Rediscovering Government initiative and author of Age of Greed.

     

    Paul Ryan image via Shutterstock.com.

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  • Rediscovering Government

    Memo to RNC Delegates: You Didn't Build It, But Feel Free to Pay Up

    Aug 28, 2012Jordan FraadeSarah PfeiferJeff Madrick

    “We built this” is the phrase ringing throughout the (largely publicly funded) Tampa Bay Times Forum this week at the Republican National Convention. Though it is meant as a rebuttal to President Obama’s remarks earlier this summer emphasizing that government is the dynamic foundation and support system upon which all Americans rely, its use as a theme of the RNC is actually a critical illustration of the president’s point.

    “We built this” is the phrase ringing throughout the (largely publicly funded) Tampa Bay Times Forum this week at the Republican National Convention. Though it is meant as a rebuttal to President Obama’s remarks earlier this summer emphasizing that government is the dynamic foundation and support system upon which all Americans rely, its use as a theme of the RNC is actually a critical illustration of the president’s point. To be clear, Obama was saying that “there are some things (like fighting fires or building infrastructure) that we (the government and its people) do better together,” such as constructing a multi-million dollar professional sports facility in downtown Tampa or, say, rebuilding the infrastructure and restoring public services to an entire city in the wake of a (relatively small) hurricane to the tune of millions of dollars. But if the 50,000-plus people visiting Tampa for the RNC this week really want to take credit for these enormous feats of collectively funded and supported work, we have helped them figure out just how big a check they’ll need to write.

    As Media Matters pointed out last week, the Tampa Bay Times Forum was built in 1996 by the Tampa Bay Sports Authority, a public entity. Of the $139 million construction cost, 62 percent, or $84 million, was paid with public money – bonds backed by the City of Tampa and Hillsborough County, paid back through sales taxes, tourist development taxes, and ticket surcharges. More recently,  the Republican National Committee, which received over $18 million from the federally supported Presidential Election Campaign Fund, shared costs of over $500,000 with the Tampa Bay Lightning just to upgrade the arena’s sound system.

    Additional preparation for the RNC cost the City of Tampa upwards of $2.7 million in beautification projects and infrastructure upgrades, like improving highways, redesigning signage, planting palm trees, and bringing a locally loved fountain back into use. Commuting from up to 90 miles away, RNC delegates will surely find these upgrades to be pleasant as they are introduced to the hallowed Tampa tradition of long, grinding commutes. Some delegates may even be transported around by a fleet of 400 city-chartered buses. Those same delegates who, like Florida Governor Rick Scott, are adamant about blocking any further government expenditures on mass transit are more than welcome to walk to the Forum (although a 2007 survey of cities found that Tampa has no walkable destinations, and 50 percent of the urban core is set aside for parking).

    Downtown Tampa offers delegates benefits that come as a result of public investment in the city’s urban core (unless, of course, they choose to avert their eyes out of principled opposition to wasteful government spending on things like public art and higher education). The Riverwalk, a two-mile green space along the Hillsborough River, has already enticed the Tampa Museum of Art to relocate and freed up space for public events. The city received $11 million from the Obama administration to put the finishing touches on the project, and is spending $3 million to turn downtown’s Zack Street into a pedestrian thoroughfare with benches, landscaping, and street art. Finally, along the downtown riverfront, the University of South Florida’s new Center for Advanced Medical Learning and Simulation is the world’s largest medical facility that allows medical students to practice surgery without a patient. The center was built at a cost of $38 million and was partially paid for by Build America Bonds, an Obama administration program that provides capital for infrastructure projects and issued over $100 billion in bonds in its first year of operation. More wasteful government spending!

    Of course, no event in Florida in August would be possible without hurricane season preparation. In anticipation of Tropical Storm Isaac’s imminent development into a hurricane, the RNC cancelled Monday’s convention activities. Though it’s not clear yet what cleanup the storm will require, similar strength storms generally cost FEMA millions in statewide recovery. When Tropical Storm Debby hit Florida earlier this summer, FEMA spent over $15 million on individual assistance.

    For the 2,286 RNC delegates eager to claim they “built this” – whether it’s the Tampa Bay area infrastructure or social services, Tropical Storm recovery included, provided by the host town – we’ve done some math to help them determine just how much money they would have to personally shell out to validate such a claim. Diffusing a $15 million cleanup cost among 2,286 delegates would lead to a total of about $6,562 per delegate—a small price to pay to make sure the party can actually nominate a candidate for president. If we ask everyone visiting Tampa for the convention to pitch in—roughly 50,000 people, according to the RNC website (and yes, 15,000 members of the press, that includes you too)—each person would pay $300 to help clean up. Natural disasters aren’t cheap. Without coordinated government efforts to manage and clean them up, they would be even less so. To cover the roughly $100 million in Tampa Bay area beautification and service and infrastructure improvements, including the construction and upgrades of the Tampa Bay Times Forum, each delegate would need to pitch in an extra $43,745, or an extra $2,000 per visitor, and that doesn’t include myriad other costs going into this week’s events, including the nearly $50 million federal grant covering RNC security.

    With this $15 million tucked away and set aside for hurricane cleanup and over $100 million secured for RNC-related infrastructure and beautification, Tampa and Florida taxpayers could go back to taking care of day-to-day expenses, like improving Medicare coverage in a city and state where the need for it is acute. Florida’s health care costs are well above the national average—it ranks 18th in per-capita health spending overall—but the state rockets to second place nationwide in Medicare spending with $11,893 spent per enrollee. The state also ranks second behind California in gross Medicare spending, with just over $39 million spent on the program. And while the Tampa and St. Petersburg hospital referral regions do not contain Florida’s highest per-enrollee Medicare expenditures, nor are the cities among Florida’s most elderly, the city’s age 50-64 population grew by 40 percent between 2000 and 2010. A city whose largest-growing age group is on the cusp of Medicare eligibility is hosting the convention of a party that has dedicated itself to ending the program as we know it.

    There’s a larger-than-usual chance that your average Republican delegate will be a Medicare recipient, too. While the convention does not officially release information on the age of its delegates, several states do. North Carolina, Texas, and Connecticut, for example, are all sending delegations whose median age is 57 or 58. Any delegates who require medical care during the convention, hurricane or no, will have the option of visiting Tampa General Hospital, a downtown hospital affiliated with the public University of South Florida—but not, alas, with the for-profit hospital chain managed by Florida Governor Rick Scott in the 1990s and later found guilty of Medicare fraud. Tampa General is the city’s largest hospital, with an operating revenue of $1.1 billion in fiscal year 2011—a year before it was voted the best hospital in Florida by U.S. News and World Report. No doubt at least one Republican delegate, for some reason or another, will find a reason to visit the hospital and help contribute to this nonprofit, government-funded success story.

    As for the delegates who stay healthy, we hope you’ll enjoy your stay and that your cheers of “we built this!” are worth the $50,307 you’ll have to refund the government for all the work it did to prepare the city on your behalf. And remember to set a little extra aside for tourist activities!

    Jordan Fraade is a former member of the Roosevelt Institute | Campus Network.

    Sarah Pfeifer is Manager of Programs for the Roosevelt Institute.

    Roosevelt Institute Senior Fellow Jeff Madrick is the Director of the Roosevelt Institute’s Rediscovering Government initiative and author of Age of Greed.

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  • The Left Doesn't Need a Rand and the Right Shouldn't Want Another Reagan

    Aug 16, 2012Jeff Madrick

    When we wish for modern incarnations of the right's biggest idols, we feed into the myths surrounding them.

    When we wish for modern incarnations of the right's biggest idols, we feed into the myths surrounding them.

    I am more than a little disturbed by all these pieces coming out about why the left has no Ayn Rand as a guide or how Ronald Reagan was a “socialist” compared to Paul Ryan. One has to be more than a little careful not to elevate these two icons to acceptable status. Let’s keep Ayn Rand in perspective. She was a talented mass market novelist who wrote David and Goliath myths about a super individualist versus the behemoth society. Her philosophy was not even second rate. Ronald Reagan did not save the economy; his legacy was a crumbling foundation for growth and a rising tide of injustice. It could be seen as a positive to fail to measure up to either of them.

    The right's portrayal of Paul Ryan as a Reaganite is not that far from the truth, but the right then goes on to mythologize and entirely distort the Reagan years. Under Reagan in the 1980s, wages stopped growing, productivity grew at historically slow rates, investment was soft, and the deficit never came down to the levels promised. That deficit was an albatross around the neck of George H.W. Bush, his successor. Meanwhile, deregulation was unloosed, only to be given further impetus by the Clinton administration. The right goes so far as to attribute the productivity boom of the second half of the 1990s -- that is, after the Clinton tax hike -- to Reagan. How can we take such claims seriously? 

    Does Ryan go much farther than Reagan did in terms of changing Medicare from a guarantee to a poorly financed premium program? Sure. Would he cut other programs to almost zero? Yes. Did Reagan? No, but probably because he couldn’t politically, not because he didn’t want to. Maybe Reagan had a more generous heart than Ryan’s -- he was once a lefty and never a rich kid like Ryan, and his dad worked for the New Deal. But he played the race card in California and on his way to the White House. Is there anything uglier these days than his attacks on "welfare queens" were then?

    In the end, Romney and Ryan are both preaching Reagonomics: cut taxes and worry about closing the deficit sometime in the future. Neither tells us the loopholes they’d close or the other programs they’d cut to allegedly meet their deficit targets. Their aim is to reduce the size of government, as was Reagan’s and Milton Friedman’s. The deficit is a secondary consideration, for all the blather about it.

    As for why the left doesn't have an Ayn Rand, I say thank goodness it doesn’t follow a great over-simplifier like her. Her sexually charged novels focusing on an individualist hero appealed to adolescents or those who still yearned for those years. Her economics were derived from her individualism. A Russian by birth, her thinking was animated by her loathing of Soviet totalitarianism -- certainly understandable. But she became an ideologue, not a disinterested intellectual. She had no serious friendships with the likes of Hayek and collaborated with few schooled economists other than Murray Rothbard, who later left her circle. She was really more a cult leader than a thinker. 

    The nation turned conservative in the 1970s and began reading Rand, Hayek, and Friedman again. Milton Friedman’s writings really only caught on well after he published, but he was all over the mass media in the 1970s and won a Nobel prize, which would have been unlikely had it existed when he started out. These books were very accessible as part of the right’s appeal is the simplistic nature of its economics, all captured by a demand and supply curve that economists as far back as Alfred Marshall warned against taking too seriously. Today, the entire economy is portrayed as a supply and demand curve crossing at equilibrium. But we have cause and effect mixed up here. Americans became more conservative not due to the literature, but for a complex number of reasons. 

    But there have been great leftist successes. J.K. Galbraith was more articulate than any of these conservative authors and wrote major best sellers. The counter-culture of the 1960s was groomed on Marcuse and others. I myself as a student wrote a summary of such writing for the curriculum of Harvard Business School. Why is there no return to these kinds of authors—to Harrington, Rachel Carson, Betty Friedan, even Eldrige Cleaver? The answer is that the nation and its press are pretty conservative and seek books that reinforce these views.

    Perhaps we will get a novel out of Occupy Wall Street that will move young people. I hope so. It seems ripe with possibilities. But there are other books to be read or at least dipped into. The most recent mass phenomenon was a book by French author Stephane Hessel called Time for Outrage! in English. It reportedly sold millions of copies and helped ignite the Arab and Spanish Spring. It is a highly accessible and moving and angry work. Robert Nozick was the popular libertarian philosopher of the 1970s, but John Rawls won the day among serious thinkers. A lot of writers have written about the importance of government recently. Stiglitz has written well about inequality. 

    So let’s not demand another Ayn Rand, who wrote essentially low-brow literature, or another Reagan, who is now mostly a mythological figure. Let’s keep our sights higher and avoid drawing the wrong conclusions from the right's past success.

    Roosevelt Institute Senior Fellow Jeff Madrick is the Director of the Roosevelt Institute’s Rediscovering Government initiative and author of Age of Greed.

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