Creating Good Jobs is the Defining Issue of Our Time

May 21, 2013Richard Kirsch

On June 4th, the Roosevelt Institute will bring together leading thinkers, activists, and policymakers for A Bold Approach to the Jobs Emergency: Setting the Political Agenda for 2014 and 2016, a daylong conference in Washington, D.C. that will focus on America's desperate need for more and better jobs. Today, Roosevelt Institute Senior Fellow Richard Kirsch, who will take part in a panel on "Creating Momentum for More Good Jobs," explains why job quality is as important as job quantity.

On June 4th, the Roosevelt Institute will bring together leading thinkers, activists, and policymakers for A Bold Approach to the Jobs Emergency: Setting the Political Agenda for 2014 and 2016, a daylong conference in Washington, D.C. that will focus on America's desperate need for more and better jobs. Today, Roosevelt Institute Senior Fellow Richard Kirsch, who will take part in a panel on "Creating Momentum for More Good Jobs," explains why job quality is as important as job quantity.

What is the single biggest economic problem facing people early in this century? It is not the budget deficit or national debt. It is the eroding and disappearing of good jobs. People with good jobs – jobs that provide decent pay and benefits and the flexibility to be able to take care of one’s family – are the fuel of the economy and the basis for broadly shared prosperity. Good jobs, and the things that go with them – a good education, affordable health care, and a secure retirement – are the very definition of a successful economy.

The public gets it. When asked to identify “the single biggest problem facing this country today,” 40 percent answered “jobs and the economy.” Number two was “budget deficit/national debt,” at 6 percent.

Four years after the official end of the Great Recession, the real economy – not corporate profits or the stock market – remains stalled. The proportion of Americans working is the lowest in 30 years, or basically since women started entering the work force in large numbers. Most of the jobs that have been created since the recession pay low wages. Long-term unemployment also is at levels well above anything since the Great Depression. And income for all but the richest has gone down.

So why does Washington and elite discussion remain focused on the debt and deficit? And what will it take to move the politics of the nation to take on what the public correctly understands is the central economic issue?

The fundamental reason that good jobs is not the defining issue is that an economy in which some people have a lot while more and more scrape buy is working just fine for the wealthy and huge corporations that control our politics and media. Personally, the rich are doing better than ever, as their inflated pay and corporate profits are supported by the financialization of the U.S. economy, low-wage service sector jobs here. and low-wage manufacturing and importable services abroad. The middle class in the U.S. may be getting squeezed and shrinking, but it’s still broad and big enough to fuel demand for U.S. goods and services. The disasters to come from the lack of retirement savings, high student loan debt, and long-term wage stagnation are not stopping the rich from getting richer today.

The interest of the ruling elites has been powerfully popularized by the right’s highly disciplined, focused narrative on the national debt and budget deficits. While the motivation here is ideological – to shrink those government services and activities that improve social welfare or regulate the markets – the weapon has been convincing Americans that the national debt is an unconscionable burden on our children, that government deficits are as unsustainable as household deficits, and that taxes are paid to a wasteful, corrupt government. Instead, the right insists that businesses are the “job creators” and that any effort to interfere with what business thinks is best will put people out of work.

As a result, the great public concern about the lack of good jobs doesn’t translate into support for government action – or any action, other than to do your personal best and pray that things get better. People don’t believe that there are solutions for good jobs in a global economy. They certainly don’t see that government has a role in creating jobs or that tax dollars could be spent on effective job creation. And while they support regulations to improve job quality, they are very susceptible to pro-business arguments.

What do we do about it? Here’s an overview of a strategy. One, we need to make good jobs the central, driving focus of progressive discourse, just as the right has put deficits/debt/limited government at the center of their policy, politics, and communication. That requires clearly linking every issue to the need to create good jobs that will enable working- and middle-class families to have opportunity and security. In doing that, we need to be talking about good jobs in a multi-dimensional way. Good jobs are about having enough pay to support your family, flexibility to allow you to care for your family – from children to elders – and access to good, affordable education, affordable health care, and a secure retirement.

Two, we need to center our discourse on good jobs in a powerful, values-based story about how we create an America that works for all of us. This story starts with a vision of an America that provides liberty, justice, and prosperity for all. It reinforces the notion that people believe but rarely hear: working families and the middle class are the real engines of the economy. It provides examples from American history of how decisions we have made together built the great American middle class. And it follows those with a vision and example of how we can make decisions together in the 21st century to create good jobs for everyone in America. It clearly identifies who is responsible for the mess we’re in – the super-rich and corporations who game the system at our expense and buy off our government. And finally, the story empowers people as the heroes who can take action for change.

Third, we need to champion a program of policies that will work to create good jobs. We have policies and innovative ideas that will work today, many of which will be discussed on June 4th in Washington when the Roosevelt Institute holds a daylong conference on A Bold Approach to the Jobs Emergency. Certainly, we will need to continue to develop policy solutions that address major challenges like globalization and technology. But we should be clear that it is in our power now to redirect economic policy to dramatically improve the quality of the jobs Americans now hold and to create millions of new good jobs for people who are out of work.

Fourth, we need to organize campaigns for good jobs, starting with a focus at the local and state level. Even though municipalities and states don’t have as many resources as the federal government, there are policies that can be taken locally to create a new economic paradigm. The success of those policies will be more immediately visible to people. The lessons learned in building popular support for these policies will be transferable to other places and to the federal level.

Finally, we need to make good jobs a defining issue of the 2016 election. To reach that goal, we will need to do all of the above, with a strategy that brings the work together for the 2016 election. In 2014, we should focus on a few U.S. Senate and congressional elections to experiment with the best approaches. We can take a page from specific strategies used from 2007-2008, which made health care the central issue of the 2008 election.

American’s historical optimism is being deeply challenged by the squeezing, and indeed crushing, of the middle class. Our job is to rekindle that optimism and make it a powerful force for change. We can build an America that works for all of us by building a movement to demand good jobs for everyone. 

Richard Kirsch is a Senior Fellow at the Roosevelt Institute, a Senior Adviser to USAction, and the author of Fighting for Our Health. He was National Campaign Manager of Health Care for America Now during the legislative battle to pass reform.

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How Can We Solve the Jobs Emergency? A Q&A with Jeff Madrick

May 17, 2013Cathy Harding

On June 4th, the Roosevelt Institute will bring together leading thinkers, activists, and policymakers for A Bold Approach to the Jobs Emergency: Setting the Political Agenda for 2014 and 2016, a daylong conference in Washington, D.C. that will focus on America's desperate need for more and better jobs. Recently, Cathy Harding, Roosevelt's VP of Operations and Communications, sat down with Jeff Madrick, Roosevelt Institute Senior Fellow and Director of the Rediscovering Government initiative, to discuss his goals for the conference and his thoughts on what we can and must do to address the ongoing jobs crisis.

On June 4th, the Roosevelt Institute will bring together leading thinkers, activists, and policymakers for A Bold Approach to the Jobs Emergency: Setting the Political Agenda for 2014 and 2016, a daylong conference in Washington, D.C. that will focus on America's desperate need for more and better jobs. Recently, Cathy Harding, Roosevelt's VP of Operations and Communications, sat down with Jeff Madrick, Roosevelt Institute Senior Fellow and Director of the Rediscovering Government initiative, to discuss his goals for the conference and his thoughts on what we can and must do to address the ongoing jobs crisis.

Cathy Harding: At the upcoming Rediscovering Government conference titled “A Bold Approach to the Jobs Emergency,” you’re going to make the case that solving the jobs emergency requires a comprehensive approach. Is that a new perspective on job creation? In other words, what needs to be included as part of a meaningful response that has not be included before?

Jeff Madrick: I think it basically is a new approach. I think people have their one or two favorites. Mainstream economists almost solely talk about education; in fact, there is a quote from Claudia Goldin and Larry Katz of Harvard in a Mike Milken Institute publication that says, yes things like minimum wage and unionization may matter, but they really don’t matter very much. It’s almost all education, or Raghuram Rajan, who is a well-known Chicago economist, says the big problem is education. I think even left-wing economists will say the big problem is education. In my view it is one of many problems.

There are bills out there that are moderately comprehensive, like Tom Harkin’s bill, and he’s going talk about that.

Minimum wage contributes too, and de-unionization contributes to it. I think the lack of enforcement of the employment laws contributes to it, which has been serious.

We don’t pay any attention to job training programs in a serious way, aside from college education.

I think there are issues about health insurance that have to be talked about; there are issues about Wall Street, in particular, that are almost totally ignored by Washington, D.C. Wall Street’s impact on suppressing good jobs has been very serious, and it’s not part of any of these bills. So I think all of these matter.

And finally, government investment in infrastructure and new technologies are job creators.

CH: What happens if you don’t approach the jobs crisis across many planes?

JM: We are going to continue to generate fewer jobs than we should, and we won’t generate enough jobs that pay well. That’s a big deal. We are already in a very serious hole merely on the number of jobs, but the quality of jobs, in terms of wages they pay, and in terms of benefits like retirement and health insurance, is stunningly bad.

CH: So you are saying that without a multi-pronged approach to the jobs issue, it is just going to get worse?

JM: I think, yeah. I think if we listen to what most economists tell us to do, we would be a very sad country.

CH: So, Jeff, when we read reports that say unemployment is going down, and that jobs are being created, what questions should people be asking about those numbers?

JM: Long-term unemployment, that is, people who can’t get jobs for 6 months or more, is very high. It has been setting records for a long time now. So yes, there is a slight improvement in the unemployment rate, but it is not nearly enough. What are the reasons for that? Part of it is slow economic growth in itself. Why do we have slow economic growth? Probably the single most important reason, but not only reason, is high levels of debt that are held over from the mortgage boom. So slow growth contributes to that lack of rapid job creation, but so do these other factors, including Wall Street and pressure on wages by business. Some of it generated by Wall Street needs and stock market needs, some of it generated by globalization and the ability to go somewhere else.

CH: So you are not cheered when you see a report that says the unemployment rate is down to 7.5 percent?

JM: All of it has to be in context. I think it suggests, given that the government is taking money out of the economy through this now famous sequestration process, that the economy is stronger than we thought it might be. If only they would get out of the way, we would probably be creating a lot more jobs, but they are not getting out of the way. So that is another issue we have to deal with. So I am cheered that the job situation in the latest reporting month was better than most people thought, given that the government is stepping on the breaks and we are still moving.

CH: You talked about it not just being a matter of jobs, but the question of good jobs. The students involved in Roosevelt Institute | Campus Network through their Government By and For Millennial America report have identified that quality of jobs as being a very important issue for the country as a whole, and their generation. Can you specify what a bold approach might look like, specifically for the generation just coming onto the job market?

JM: Young people are getting the tail end of what is a pretty crummy job market for almost everybody. So to tailor a jobs program for the very young probably requires a variety of different types of policies. Still, going to college enables you to at least get a job, even if it is not a good job. A lot of people who go to college have to take jobs where you don’t really need a college education. So is there a simple answer – go get a college education? It is a negative answer. Don’t not get a college education.

We may have to tailor jobs programs run by the government to hire young people. It may come to that. We might need job-hiring programs by the government in the end. And we can’t neglect that idea, or keep it out of sight because we haven’t done for so long, or because “it is not the private market.” The big crisis is for the young people.

If you get a bad- or lower-paying job at 25, it probably affects your earning power for the rest of your life. So it is a pretty serious issue.

CH: You have written a lot about what you call “the age of greed.” Is there is a cultural aspect to this current jobs crisis?

JM: I haven’t thought about that sufficiently. I think there is now too easy an acceptance that people won’t get good jobs and that the future may not be very good. That’s rather a new thing in America. One of my favorite stories is from Fernand Braudel, the historian, who says, way back who knows when, a Frenchman wrote a letter from Wyoming or somewhere like that. He said, “You can’t believe what they are doing in this town. They are building City Hall a mile from where we all live, and where the town center now is. Why? Because they’re so optimistic the town is going to grow so much that will be the new center.” I don’t think we have much of that kind of optimism. Ironically, the great so-called optimistic president, Ronald Reagan, in my view, was the guy who made us all pessimists -- that we can’t rely on government to make things better and that all we have to do is have good thoughts and things will get better on their own. So now that I think about it and you brought it up, I think there is a pessimism that’s taking root in our society that is very dangerous. I don’t think if you talk to people who are 35 now and have children that they are extremely optimistic about prospects for their children. 

CH: The closing panel at the jobs conference will address momentum building. What can people expect to take away from that?

JM: I think that most of us don’t think that a jobs conference or a well-written jobs proposal is immediately going to result in action. I think we have to win people over with argument, and persuasion, and facts, and a sense of what is really at stake here. And I think that’s what building momentum is about. One can say, “Win over one person at a time, and then eventually you get a movement.” It is something like that. And I think that is what Rediscovering Government is going have to be dedicated to. We are not going go down there and change the world on June 4th, but we want to lay the groundwork for fighting the ongoing battle. And indeed, laying the groundwork and setting the political agenda for the elections of 2014, and especially 2016. We want to influence elections. We want a job-creating President and a job-creating Congress.

The full agenda for the June 4th conference is now available online. Click here to learn more about the speakers and RSVP today.

 

Job search image via Shutterstock.com

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Good News on the Deficit Makes Social Security Cuts Even Worse

Apr 12, 2013Jeff Madrick

The deficit is already shrinking rapidly, and Social Security won't add much to it anyway.

The deficit is already shrinking rapidly, and Social Security won't add much to it anyway.

The reason President Obama's proposal to cut Social Security benefits is tragic is that it is simply not necessary. His plan is to use a different method to compute how much benefits are raised to offset inflation. But Social Security will add very little to federal spending over the next 30 to 40 years. As a proportion of national income (GDP), It will rise from 5 percent to 6 percent. At the same time, retirees are set to get much less money from their pensions because so many were forced to depend on 401(k)s and defined contribution plans rather than traditional pensions with defined benefits.

But a new report from Goldman Sachs economists puts the Obama decision in an even harsher light. The federal deficit is coming down rapidly on its own. In a piece entitled, “The Rapidly Shrinking Federal Deficit,” Goldman notes that the deficit averaged 4.5 percent of GDP in the first calendar quarter, compared to 10.1 percent in fiscal year 2009. The reasons are faster economic growth, higher taxes, and reduced government spending. 

More importantly, Goldman thinks the deficit will fall to 3 percent or so over the next two years, mostly because business and households will begin spending again. They think so-called deleveraging—that is, paying back debt—is coming to an end.

And here’s some additional good news: deglobalization! McKinsey reports that deglobalization has plagued the world since the financial crisis. The cross-border flows of capital are down sharply. The good news, McKinsey admits, is that they probably should be. Such border flows were often hot capital, financing speculation more than long-term investment. Now foreign direct investment, usually stable investment in business, is a much higher proportion of capital flows.  

And financial deepening—the proportion of GDP that is in debt and stocks--is also down. What sticks out like a  sore thumb is that the financial deepening of the preceding two and a half decades—which was huge--went far less to households and business than is to be expected. Even McKinsey says this is astonishing, because what else is finance supposed to do but supply funds to individuals and businesses? Instead, an enormous proportion went to finance itself—that is, financial firms borrowed at dramatically higher rates. And an awful lot of that must have gone into speculative activities, especially highly risky mortgage securities. From my point of view, this financialization was the disease created by the triumphalism of globalization. Globalization, to be sure, had benefits, but they were overshadowed by the financial instability of capital flows, which grew enormously since Ronald Reagan was president.

McKinsey warns that this deglobalization of finance could go too far. As noted, cross-border flows, especially long-term investments, can be highly benefical for world growth. But for me, it is now welcome. 

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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Defeating Laissez Faire Thinking in the Name of the WPA

Apr 8, 2013Jeff Madrick

Winning the war of ideas will be vital if we ever hope to implement such a successful program again.

Winning the war of ideas will be vital if we ever hope to implement such a successful program again.

Many thinking people are surprised that the lessons of the Great Depression have been so easily forgotten as the rich world struggles to get economies back on track after the worst recession since the 1930s. Keynes himself would have been surprised, because he thought the end of laissez-faire economics was well on its way even before the Great Depression. He wrote an essay in 1930 to that end called "The End of Laissez Faire," nicely summarized in a new book by Angus Burgin, The Great Persuasion, which predated his magnum opus, The General Theory, by six years.

But laissez-faire rose again with a vengeance under the articulate, if simplistic, preachings of Milton Friedman. It remains a guiding principle today partly because of the very allure of its simple core principle. For those of us who believe government is needed not merely to tame capitalism but to make it work, as well as to provide for a decent society that rewards all fairly and promotes social cohesion and optimism, we should remind ourselves how profoundly appealing laissez-faire is and what a battle we face. It is a set of elegant principles, while the correct critiques of it are ugly by comparison. Also, it was in the 1920s, and is today, the philosophy of the rich and powerful, not a small matter.

The rise, momentary fall in 2008, and rise again of laissez faire is therefore not really a stunning historical event. Fiscal stimulus, the main legacy of John Maynard Keynes, was derided when President Obama got an $800 billion stimulus passed. Then it was said by many that it didn’t either save or create new jobs. Meanwhile, Europe is overwhelmed by the disease of austerity economics. Only Germany stays above water based on exports made cheap by the low value of the euro -- something it would not be able to enjoy if it were independent of the Eurozone and had its own currency. Austerity economics has spread to the U.S. in the form of allegedly sensible budget balancing commissions that are not sensible at all. They helped foment the pressure to balance the budget as soon as possible, even with unemployment at nearly 8 percent.

It is not only fiscal stimulus that is derided. Programs to spur job growth have been limited to relatively modest infrastructure investments and tax cuts, especially payroll tax cuts. Less obvious, the push by mainstream economists to explain income inequality almost solely in terms of inadequate education is deeply misleading. Such an expalantion neglects the low minimu wage, persistently high unemployment rates, the failure to implement labor organization laws, and on.

There have been new programs. A modest investment in infrastructure and tax cuts. We do have a healthcare bill, which we should applaud on balance. But none of this compares to the adventure of the New Deal, and in particular the Works Progress Administration, whose anniversary we are celebrating today. The WPA went out and hired Americas to do jobs, including building infrastructure. By some estimates, some 8 million jobs were created.

We need a wide range of New Deal ideas made contemporary: higher minimum wages, living wages, aggressive public investment, green investments, and on. Government will be the generator of these jobs. Some, but very few, argue we need outright public employment programs, just like the WPA.

What made that happen then? A more severe recession than now, for one thing. A far bolder president, for another.   

But the ideology of laissez faire still had to be defeated. Laissez faire was not mentioned by Smith, Ricardo, or Mathus, Keynes wrote. “Even the idea is not present in any form in these authors,” he said in “The End of Laissez Faire.” He went on, the public had “come to regard the simplified hypothesis as health and the further complications as disease.”

Keynes blindly believed reason would prevail. The many over-simplifcations of laissez faire would become obvious, he optimistically thought. Sane criticism would prevail over simple ideology. For a while, he was right—a pretty long while. Arguably a version of Keynesian progressivism, which even included fixed exchange rates and plenty of social programs, especially in Europe, prevailed until the 1970s. Then it turned to over-simplifications and scapegoats, mainly driven by the painful inflationary economy of the 1970s.

Many are enamored of the idea that a revitalized right wing of effective think tanks, lobbying, and media disinformation ended progresssivm in the U.S. But that misreads history. Margaret Thatcher introduced stern anti-Keynesian policies well before the U.S. did at the start of the 1980s. Germany was anti-Keynesian throughout the 1970s. Ideas matter, and the acceptance of the idea of laissez faire regained the upper hand.

As we battle in memory of the marvelous WPA, we should keep in mind how intensely compelling laissez faire ideology is. It has captured, without their really noticing, the hearts and minds of most orthodox economists. As usual, it has the rich mostly on its side. If we recognize it is a tough, ongoing battle to defeat the simple version of it, we will fight it better. In the meantime, we can rejoice in how well we once did. That is the proof that we can win. American history can be repeated.

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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Obama's Other Message: Times Change and Government Changes With Them

Jan 23, 2013Jeff Madrick

The president didn't just make a case for big government; he argued that the government must adapt to meet its citizens' needs.

The president didn't just make a case for big government; he argued that the government must adapt to meet its citizens' needs.

Almost hidden in President Obama’s second inaugural address was a key idea that received little if any attention. The focus has been on the president's eloquent defense of collective government, and who couldn't be gratified by that? Time and again, he used the world “together” to describe the nation’s purpose. Government is about working together, and Obama very nicely made the case for it in the face of 40 years of pronouncements by those who disparage government and want to cut it down, if not out. Democrats, not just Republicans, have been leaders in this quest.

But for me, what was most interesting about Obama’s speech was the emphasis on how we must change with the times. I was interested because I wrote a book about this. I take no credit for Obama’s point, because my book was titled The Case for Big GovernmentI doubt he would be caught even in the privacy of his own bedroom reading a book with that title.

Seeing the title, many presumed I was writing about Keynesian policy. In fact, my argument was that the size of government is not the issue, the need for government is. I cited the work of economists who show that size and high taxes have not automatically deterred growth. But when I published this before the crash, Republicans in particular, but also some Democrats, kept talking about the original intentions of the Founders and were urging us not to go beyond the early purposes of government. That is where I focused my attention: the needs of government change as society, science, social thought,  technology, and expectations advance.

To say government must be small is nonsense. Government must be the size necessary to make a society and economy work, and that is not fixed -- nor could it possibly have been known by farmers in the late 1700s.

Here is what Obama said about change on Monday:

[W]e have always understood that when times change, so must we, that fidelity to our founding principles requires new responses to new challenges, that preserving our individual freedoms ultimately requires collective action. For the American people can no more meet the demands of today's world by acting alone than American soldiers could have met the forces of fascism or communism with muskets and militias.

Let me reemphasize that this has been said before but not often enough. Surely it is not part of the media discourse and it is not part of the thinking of those budget writers in Washington who claim the federal government should be a fixed proportion of GDP. I refer of course to the Bowles-Simpson budget balancing plan that so many think is the height of good sense. They’d like to limit federal spending to 21 percent of GDP -- no matter that our society ages, that health care is more costly, that we need to educate preschool children and better educate those in higher grades as the world gets more competitive, that our poverty rate is still high, that our ability to create jobs is under severe challenge, and so on.  

There are no fixed rules for what government should do because we can’t anticipate the future. The colonial writers of America’s Constitution did not know we’d need high schools or highways, electricity or polio vaccines, MRI machines or antibiotics, fertilizers or pollution restraints, gasoline or wind power, or computer chips. They didn’t even know we’d need railroads.

Our view of human rights also changes. Slavery is now abhorrent to almost all, women are equal, those with birth defects require help, and very young children, we have learned, benefit greatly from educationally nourishing environments.

Most of this requires government, and President Obama recognizes this. His agenda, what we must now do “together,” includes climate change, equal rights for women and gays, gun control, and a sensible international policy for the times. He goes on, “So we must harness new ideas and technology to remake our government, revamp our tax code, reform our schools, and empower our citizens with the skills they need to work hard or learn more, reach higher. But while the means will change, our purpose endures.”

The means will indeed change, and the nation would do well to accept that truth, or it will not rise to the challenges of this new century. I originally titled my book The Purpose of Government. Maybe that would have been better. But the point remains the same. Shed ideology about government and fixed ideas and turn our attention to what must be done. Yes, my guess is it would mean bigger government. But so what?

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 Simpson-Bowles Consensus Isn't Common Sense. It's Nonsense.

Nov 28, 2012Jeff Madrick

Capping federal spending at 21 percent of GDP is arbitrary, short-sighted, and wrong for America.

Capping federal spending at 21 percent of GDP is arbitrary, short-sighted, and wrong for America.

The Simpson-Bowles budget balancing plan seems to have become the common-sense standard for dealing with America’s future budget deficits. I’d say this move toward the right is dangerous to the future of the nation and essentially cruel—far more dangerous than the level of the deficit over the next 15 years. The commission, formally known as the Commission on Fiscal Responsibility and Reform, appointed by President Obama, achieves its deficit reduction by reducing government spending to do two-thirds of the job and raising taxes to do only one-third of the job. Even 50-50 would not be fair in such a low-tax nation. The commission proposed cuts in Social Security benefits of 15 percent for medium earners, for example.

But easily the most short-sighted objective is to hold federal spending to 21 percent of Gross Domestic Product into the future. How did they get this number? It is roughly the average level of federal spending since 1970. This is not a reasonable standard—it is not even a way to think about the issue. So where did the idea originally come from? The answer: the right-wing Heritage Foundation.

Now our most respected elder statesmen of the economy, Paul Volcker and Warren Buffett, are endorsing the 21 percent level in recent editorials. It may have been missed in Buffett’s piece, which endorsed a 30 percent tax on the rich, and correctly so. But he said it plain as day: “Our government’s goal should be to…spend about 21 percent of G.D.P.”

Oh my. Did they do any analysis at all about what that level would mean for retired, sick, and middle-income-to-poor Americans? Did it occur to them how vastly the U.S. economy has changed over those years? There are many more retirees, health care is more expensive and more extensive, the U.S. has chosen to fight expensive wars, and its infrastructure and educational needs are dire.

The words of the wise oracles should not be taken seriously. One wonders whether Volcker would have run the Federal Reserve or Buffett picked stock on such skimpy analysis. They present no evidence, nor do I think they have done any research or even reading that shows that a 21 percent spending level will make the economy more efficient than, say, a 24 percent level of spending. 

And they beat their chests as the exemplars of responsibility in an otherwise irresponsible America. Moreover, Pete Peterson, of course, is now financing a road tour for Bowles and Simpson to fight their great moral battle to get America’s budget under control—as a reminder, not by raising taxes significantly but by cutting social entitlements significantly. America cannot be run by men like these. America’s great moral battle is for social justice and adequate federal investment.

The heroic and correct analysis of the Simpson-Bowles plan has been done by Paul Van de Water of the Center on Budget and Policy Priorities. Some think of the CBPP as left-wing, but it is only mildly so. It makes deficit reduction a top priority, and its analysis is typically excellent. 

Van de Water concludes that keeping federal spending at 21 percent of GDP would require deep cuts in Social Security, Medicare, and Medicaid over time, as well as virtually all other federal programs. He wrote this before the Budget Control Act and the sequester we now face, but its principles still apply.

Moreover, he reminds us that the Brookings Institution held panels on the future budget, and in general, centrists on those panels agreed that spending as a percent of GDP should be 23 to 25 percent 20 years from now. He thinks the Simpson-Bowles plan is simply wrong for America. In truth, Social Security is inadequate today, and Medicaid tragically so. The latter in particular needs building up.

And then the 21 percenters generally have the audacity to demand more investment in education and infrastructure. How?

Centrists had better get together and remind America, with analysis, pragmatism, and a keen sense of justice and America’s future, how deeply wrongheaded most of the basic principles of Simpson-Bowles are. This thinking has led to today’s fiscal cliff, and as a blueprint for the future it is both damaging to the economy and cruel for most Americans.

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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All Aboard the Pro-Government Bandwagon

Nov 13, 2012Jeff Madrick

Cracks are beginning to show in conservatives' opposition to government, but progressives still need to make the case for higher tax revenues.

So now everyone is climbing aboard the government-is-necessary bandwagon. I use as my litmus tests David Brooks and Ross Douthat, conservative op-ed columnists of The New York Times.

Cracks are beginning to show in conservatives' opposition to government, but progressives still need to make the case for higher tax revenues.

So now everyone is climbing aboard the government-is-necessary bandwagon. I use as my litmus tests David Brooks and Ross Douthat, conservative op-ed columnists of The New York Times.

To myself and my colleagues, who have been fighting this battle for some time, the Johnny-come-latelys, even among the Democrats, are welcome. I wrote a book called The Case for Big Governmentpublished in 2008, based on lectures I gave back in 2006. A few years before that, I wrote a speech for Senator Ted Kennedy on this subject, largely with historical references about what government did for America in the preceding 200 years, that he gave to considerable notice from his own senatorial colleagues. I was writing a monthly column in The New York Times before that, which persistently sounded this theme. I can’t remember many of the editors being enthused. When I complained about education decline or lack of good wages, one reporter told me to look at how high a proportion of people now owned a home. Many, if not the vast majority, in the media who covered such matters believed in the new “American model,” not to mention the “Washington consensus" -- that is, deregulation, low taxes, and Wall street hegemony.

The financial crisis, Hurricane Sandy, foreclosures, and ultimately the lack of jobs in a Great Recession have changed some of that. We at the Roosevelt Institute started Rediscovering Government with enthusiastic support from Roosevelt’s management and similarly enthusiastic financial support from Bernard Schwartz and a couple of others. We plan to keep sounding the theme about restoring faith in government and take the program to a new level in 2013, bearing down in particular on government and jobs.

Meanwhile, some traditional Republican voices are sounding a bit more constructive about government than they used to. Make no mistake, they are still hesitant, but the language is changing.

David Brooks is now talking about how the big-government-versus-small-government argument is no longer that relevant. He suggests it’s because of the changing composition of the American voting public. “The Pew Research Center,” he writes, “does excellent research on Asian-American and Hispanic values. Two findings jump out. First, people in these groups have an awesome commitment to work. By most measures, members of these groups value industriousness more than whites. Second, they are also tremendously appreciative of government. In survey after survey, they embrace the idea that some government programs can incite hard work, not undermine it; enhance opportunity, not crush it.”

Now, don’t be surprised the Brooks twists American history into something so simplistic it is unrecognizable in order to make the Asian and Hispanic electorate sound like an unprecedented cultural shift in the nation. He says the old Protestant nation had disdain for government and now they are—so he implies—losing their influence. He of course does this kind of simplistic reading of American history from time to time. Who supported the great progressive revolution of the 1930s well before the Asian and Hispanic rise? This kind of idea—that culture explains so much—is generally dangerous.

But the point here is that Brooks is now saying Republicans have to get off the anti-government kick. He goes on: “Moreover, when they look at the things that undermine the work ethic and threaten their chances to succeed, it’s often not government. It’s a modern economy in which you can work more productively, but your wages still don’t rise. It’s a bloated financial sector that just sent the world into turmoil. It’s a university system that is indispensable but unaffordable. It’s chaotic neighborhoods that can’t be cured by withdrawing government programs. For these people, the Republican equation is irrelevant. When they hear Romney talk abstractly about Big Government vs. Small Government, they think: He doesn’t get me or people like me." 

Well, that’s a heck of a breakthrough, even if argued on spurious grounds about how more and more Americans don’t have old-fashioned American cultural roots. Let’s just get away from the cultural stuff. Who elected Teddy Roosevelt and Woodrow Wilson before Hispanics voted? Who backed the progressive income tax at the start of the 20th century?

Anyway, the conservative punditry is shifting. Ross Douthat, the other conservative regular on the Times op-ed page, has a firmer grasp of historical context than does Brooks. He only partly buys into the “demographic excuse,” as he puts it. As he says, “Republicans are also losing because today’s economic landscape is very different than in the days of Ronald Reagan’s landslides. The problems that middle-class Americans faced in the late 1970s are not the problems of today. Health care now takes a bigger bite than income taxes out of many paychecks. Wage stagnation is a bigger threat to blue-collar workers than inflation. Middle-income parents worry more about the cost of college than the crime rate. Americans are more likely to fret about Washington’s coziness with big business than about big government alone. “

And he recognizes that Hispanics are not a one-issue demographic group. A simple change in immigration policy won’t win them over to the Republicans. He importantly concedes that Latinos tend to see government more as an ally than a foe. And increasingly others in his political camp are talking that way. He notes, “As the American Enterprise Institute’s Henry Olsen writes, it should be possible for Republicans to oppose an overweening and intrusive state while still recognizing that 'government can give average people a hand up to achieve the American Dream.' It should be possible for the party to reform and streamline government while also addressing middle-class anxieties about wages, health care, education and more."

And now some conservatives are even saying the Republicans should give up their resistance to higher rates on upper income Americans. Bill Kristol of the Weekly Standard made headlines when he said just that the other day. 

Glenn Hubbard, a former Romney adviser, says we can raise taxes on the rich by putting caps on deductions like mortgage interest, charitable contributions, and business provided health insurance. This deduction cap is gaining adherents among Democrats. But the devil here is in the details, and when one reads more closely what Hubbard has to say, one sees the dangers if one thinks the battle is won. By no means.

One issue is the refusal to raise income tax rates themselves, say the top bracket to 42 or 43 percent. Hubbard claims this reduces incentives. This was the same argument Martin Feldstein made when he said Bill Clinton’s income tax rate increase on the rich would hurt the economy. The Clinton boom soon followed. There is no accepted evidence that higher rates on the rich would dampen economic growth. A research report to that effect was completed and about to to be published by the non-partisan Congressional Research Service, and it was suppressed by the Republicans.

The more important point Hubbard makes is that most deficit-cutting should be accomplished by reducing government spending, not tax increases. And to him this necessarily means cutting the safety net and, probably, public investment.

Hubbard makes the critical point, however, as much as he disagrees with it. If Americans wants a bigger government, most Americans, not just the rich, will have to pay. But a lot more of the taxes can come from the rich than he admits. There’s a lot of room to raise taxes in America compared to tax bites in other rich nations. 

The battle for an active, constructive use of government will remain a tough one, even as the conservatives start compromising modestly. And the fight should ultimately be over tax increases, once the economy starts growing rapidly again (and not until then!).

So, for those of us who believe in the constructive purpose of government, we have to show how higher tax revenues can be put to critical work. We can do that. 

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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Hurricane Sandy Upends the Increasingly Strained Case Against Government

Nov 1, 2012Jeff Madrick

The arguments over FEMA in the wake of the hurricane expose just how empty anti-government rhetoric is.

The arguments over FEMA in the wake of the hurricane expose just how empty anti-government rhetoric is.

The chorus is now loud in defense of government. The New York Times even used that forbidden phrase, "big government," in its editorial earlier this week. Eduardo Porter, the economics writer for the Times, wrote a column about how the election is a choice between a limited-government candidate and a president who would use government to provide a safety net for the less advantaged. He seemed to side with pro-government philosophy. “Government matters,” wrote The New Republic this week.  

The Rediscovering Government Initiative has been dedicated to restoring faith in government through publicizing the best scholarship, clarifying the nation’s true history, and countering the prevailing and widely prevalent myths about government. So it is encouraging to see the growing chorus, even if there is a Johnny-come-lately feel to some of it. 

Hurricane Sandy is of course stimulating the latest such talk. Mitt Romney had suggested he’d cut back FEMA, the Federal Emergency Management Agency. Has there ever been a stronger case for FEMA? Everyone has taken notice, it seems. Governor Christie of New Jersey was beside himself praising President Obama for his quick response. FEMA is Obama’s main conduit for rescue. The state, clobbered by Sandy, will not be able to handle its recovery alone—not even close.

Yet ideology runs so deep among the right that absurdist claims continue to be made, now about how we really don’t need all that FEMA. The New York Times ran a Room for Debate this week with the theme, “Do We Really Need FEMA?” An “entrepreneuriship” scholar, Russell S. Sobel of The Citadel, writes that “centuries of economics research suggests” that central planning is doomed. Centuries? Really? Adam Smith was well aware of the need for government (although did not do research in any modern sense).

A Cornell professor argues that the federal government should only fill in when states can’t do the job. Well, sure. And he goes on to say that hurricane damage is localized and requires a street-by-street response, which the federal government cannot assist in. Is experience helping dig out from other hurricanes useful to states? Is the money? The truth is, 9/11 was also localized. Does this man have any idea the extent—the sheer breadth—of the problems caused by Sandy, not to mention the cost? And further, mustn’t New York and New Jersey coordinate?   

The saddest, or sadly funniest, attack on FEMA was offered by James Pethokoukis of the American Enterprise Institute. He compares FEMA’s poor performance to Wal-Mart’s ability to get back on its feet during Hurricane Katrina. Never mind how much smaller a task it is to get Wal-Mart working again. FEMA was overseen by George Bush, who put in a totally incompetent political crony to run it. Bush’s carelessness is now legendary.

Pethokoukis also cites what is now an old conservative cliché that these are local problems. On those terms, what isn’t local? Old people’s healthcare? Local unemployment? Do these people have any idea the extent of damage and the need to share costs, expertise, and responsibility?

One more word about criticizing FEMA under Bush. Ever since Ronald Reagan, the right has appointed regulators who don’t take their jobs seriously, want to cut back the powers of their agencies, and want a smaller government. There is no better way to make government ineffective than to appoint people who want to undermine it. This undermining of Washington has added fuel to the fire of anti-government ideology. Such ideologically-based incompetence swept across agencies from the FCC, FDA, and OSHA to most of the financial and anti-trust regulators. It led to the crisis of 2008. Under Obama, some of that has been corrected.

Government is hardly immune to criticism. But the anti-government campaign reaches ever-greater heights of sheer silliness, so determined are its proponents to make their blindly angry and highly ideological case.

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

 

Hurricane Sandy image via Shutterstock.com.

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What Do We Get Out of Government?

Oct 25, 2012

"Let us not be afraid to help each other -- let us never forget that government is ourselves and not an alien power over us." FDR said those words in Marietta, Ohio in July 1938, but it's just as relevant today. As conservatives continue to deride every attempt to create progressive change through government as an oppressive socialist takeover, we need to remember that government is nothing more or less than an expression of common initative -- a forum through which we come together to build the things we need to make our country stronger.

"Let us not be afraid to help each other -- let us never forget that government is ourselves and not an alien power over us." FDR said those words in Marietta, Ohio in July 1938, but it's just as relevant today. As conservatives continue to deride every attempt to create progressive change through government as an oppressive socialist takeover, we need to remember that government is nothing more or less than an expression of common initative -- a forum through which we come together to build the things we need to make our country stronger. In the video below, the Roosevelt Institute's Rediscovering Government Initiative looks at the government's vital role in every facet of society, from encouraging innovation to defending our shores, and at what we can still achieve if we're willing to dream big.

Click here to find out how you can get involved in the Rediscovering Government Roadshow.

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Mythbusters: The Rediscovering Government Edition

Oct 22, 2012

We all know the conservative talking points about government: Big government impedes growth. Social Security is going bankrupt. We need to balance the budget. We've had the idea that government is an economic albatross drilled into our heads through decades of repetition. The problem is, it's just not true.

We all know the conservative talking points about government: Big government impedes growth. Social Security is going bankrupt. We need to balance the budget. We've had the idea that government is an economic albatross drilled into our heads through decades of repetition. The problem is, it's just not true. Check out this new booklet from the Rediscovering Government Initiative to get the facts, plus an illustrated timeline of the government's role in shaping the economy and more information on how you can get involved in Rediscovering Government. Click here to view the booklet in magazine layout.

 

Capitol image via Shutterstock.com.

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