Goolsbee's Gone: Another Top Obama Econ Advisor Exits

Jun 7, 2011

A Monday night announcement has shaken things up in Obama's economic team. Austan Goolsbee, chairman of the Council of Economic Advisers, is packing his bags, heading back to Chicago to resume his teaching gig. What does the exit of a man central to the crafting of Obama's economic policies for the past two-and-a-half years really mean? Roosevelt Institute fellows weigh in.

A Monday night announcement has shaken things up in Obama's economic team. Austan Goolsbee, chairman of the Council of Economic Advisers, is packing his bags, heading back to Chicago to resume his teaching gig. What does the exit of a man central to the crafting of Obama's economic policies for the past two-and-a-half years really mean? Roosevelt Institute fellows weigh in.

"Anyone who is a good economist does not want to be associated with the policies of this Administration that has turned a blind eye to idle resources and tragic levels of unemployment."
-Robert Johnson, Senior Fellow, Roosevelt Institute

"There shouldn't be a wet eye in the place. Goolsbee's legacy is wretched: He approved of bailing out the banks, insisted that prosperity was just around the corner, and recently kept repeating that the private sector must drive recovery, in the face of overwhelming evidence that recoveries from financial crashes take years if the government does not move vigorously to offset private sector deleveraging and caution. But it's an ill wind that blows no one any good: Now the President has yet another vacancy to fill; at least there is a chance that somebody who takes to heart the great lesson of the New Deal -- that government can stimulate the economy if it doesn't lose its nerve (as in 1937 and, it appears, now) -- can find a place in the White House."
-Thomas Ferguson, Senior Fellow, Roosevelt Institute and Professor of Political Science, U Mass, Boston

"Goolsbee is another champion of the 'fiscal austerity lite' ideology that continues to wreak havoc on the US economy. As one of the President's main economic spokesmen, he has championed the Administration's Wall Street-centric approach, notably in regard to the bailouts. These programs have fostered the impression that there is already plenty of fiscal related stimulus, though virtually all employment measures indicate that full recovery is far from accomplished and many needs that are more pressing remain unaddressed. He won't be missed."
-Marshall Auerback, Senior Fellow, Roosevelt Institute

"Austan Goolsbee is a well-trained and by all accounts affable economist. But these have been unusual times and he seemed unequal to them. The current administration policy is a wish and prayer that GDP will grow at 3 to 4 percent a year. It is construed that this will be sufficient to get the president elected as the unemployment rate, if high, starts to fall consistently.

As I have noted before, the risks to that forecast are very high. This seems lost on an administration, and perhaps on Goolsbee. They are unwilling to take the action needed, despite the political obstacles, to keep the economy growing. To the extent Goolsbee contributed to this, he wil not be well-remembered and his leaving may be useful. This of course depends on his replacement, about which there is no reason to be optimistic.

But the main issue is that this Administration has never evinced a passion about the loss of jobs in this economy and the suffering and confusion of tens of millions of Americans. Goolsbee was in a position to make this clear to the president. Apparently, he did not. There is no jobs program, no outrage about levels of unemployment, no anger at nonsense written about structural unemployment. Goolsbee seemed to be one of those people who didn't want to rock the boat much. We need a boat rocker."
-Jeff Madrick, Senior Fellow, Roosevelt Institute

"I hope he has a few million apologies ready for the foreclosure victims he did nothing to help."
-Matt Stoller, Fellow, Roosevelt Institute

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Why Liberals Need to Take a Page from (Classical) Republicanism

Apr 28, 2011Ned Resnikoff

flag-150Progressives need a unified set of principles when reclaiming the politics of freedom.

flag-150Progressives need a unified set of principles when reclaiming the politics of freedom.

America's founders baptized her in the rhetoric of personal liberty. Jefferson, when listing the rights of all people in the Declaration of Independence, put liberty second only to life. Nathan Hale and the state of New Hampshire declared that liberty was actually worth more than life. And ever since, freedom and liberty have been central concerns in American public discourse.

That might help explain why, as Professor Corey Robin writes in the most recent issue of The Nation, "conservative ideas have dominated American politics for thirty years." The right has virtually monopolized the rhetoric of freedom, and the left has failed to offer up a single competing vision.

Robin's article, called "Reclaiming the Politics of Freedom," is a proposal on how best to correct this. And the left-wing schematic of liberty he offers up isn't a bad start. He writes:

We must develop an argument that the market is a source of constraint and government an instrument of freedom. Without a strong government hand in the economy, men and women are at the mercy of their employer, who has the power to determine not only their wages, benefits and hours but also their lives and those of their families, on and off the job.

It is, as I said, a start. The challenge for left-leaning political philosophers and theorists is to convert Robin's rhetoric into a fully fleshed out theory of freedom and governance. On the face of it, this would seem to be a daunting task, because Robin's conception of freedom represents a clean break from the tradition of classical liberalism that looms so large in modern philosophy.

Classical liberalism, a distinct entity from American political liberalism, most often defines liberty as non-intervention, which would seem to make its closest political ally libertarianism. (The Republican Party, and especially those Republicans who identity as members of the Tea Party, tend to talk about freedom in a way that makes them sound superficially like classical liberals. But on social issues in particular they apply the classical liberal's standard of freedom as non-intervention inconsistently at best.) Not even the forms of classical liberalism more closely associated with the left, like Rawlsianism, truly satisfy Robin's demands. Whereas Rawlsian liberalism conditions freedom as non-intervention with certain restraints, Robin insists that government intervention can actually promote freedom.

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Lucky for us, there is a philosophical tradition -- less fashionable than classical liberalism -- that supports Robin's claims. It is called republicanism. (No relation to the philosophy of the modern Republican Party.)

The best introduction to modern republicanism is likely "Republicanism: A Theory of Freedom and Government" by the Australian philosopher Philip Pettit. The book largely consists of the sort of academic philosophizing that laypeople might find hopelessly esoteric, but it also contains some thoughts on the intellectual history of republicanism that help explain most of the key concepts. Pettit writes that the fundamental principle of over two millennia of republican thought is this: no citizen is a slave, either of the state or any other entity. (Of course, many republics have had slaves. But they were not considered citizens in the formal sense.) Putting this principle in modern analytic terms, he describes it as the conviction that freedom constitutes non-domination, not non-intervention. A slave is still a slave, even if his master is benevolent and does not interfere with him. The point is that the master still has the right to reverse his policy without warning and arbitrarily project his own interests onto the slave. This, Pettit says, is domination: the ability to arbitrarily interfere in the affairs of others without being constrained by their interests or stated preferences.

Already we can see how closely this idea of freedom as non-domination tracks with the vision of freedom laid out by Robin. When he argues that a "strong government hand" is needed to ensure that employees are not put "at the mercy" of their employers, he is actually saying that the state must promote freedom by encouraging non-domination. This is, in fact, the sole aim of the ideal republican state, and Pettit strenuously encourages a "strong government hand" when he thinks it will serve that end. Whereas, in strictly classical liberal terms, any sort of government interference represents a constraint on liberty, Robin and Pettit both agree with the republican notion that, in Pettit's words, "the properly constituted law is constitutive of liberty." He takes that logic further than even many orthodox republicans, arguing that the state must "seek to reduce the influence of factors like handicap and poverty and ignorance," which condition freedom.

But republicanism, at least as articulated by Pettit, is also a relatively conservative doctrine. After all, he argues, America was founded on republican principles. And indeed, Pettit ends up building on those republican principles to advocate for a lot of things we already have: separation of powers, for example. Thus do we find that republicanism has exactly that "deep immersion in a wellspring of American political thought" that Robin wishes for.

I've only had the room here to give a crude schematic of republicanism, but hopefully it's enough to pique the interest of some fellow lefties. For too long now, the American left has had very little in the way of an articulated set of unifying first principles. Republicanism could be what we have been missing; not only does it satisfy the policy intuitions of most liberals, but it integrates them into a system that is logical, humane, and deeply American.

Ned Resnikoff is a researcher at Media Matters and a freelance writer. The above piece is not intended to represent the views of his employers.

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Happy Tax Day, Alexander Hamilton!

Apr 18, 2011William Hogeland

american_colonial_flagHamilton is revered for putting America on sound financial footing, but he couldn't have done it without federal taxation.

american_colonial_flagHamilton is revered for putting America on sound financial footing, but he couldn't have done it without federal taxation.

The annual drop-dead moment when Americans must file tax returns or face unpleasant consequences has become an opportunity for the Tea Party, protesting what it sees as crippling taxation and overactive federal government, to rally its supporters. Extending this year's filing deadline from April 15 to today, April 18, the IRS gave Tea Partiers a big weekend, and all over the country, tax-day events hymned unregulated markets, excoriated federal programs like the health-insurance reform bill, and defended anti-labor governors. Anti-Obama leaders from Sarah Palin to Donald Trump urged the faithful to oppose evils summed up for them in the annual requirement to file federal tax returns. For the Tea Party, "Tax Day" represents all that's gone wrong with America since the founding.

So as we stand on long lines at the post office hoping to avoid the midnight axe, we might spare a moment to consider the father of federal taxes, Alexander Hamilton. Our first Secretary of the Treasury, Hamilton is celebrated by both establishment liberals and establishment conservatives: The Hamilton Project is an economic effort of the liberal Brookings Institution, and former Obama budget director Peter Orszag hung a Hamilton portrait in his office; on the right, the writer David Brooks and former Bush Treasury Secretary Henry Paulson are two of Hamilton's biggest fans. It's not surprising. Hamilton is rightly said to have put the new nation on sound financial footing and secured its creditworthiness. He gave us our first comprehensive national finance policy.

That policy depended on exercising certain economic powers that finance nationalists like Hamilton and his mentor the rich financier Robert Morris, as well as planter nationalists like James Madison, had been striving to achieve for the federal government throughout the 1780's, and which came to fruition at the Constitutional convention in 1787. While Hamilton and Madison would arrive at dire odds over whether the Constitution gives the federal government the right to form a central bank (Hamilton yes, Madison no), all nationalists had long agreed that a national government, unlike a confederation of states, would have a right to tax its citizens directly, throughout the states. And unlike what they saw as state governments' susceptibility to the American popular-finance movement's riot and noncompliance, a national government, nationalists hoped, would have both the will and the police resources to enforce and collect taxes.

So whereas Tea Partiers sometimes associate their objections to federal taxes with a desire to "get back to the Constitution," federal taxation is one of the Constitution's central purposes. And we can thank the wunderkind Alexander Hamilton for proposing the legislation by which the first U.S. Congress imposed the first federal tax ever on an American product.

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Hamilton wasn't messing around. Empowered by the new government to do what he and Morris had long been frustrated in trying to do, the young, charismatic, brilliant, diligent Secretary worked up a full-blown plan for connecting national wealth, and even more importantly national credit, to ambitious national aims. Like Morris, though to a far more sophisticated degree, Hamilton wanted the United States to become an economic powerhouse and financial empire to compete with England. And he'd been tireless in figuring out how to do it.

The key, as Morris had always suggested, was to combine a big public debt with vigorously enforced taxes earmarked for funding that debt. That is: sell U.S. bonds to the small, rich merchant lending class and, as Morris had put it, "open the purses of the people," collecting taxes from the American people, in metal, not paper, and earmarking revenues for paying the bondholders their 6% interest in hard, cold cash -- 6% untaxed interest, that is. Federal power would thus shift national wealth upward and consolidate it. Yoking national credit to national interest, government would serve as an economic pivot between the creditors and the people and thus be in a position to finance roads, canals, wars, and other national projects.

Morris had fought hard during the confederation period for a simple federal tariff on imports, known as an "impost," and opposition even to that measure had always been stiff: states wanted to retain their sovereign power to tax. But he'd also schooled his supporters in what a real federal tax slate would look like. Once people had become inured to paying a federal tariff, Morris had predicted, the federal government would be able to impose taxes on domestic products too, taxes known as "excises." Continuing to expand tariffs alone would hit too hard the very people Morris and Hamilton wanted to encourage: the merchant financiers, who also engaged in international trade (that's where they got the gold). Fully consolidating wealth, and fully connecting it to high national aims, meant collecting revenue for finding bonds from people who would never own a bond. Hence the importance, to Hamilton, of imposing domestic taxes.

And Hamilton pulled his whole plan off, pretty much on his own. He is often portrayed as having faced down and tamed a huge public debt that had been run up, somehow, to unfortunate proportions during the war and now needed to be paid off. Nothing could be farther from how Hamilton himself saw the situation. Swelling the public debt had been a project of his and Morris's for many years -- for all the cogent reasons of national credit described above -- and now as Secretary, his plan was hardly to pay the debt down (many of his biographers to the contrary) but to fund it. Which as those of us with credit cards know, is another thing altogether.

In that context, Hamilton further persuaded Congress to assume all the states' debts in the national one, swelling the public debt to the nth degree at last and placing it all in federal hands. That took a tough political fight. Hamilton won it in part because his Madisonian opponents were nowhere near as finance-savvy as he, and partly because empowering the federal government to enact a top-down national finance plan had all along been a chief purpose of the Constitution under which Hamilton acted.

So state debts were nationalized, and a law for funding the domestic public debt was passed. Hamilton couldn't get his bondholders their full 6%, but they were happy enough. Investing in the U.S. looked safe and lucrative.

Funding and assumption: those were Hamilton's great twin achievements, and they did secure the credit of the nation in just the way he and Morris had always wanted. But they depended on a third leg of the finance program, rarely discussed but utterly essential: federal taxation of the American people, with a full-fledged collection service, inexorably spreading federal power to collect, audit, and prosecute throughout the country, from state to state, town to town, and village to village. To Hamilton, taxes weren't an unfortunate necessity. They created a nation, pulling the country together through a network of federal officers opening offices and banging on doors. Running every last detail of that widespread, growing, and powerful federal agency, Hamilton came into his own.

Next week: How Hamilton constructed and calibrated his first federal tax -- the excise on American distilled spirits -- to achieve his and Morris's longstanding goal of quelling the popular finance movement. Also: How the finance populists fought back. In the meantime: Happy Tax Day!

William Hogeland is the author of the narrative histories Declaration and The Whiskey Rebellion and a collection of essays, Inventing American History. He has spoken on unexpected connections between history and politics at the National Archives, the Kansas City Public Library, and various corporate and organization events. He blogs at

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What Actually Happens When the Government Shuts Down (And Other Things You Don't Know About the Budget Fight)

Apr 6, 2011Bryce CovertBo Cutter

Bryce Covert sat down with Roosevelt Institute Senior Fellow Bo Cutter, who was Director of the National Economic Council and Deputy Assistant to the President from 1992-1996 during the Clinton Presidency and the last government shutdown. He explains why the current shutdown is small potatoes compared to the looming battle over the debt ceiling and other things you need to know.

Bryce Covert: What are the odds of a total government shutdown?

Bryce Covert sat down with Roosevelt Institute Senior Fellow Bo Cutter, who was Director of the National Economic Council and Deputy Assistant to the President from 1992-1996 during the Clinton Presidency and the last government shutdown. He explains why the current shutdown is small potatoes compared to the looming battle over the debt ceiling and other things you need to know.

Bryce Covert: What are the odds of a total government shutdown?

Bo Cutter: It looks like we'll have one but it isn't clear yet what kind it will be. It may be that we have one that's purely procedural in the following way: The House Republicans have put in a requirement that a piece of legislation be available for public view on the internet for 72 hours. So if they come to a deal say on Wednesday, they can't meet that commitment and they've made an avoidable showdown. And I think they said three working days, so weekends don't count. Let's say they came to a deal on Wednesday afternoon and the resolution has to be voted and in place, signed by the President, by close of business on Friday. They couldn't make it unless they waive that requirement, and they don't want to waive it. So you would in fact be shut down Saturday, Sunday and Monday. But it wouldn't have much effect because there would already be a deal in place. It looks to me like the highest odds are that's what it's going to be. So going down that track, the results wouldn't be particularly substantial.

But there's every possibility that it could be real. There are a whole series of riders attached to the resolution that Democrats and the President have said not only no but hell no, and the tea party has said they won't accept anything that doesn't have them. I don't believe the tea party, so we'll see. As I understand it and as friends at the White House have said to me, all of the discussions to date between the members of Congress have been about the numbers and they've kind of put the riders to the end. If the riders wind up being the sticking point, you could have a real shutdown.

Bryce Covert: If it shuts down over the weekend, what effects will we feel?

Bo Cutter: The obvious public things that aren't matters of life and death, if there's no money to run the government then you have to shut them down. One of the things that governs this is something called the Anti-Deficiency Act that says there are actually personal, criminal penalties to officials who consciously direct that work be done when there's no money to do it. So one of the things we found when I was there during the last shutdown was that in the absence of legal authorization to do work, people in the civil service are very reluctant to expose themselves and the people who work for them to penalties. And it's not that they're trying to avoid work. As I said previously, I think that one of the real strengths of the American system is our civil service. In both my times in government I've had lots of civil servants who worked with me and for me and I thought they were incredibly good. So I'm not saying civil servants are lazy or trying to avoid work, I'm simply saying that they face legal sanctions. Once the hammer goes down and there is officially no money, while it may sound like a funny formality, they can't work. So you begin to see some of the obvious things close down like the Washington Monument, the Air and Space Museum, the Smithsonian. Which, if you have the bad luck to have taking your three kids and your wife to Washington for that weekend, is not going to be a good thing.

Bryce Covert: What else happens in a real shutdown?

Bo Cutter: Let me take it the other way around and say what doesn't happen. There is an agreement, and it's legal, that life and death stuff continues. So the military continues to function, although there are functions of the military and the civilian side of the defense department that have to begin to stop. The veteran's hospitals continue. Walter Reed, that has the wounded from Afghanistan and Iraq and now maybe Libya, continues to function. Social Security checks do get mailed out. A lot of the stuff that is really immediate and involves immediate transfers of critical services like health or income will continue.

Every agency has a plan. Employees are distinguished between those who are critical and essential and those who are not, and there's a process that involves the legal counsel of each agency. The distinction is people who are required to keep the basic infrastructure of government going and people who aren't. The critical people work without pay. If I were running a part of the White House, which I was, and I had people that had officially been deemed critical and essential, I could then ask those people to come to work. Now, they could say no because they're not being paid. It's forced volunteerism. I was in that status. But I wouldn't be subject to legal sanctions for doing it. On the other hand, I would be for those people who aren't deemed critical and essential -- I can't ask them and they can't come. And the reason for that is the lawyers and court cases decided that it could be too easily a subterfuge -- you could tell somebody I know you're not critical but you better damn well volunteer or I'm going to be unhappy when the government's back in force.

Bryce Covert: How is it decided who is critical and who is not?

I remember one of the big fusses, and it is a very awkward problem, is how do you draw the line between who is and who isn't critical. We have about 1,300,000 civilian employees. Let's say 60,000 to 70,000 of them are critical. You have around 1,200,000 people who suddenly aren't working. And the people who aren't considered critical, how is it you explain to them they aren't critical? The State Department had a terrible problem. Let's say it has 160, 170 ambassadors. They're not all critical, and they had to determine which were the 50 or 60 where you absolutely had to keep country operations going and which were the ones that weren't. People had hurt feelings and were angry and friendships were disrupted because there were ambassadors who were told they weren't critical. In a much smaller way I had the exact same problem. Everybody kind of does.

On the civilian side of the government, domestic side, a skeleton force is immediately put in place in the forests and the parks. You can't visit. But maintenance also stops. In the granting operations of the government, whether it's HUD or HHS, their grants all stop. The part of HHS that oversees Social Security checks will continue, but that's all it'll do. There isn't going to be anybody there to answer questions. If you have a question you're not going to get an answer while the government's shut down. Places like the Department of Education basically shut down entirely because it's hard to argue that it's critical in the sense that I mean the word. The Department of Commerce, which has the National Oceanic and Atmospheric Administration, shuts down, so you're not getting the temperature of the ocean monitored. On the other hand, the Coast Guard will stay in operation. Almost all regulation will shut down, so there isn't anybody doing meat inspection during those periods. Ultimately most of the EPA would shut down. I was in the discussions that were occurring in the White House every night with the members of Congress, and every day there are pleas coming in saying, "Well you couldn't possibly mean we have to close down this," and the thing is legally yeah we do mean it. If you're having a trade negotiation, the negotiators have to go home because it's not crucial immediately. Congress shuts down. I don't know what they do but they can't come, and they can't get paid and their staffs can't get paid and they go through the same thing about who's critical and who's not.

If you think of the things I've been talking about, time matters. Yeah you can close down inspection for a day, but do you really want to close down mine safety inspection for a month? No. And you wouldn't, you'd still have a critical infrastructure. But most of the mine inspectors would be told they're not critical, not for this moment.

Bryce Covert: Are shutdowns just political theater?

The shutdowns are real. People think that this is all a subterfuge sometimes. And particularly I always thought that the Republican Congress basically thought none of this was real and therefore they could have it both ways. They could politically posture by saying that by god they were going to shut the government down and they were rough and tough and all of that, but in their hearts they kind of knew nothing would happen. So some of them were the most surprised people of all when actual things actually happened and when their constituents suddenly didn't get services because the government was shut down. It is quite real.

When we were there during the shut down, President Clinton had done a superb job of positioning before the fact, of saying to people, "I'm not going to give in to outrageous requests just because people think that I'm unwilling to go through this. But I will warn you in advance that it has effects and you won't like them. And this is not the way adults should negotiate." So by midway through the shutdown, the polling had shifted to being very, very substantially in the favor of Clinton, and I think the same thing would happen here.

Bryce Covert: What does the average American feel when the government shuts down?

Bo Cutter: First of all, there's the disappearance of all of the things that are really visible like forests and parks. I don't mean the forests disappear, obviously. But people who'd planned trips are the ones who get hit first. The TSA will be there, but that proverbial family that is in Washington really can't go to the Air and Space Museum and they don't believe it. They think this is crazy, why would anybody close down the Air and Space Museum? So they yell and scream, and they're right, they should be mad.

The second thing you notice is a real slowdown in everything. There's no place to call and find out what's happening to a particular grant. If you're Caterpillar and you sell heavy earth moving equipment and you had a contract in competition with others being considered by the Department of Transportation, your contract isn't going to get looked at. So the people whose jobs depended on that work lose their jobs.

So the first effect is on the people who were planning to do something that depended quite directly on the provision of government services.

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Bryce Covert: Will there be job losses?

Yes, the second effect is people beginning to lose their jobs. And that surprises people. It happens in two ways. One is the federal employees. People are very funny about that. The vast majority of federal employees don't work in Washington. They work out in the real world. When people yell and scream about government in Washington, they don't really think that about Joe who lives next door and works for the Department of Transportation's regional office. What Joe is frequently in the business of doing is providing services to his neighbors, providing information about grants and contracts and all of that. They don't really think that Joe's one of those people in Washington that they don't like, Joe's a neighbor who's got a job like everybody else and suddenly he's out of work. Then all the people whose contracts, grants, etc. suddenly can't get done, they feel it. It's a progressive thing that you first feel the direct absence of things, then you see people aren't working, then everything starts to slow down and stop.

Bryce Covert: Given the unemployment crisis, do you think that people losing their jobs from a shutdown will have greater reverberations this time around?

Bo Cutter: A bit. There are a couple of ways of answering the question. One is just numerically. People will be out of work and they will be counted as such, so the unemployment rate will bump up. But it's presumably pretty short. The labor force as a whole is 142 million people, and at 9% unemployment that means that we have 128/129 million Americans working. Having 1 million and a couple hundred thousand not working is less than 1% of that. So you don't see it big in the numbers because by the time you look at its year effect it's less than that. But there is some effect there. I don't think there is a lost GDP effect, therefore a bigger unemployment effect, if the shutdown is relatively short, because then you have a down month and then that just means you have a catch up.

But I do think the politics of the unemployment rate will be sharper because it feels different at 9% unemployment. When we did it, when we had to go through it, the unemployment rate was at around 4.5% so the world was in a different place. Maybe slightly higher, but it was lots less.

Bryce Covert: Which Americans are the biggest losers of a government shutdown?

Bo Cutter: Well obviously the biggest losers are people who actually lose jobs, whether it's short or long, because of it. And probably the biggest losers in terms of actual money at least at the start are all the federal employees who are furloughed. But much more broadly than that, the losers are going to tend to be the American middle class because Social Security checks get continued, so the elderly don't see as much of an immediate problem, the defense operations keep working, so it's really people outside of Washington who in their daily life depend on the government functioning. And that's contracts and grants. A second big area to feel it is probably cities because there's a lot of granting that goes directly and indirectly to cities and that stuff stops.

Bryce Covert: Does the government take a monetary hit because of a shutdown?

Bo Cutter: It does and I don't know what it is. We made an effort to figure it out but you had to make so many assumptions that your range of error was going to be so great that if you said a number you were certainly going to be wrong. The people who would argue you've way overestimated this or the people who said you way underestimated this were all going to beat on you and you wouldn't have a number you could defend. So we didn't do it.

But there are certainly real costs, not just deferred costs. We were trying to look at a couple of different sorts of things. Whenever you start something and then start it again, there is a cost of the wind down and a cost of the start up. If you think of it in terms of a factory, to bring a factory line down to a close and ensure that the equipment will stay in shape and is maintainable so that you can in fact then walk away from it involves costs you wouldn't be incurring if you didn't have to shut it down. So they're lost costs. Exactly the same is in reverse when you have to start something that you shut down. You have to go through all kinds of procedures, both safety and operational, to get to start it up again. Now the world isn't a factory, but the same kinds of things occur. If you tell people to shut down a grant making organization you have to make certain that you can start back up again at some point. You can't just walk away with a memorandum half written in Word and come back three weeks later. You have to close it down. It's hard, as you can see, to figure out what those costs are, but you know they're there. It is a vast loss of efficiency.

And then there's also the effort to figure out the real GDP loss. You know there is one, it's just kind of very hard to figure out how you go about counting it.

Bryce Covert: Are there other differences between the last shutdown and now that you foresee making this one better, worse, or different?

Bo Cutter: It's more the politics of controlling it. When we went through it, Newt Gingrich had come in with the Contract with America. The new Republicans believed, and the evidence was pretty good, that the reason they were elected was that Gingrich had managed to nationalize a whole set of local elections and it was sort of the power of his thinking that created their election opportunity. So they were with him lock stock and barrel and he had real control over his caucus. No one ever has complete control over everything and the control began to ebb, but he had it. Today the circumstances are really different in that Boehner does not have control over the Republican caucus. Large numbers of the tea party members don't have any interest whatsoever in figuring out the rational answer to all of this. So you have a really fundamentally different condition of political management. Clinton was reasonably certain, and at our lower levels in the conversations we were reasonably certain, that if the Republicans committed to do something when we finally began negotiations about how to end it, they could follow through on whatever it was they committed to. It's not clear here.

If it happens, this phenomenon could extend the shutdown. The problem is that when you get into a shutdown, like everything else you better have thought through your way out of something difficult before you kind of jump into something difficult. They rarely do. Once you're in a shutdown all kinds of motivations come into play. There is the "by god we're not going to lose to President Obama, whom we don't like anyway, so we're going to stick" thinking. On the other hand, the members who weren't terribly enthusiastic to begin with are beginning to hear from their constituents, and that happens pretty fast. There were a lot of frank conversations when I was part of it last time and Republican members were saying, you know the people back home don't really like this. And the members who weren't enthusiastic about doing it to begin with and are also being whacked by their own voters get madder and madder. So the internal dynamics of the Republican side get more and more complicated. Meanwhile, if as I suspect the polls begin to swing in President Obama's direction, his position is even harder because he doesn't want to have presided over a loss, he doesn't control the votes of the diehard tea party members, but he's got to get himself out of an untenable situation or he could easily lose the House again. So he's feeling (this is all surmise) that he's got big problems.

And all of this is occurring in real time. It's not as if it's occurring in a calm, deliberate atmosphere. It's all occurring with people shouting at each other. Exactly how you begin to move to the end game is much harder for the Congress than it is for the executive. We could meet around a table and we had a boss, the President. So our messaging was better, and Obama's messaging is and will be better than Congress', and when you have the cacophony that occurs during the shutdown it's even more so. We could think through what's the nature of the negotiations we want to have, what do we think will happen, we could role play. They can't because they have 200 plus people around the table. It's much more helter skelter for the Congress.

Bryce Covert: What's the longer term outcome of all of this?

Bo Cutter: I think for a political situation to get to the point where you shut the government down is a failure of governance and it's absolutely wrong as an outcome. I also think somewhat paradoxically that from the politics of it, shutdown would help Obama enormously. Obama does not have anything to fear from this. They have a competent White House. I think they will manage this well and will manage it with a single message. The polling already says that the public thinks the Congress looks like squabbling children. The President looks pretty good and I don't think he has any reason to give in very much. So if I were the President and I had to have one, I'd want one.

I also think that from the point of view of the management of the next fights, both the country and President Obama will be better off if there's one now. This is small potatoes. But we are about to see the debt limit debate. And there are people on the Republican side who actually believe that risking a default isn't a bad thing. I think it's an awful thing. I think it's really, really reckless. And I don't have any confidence that the Republican tea party members are going to come to that realization soon enough and they could play a real game of chicken. That's different than the shutdown stuff. The shutdown occurs gradually and it would have to last quite a while before the results really, really hit.

If you are running a deficit, and we're running a 1.6 trillion dollar deficit, and you refuse to extend the debt limit today, tomorrow you can't issue any more debt and you can't even roll over your debt. The next morning at 9:01, if you're running a deficit, in theory and in fact the deficit increases somewhat in that first minute. So you can't do anything. In that case you can't send out the Social Security checks. Since you are instantly above the debt limit and you have no money if it isn't extended, everything else about a shutdown comes into place. Instantly all of those workers can't be paid because it's against the law to pay them. They have to go home. So it's a shutdown raised to the nth degree. Now there are a couple of things a Secretary of Treasury can do that give you a little room, but it's like a week. I remember when Robert Rubin was Secretary of the Treasury, I knew him very well and I had worked for him and he and I talked about it, he said I've had all the experts, I've had everybody in on debt management, I've had all the lawyers in and we've looked at it every way around, there is some legal room but there isn't very much.

If your debt limit is 1.6 trillion, people think, okay, well as long as that's occurring it's kind of beyond that in some way. But anything above zero you've broken the debt limit if they won't raise it. It hits you broadly and it hits you fast. The other thing is the Treasury is involved in debt management all the time that is in concept unrelated to an increasing deficit. You may not like the term structure of the debt, you may want to make it a little longer or a little shorter. In the bowels of the Treasury there are constant operations that are occurring by financial technicians who aren't trying to do anything with the deficit. But you can't separate that from the deficit, so you can't do those things either. In terms of the operation of the debt it begins to hit you right away.

Bryce Covert: What does it mean to the markets?

It has big money market consequences. If people begin to think that the governance of this country is so irresponsible and reckless that we would actually risk the credit standing of the country, they're going to have a little less faith in our money. Let's say it's just trivial, it's only 10-15 basis points, you multiply 10-15 basis points all across government debt and you've paid one hell of a lot of money for a symbolic act.

That's coming up right down the road pretty soon. My theory is that it's always better if you think a hit's going to come to take it early rather than late. My own view is that the President will win a shutdown hands over, the Republican tea party will look awful, and they aren't going to have the appetite to really be reckless. But on the other hand if we don't, and this is one of the reasons I think we should have one, their view is going to be that they didn't get all they wanted but by their tactics they forced something out of the administration. So why not try again? And the next time you try is the debt limit.

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Let the Government Shut Down

Apr 5, 2011Bo Cutter

Eking out a compromise to avoid a government shutdown will only play into Tea Party hands.

My negotiating instincts say that President Obama ought to want the House Republicans to shut down the Federal Government. Why? Six points.

Eking out a compromise to avoid a government shutdown will only play into Tea Party hands.

My negotiating instincts say that President Obama ought to want the House Republicans to shut down the Federal Government. Why? Six points.

First, the wrong negotiating strategy is to see the endgame as a compromise that avoids a shutdown. This is how Congress sees it; this is how Congress always sees these kinds of issues. The long run is next Friday. But the real end game for President Obama is (1) to succeed in managing a series of events well, of which a shut-down is only one; (2) to demonstrate to the American people his sense of prudence and pragmatism, contrasted to the House Republican crazies (you want them to be the Republican Party's poster children for the 2012 elections); (3) to avoid a real catastrophe -- which would be to come anywhere close to a default during the coming debate over the debt ceiling; and (4) to put forward a convincing overall economic plan, contrasted again against the Republican plan that consists of muscle flexing over a shutdown.

Second, despite what a number of "prudent" commentators have said, a shutdown now would not have any substantial effect on international perceptions and is, paradoxically, the prudent course in the midst of all the craziness. Policy does not always, or even often, move in a straight line.

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Third, the President has, for once, some wind at his back. Recent polls are saying that by a substantial margin Americans will blame the House Republicans for a shutdown. And the recent jobs report suggests the economy has more strength than expected. The President has the upper hand now.

Fourth, if a compromise is reached the Tea Party will think they won that battle. There would be no good reason not to push the limit again in a debt ceiling fight. That fight involves very real dangers; the administration would be forced to err on the cautious side and House Republicans simply do not know enough about the issue to understand how recklessly they are behaving. The way to win the debt ceiling battle is to beat the Republican Congress like a rug in the current fight. The time to win the debt ceiling battle is right now.

Fifth, during a shutdown an administration can speak every day with one coherent message. The House and Senate Republicans will instantaneously fracture into a couple hundred voices. Your average member of Congress really does not want to explain to her constituents why the Washington Monument and the Space Museum are closed during their vacation.

Sixth, one nanosecond after winning a shutdown battle the President can put forward a full economic and budget plan. He will be saying, in effect, "Now that we have ended these childish games, let's work together to accomplish real things."

Roosevelt Institute Senior Fellow 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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How We've Budgeted Ourselves Out of Investing in Our Country

Mar 30, 2011Bo Cutter

The way things are going, we'll have scraps -- if anything -- to spend on vital government functions.

While the Republican right carries on its budget antics in the House and the left denies there is any problem, we are allowing the most important part of the public sector to deteriorate into irrelevancy.

The way things are going, we'll have scraps -- if anything -- to spend on vital government functions.

While the Republican right carries on its budget antics in the House and the left denies there is any problem, we are allowing the most important part of the public sector to deteriorate into irrelevancy.

Let's start with some numbers, boring as that is. The Federal Government will spend $3.77 trillion in fiscal year 2011; 87% of that total -- $3.27 trillion -- will be spent on defense, the entitlements (Social Security, Medicare, Medicaid, mostly), and interest. That other 13%? The entire rest of the government? $500 billion.

Now jump forward 10 years. The President projects we will spend $5.9 trillion, or $2.2 trillion more. All of the growth will be spent on defense, entitlements, and interest. The entire rest of the government stays constant at $500 billion (no growth for 10 years) and falls to 9% of the total. This is the best overall number I can get for total public sector investment (both hard and soft). Actual infrastructure is a much smaller piece of that.

Almost everything you ever heard of involving the government is in this 13% -- going to 9% -- figure. Green technology, SEC regulation, job training, the Parks Service, the forest service, infrastructure, tsunami warnings, environmental protection, head start, the National Cancer Institute, the State Department, disaster assistance -- just to name a few at random -- are all declining or going away.

Do you think we should invest in a smart grid, or a public jobs program, or infrastructure, or public health, or healthier forests? Well, we're not going to. And my spending numbers are on the high side. The House Republicans will take my numbers down a lot.

One other set of numbers: of this $500 billion, about $190 billion is personnel costs. Over the next 10 years, these costs will grow to $230 billion. (I am assuming no increase in the number of federal employees and a 2% annual increase in pay and benefits.)

So what? This means that the total of all of our non-personnel investments is now $310 billion, or 8% of the total federal budget, and will fall to $270 billion, or 5% of the total budget. (For the record, I have no intention of dismissing the contributions of Federal employees. To the contrary, one of the great strengths of America is the quality of our public service.) G.E. employees in the 1980s called CEO Jack Welch "Neutron Jack" because when he finished fixing a company, the buildings were all there but the people were gone. This is the reverse. The people are all here, but the buildings are gone.

So what? Four questions and then four answers: What do these numbers mean? What are their consequences? Why are we in this corner? How do we get out of it?

1. These numbers mean that we will invest virtually nothing in our economy through the public sector. If you think -- as I do -- that these "rest of the government" expenditures include valuable public sector investments in our economy, then we will invest an average of slightly more than 2% annually -- and steadily falling -- for the next ten years. Just on the face of it, this is crazy. No well-run company in the world could go 10 years investing as trivial an amount as 2% annually. (And that leaves out the terminally boring issue of depreciation: if you think that is real -- I do -- then we are systematically reducing our stock of public capital every year.)

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2. This underinvestment probably means a lower economic growth rate, a poorer, less competitive nation, and higher unemployment. I have always thought that Ben Friedman's book "The Moral Consequences of Economic Growth" should be a central part of the true progressive canon, but unless we are lucky beyond all rational expectations, you don't get growth without investment. And I believe that sustained higher growth in our private sector is in part dependent upon higher public sector investment. But we are planning the opposite. We are planning for lower investment, lower growth of productivity, and a poorer nation. We have maneuvered ourselves into a very tough corner: our public debt and deficit levels are way too high and simultaneously our public investment levels are way too low.

3. We are in this corner because our political system is frozen into a sterile and seemingly permanent quarrel between America's left and right, which long ago departed from reality. I won't waste my energy on the right. It is owned today by a group of nihilists who actively want to wreck the public sector. (For a full description of the new doctrine, read Senator Marco Rubio's piece in the Wall Street Journal, "Why I won't vote to raise the debt limit.") But the left is almost as bad -- less mean, mostly less vicious, less irresponsible but just as empty. The left lacks a coherent economic growth strategy, it is in denial about our debt and deficit levels, and it has no overall perspective on what the role and shape of our public sector ought to be. For both the right and the left, economic and budget policy are derivative. It's what is left after you do whatever is central to your agenda. By definition, this means there is no political energy remaining to do anything hard.

4. We will only get out of this corner when an administration -- it has to be the Obama administration, we can't wait -- puts forward an economic strategy that simultaneously brings our public debt issues under control and commits the federal government to a long-term program of public investment. Doing this requires both new tax revenues and reductions in the growth of entitlements and defense. I would do roughly the following:

(a) Commit to holding public debt -- over the long-run -- to a maximum of 70% of GDP. (I would live with a higher level in the next few years -- we still have a 9% unemployment rate.) This is less onerous than the Simpson-Bowles Commission, but tougher than the administration's current track.

(b) Propose new public investment for the next 10 years of 1% to 2% of GDP annually. This makes the necessary budget policy even harder.

(c) Create a new structure for this new investment so it doesn't turn into pure pork (call it a combination of national foundation and infrastructure bank); track the expenditures and report on them annually.

(d) introduce a 2% to 4% net VAT (value added tax) to pay for the investments, maybe even tied to these investments.

Will we actually do anything remotely like this? The only honest answer is of course not. Congress won't. The two ends of our political system do not inhabit the same universe and regard compromise and bargaining as evil. And there is no center -- although in further demonstration of the triumph of hope over experience, I would love to see the gang of six in the Senate, who are working with Alice Rivlin, come up with something. The only real hope is that President Obama plays the impending government shutdown rope-a-dope perfectly, wins the battle of public opinion, and then, at precisely the right moment, gives the big economic speech I suspect he already has written.

And if not, then as the joke's punch line says, "I'm gonna go find my brother Chester, cause he ain't never seen a train wreck."

Roosevelt Institute Senior Fellow 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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The Unfinished Business of Making the World's Women Citizens

Mar 29, 2011Allida Black

world-hand-200Recognizing Women’s History Month, New Deal 2.0 tells the surprising story of how women became citizens -- and how their economic lives have evolved along with their rights. Allida Black urges action on UN Resolution 1325, which ensures equal citi

world-hand-200Recognizing Women’s History Month, New Deal 2.0 tells the surprising story of how women became citizens -- and how their economic lives have evolved along with their rights. Allida Black urges action on UN Resolution 1325, which ensures equal citizenship for women across the globe.

The monumental elections of Presidents Ellen Johnson Sirleaf (Liberia), Roza Otunbayeva (Krygyzstan), Dilma Rousseff (Brazil), and Prime Minister Julia Gillard (Australia) and the game-changing appointments of Dr. Michelle Bachelet as Under-Secretary General of the United Nations and Executive Director of UNWomen and Hillary Clinton as Secretary of State proved that women can govern, run preeminent human rights organizations, set international policy, and place women at the center of diplomacy, development, and peace.

But the question remains -- if women can be president, why can't they be citizens? Article 1 of the Universal Declaration of Human Rights declares, "All human beings are born free and equal in dignity and in rights." Yet it took another twenty years after its signing to get the international conventions on political and civil rights and on economic, social and cultural rights -- and, in the United States, another twenty plus years for Congress to adopt legislation ensuring women's political and economic rights. It took another thirteen years for the United Nations to ratify (without the support of the United States) the Convention to End All Forms of Discrimination against Women. And in 2011, the US House of Representatives and other foreign governing bodies still toy with legislation essential to women's identities, ranging from limiting access to reproductive health services and marriage to crafting sentencing guidelines that treat girls and women as felons and charges those that have abducted and abused them with misdemeanors.

In a 1946 column, written before she joined the UN Commission on Human Rights, Eleanor Roosevelt urged women to "call on the Governments of the world to encourage women everywhere to take a more conscious part in national and international affairs, and on women to come forward and share in the work of peace and reconstruction as they did in the war and resistance." More than fifty years later, at the dawn of a new century, the UN Security Council -- pressured by a well-organized international women's lobby, Hillary Clinton, and other stateswomen and embarrassed by the rampant use of rape and genital dismemberment as tools of war -- adopted Resolution 1325. It urged "Member States to ensure increased representation of women at all decision-making levels in national, regional and international institutions and mechanisms for the prevention, management, and resolution of conflict."

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Now ten years later, the campaign -- indeed the struggle -- to enforce this resolution rages across the United States as much as it does across Egypt or the Congo or Afghanistan.

It is tempting to construct this resolution narrowly -- to see it as a tool of armistice rather than reconstruction, as a vehicle to protect women rather than empower them. To do so, to paraphrase Albus Dumbledore, would be to do what is easy rather than what is right.

UN1325 is on the front line in the campaign for women's citizenship. It is a battle to ensure that economic, social and cultural rights cannot be divorced from, or considered separately from, political and civil rights. It is the struggle to reclaim democracy promotion away from post-Cold War politics, self-interested development and the campaign against terror and place it at the heart of citizen participation.

Just as important, it is a campaign to ensure women's rights as citizens as much as it is a campaign to force governments to act responsibly to all its citizens. While equality and human dignity have no sex, policy designed without taking stock of gender differences often perpetuates discrimination.

As Eleanor Roosevelt would say, both citizens and governments must "recognize that the goal of full participation in the life and responsibilities of their countries and of the world community is a common objective" and one "which the women of the world should assist one another" in achieving.

Allida Black is a director of the Roosevelt Institute and founded the Eleanor Roosevelt Project.

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Bob Herbert, Champion of Infrastructure Projects, We Hope to Hear from You Soon

Mar 29, 2011Jon Rynn

train-200As Bob Herbert leaves the Times, a letter to encourage him in continuing his advocacy for prosperity built on a green manufacturing sector.

Dear Mr. Herbert,

train-200As Bob Herbert leaves the Times, a letter to encourage him in continuing his advocacy for prosperity built on a green manufacturing sector.

Dear Mr. Herbert,

I was sad to hear that you will no longer be writing for the op-ed page of the NYTimes. Your critical perspective on the class war being waged against the middle and working class and the poor, on the waste and recklessness of our wars, and on the wrenching struggles of ordinary Americans made you an invaluable voice. But I want to suggest that even more important than those insights was your consistent attempts to point to a better future, and the path to getting there, by rebuilding our infrastructure. I hope that in your forthcoming book you make that effort a substantial part of your argument.

For instance, back in 2009 you declared that "America has to be rebuilt, modernized and re-energized -- from its water and sewer systems to its schools to the smart grid and the alternative energy sources that so many are talking about and beyond. That's where the jobs are for the long term, and that's the only route to a truly flourishing future." You went on to say that "These investments would be costly and require vision."

Well, you can't single-handedly pay for the cost, but you have started to create the vision: "Imagine... an America with rebuilt, healthy, dynamic metropolitan areas, and gleaming new port facilities, and networks of high-speed rail, an America with electric vehicles and a smart grid and energy generated by the power of the sun and wind and water and the ocean's waves. Imagine if the children of today's toddlers had access to world-class public schools all across the nation and a higher education system that is both first-rate and affordable."

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I submit to you that the ills that you so eloquently address will not be healed without a clear vision, one based on a new, sustainable, job-creating infrastructure. Maybe the word "infrastructure" doesn't stir the soul; Rachel Maddow tries, but she seems to have a wistful look on her face, as if to say -- and she sometimes admits -- "I wish I could make the infrastructure more interesting for you." Now, to me it's fascinating, but apparently I am in the small minority. However, I think that part of the attraction of discussing high-speed rail or networks of wind farms or walkable neighborhoods is that they literally create an image in the reader's or viewer's head.

But there is an even deeper need for infrastructure renewal to which you have alluded, as when you wrote that "A long-term program to rebuild the nation's infrastructure... would create jobs and establish a sound industrial platform for 21st-century industries. The transformation to a greener economy needs to be accelerated, and most of the manufacturing associated with that newer, greener economy should take place in the United States." As I argue in my book, "Manufacturing Green Prosperity", the way to build a strong economy in the long-term is to rebuild the manufacturing sector, and the way to rebuild the manufacturing sector is to build an environmentally sustainable infrastructure. The two can be joined, hand in hand, if we create the right set of policies.

And as you point out, "Think of the returns the nation reaped from its investments in the interstate highway system, the Land Grant colleges, rural electrification, the Erie and Panama canals, the transcontinental railroad, the technology that led to the Internet, the Apollo program, the G.I. bill." The government can and must be a force for good in society -- that is, if the population has a choice of candidates who will do the right thing. You wrote of how China is moving full speed ahead, how John Kennedy used the presidency to create a vision of the future, of how first steps like an infrastructure bank can help lead to a needed turnaround.

Finally, I urge you to consider putting forth these principles as a first step in constructing a new kind of economics, as intimidating as that may sound. The ideas you are talking about are actually complementary to much of neoclassical economics, even if many economists might not see it that way. What conventional economists are not good at is what you, and others like you, are good at -- understanding the need for good jobs for everyone, the role of a modern and well-maintained infrastructure, for a manufacturing base that can provide millions of jobs, and for a government that has a constructive role to play. These should be touchstones for, as you sum up in your last column, "expand[ing] my efforts on behalf of working people, the poor and others who are struggling in our society." I wish you luck!

Jon Rynn is the author of the book Manufacturing Green Prosperity: The power to rebuild the American middle class, available from Praeger Press. He holds a Ph.D. in political science and is a Visiting Scholar at the CUNY Institute for Urban Systems.

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How John Adams and Thomas Paine Clashed Over Economic Equality

Mar 28, 2011William Hogeland

commonsenseIn "Common Sense," Paine pushed for economic equality for ordinary Americans. Which made John Adams a bit queasy.

commonsenseIn "Common Sense," Paine pushed for economic equality for ordinary Americans. Which made John Adams a bit queasy.

Here's John Adams on Thomas Paine's famous 1776 pamphlet "Common Sense": "What a poor, ignorant, malicious, short-sighted, crapulous mass." Then comes Paine on Adams: "John was not born for immortality."

Paine and Adams may have been alone among the founders for having literary styles adequate to their mutual disregard. "The spissitude [sic!] of the black liquor which is spread in such quantities by this writer," Adams wrote of Paine, "prevents its daubing." Paine: "Some people talk of impeaching John Adams, but I am for softer measures. I would keep him to make fun of."

They went on and on.

The Paine-Adams antipathy wasn't just personal. Its sources lay in the founding generation's deep political divisions over economic equality. Those who don't know there was a founding political division over economic equality can thank the many historians -- including even some biographers of finance-savvy founders like Superintendent of Finance Robert Morris -- who feel more comfortable with philosophies of government, issues in constitutional law, and (if they get into economics at all) the legacies of Robert Walpole, Jacques Necker, and David Hume than with day-to-day American economic realities, and with the full range of 18th-century thinking from elite to working-class, on monetary and finance policy.

Things John Adams hated about "Common Sense" are revealing. One was the pamphlet's widespread reputation as the tipping point for America's declaration of independence from England. Adams thought that was nonsense. The only novel thing in "Common Sense," Adams believed -- and he meant it in a bad way -- wasn't what he cast as its belated, derivative call for American independence. It was what he blasted as Paine's "democratical" plan for a new kind of American government, which flew in the face of the balanced republicanism that Adams loved. That part of the pamphlet was its only important part to John Adams, but it is often ignored or glossed over in favor of celebrating what Adams thought the pamphlet never did: persuade Americans to support independence.

In proposing a new American government, Paine scoffed caustically at the whole idea of balance and the covalence among branches that we're taught to revere as exceptionally American, but were really derived from the post-Settlement English constitution. Where Adams saw checks and balances as key to liberty, Paine wanted an executive branch subordinated to a hyper-representative legislature (a single house, with no check from any elite "upper" house) and a judiciary directly elected by the people.

Most horrifying to Adams, Paine wanted citizens to have the vote regardless of property ownership. While in "Common Sense" Paine dialed back his thoughts on equality, arguing only for easy access to the franchise, in other works he promoted smashing the ancient equation that liberty-loving Whigs had always made between property and representation. Paine wanted the less propertied and -- horrors! -- even the unpropertied not only to vote in a free America, but also to hold office.

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Paine's goal in giving the lower sort and the poor access to political power was economic equality. When ordinary Americans held power, they would pass laws promoting the interests of ordinary Americans -- and obstructing, not coincidentally, the interests of finance elites. And that's just what happened in Pennsylvania beginning in 1776, when Paine's friends wrote a constitution for that state, based largely on Paine's ideas, removing the property qualification for the first meaningful time anywhere. Assemblies elected under that constitution passed anti-monopoly laws, worked to bring about government debt relief, and took away the charter of the bank founded by the high financier Robert Morris for the purpose of enriching himself and his friends.

The ideas in "Common Sense" that John Adams feared and loathed became realities in Pennsylvania. Many historians celebrating Paine's goals of liberty and independence fail to acknowledge that for Paine, those goals were inextricable from political equality for the people he spoke for: ordinary working Americans.

One of the most fascinating moments in Paine's career therefore occurred when he went to work for the high financier Robert Morris himself, writing at Morris's behest on behalf of federal taxation in the service of national unity. Paine's democratic populist friends saw Morris's taxes, and indeed Morris's wish for national unity, as a means of shoring up American wealth and pushing back the economic gains ordinary people had made in the Revolutionary period. Paine excoriated Morris for chicanery during the Revolution and helped create the economically democratic government that took away Morris's bank and made the fat cat investor accountable to public opinion. In the 1780s, sudden support for Morris's nationalist finance made Paine look like a sellout. He lost friends among his 1776 allies for equality.

But unlike many of his populist friends, Paine wanted a strong national government for America. Many economic populists of the period made the mistake of placing hopes for popular finance in antifederalism and then in the emerging "states rights" thinking of the anti-Hamilton elites. Populists had reason to feel more sympathy for state governments than for a national one: legislatures from time to time had been susceptible to the will of the less enfranchised, expressed through rioting; states had issued paper currencies and established land banks. And nationalists like Morris and Hamilton were indeed out to end all that. They wanted to make finance and monetary policy national matters, empowering suppression of debtor riots and enforcement of taxes collected for the benefit of an interstate money elite.

Paine, however, was impatient with the anti-nationalism of his fellow democrats. Skeptical of knee-jerk populism, he had high hopes for national finance. The strangest of bedfellows, Paine and Morris were working together at weird cross purposes. Paine's vision, diametrically opposed to Morris's, was like Morris's in being a national one. Along with "the madman of the Alleghenies" Herman Husband, who also saw through state-focused elites' pandering to populism and thought an egalitarian national government might be better empowered to hold greed in check, Paine's radical democracy made him an offbeat kind of Federalist. Gazing farther than most of the popular finance activists of his time, he looked for a strong national government that would amplify the democratic gains he'd helped achieve in Pennsylvania.

The United States government, in Paine's vision, would justify its national power by regulating elite finance throughout the states, promoting the interests of ordinary Americans everywhere, and increasing social equality by law. For Thomas Paine, American finance policy must dedicate itself to economic equality.

William Hogeland is the author of the narrative histories Declaration and The Whiskey Rebellion and a collection of essays, Inventing American History. He has spoken on unexpected connections between history and politics at the National Archives, the Kansas City Public Library, and various corporate and organization events. He blogs at

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Wal-Mart v. Dukes and the Matter of Size

Mar 28, 2011Erica Payne

genderless-icon-144Recognizing Women’s History Month, New Deal 2.0 tells the surprising story of how women became citizens — and how their economic lives have evolved along with their rights.

genderless-icon-144Recognizing Women’s History Month, New Deal 2.0 tells the surprising story of how women became citizens — and how their economic lives have evolved along with their rights. Erica Payne considers tomorrow's pivotal decision that will determine the power of women -- and all Americans -- to stand up to employer abuses.

Women's History Month is a celebration of women's progress and the American piece of this epic story began in Lawrence, Massachusetts, when 25,000 mill workers took to the streets to protest for better wages. One particularly memorable account from the Bread and Roses strike involves several women who surrounded a police officer, stole his gun and then his pants and then tried to throw him in a river. The officer was saved from an icy dunking by fellow members of the force (who were colluding with the mill owners to stop these fierce women from striking). Here in the U.S., we will best honor our sisters past and present by ensuring that women's progress doesn't come to a grinding halt on March 29th in the hallowed halls of the Supreme Court.

Tomorrow the Court will hear arguments in one of the most important civil rights cases in the country's history. Their decision will pave the way for further progress or stop it dead in its tracks. In Wal-Mart v. Dukes, one million employees take on the largest public corporation in the world in a case that could cost the company $1 billion. But this case is about something much bigger than $1 billion; it is about whether or not any American citizen will have the ability to try to stop illegal bias in the workplace. In David v. Goliath, the Supreme Court will decide who gets the slingshot.

The case started when seven female employees of Wal-Mart figured out the corporation was paying men more than women for comparable jobs and was promoting men more often than equally qualified women. More than 100 women presented their personal cases of illegal bias and statistical evidence showed that the preferential treatment was true across the company -- in every region and across job categories from entry level to management. As a result, District Judge Martin J. Jenkins determined -- and the Ninth Circuit agreed -- that the one million women who worked at Wal-Mart in the last decade should be treated as a "class" and as such be able to fight the world's largest corporation together, rather than one at a time. Wal-Mart, which serves about 100 million customers a week, appealed, arguing that no one could manage a group of one million people and, because of that, these women could not argue their case as a single class. How will the Court decide and what will be the results?

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Consider this -- it is infinitely cheaper to pay off one employee (or bury her in legal fees) and to continue the illegal pay disparity than it is to pay all employees what they should have been paid all along. By limiting the ability of similar individuals to act as a group, the Court will diminish the individuals' power to challenge a bigger (and richer) wrong-doer. It is only the ability to challenge illegal bias as a group that renders the action economically viable for the plaintiffs (and yes, for the lawyers who work for them). Similarly, it is only the threat of action by a group that makes illegal bias economically un-viable for a corporation.

As it happens, in matters of law and money, size does matter.

If the Supreme Court upholds the Ninth Circuit and agrees that "mere size does not render a case unmanageable," regular Americans will be able to challenge illegal bias in the workplace. If the Supreme Court strikes down the Ninth Circuit's decision, they won't.

Slingshot or no slingshot?

With a slingshot you have a chance against Goliath, without it you have none.

By attempting to limit the size of a class, activist conservative judges are reversing years of precedence and weakening the power of individuals to fight illegal bias in the workforce. It's worth noting that after years of discrimination, Lilly Ledbetter has not received a dime of compensation -- thanks to the Supreme Court. A recent study from Cornell Law found that in employment discrimination suits in the federal court of appeals corporations consistently do better, managing to reverse rulings 41 percent of the time compared to 9 percent for plaintiffs.

One hundred years ago, it was 25,000 mill workers in Lawrence, Massachusetts, who fought for rightful pay and dignified working conditions. Since that time, women have become 50 percent of the U.S. workforce. They are the sole breadwinners in 34 percent of families with children; and the owners of eight million small businesses. Women currently receive 58 percent of bachelor's degrees, 60 percent of Master's degrees and 55.5 percent of Doctorates, our progress will continue. Unless the Supreme Court decides to stop it.

Tomorrow, 1,000,000 women of Wal-Mart will take their place in history, but like the strike of Bread and Roses, this fight is about much more than a single company -- or a single group of people regardless how large. This case is about an ongoing and winnable fight to secure the 'Blessing of Liberty' for all of our citizens.

After all, what is more liberating than a paycheck and the economic security that comes with it?

**This originally appeared on The Huffington Post.

Erica Payne is Founder and President of The Agenda Project.

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