Political debate is a contest between competing stories about, as supply-sider Jude Wanniski once neatly put it, "how the world works." Today, America lacks serious political debate because Democrats are still substantially trapped in Ronald Reagan's narrative—the morality play of the Individual against the Collectivist State, in which virtue is identified with wealth, efficiency with the unregulated market, and freedom with the opportunity to get rich.
Bill Clinton claims he is telling a new story—a centrist compromise that deregulates the market and shrinks government to spur greater economic growth, and then, through education and the celebration of self-help, broadens opportunities to enjoy the fruits of that growth. Policy insiders can still read the differences between the Clinton and Reagan stories. But to most Americans, Clinton's story line is muddled, its characterizations weak (nothing to match Reagan's welfare queens, power-grabbing bureaucrats, or hypocritical intellectuals secretly lusting after business wealth), and the practical moral of his tale is not much different.
Assume you are a 50-year-old worker, laid off from the last decent-paying job you think you'll ever have; or a single mother making $7 an hour when it costs $10 an hour to live; or a college graduate five years out of school and still struggling with loan payments. You want to know why you are having such a hard time when the economy is said to be booming. So you listen when you turn the channel and see Newt Gingrich telling an updated version of Reagan's story.
It goes something like this:
We are entering the Information Age—a time of change equivalent to the shift from the Agricultural to the Industrial Age. The resulting deregulated global economy is bringing freedom and democracy to the rest of the world, and technological wonders to America. But if you want to enjoy it, you have to compete against about six billion people out there, most of whom will work for a lot less than you will.
The price of labor is set in South China. If you want to live seven times better, you have to be seven times more efficient. You should get all the technical training you can get, pack a computer on your back, and get out there and compete. If you're a woman, you ought to think about getting married. As for the government, the best it can do is cut your taxes so you have more resources to compete with. You are on your own.
Not much comfort there, so you turn the channel to Bill Clinton:
We are entering the Information Age. It is a time of change equivalent to the shift from an agricultural to an industrial-based society. The resulting deregulated global economy is bringing freedom and democracy to the rest of the world, and technological wonders to America. But if you want to enjoy it, you have to compete against about six billion people out there, most of whom will work for a lot less than you will.
What you earn will depend on what you learn. You should get all the technical training you can get, pack a computer on your back, and get out there and compete. But we are Democrats. We believe that government can help those who deserve to be helped. Unfortunately, the government has this big deficit; we have to pay off the huge debts run up by Ronald Reagan. So we don't have very much money. And although we'd really like to, we can't really give you world-class skill training, or help you live while you are being re-educated. Or provide child care, or secure health care. So, unfortunately, you are mostly on your own.
DEMOCRATS AS BIT PLAYERS
As long as they remain trapped in Reagan's story, Democrats will be the supporting players in America's historical drama. Bill Clinton has demonstrated that Democrats without a story of their own can edit the Reaganite drama a bit, soften the insensitive dialogue, and tone down some of the socially violent scenes. But, however reluctantly, they are forced to move the conservative plot forward to its climactic scene—the triumphant return of Social Darwinism.
The problem is not just in the White House. The reluctance to challenge the Republican story of how the world works pervades Democratic elected officials at all levels. Shortly after last year's election, some Democratic politicians and liberal group lobbyists met to discuss a program for the coming congressional session. After an hour, only two priorities were clear: balancing the budget and cutting taxes. A frustrated voice asked if there was any chance to revive the issue of national health insurance, now that more than 40 million people are without health care coverage and complaints about the corporate takeovers of hospitals and health care are endemic. Eyes rolled. A congressman with an impeccable Americans for Democratic Action voting record finally remarked: "As the President has said, the era of big government is over." End of conversation.
Democrats can't become relevant again until they can muster the courage to push past the conventional wisdom that stops nearly every conversation among Democrats, traditional or new. The conversation stopper comes in three parts:
- The people don't want big government.
- Even if they wanted it, they can't afford it.
- Even if they could afford it, the global economy will not let them have it.
These propositions are not as self-evident as the conventional wisdom would have us believe. The voters don't want big government. Polls consistently show that voters want almost all of the big things that big domestic government does, from Social Security and Medicare, to protecting the environment and the workplace, to building schools and damming rivers and underwriting research. In 1996, American voters re-elected a President who had risen from the political grave by campaigning against Republican threats to cut Medicare, Medicaid, federal aid to education, and federal protection of the environment. He had vilified his opponents for forcing a shutdown of the supposedly despised federal government. To save themselves, vulnerable Republicans joined Clinton in passing an increase in the federal minimum wage—that is, big government ordering business to pay low-wage employees another 90 cents an hour.
Moreover, the President took credit for reducing crime by providing federal financing of 100,000 more cops on the street, forcing manufacturers to put V-chips in their televisions, and requiring insurance companies to maintain portability of health care coverage. Small impact perhaps, but big government nevertheless.
True, Democrats did not win back the House. But they were in the process of recapturing it a few weeks before the election when the scandals over foreign contributions to the Democratic Party broke, and the Democratic financiers diverted money from the congressional to the presidential campaign. Even so, Democratic candidates for the House won about the same number of total votes as Republican candidates. The election could hardly be seen as a referendum against big government.
Even after having facilitated the Reaganite welfare reform scenario, which did involve a reduction in a big government program, the President finds himself caught in the contradiction that there are not nearly enough jobs to absorb the people being booted off of the welfare roles. His solution? In his own words: "We've got the deficit. We've got to balance the budget. We can't possibly meet the hiring targets of the welfare reform law unless we organize the private sector."
Organizing the private sector to hire people that it doesn't want may mean government that's cheaper, but hardly one that's smaller.
But we have no money. Nowhere is the power of Reagan's Magical Realism more revealing than in Democrats' obsession with the federal budget deficit. Murray Weidenbaum, the first chair of Reagan's Council of Economic Advisers, later recalled to journalist Sidney Blumenthal the evolution of Reagan's views of the possibility that his budget policies would create a string of deficits: "One, they won't occur; two, they'll be temporary; three, when they stick, they serve a good purpose—they keep the liberals from new spending programs."
The inherited structural deficit would have been a problem for any Democrat assuming the presidency in 1993. But it could have been used as an object lesson about the failure of the Reagan story. Instead, the Democrats accepted Reagan's narrative of the deficit as an emblem of incompetent and bloated domestic government.
As a symbol, the balanced budget has paralyzed Democrats beyond Reagan's wildest dreams. Its magic is so strong that it made Clinton's own real-world accomplishment in reducing the deficit programmatically irrelevant. The deficit is now a minuscule share of gross domestic product (GDP). But no matter; the majority of House Democrats—their leader Richard Gephardt is a notable exception—supported a budget deal that would further tighten the noose around the neck of progressive government.
To soothe their liberal consciences, Democrats beguiled themselves with the notion that once the budget is finally balanced, they will be free of Reagan's fiscal straitjacket. Right after the budget deal was signed, New Democrat Rob Shapiro wrote that "a balanced budget is conducive to activist government," citing as an example the new program to fund health insurance for poor children. But so long as the balanced budget is enshrined as the fiscal deity, there will never be any room for the domestic spending needed to stop, much less reverse, the steady impoverishment of the domestic public sector. The current deal is front-loaded with tax giveaways, and backloaded with a mortgage of unspecified cuts that will require further slashing of domestic expenditures to achieve balance. Moreover, the agreement does not address the fundamental long-term problem of rising health care costs. If the budget is truly balanced in the talismanic year 2002, the next year, 2003, will require still more cuts in domestic investment, as will the next and the next.
The promise of health care for poor kids was a sop to the liberals to get them to support the compromise. Winks from the White House hinted that this might be a "foot in the door" to national health insurance. But as a block grant to the states, the program has no more security than the rest of the domestic discretionary budget, which as a whole must be further sacrificed if the 2002 goal is to be achieved. More thoughtful liberals might have pondered the example of HeadStart, the popular program of education for poor kids, which after more than 30 years still covers less than half the eligible children.
Democrats have become so mesmerized by the Republican story that they cannot recognize that the plot doesn't hang together. Witness, for example, the budget projections of the Congressional Budget Office (CBO), which are the primary source of the argument for fiscal austerity.
The CBO, under the control of the Republican majority, regularly makes three long-term economic forecasts to the year 2050, varying according to different assumptions about future budget policy. The economic model on which all the forecasts are based conservatively assumes that public investment in education and infrastructure makes no contribution to economic growth. Thus, literally, a dollar invested in a tavern is productive, a dollar invested in a school is not. The effect of this assumption is to make a balanced budget, which shifts investment from the public to the private sector, appear more effective in stimulating growth than it is. Even so, the CBO's scenarios dramatically undermine the conventional wisdom.
One scenario is the familiar disaster story: Current policies are frozen, the deficit rises exponentially after 2030, and the sky falls on the economy.
Under a second "sustainable" scenario, the budget is balanced by the year 2002 and each year thereafter. Per capita GDP rises to $38,200 in 2030 and to $50,400 in 2050. But a third scenario, also sustainable, which has received almost no attention, stabilizes the ratio of the deficit to GDP at 1.7 percent from now until 2050. Remarkably, the economic result is almost identical to the balanced budget forecast: a per capita GDP of $37,500 in 2030, and $49,200 by 2050. So even with an economic model that credits no benefits to public investment, the difference to the economy between a steady modest budget deficit and zero deficit is minuscule. On the other hand, the latter path of moderate deficits would free up a net (taking into account greater interest costs of maintaining a deficit) of $600 billion over the next five years and more than a trillion dollars over the next ten for desperately needed public investments in human and physical capital. In any realistic model of the economy, this investment would add enough to the long-term growth rate to surpass the per capita income performance of the balanced budget scenario. Yet Democratic politicians are so frightened of being labeled fiscally irresponsible that there is no effort to try to build on this opportunity to tell an economic story with an investment theme.
It gets worse. Consider how Democrats treat the ingredients of the deficit. The prime remaining source of the disaster budget scenario is the country's inefficient, chaotic, and expensive health care system. It combines the worst features of capitalism and socialism in which huge public subsidies enrich private insurers and providers. Bill Clinton had it right in 1993 when he told the country that the system had to be changed. But when his health care plan failed, instead of taking the issue to the country, he abandoned his story. This allowed the Republicans to redefine the villain from one of the health care system to one of Medicare and Medicaid costs, for which there is only one answer—spend less.
Within the context of the balanced budget, Democrats have also largely bought into Reagan's spending priorities. Eight years after the fall of the Berlin Wall and the end of the Cold War, the United States is still spending more on defense in real terms than we were in the mid-1970s when the Soviet Union was armed to the teeth. Clinton's proposal to expand NATO will add an estimated $40 billion in additional military spending to bring the new eastern European nations' military up to required NATO standards (the new countries don't have the money and our European allies have said they will not support the upgrading), and for more aid to Russia to overcome its anxieties. Slowly the Pentagon is regaining its old confidence; it has permitted the sale of F-16 fighters to Third World countries while telling Congress it needs money for more F-22s to counter the proliferation of F-16s.
But the global economy will not permit us to have a big government. Like the budget deficit, the global economy is both reality and myth. Over the last quarter century, the international sector of the U.S. economy has doubled and global international financial markets have indeed gained power over national economies. The United States, like other countries, does not control as much of its domestic destiny as it did 30 years ago. But we remain by far the most important economy in the world, and we still make between 85 and 90 percent of what we buy. Selling to the U.S. market is a central economic goal of a large number of nations around the world.
So the United States retains enormous leverage. The American government has forced Third World countries to meet the demands of our multinationals to protect overseas investments and obey our patent and copyright laws. We have made the Russians accept a humiliating expansion of NATO. And alone against almost the entire world, the Clinton administration prevented the previous secretary-general of the United Nations from being reappointed—this, despite the fact that the United States is the United Nations' chief deadbeat, owing that world body more than a billion dollars in back dues.
Thus the United States could lead the world in creating the rules that would make a global marketplace work for everyone—not just those at the top of the wealth and power pyramid. The creation of international health, labor, and environmental standards, the regulation of dangerously volatile international financial markets, and the lifting of the debt burden to the weakest Third World nations is a task fit for the world's remaining superpower—and an inspiring theme for a twenty-first-century Democratic Party. But Democrats who have attempted to make this an issue are denounced by a Democratic White House that prefers to spend its international political capital forcing the rest of the world to swallow Reagan-Thatcher economic dogma.
A five-year cyclical expansion has lowered the U.S. unemployment rate and sent the stock market soaring. But the real wage of the typical American is 10 percent below where it was at the previous peak of 1979. Despite deregulation, privatization, and a halving of the corporate tax rate, private investment in this expansion has been no greater than in previous ones. In the 1990s, productivity growth in the United States is slightly below its anemic performance in the 1970s and 1980s—and considerably below the rate of productivity growth in western Europe, which for a decade has been saddled with Maastricht-induced austerity. As for our well-hyped national concern for the next generation, try this: In France the poverty rate for children under six years old is 6 percent; in the United States it's 22 percent. Which economy is working better for kids?
The consequences of Democrats remaining as supporting players in the Reagan movie will be profound, both to the nation and to themselves. The absence of a progressive story about what is happening to America deprives the citizenry of the analysis it needs to consider an alternative path. When the next recession hits, we know what the Republican explanation will be: Taxes were too high, government was too big, business was overregulated. What will the Democrats say?
A NEW STORY LINE: YOU ARE NOT ALONE
Reviving a liberal story in the late 1990s does not mean going back to the characters and images of the 1930s or the 1960s. But the basic theme of politics—who gets what—has not changed. It is no surprise that as the conservative story has come to dominate our political culture, the distribution of wealth in America has become the most lopsided in modern times.
A liberal story worth telling would assert that the distribution of wealth is not the result of natural economic laws, but of the capture of government by those who now enjoy its favors. It would reverse the conservative tales, in which the striking worker who withdraws his or her labor is a villain, but the striking investor who withdraws his or her capital is a hero. Or in which the public school teachers, who are not given enough books and pencils to teach inner-city children, are treated with contempt, and urban real estate speculators, who are subsidized to destroy neighborhoods, are revered as creators of wealth.
A liberal story would raise citizens' expectations of politics, teaching that you are not alone in your struggle to survive in the new brutally competitive world. As an American, whatever your race, your gender, or the condition of your pocketbook, you are in fact "entitled" to certain opportunities—to work, to education, and to have your vote count for as much as anyone else's.
A strong story requires strong language. Once again, we might hear respectable politicians and journalists using bold terms—such as "full employment," "national health insurance," and perhaps even "working class." We need straight language not primarily as sound bites or bumper stickers, but rather as a means of making clear how we really think the world should work.
Get that story right, and the bumper stickers will follow.