How the national debate is framed, and what options are put before the public, can be more important ultimately than the immediate choices made. The framing defines the breadth of the nation's ambition, and thus either raises or lowers expectations, fires or depresses imaginations, ignites or deflates political movements.
A future generation pondering the present era may find it strange that the nation focused most of its collective energies between the start of 1993 and the end of 1997 on bringing the federal budget into balance by 2002 (after which time it will likely fall out of balance again), cutting taxes (mostly on the wealthy), and forcing the poorest Americans off welfare without a guarantee of a job at a livable wage. Republicans had wanted to do all of this somewhat more aggressively, and Democrats, somewhat more equitably. But the differences were of degree and there was no real debate. The larger issues facing the nation had either been put aside, or were declared, by way of magical reasoning, to be remedied by one or the other of these barely distinguishable directions.
The deficit, which so obsessed the nation for a decade, began to vanish during the spring and summer of 1997, even before the White House and Congress reached agreement, with great fanfare, on how to make it do so officially. The economic recovery had boosted earnings so much, particularly in the upper brackets, that tax revenues poured into the Treasury in far greater numbers than had been foreseen. The truly astonishing thing was not the economy's buoyancy at the time, but how our nation's leaders chose to spend most of the unanticipated bounty: Rather than dedicate it to what had been neglected and was most needed—universal health care, child care, better schools, jobs for the poor who would be shoved off welfare, public transportation, and other means of helping the bottom half of our population move upward—they devised the largest federal tax cut on upper incomes since Ronald Reagan signed the tax cut of 1981.
According to an analysis by Citizens for Tax Justice, almost half of the tax cut will go to the richest 5 percent of Americans; the richest fifth will receive more than 75 percent of its benefits. The average tax cut for middle-income families and individuals will be less than $200 per year, while the richest 1 percent will pay more than $16,000 less. Most of these cuts will explode in later years: The Joint Committee on Taxation figures that the legislation will cost $95 billion from 1997 through 2002, but the cost will expand to $180 billion in the next five years.
New funds (some $24 billion over five years) are allocated to provide health coverage to some uninsured children, a worthy accomplishment. But this progressive step is tempered by cuts in Medicaid to the poor (about $13 billion, achieved mainly by lowering payments to hospitals that treat the poor). Medicare is also cut, through reductions in payments to doctors and hospitals. (A proposal to reduce Medicare benefits to wealthy retirees was scrapped.) With almost no public discussion at all, annual defense spending will rise steadily from $269 billion in 1998 to $289.6 billion in 2002. Meanwhile all other discretionary spending will be held to a nominal $256 billion per year, which means steadily fewer dollars when adjusted for inflation. Fewer resources will be available to people who are poor or of modest means, for education, job training, low-income housing, mass transit, food stamps, or even inspections of factories to ensure safety and adequate wages.
If "balancing the budget by the year 2002" were the most important goal the United States could achieve now, such a regressive tilt would still be cause for alarm. But it is not the most important goal. The entire federal budget is an accounting device, and a curious one at that—calculated very differently from the way private businesses do their books. A company would never show a deficit in its income statement when investing in new machinery or a new factory; these would be considered capital expenditures rather than charges against income. The only debits would be on the depreciation of the existing capital stock. But in the federal budget, all outlays are considered spending, regardless of what the spending is for. There is no separate budget calculated to show investments in, say, the capacity of all Americans to be more productive in the future. In Britain, by contrast, budgets are generally balanced for current outlays, and deficits are permitted so long as they support investment. This process then invites a public dialogue about the extent and nature of social investment, and gives legitimacy to the idea of borrowing to invest.
Far more important than budget balance is for the United States to get back on the track we were on during the first three decades after World War II—a track of higher growth and a more inclusive, more equitable society. We got off that track in the late 1970s and have veered even further off it since. It is good news that six years of economic recovery have generated 13 million net new jobs, and that the rate of unemployment—as I write this, under 5 percent—is lower than in almost a quarter century. But the sobering news is that six years of economic recovery have failed to reduce the trend toward inequality that began in the late 1970s.
From 1989 to 1997, the real wages of the bottom tenth of workers stopped dropping, but their fringe benefits—employer-provided health care and pensions—sharply declined until they virtually disappeared. Meanwhile, the wages of the majority of workers in the middle continued to erode, with the median worker's wage sinking 5 percent. Even in the robust 12 months from the middle of 1996 to the middle of 1997, as corporate profits ballooned and the stock market soared beyond even most Wall Street bulls' imaginations, the real median weekly wage of full-time employees increased just three-tenths of 1 percent. Taking into account the decline in employer-provided health and pension benefits, the bottom half of the American workforce continued its descent.
Many families have made up for the steady decline by working longer hours, and the current tight labor market has enabled them to do so to an even greater extent. But for most mortals who do not adore what they do for pay, more time at work does not translate into a higher standard of living. At the same time, the upper reaches of America—mostly college-educated, mostly professional or managerial—have never had it so good. Their pay and benefits have continued to rise and their shares of stock have exploded in value. (Nearly 40 percent of America's financial wealth is held by the richest 1 percent of the population. Even taking into account pension wealth held on behalf of workers, the top 1 percent still owns 22 percent of all financial assets.)
The budget agreement's regressive lurch does not help the situation, to say the least. America is strangely immobilized. Rather than giving us the confidence we need to move forward, the good economic news on growth and jobs—combined with a rare period of world peace—seems to have anesthetized us. Future generations looking back on this era will ask why—when today's Americans had no hot or cold war to fight, no depression or recession to cope with, no great drain on our resources or our spirits—we did so little. Little, that is, relative to what the situation demanded; little, relative to what we could have done. Did we simply assume that the economic expansion would last forever? That the sharp disparities of income, wealth, and opportunity would not have serious consequences for our future and our children's future?
The real answer is simpler, and all the sadder for its simplicity. The larger issue was not placed on the national agenda because neither party, and neither political branch of government, had a stake in putting it there. Republicans did not want to talk about income inequality, because they had no answer acceptable to most of their supporters. Some Democrats were willing to speak of it, but pollsters often cautioned against doing so. Americans, pollsters counseled, did not want to hear about it; they would rather dwell on the good news. Besides, any serious program to reverse these trends would require large public investments combined with a far more progressive tax system, and neither seemed remotely in the cards. The 1993 campaign to provide health insurance for the 43 million Americans without it had gone badly, after all. And given that Democrats had run the White House for over four years, two of them with Democratic Congresses, it would be unwise to speak of such a large, unfinished agenda at this stage. Better to take credit for what had gone well. Thus it was that the two parties reached tacit agreement: a conspiracy of silence.
The average working American knew that the economic expansion was not trickling down, but remained hopeful it would, eventually. Elites—including much of the national media—were tired of discussing the problem of inequality even if they had once been interested. Most saw scant evidence of declining incomes and of poverty, because it was now more sharply cordoned off from them than before. It occurred elsewhere; it happened to different people. The elites didn't see, or didn't want to see, connections between widening inequality and the political tilt toward regressive public policies, as exemplified by the budget agreement. They didn't see, or didn't want to see, the wave of "soft" money flowing into election campaigns from business and the very wealthy, and the increasing disengagement from electoral politics of blue-collar and very poor Americans.
How the debate is framed—what options are put before the public—makes all the difference. Over five years, the national debate shifted, and it shriveled. At first the central question was: Shall we invest in our future—including providing universal health care—by raising taxes or by borrowing (or by what combination)? Then the question quickly became: Shall we invest in our future or shall we balance the budget (or what combination)? And then: Shall we balance the budget in ten years or by 2002? Then: Shall we balance the budget by 2002 and also cut taxes? Then: Shall we cut taxes equitably or will most of the tax cuts go to the wealthy? At each step, the frame got smaller, the options less relevant, and the broad public less interested in the outcome.
Part of the progressive challenge is to create vibrant debate about how to restore shared prosperity to this nation. But bringing this question to the forefront will not be the greatest challenge, for in a democracy a looming issue like this does not remain off the table indefinitely. The larger debate will occur, with or without progressive leadership. Perhaps we have only to wait for the next recession for it to begin. But this is a dismal strategy for liberals. The greater challenge will be to fill the larger frame with positive visions of a more inclusive society, and options for achieving it. Otherwise, the coming debate will simmer with the rancor of those who for years have been excluded from the general prosperity. And the next generation of Americans, looking back in puzzlement on this one, will inherit a politics of resentment.