How to address the jobs crisis? President Obama has promised a major speech after Labor Day.
Bill Galston, one of the premier New Democrat intellectuals, has a piece in The New Republic, ghostwriting what he thinks the president should say.
Galston is a very smart academic and a kind person, but this proposed speech epitomizes how New Democrats get politics and economics fatally wrong.
Galston would have Obama begin:
In recent decades we've become addicted to consumption at the expense of production. But we can't indefinitely consume more than we produce... . now it's time to focus on the investments and innovations needed to make [foreign] countries into markets for what we make.
This is wrong on two counts. "We" haven't become addicted to consumption. Real incomes and outlays for most people have been stagnant. It's the top who have become addicted to gluttony. Second, domestic production has gotten clobbered because the rules of trade and taxation have favored a shift to industrial investment and production offshore.
It's certainly true that American business needs to invest more in innovation and domestic production, but with the current rules of taxation and trade, we won't gain foreign markets or domestic jobs. Imagine that you are an unemployed worker. What, exactly, does this analysis offer you?
Galston adds that "we" have become "infatuated with financial manipulation at the expense of the real economy." Good point, but again, who is this "we"? It's not as if the citizenry suddenly decided all to become hedge-fund operators.
As they say in the academy, "What's your theory of agency?" Or in plain English, who should we blame for these bad decisions? Galston seems to be saying, everybody and nobody. It just sort of happened.
(What happened was this: His New Democrat friends changed the rules to give priority to Wall Street and were rewarded handsomely for it, sinking the rest of the economy. Right now, Republicans, of all people, can credibly blame Democrats for being too close to Wall Street. But I digress.)
Next, Galston chides Americans for seeing homeownership "as ever-rising assets that we can use to finance consumption and replace savings. During the past decade, too much capital and debt flooded into the housing market, and prices rose to unsustainable heights. The inevitable crash was devastating."
Here again, this is a backward politics of faulting regular Americans for the sins of moguls. Someone hearing this speech would come away with the kind of dull headache that Jimmy Carter used to induce: The president seems to be blaming us. Galston should try writing a speech without using that all-purpose fudge word, we.
Galston has some good things to say about the costs, moral and economic, about rising income inequality, but his final point is this doozie:
And yes, we lost control of the federal budget. We can argue forever about why that happened. But what matters is fixing the problem so that we can restore confidence at home and abroad.
Argggh! Galston is offering this rhetoric as an improvement on the stuff Obama has been saying. But everything about that passage is pure Obama in its bland, uselessly high-minded post-partisanship.
"We" did not lose control of the federal budget, which was in surplus when Bush II took office. The Republicans created huge holes in the tax code, and then revenue losses were compounded by the effects of the financial crash.
Saying that "we can argue forever..." implies that the cause is either a mystery or of no consequence. But the issue of what caused the deficit and how to cure the prolonged stagnation is the essence of what divides the two parties (or should). The more Obama pretends that's not so, the more the voters conclude that he stands for everything and nothing.
In the second part of his proposed presidential speech, laying out a blueprint for job creation, Galston calls for a "balanced" deficit-reduction plan drawing on the very conservative Bowles-Simpson Commission, and a variety of policies making it easier for entrepreneurs to start businesses.
But during the boom years, when workers' wages were rising with productivity growth, businesses had no problem expanding. Its not government rules that are strangling business (a Republican conceit). It's the recession itself that's killing entrepreneurship.
Galston does propose "targeted investments in those areas where the market won't [invest]--in education, basic research, and infrastructure."
But, he cautions, "to do that, we'll have to reduce spending in areas less directly related to growth and innovation." In other words, no net increase in federal social investment.
For a purported speech on jobs, there is just about nothing here that would persuade a voter that this president is at all serious about putting unemployed Americans back to work any time soon.
It would be redundant for Obama to hire Galston. This is exactly the kind of speech that has been sinking his presidency.
