Kerrynomics: Seems Like Old Times


Robert Pollin’s excellent Contours of Descent: U.S. Economic Fractures and the Landscape of Global Austerity provides a snapshot of Clintonomics that should be required reading for those in the anybody-but-Bush school. It’s a taste of things to come. Pollin writes:

“Unlike Clinton, Bush is unabashed in his efforts to mobilize the power of government to serve the wealthy. But we should be careful not to make too much of such differences in the public stances of these two figures, as against the outcomes that prevail during their terms of office. It was under Clinton that the distribution of wealth in the U.S. became more skewed than it had been at any previous time in the past forty years-with, for example, the ratio of wages for the average worker to the pay of the average CEO rising astronomically from 113 to 1 in 1991 under Bush-1 to 449 to 1 when Clinton left office in 2001.”

Such skewing was conscious policy, as will be reviewed momentarily. Pollin reports that Clinton’s tax policy did reverse some of the regressive taxation under Reagan but not all of it. And, he notes, “The fact is that, insofar as the end of the Cold War yielded any peace dividend under Clinton, it took the form of an overall decrease in the size of the federal government rather than an increase in federal support for the programs supposedly cherished by Clinton, such as better education, improved training, or poverty alleviation.”

Pollin allows that the Earned Income Tax Credit (EITC), the most significant initiative under Clinton, more than doubled from $9.3 billion to $26.8 billion during his two terms. But food stamps,

“dropped by $8.5 billiona decline reflecting a large increase in the percentage of households who are not receiving food assistance even though their income level is low enough for them to qualify. Under Clinton’s presidency, the decline in the number of people receiving food stamps-9.8 million-was 17 percent greater than the decline in the number of people officially defined as impoverished, and was accompanied by a dramatic increase in the pressure on private soup kitchens and food pantries.
“And while the EITC does correct some of the failings of the old welfare system, it has created new, and equally serious problems. Moving poor and unskilled women from welfare onto the labor market exerts a downward pressure on wages, and the national minimum wage itself is too low to allow even a full-time worker to keep just herself and only one child above the official poverty line.”

But wasn’t Clintonomics the policy that created boom times? Poverty did decline under Clinton by almost 4 percentage points. Yet, as Pollin explains, in the prosperity of the 1990s, this small drop back to the level it was in 1974 is reprehensible: “Per capita GDP in 2000 was 70% higher than it was in 1974, productivity was 61% higher, and the stock market was up 603%.”

Clinton’s presidency did see a stop to the declining wages from 1993 to 1996, according to Pollin. And in the next 3 years wages rose sharply. But,

“the real wage gains were also, in turn, largely a result of the stock market bubble. The Clinton economy of the late 1990s, whose successes were so heavily dependent on the stock market, offers little guidance as to what such an alternative path to sustained improvements in real wages might be.
“Moreover, conditions under Clinton worsened among those officially counted as poor. This is documented through data on the so called “poverty gap,” which measures the amount of money needed to bring all poor people exactly up to the official poverty line. The poverty gap rose from $1,538 to $1,620 from 1993-99 (measured in 2001 dollars).”

The good news is both not so good and not repeatable. As Pollin points out in his chapter “The Down Side of Fabulous”:

“The conclusion is clear: the overall rise in consumption spending in the Clinton years-which was itself central to the economy’s overall growth in this period-was driven almost entirely by an enormous increase in consumption by the country’s richest households, tied to the similar formidable increase in wealth for those households.”

Pollin makes clear that the modicum of good news was temporary, unsustainable, and costly. “The stratospheric rise in stock prices and debt-financed consumption and investment booms produced a mortgaged legacy. The financial unraveling had begun even as Clinton was basking in praise for his economic stewardship.”

But how can we blame Clinton for the stock market boom? As Pollin shows, Federal Reserve Chairman Alan Greenspan not only knew of the “irrational exuberance” of the market back in 1996, but in minutes of a September 1996 meeting stated that, “I guarantee that if you want to get rid of the bubble[raising margin requirements on stock speculators to lower how much they can borrow] will do it.” But Greenspan, like Clinton, was not willing to confront Wall Street. Instead, the Clinton administration and the Fed presented a united front in advancing across-the-board financial deregulation in the name of market efficiency and modernization.

The yawning gap in wealth distribution was by design. Quoting from Bob Woodward’s The Agenda, Pollin reports that:

Clinton himself acknowledged only weeks after winning the election that “We’re Eisenhower Republicans here We stand for lower deficits, free trade, and the bond market. Isn’t that great?” Clinton further conceded during this same period that with his new policy focus “we help the bond market and we hurt the people who voted us in.”

Just as Bush’s personnel were key players in past Republican administrations and therefore represent no real break with the past, a Kerry administration would employ key players from Clinton’s administration. As discussed later key members of the team-Roger C. Altman, Gene Sperling, and Sarah Bianchi who worked for Gore-are mapping out the Kerry economy.

Kerry’s economic policy shows the promise of moving the country rightward, just as Clinton’s did. In fact, Kerry is running right so fast that he’s running against the promises he made during the primaries. In a May 3, 2004 interview with the Wall Street Journal, he proclaimed that he was scaling back some promises in an effort to woo business. These “involved paring earlier proposals to expand college-tuition subsidies and provide aid to state governments, to help achieve the higher priority of halving the federal deficit in four years,” the Journal reports. Regardless of what one thinks of this particular trade-off, it is yet another sign that, in his bid for the presidency, nothing is safe.

Another example of Kerry’s rightward push is his orientation toward the bond market. As mentioned earlier, Clinton admitted his rightwing position in saying that he was helping that market while hurting his voters. With Kerry, we are already one step farther right, and the guy hasn’t even been elected yet. As the Wall Street Journal concluded that May 3 article:

Liberals worry that, in the White House, Mr. Kerry is likely to tack even further toward the center. Some on the left complain Mr. Kerry is already doing so-undercutting the populism that was a key part of Mr. Clinton’s 1992 campaign. “The risk is that he’s going to run the way Clinton governed, rather than the way Clinton ran,” says Robert Kuttner, editor of the liberal American Prospect. “No president ever got elected by promising to appease the bond market.”

Kerry’s advisors make clear where his presidency would take us. As the New York Times headlined March 28, 2004, it’s “A Kerry Team, A Clinton Touch.” Four people are at the heart of the team. Roger C. Altman was a deputy Treasury secretary in the early Clinton years who got derailed by the Whitewater scandal and resigned. He’s back, having invigorated his wallet with stock market wealth. The three other team members are Jason Furman, an economist trained at Harvard, Gene Sperling, who served under Clinton for all of the eight years, and Sarah Bianchi who served as Al Gore’s health care specialist and later policy advisor during the 2000 campaign. And the man in the wings is Clinton’s former secretary of the Treasury. “This group is consulting literally daily with Bob Rubin,” Altman told the Times.

“The right tax code will spark job creation at home,” Sperling claimed. Gone is any whiff of aid to the poor, any sense that government could reinvigorate the New Deal politics of FDR, which long ago sought to employ people directly instead of paying companies to do it indirectly-the latter being at greater cost to the taxpayer per job created, and a far more dicey form of insuring the economic health of the country.

Another principle is that “New spending must be offset by cuts in existing spending,” the Times reported. Kerry has made clear that spending on Defense and Homeland Security will continue to outpace inflation; the growth of these sectors will impose draconian fiscal discipline on the rest of the government if Kerry were to keep his pledge of balancing the budget.

The article also reveals what John Kerry really means by healthcare for all. Not single payer insurance, by far the most cost efficient and most effective means for insuring access to health care for all-favored by most Americans. Instead, money will be shoveled to corporations: “federal subsidies for some aspects of corporate health insurance,” the Times reports. The Wall Street Journal, May 3, 2004, quotes Kerry as saying about his health care subsidies, “I would think American business would jump up and down and welcome what I am offering.”

The Wall Street Journal explained further in a sober-eyed analysis of the two candidates just before that third debate. On October 13, the paper reported:

“Mr. Kerry balances his support for new government programs with a Clintonian bow to limits on government action. His health-care plan eschews regulatory mandates and is heavy on market-based incentives: It gives uninsured people tax credits to buy into existing plans, and encourages companies to lower health-care charges for employees by having the government subsidize their most expensive cases.”

Returning to the Times article, regulation of outsourcing is out the window, the only hope for actually addressing the more pernicious effects of globalization’s race to find the cheapest worker. Instead, Kerry will “provide tax rebates to manufacturers that add jobs in the United States.” And he would cut corporate taxes-already at astonishing low levels-by 5%. It could be a nice tax break-offset in part by forcing companies with overseas income to pay tax on it immediately instead of deferring it indefinitely. Then, to cut the deficit by $250 billion, Kerry will reinstate the tax rates Bush cut on those households earning over $200,000 a year. Sounds good, but there is no plan to cut back on Bush’s bloated Defense and Homeland Security spending. Kerry claims he can save tens of billions a year by ending some corporate welfare subsidies. But ending deficit spending while increasing the Defense and Homeland Security budgets would be devastating nonetheless. Progressives, arguing we must vote Kerry to “stop the pain,” should consider exactly what they are voting for. Lest there be any question whether Kerry’s presidency would be a move to the right for the economy, Altman clarifies that “It is a credible, enforceable pledge that will position Kerry to the right of Bush on fiscal policy.”

In the third presidential debate, Kerry promised to level the playing field for the American worker, but put the matter bluntly:

“Outsourcing is going to happen. I’ve acknowledged that in union halls across the country. I’ve had shop stewards stand up and say, “Will you promise me you’re going to stop all this outsourcing? “And I’ve looked them in the eye and I’ve said, “No, I can’t do that.” “

The Wall Street Journal pointed out (October 13),

“In practice, both men are free traders, and their rhetoric exaggerates their differences. Both support a new global trade pact, as well as one for the Western hemisphere. Mr. Kerry says he would review all existing trade pacts in the first 120 days of his administration to ensure their fairness, but it’s nearly inconceivable that he would pull out of any of them because of the havoc that would cause the trading system.”

Returning to the band of merry men and women who are designing Kerrynomics, is there any shred of remorse over what these policy wonks did while they worked for Clinton? Any hope that we can escape the accelerated transfer of wealth to the rich, that, as mentioned, went from a CEO-to-worker ratio of 113 to 1 to 449 to 1 during Clinton’s reign? Bianchi was asked in general terms about the relationship between Kerry and the Clinton years, and framed it this way, “The Clinton-Gore administration had a fantastic record on the economy, and John Kerry supported their plan. It’s a logical place for him to be philosophically.”

GREG BATES is the founding publisher at Common Courage Press and author of Ralph’s Revolt: The Case For Joining Nader’s Rebellion. He can be reached at